Unit-III

Development and Growth – Role of institutions

Theories of growth and development – Models of growth of Joan Robinson and Kaldor; Technical Progress – Hicks, Harrod and learning by doing, production function approach to the determinants of growth : Endogenous growth : role of education, research and knowledge – explanation of cross country differentials in economic development and growth.

Theories of development – Classical, Marx, Schumpeter and structural analysis of development – Imperfect market paradigm, Lewis model of development, Ranis-Fei model, Dependency theory of development

Factors in economy development – natural resources, population, capital, Human Resource Development and infrastructure

Trade and development – trade as engine of growth, two-gap analysis, Prebisch, Singer and Myrdal views; gains from trade and LDCs

1. Chamberlin introduced the concept of cost known as :
(A) Fixed cost
(B) Floating cost
(C) Selling cost
(D) Variable cost

Ans. c

2. If commodities are perfect substitutes indifference curve becomes a :

Downward sloping curve
(B) straight line with negative slope
(C) Right angle
(D) Rectangular hyperbola

Ans. b

3. C E S Production function is associated with the name of one of the following :
(A) Joan Robinson
(B) B. S. Minhas
(C) Manmohan Singh
(D) A. K. Sen

Ans. b

4. Psychological law of consumption is given by :

(A) Milton Friedman
(B) Pigou
(C) Tobin
(D) Keynes

Ans. d

5. When interest elasticity of demand for money is zero the L - M curve is :
(A) Vertical Parallel to Y-axis
(B) Horizontal Parallel to X-axis
(C) Positive Sloping straight line
(D) Negative Sloping straight line

Ans. b

6. Natural rate of unemployment is the rate of unemployment at which :

(A) Rate of inflation is stable
(B) Rate of inflation is unstable
(C) Rate of inflation is falling
(D) Rate of inflation is rising

Ans. a

7. Knife - Edge Problem arises in :

(A) Solow model
(B) Kaldor Model
(C) Joan Robinson model
(D) Harrod - Domar Model

Ans. d

8. Who has propounded the theory of Unbalanced growth ?

(A) E. Domar
(B) A. K. Sen
(C) A. O. Hirshman
(D) W. A. Lewis

Ans. c

9. Exclusion principle is not applicable to :
(A) Merit goods

(B) Private goods

(D) All goods

Ans. c

10. Redemption of Public Debt means :

Repayment of Public Debt

Refusal to pay Public debt

Redefining of Public debt in terms of foreign currency

Linking Public debt with inflation rate

Ans. a

Read the passage given below and answer questions from 11 to 14 on your understanding of the passage:

The more difficult task of ensuring global economic stability was assigned to the IMF. Those who convened Bretton Woods had the global depression of the 1930's very much on their minds. Almost three quarters of a century ago, capitalism faced the most severe crisis to date. The Great Depression enveloped the whole world and led to unprecedented increases in unemployment. At the worst point, a quarter of America's workforce was unemployed. The British economist John Maynard Keynes, who would later be a key participant at Bretton Woods, put forward a simple explanation, and a corresponding simple set of prescriptions; lack of sufficient aggregate demand explained economic downturns; government policies could help stimulate aggregate demand. In cases where monetary policy is ineffective, governments could rely on fiscal policies, either by increasing expenditures or cutting taxes. While the models underlying Keynes' analysis have subsequently been criticised and refined, bringing a deeper understanding of why market forces do not work quickly to adjust the economy to full employment, the basic lessons remain valid.

11. The IMF was assigned:

(A) The task of accelerating economic growth of the world
(B) The task of controlling inflation in the world economy
(C) The task of ensuring economic stability in the world economy
(D) The task of removing imbalances from the U.S.A.

12. During the Great Depression :

(A) Unemployment rate in the World was 25%
(B) Unemployment rate in England was 20%
(C) Unemployment rate in the U.S.A. was 25%
(D) Unemployment rate in India was 20%

13. According to Keynes, the cause for the unprecedented global depression of the 1930's
was:

(A) High interest rate in the USA.
(B) Low interest rate in the UK.
(C) Break down of the gold standard
(D) Lack of sufficient aggregate demand

14. Keynes' prescription to fight global depression was that:

(A) The government should pursue active monetary policy
(B) The government should pursue a combination of fiscal policy and monetary policy
(C) The government should pursue fiscal policy where monetary policy is in effective
(D) The government should have a policy of balanced budget

answers: 11.C,1 2. C, 13. D, 14. C

Read the following passage below and answer questions from 15 to 18 on your understanding of the passage :

One argument for protection that stands up to close economic scrutiny is the infant - industry argument. It holds that a nation may have a potential comparative advantage in a commodity, but because of lack of know-how and the initial small level of output, the industry cannot successfully compete with more established foreign firms. The infant-industry argument for protection is correct but requires several important qualifications. First, such an argument is more justified for developing nations where capital markets may not function properly. Second, as experience has shown that protection, once given, is difficult to remove. Third, what trade protection in the form of an import tariff, can do an equivalent production subsidy to the infant industry can do better. The reason is that a purely domestic distortion such as this should be overcome with purely domestic policy such as direct production subsidy to the infant industry. A production subsidy is also a more direct form of aid and it is easier to remove than an import tariff. A better policy would be to provide a direct subsidy to the industry. Similarly, a direct tax would also be better than a tariff to discourage activities that give rise to external diseconomies because the tax does not distort relative prices and consumption.

15. The obstacles for an industry to compete with more established foreign firms are due to :

(A) Lack of know-how and technology
(B) Lack of Capital and initial small level of output
(C) Lack of know-how and initial small level of output
(D) Lack of flexibility.

16. Developing countries are characterised by :
(A) Improper functioning of money markets
(B) Absence of capital markets
(C) Absence of both money markets and capital markets
(D) Improper functioning of the capital market

17. Which is appropriate form of trade protection ?

(A) Export tariff
(B) Import tariff
(C) Export subsidy
(D) Non-tariff barriers

18. Which of the following is appropriate activity giving rise to external economics ?

(A) A direct tax
(B) Tariff
(C) Trade policies
(D) Production subsidy

Ans. 15. C 16. D 17. A 18. C

Tick mark the option having the right chronological order.

Q.19

(i) Theory of monopolistic competition
(ii) Gurnot's Theory of Duopoly
(iii) Marshall's Theory of Quasi-rent.
(iv) Sweezy's kinked demand curve Analysis
Codes :

(iv) (iii) (i) (ii)

(i) (iii) (ii) (iv)

(ii) (iii) (i) (iv)

(iii) (i) (iv) (ii)

Ans. 3

Q.20

(i) Peacock-Wiseman hypothesis
(ii) Buchanan's 'An Economic Theory of Clubs'
(iii) Wagner hypothesis
(iv) Findlay Shirras's canons of public expenditure
Codes :

(i) (iii) (ii) (iv)

(iii) (i) (iv) (ii)

(ii) (iv) (iii) (i)

(iii) (iv) (i) (ii)

Ans. 2

Q 21

(i) Inventory Theoretic Approach
(ii) Restatement of the Quantity Theory of Money
(iii) Fisher's Equation of Exchange
(iv) Tableau Economique
Codes :

(i) (iii) (ii) (iv)

(iii) (ii) (i) (iv)

(iv) (iii) (i) (ii)

(ii) (i) (iv) (iii)

Ans. 3

Q 22

(i) Introduction of Rolling Plan
(ii) The movement from Planning to Market mechanism
(iii) Feldman-Mahalanobis Model
(iv) Declaration of Plan holiday
Codes :

(i) (iii) (iv) (ii)

(ii) (iv) (i) (iii)

(iii) (iv) (i) (ii)

(i) (iii) (ii) (iv)

Ans. 3
Q 23

(i) Specific Target-group Oriented Programmes
(ii) Introduction of Family Planning
(iii) Direct Anti-poverty Programmes
(iv) Minimum Needs Programme
Codes :

(ii) (i) (iv) (iii)

(i) (iii) (ii) (iv)

(iv) (iii) (i) (ii)

(iii) (ii) (iv) (i)

Ans. 2

Q. 24

(i) WTO Ministerial Meeting at Cancun
(ii) WTO Ministerial Meeting at Hong Kong
(iii) WTO Ministerial Meeting at Singapore
(iv) WTO Ministerial Meeting at Doha
Codes :

(i) (iii) (ii) (iv)

(iii) (iv) (i) (ii)

(ii) (iii) (i) (iv)

(iv) (ii) (iii) (i)

Ans. 3
Q. 25

Chairman of the Finance Commission
(i) N.K.P. Salve
(ii) C. Rangarajan
(iii) P.V. Rajmannar
(iv) K.C. Niyogi
Codes :

(i) (iv) (iii) (ii)

(iv) (iii) (i) (ii)

(iv) (i) (ii) (iii)

(iii) (i) (iv) (ii)

Ans. 2
Q. 26

(i) Milton Friedman's Approach
(ii) Fishers Approach
(iii) Stock Balance Approach
(iv) Keynes Approach
Codes :
(A) (ii), (iii), (iv), (i)
(B) (i), (ii), (iii), (iv)
(C) (iii), (i), (ii), (iv)
(D) (iv), (iii), (i), (ii)

Ans. a

27. The goods which are non-rival in consumption are called :
(A) Private goods (B) Free goods
(C) Public goods (D) Non-economic goods

Ans. c

28. A competitive firm achieves long-run equilibrium in the product market when :
(A) AR = MR (B) MR = AC
(C) MR = MC (D) Price = AR

Ans. c

29. The statement that the compensation principle of welfare economics is capable of givingcontradictory results is associated with the name of :
(A) T.Scitovsky (B) A. Pareto
(C) ABergson (D) P.A Samuelson

Ans. a

30. A rational consumer choosing between uncertain events will make a choice on thebasis of:
(A) expected monetary benefits (B) expected utility
(C) expected prices (D) expected incomes in future

Ans. b

31. Which of the following is not an element of selling cost:
(A) salary of the salesmen (B) expenses incurred in advertising
(C) transportation cost (D) costs incurred on window displays

Ans. c

32. Keynesian economics lays more emphasis on :
(A) monetary policy (B) fiscal policy
(C) interest-rate determination (D) free market mechanism

Ans. b

33. High-powered money is produced by :
(A) Commercial banks (B) Co-operative banks
(C) Ministry of Finance (D) Reserve Bank of India

Ans. d

34. A person who left the job to find another job would be classified as :
(A) fractionally unemployed
(B) structurally unemployed
(C) cyclically unemployed
(D) no longer in the labour force

Ans. a

35. Second Five Year plan was based on a model developed by :
(A) C.H. Hanumantha Rao (B) P.C. Mahalanobis
(C) A.K. Sen (D) K.N. Raj

Ans. b

36. The theory of unlimited supply of labour was proposed by :
(A) J.M. Keynes (B) Robert Solo
(C) A. Lewis (D) Roy Harrod

Ans. c

36. The difference between total revenue and total expenditure is called :
(A) Capital deficit
(B) Revenue deficit
(C) Fiscal deficit
(D) Budgetary deficit
Ans. d

37 . Borrowings from foreigners are known as :
(A) Export of goods
(B) Unrequited receipts
(C) Capital receipts
(D) Current receipts

Ans. d

38. Quantitative restrictions on imports by a country will lead to :
(A) Decreased demand for imported products
(B) Increased demand for imported products
(C) Increased supply of imported products
(D) Decreased supply of imported products

Ans. d
39. As per the UNDP's Global Human Development Report 2007, India's relative rankingout of 177 countries in respect of HDI was :
(A) 123
(B) 131
(C) 128
(D) 125

Ans. c

40. Consider the following statements and select the correct answer from the codes given below for questions 41 to 46 (Assertion and Reasoning type item).

Assertion (A) : Under oligopoly, all firms are aware of their inter-dependence.Reason (R) : Personal rivalries do not exist among firms under oligopoly.
(A) Both (A) and (R) are false
(B) Both (A) and (R) are true but (R) is not the explanation of (A)
(C) (A) is true, but (R) is false
(D) (A) is false, but (R) is true

Ans. c. (A) is true, but (R) is false

41. Assertion (A) : Giffen goods have a positively sloped demand curve.
Reason (R) : The positive substitution effect in their case is more than offset by negative income effect.
(A) Both (A) and (R) are true and (R) is the correct explanation of (A)
(B) (A) is true, but (R) is false
(C) Both (A) and (R) are false
(D) Both (A) and (R) are true, but (R) is not the correct explanation of (A)

Ans. a.Both (A) and (R) are true and (R) is the correct explanation of (A)

42. Assertion (A) : According to Hicks, trade cycle occurs due to the interaction between
multiplier, and accelerator. Reason (R) : In Hicksian business cycle theory, accelerator is impotent in the depression phase.
(A) Both (A) and (R) are true and (R) is the correct explanation of (A)
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A)
(C) Both (A) and (R) are false
(D) (A) is true, but (R) is false

Ans. b.Both (A) and (R) are true, but (R) is not the correct explanation of (A)

43. Assertion (A) : Duesenberry hypothesised that consumption - income relationship is
irreversible.
Reason (R) : Consumption depends not only on current income but also on previous peak income.
(A) Both (A) and (R) are true, but (R) is not the correct explanation of (A)
(B) Both (A) and (R) are true, and (R) is the correct explanation of (A)
(C) (A) is true, but (R) is false
(D) Both (A) and (R) are false

Ans. a. Both (A) and (R) are true, but (R) is not the correct explanation of (A)

44. Assertion (A) : Backwash effects imply an unfavourable situation arising in
underdeveloped countries. Reason (R) : Undue emphasis on exports of raw-materials at the expense of the growth of domestic manufacturing.
(A) (A) is true, but (R) is false
(B) Both (A) and (R) are false
(C) Both (A) and (R) are true and (R) is the correct explanation of (A)
(D) Both (A) and (R) are true, but (R) is not the correct explanation of (A)

Ans. c.Both (A) and (R) are true and (R) is the correct explanation of (A)

45. Assertion (A) : Low levels of labour productivity exist in underdeveloped countries.Reason (R) : It is due to the lack of physical capital.
(A) Both (A) and (R) are false
(B) (A) is true, but (R) is false
(C) Both (A) and (R) are true and (R) is the correct explanation of (A)
(D) Both (A) and (R) are true, but (R) is not the correct explanation of (A)

Ans. b (A) is true, but (R) is false

46. Consider the following statements for Indian Millennium Deposits (IMDs) scheme.

1. The scheme was launched by the Reserve Bank of India.

2. It was intended for NRIs and resident Indians both.

3. The tenure of IMDs was 5 years.

Which of the statements given above is/are correct?

(a) 3 only

(b) 2 only

(d) 2 and 3

Ans. (a)

47. Consider the following components of money supply in India

1. Currency in circulation.

2. Banker’s deposits with the RBI

3. Other deposits with the RBI

4. Demand deposits of banks

Which of the above are the components of Reserve Money?

(a) l and 3

(b) l, 2 and 3.

(d) 2, 3 and 4

Ans. (B)

48. Which category of the target groups is not included in the SHG bank linkage programme for micro-finance to agriculture?

(a) Unemployed non-agricultural labourers

(b) Agricultural and non-agricultural labourers

(d) Artisans and craftsmen

Ans. (a)

49. Which one of the following countries has the highest life expectancy at birth?

(a) Pakistan

(b) India

(d) Sri Lanka

Ans. (d)

50. According to Census-2001 data, what is the urban population as percentage of total population of India?

(a) 23.3%

(b) 25.7%

(d) 28.9%

Ans. (c)

51. Which one of the following committees was set up to review the concept of poverty line?

(a) S. Chakravarty Committee

(b) D.T, Lakdawala Committee

(d) R.C. Dust Committee

Ans. (b)

52. Match List-I with List-II and select the correct answer using the code given below the lists:

List –I List-II

(Type of Unemployment) (Associated Fact)

A. Frictional Unemployment 1.Non-availability of job

B. Structural Unemployment 2. Marginal productivity is zero

C. Seasonal Unemployment 3. Use of obsolete technology for production

D. Disguised Unemployment 4. Population pressure on land

Code:

A B C D

(a) 4 2 1 3

(b) 1 3 4 2

(d) 1 2 4 3

Ans. (b)

543 According to the 60th Round of NSSO Survey on Employment and Unemployment, unemployment rate on current daily status basis (number of person days per 1000 person days) was highest for which one of the following categories?

(a) Rural male

(b) Rural female

(d) Urban female

Ans. (a)

54. Assertion (A) : Fisher’s index number is an ideal one.

Reason (R) : In the Fisher’s index number, the upward bias of Laspeyre’s index and downward bias of Paasche’s index are balanced to a great extent.

Codes:

(a) Both A and Rare individually true and R is the correct explanation of A

(b) Both A and R are individually true but R is not the correct explanation of A

(d) A is false but R is true -

Ans. (c)

55. What is the correct sequence of the Marxian stage theory of growth?

1. Slavery

2. Primitive Communism

3. Socialism

4. Communism

5. Feudalism

6. Capitalism

Select the correct answer by using the codes given below

(a) 1—2—3—4—5—6

(b) 2—1—5—6—3—4

(d) 2—1—5–6—4—3

Ans. (b)

56. What are the sufficient conditions for operation of stage theories of growth?

1. Well-integrated commodity and money markets.

2. Highly developed transport facilities

3. Well-trained workforce and an efficient bureaucracy

4. Existence of a federal structure.

Select the correct answer by using the codes given below

(a) 1, 2, and 4

(b) 2, 3, and 4

Ans. (d)

58. What is the major underlying assumption of efficiency wage models?

(a) Labour productivity depends on level of nutrition

(b) Labour productivity is independent of number of labourers -

(d) Capital and labour productivities are equal

Ans. (b)

59. Consider the following sectors:

1. Electrical Equipments

2. Service Sector

3. Food Processing Industries

4. Metallurgical Industries

Which one of the following is the correct sequence in ascending order in terms of their share in attracting FDI inflows in India?

(a) 4-3-2-1

(b) 1-2-3-4

(d) 1-2-4-3

Ans. (a)

60. Which one of the following is a component of disequilibrium mentioned often in the context of trade and development?

(a) Revenue gap

(b) Savings-investment gap

(d) Expenditure gap

Ans. (b)

61. The Feldman – Mahalanobis growth model, which one of the following strategies is followed?

(a) Emphasize the consumer goods first and then the investment goods

(b) Emphasize the investment goods first and consumer goods later

(d) Put emphasis on foreign trade only

Ans. (c)

62. Match List-I with List-II and select the correct answer by using the code given below the lists:

List-I List -II

(Model) (Proposition)

A. Marxist model of economic development 1.Give importance to

non-economic variables

B. Harrod-Domar growth model 2. Flexible capital-output ratio is assumed

C. Solow’s growth model 3. Productive capacity is equal to

aggregate demand

D. Kaldor’s growth model 4. Structural Mal –adjustment in a

growing economy

Code:

A B C D

(a) 4 2 3 1

(b) 1 3 2 4

(d) 1 2 3 4

Ans. (c)

63. Inverted-U hypothesis of Kuznets is associated with movement of which one of the following?

(a) Consumption inequality

(b) Wealth inequality

(d) Tax inequality

Ans. (c)

64. Which one of the following is the correct expression for the actual rate of growth (g)?

(a) g = s/c

(b) g = s x c

(d) g =

Where s = the ratio of saving to income

c = actual incremental capital- output ratio

Ans. (a)

65. Theory of linkages is most appropriate for which kind of development models?

(a) Balanced growth models

(b) Unbalanced growth models

(d) One sector growth models

Ans. (b)

66. Which one of the following is not a component of foreign aid of a country?

(a) Bilateral grant

(b) Multilateral grant

(d) Commercial borrowing

Ans. (d)

67. What is the assumption that economic growth will percolate down to all sectors, known as?

(a) Dispersal theory

(b) Trickle down theory

(d) Decentralized growth theory

Ans. (b)

68. In plan models, which type of model is generally used to check consistency among various sectors?

(a) Harrod -Domar model

(b) Input-output model

(d) Solow model

Ans (b)

69. Consider the following A dual economy implies

1. the existence of domestic and export markets.

2. modern industry and commercial agriculture co-existing with subsistence farming and traditional handicrafts.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Ans. (b)

70. Which one of the following does not constitute a part of the jurisdiction of WTO?

(a) Trade related tariff and non-tariff barriers

(b) Trade related intellectual property rights

(d) Regional trade agreements

Ans. (d)

71. Match List - I with List - II and select the correct answer using the code given below the lists:
List-I (Property of a Plan)
A. Feasibility
B. Consistency
C. Optimality

List-II (Model used)
1. Input-output model
2. Linear programming
3. Harrod-Domar type equation

A B C
a. 1 2 3
b. 3 1 2
c. 2 3 1
d. 1 3 2
Ans. c
72. Match List - I with List - II and select the correct answer using the code given below the lists:
List - I (Economist)
A. Ragner Nurkse
B. Paul N. Rosenstein-Rodan
C. Gunnar Myrdal
D. A.O. Hirschman

List - II (Concept/Theory)
1. Backwash effects
2. Theory of balanced growth
3. The big push theory
4. Theory of unbalanced growth

A B C D
a. 2 1 3 4
b. 4 3 1 2
c. 2 3 1 4
d. 4 1 3 2

Ans. a

73. Using Harrod-Domar growth equation, what is the rate of growth of a closed economy with C/Y = 3/4 and ÄK/ÄY = 3 where C = consumption, Y =output, K = capital?
a. 8.66%
b. 8.50%
c. 8.33%
d. 7.50%
Ans. d
74. Who among the following developed the wage-goods model?
a. M. Dobb
b. A.K.Sen
c. Vakil and Brahmananda
d. P. C. Mahalanobis

Ans. c

75. Match List - I with List - II and select the correct answer using the code given below the lists:
List - I (Concept)
A. Vicious circle of poverty
B. Balanced growth
C. Big push
Ans. a
List - II (Explanation)
1. Massive increase in investment to initiate economic development in LDCs
2. A stagnant low level of investment
3. Simultaneous investment in all interrelated industries

A B C
a. 2 3 1
b. 1 2 3
c. 2 1 3
d. 1 3 2
Ans. a
76. Which one of the following statements is correct?
According to the classical economists, the existence of unemployment at any time is only of temporary nature and can be considered as
a. structural unemployment
b. cyclical unemployment
c. frictional unemployment
d. disguised unemployment
Ans. c
77. Which one of the following statements is correct?
Creeping inflation is a situation in which the rate at which price level rises is
a. very high
b. high
c. moderately high
d. slow
Ans b
78. Which of the following groups are adversely affected by inflation?
1. Wage earners in the informal sector
2. Profit earners
3. Salary earners with salaries indexed to inflation
4. Pensioners with fixed pensions

Select the correct answer using the code given below:
13 of 13
a. 1 and 2
b. 3 and 4
c. 1 and 4
d. 2 and 3
Ans. c

79. Which one of the following statements is correct? The Heckscher - Ohlin theory states that the most important cause of trade is the difference in -
a. preferences
b. technology
c. magnitude
d. factor endowments
Ans a
80. Which one of the following statements is correct? The Leontief Paradox makes
a. a critical analysis of Haberler’s theory of opportunity cost
b. an empirical study of factor-price equalization theory of Samuelson
c. an empirical testing of Mills’ theory of reciprocal demand
d. an empirical testing of Heckscher — Ohlin theory of international trade
Ans. c
81. What is the ratio between the price of a country’s export goods and price of its import goods known as?
a. Single factoral terms of trade
b. Double factoral terms of trade
c. Net barter terms of trade
d. Income terms of trade

Ans. c

82. Prebisch-Singer thesis enunciates which of the following?

1. International trade has been operating as a mechanism of international inequalities and has, therefore, retarded the development of less developed countries.

2. The strategy of import substitution as a means to achieve self-sufficiency in industrial production, has led to ma! allocation of resources and a very bad effect on industrial productivity.

Select the correct answer by using the code given below

(a) l only

(b) 2 only

(d) Neither 1 nor 2

Ans. (a)

83. Which one of the following best characterizes the Bretton Woods System of exchange rates?
a. Adjustable fixed exchange rates
b. Fixed exchange rates
c. Adjustable pegged exchange rates
d. Pegged exchange rates

. Which of the following are the basic components of a typical IMF stabilization programme?
1. Liberalization of foreign exchange
2. Devaluation of the official exchange rate
3. A comprehensive anti-inflation programme
4. General opening-up of the economy to international commerce including foreign investment

Select the correct answer using the code given below
a. 1 and 3 only
b. 2 and 4 only
c. 1, 3 and 4 only
d. 1, 2, 3 and 4

. Ans. c

84. Consider the following:
1. Kennedy Round of negotiations
2. Uruguay Round of negotiations
3. Tokyo Round of negotiations

Which is the correct chronological sequence of the above?
a. 1 . 2 - 3
b. 3 . 1 - 2
c. 1 - 3 . 2
d. 2 - 1 – 3

Ans. d

85. Which of the following is meant by growth in the context of growth and development?
a. Growth of gross national product in money terms
b. Growth of per capita income in money terms
c. growth of gross national product in real terms
d. Growth of per capita income in real terms

Ans. c

86. On which of the following grounds is increasing inequality justified in initial stages of development?
a. It puts greater incomes in the hands of those who have greater average propensity to consume
b. It puts greater incomes in the hands of those who have greater average propensity to save
c. It puts greater incomes in the hands of those who have greater marginal propensity to consume
d. It puts greater incomes in the hands of those who have greater marginal propensity to save

Ans. d

87. What is the correct sequence of the following approaches to development in terms of their chronological emergence?
1. Basic needs approach
2. Per capita income approach
3. Human Development Index Approach

Select the correct answer using the code given below
a. 1 - 2 – 3
b. 2 – 1 – 3
c. 2 - 3 – 1
d. 1 - 3 – 2

Ans d

88. The Mahalanobis model was developed for which of the following plans?
a. First Five Year Plan
b. Second Five Year Plan
c. Third Five Year Plan
d. Fourth Five Year Plan

Ans. c

89. Which one of the following models explains the paradox pertaining to the rural-urban migration in the context of rising urban employment?
a. Lewis model
b. Todano model
c. Solow model
d. Mahalanobis model

Ans. b

90. Consider the following statements: Lewis’ model of development with unlimited supplies of labour will fail to work to the full extent if
1. there is no disguised unemployment in the traditional sector.
2. modern sector wages do not remain constant up to the point that surplus labour is exhausted.
3. investment in the modern sector is labour-saving.

Which of the statements given above is/are correct?
a. 1 only
b. 1 and 2 only
c. 2 and 3 only
d. 1, 2 and 3

Ans. a

91. Match List-I with List-II and select the correct answer using the code given below the lists:
List-I
A. Aggregate Growth Model
B. Multi-sector Growth Model
C. Harrod-Domar Growth Model
D. The False Paradigm Model

List-I
1. Western models as applied to the situation of developing countries
2. Analysis of growth in terms of interdependence of sectors
3. Deals with the entire economy by examining a set of important macro variables
4. For a specific growth rate and a given capital output ratio, the required rate of domestic investment is determined
A B C D
a. 4 2 3 1
b. 3 1 2 4
c. 3 2 4 1
d. 4 3 1 2

Ans. c

92. Under which one of the following fundamental assumptions, Solow was able to show that steady state growth was possible and stable?
a. Flexible K/L ratio
b. Flexible S/Y ratio
c. Constant growth rate of population
d. Constant rate of technical change

Ans. c

93. Consider the following statements: According to the law of variable proportions total product is maximum when
1. marginal product becomes zero.
2. marginal product curve cuts average product curve from above.
3. slope of marginal product curve is zero.
4. tangent to the total product curve is parallel to the horizontal axis.

Which of the statements given above are correct?
a. 1 and 4
b. 3 and 4
c. 1 and 3
d. 2 and 3

Ans. a

94. Which of the following is not correct in respect of Cobb- Douglas production function?
a. It was originally based on the empirical study of US manufacturing industry.
b. It is a linearly homogeneous production function, taking into account two factors, labour and capital, for the entire output of the manufacturing industry.
c. It tells us that out put depends upon labour and capital, and that part of output which cannot be explained by labour and capital, is attributed to the residual.
d. It is based on the assumption of operation of law of diminishing returns.

Ans. c

95. Income consumption line of the ‘Consumer Theory’ is analogous in ‘Production Theory’ to which one of the following?
a. Expansion path
b. Isoquant line
c. Ridge line
d. Isocost line

Ans. c

96. Suppose a fisherman has fishing net and a boat, He alone hunts fish in sea for which he has to pay no license fee etc. Fish, caught by him, wifi have which one of the following?
a. Zero economic cost of production as he makes no out-of-pocket payment to anybody and is working of his own
b. Negative economic cost of production because he enjoys fishing and has to make no payment
c. Positive cost of production due to his sacrificing the opportunity of working elsewhere and renting out fishing net and boat etc.
d. Infinite cost of production

Ans. a

97. Short-run marginal cost of a firm does not contain any element of which of the following?
a. Costs of raw materials
b. Salaries of the managerial staff
c. Wages of labour engaged on daily basis
d. Cost of fuel for operating machines engaged in production

Ans. c

98. Match List - I with List-II and select the correct answer using the code given below the lists:
List - I
(Market Type)
A. Perfect competition
B. Monopoly
C. Monopolistic competition
D. Oligopoly

List - II
(Implication)
1. Collusion of firms
2. Excess capacity
3. Uniform price
4. Blocked entry

A B C D
a. 2 4 3 1
b. 3 1 2 4
c. 2 1 3 4
d. 3 4 2 1

Ans. c

98.In Arthur Lewis's model, the surplus of output over wages paid is reinvested. Which of the following does this lead to ?

1. Increase in output.

2. Increase in labour productivity.

3. Increase in employment.. Select the correct answer using the code given below:

(a) 1 and 2 (b) 1 and 3

Ans. c

99. (i) Inventory Theoretic Approach
(ii) Restatement of the Quantity Theory of Money
(iii) Fisher's Equation of Exchange
(iv) Tableau Economique
Codes :

(i) (iii) (ii) (iv)
(iii) (ii) (i) (iv)
(iv) (iii) (i) (ii)
(ii) (i) (iv) (iii)

Ans. a

100. (i) Introduction of Rolling Plan
(ii) The movement from Planning to Market mechanism
(iii) Feldman-Mahalanobis Model
(iv) Declaration of Plan holiday
Codes :

a) (i) (iii) (iv) (ii)

b) (ii) (iv) (i) (iii)

c) (iii) (iv) (i) (ii)

d) (i) (iii) (ii) (iv)

Ans c

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Friday, April 12, 2013

UGC PAPER III ECONOMICS MCQS

98.In Arthur Lewis's model, the surplus of output over wages paid is reinvested. Which of the following does this lead to ?

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