Section - I
1. Candidate should attempt any eight of the following parts in about 50 words each.
Marks: 5 × 8 = 40
(a) What were the mercantilist's views on trade? How does their concept of national wealth differ from today's view ?
(Comment for solution.)
(b) "Because corporations do not actually raise any funds in secondary markets, they are less important to the economy than the primary markets." Comment.
(Comment for solution.)
(c) Explain why the tax multiplier is negative and is smaller in absolute value than the government expenditure multiplier.
(Comment for solution.)
(d) Distinguish between Convergent series of investment and Divergent series of investment.
(Comment for solution.)
(e) Distinguish between economic growth and economic development. Identify any four indicators of economic development.
(Comment for solution.)
(f) Differentiate between developed and underdeveloped countries on the basis of impact of the shocks and stimulants.
(Comment for solution.)
(g) Why is Ricardo's explanation of the law of comparative advantage perceived as unacceptable ? What acceptable theory can be used to explain the law ?
(Comment for solution.)
(h) What is 'natural' about the natural rate of unemployment ? Why might this differ across countries ?
(Comment for solution.)
(i) Distinguish between development via excess capacity of SOC and development via shortage of SOC.
(Comment for solution.)
Section - II
Answer any ten of the following question in about 150 words each.
Marks: 12 × 10 = 120
2. For a developing country to grow, it needs capital. The major source of capital in most countries is domestie saving. But the goal of stimulating domestic saving could be in conflict with government policies aimed at reducing inequality in the distribution of income. Comment on this trade-off between equity and growth.
(Comment for solution.)
3 (a). When there is a decline in interest rate, which type of bond will the investor prefer to hold - long term bonds or short term bonds ? Why so ? Which type of bond has greater interest rate risk ?
(Comment for solution.)
3 (b). Is deficit necessarily bad and surplus necessarily good in balance of payments? Comment.
(Comment for solution.)
4. What is the difference between a nominal tariff and an effective tariff ? What is the usefulness of the concept of effective protection ?
(Comment for solution.)
5. What is an Option contract ? How is it different from the Future contract ? Explain the merits and demerits of both the contracts.
(Comment for solution.)
6. Explain why Kaldor model of growth is viable only if marginal propensity to save from profits exceeds that from wages.
(Comment for solution.)
7. What factors are the major determinants of output and employment in the classical systm ? What role does aggregate demand have in determining output and employment ?
(Comment for solution.)
8. Omission of human capital and knowledge capital could be the most important sources of bias the case of the 'Leontief Paradox'. Explain.
(Comment for solution.)
9. Explain the concepts of 'Trade Diversion' and 'Trade Creation' in the context of a 'Custom Union'.
(Comment for solution.)
10. Explain the different forces leading to the end of capitalism in the Schumpeter model of economic development.
(Comment for solution.)
11. What are the assumptions in the Keynesian Multiplier Theory ? Examine whether it is feasible to apply this theory to an underdeveloped economy.
(Comment for solution.)
12. What is the efficient market hypothesis ? Highlight the salient features of its theree versions.
(Comment for solution.)
Section - III
Answer any two of the following questins in about 250 words each.
Marks: 20 × 2 = 40
13. Distinguish between balanced growth and unbalanced growth strategies with illustrations. Which growth strategy is applicable for Indian economy ? Substantiate your answer describing the theory and giving valid justifications.
(Comment for solution.)
" A country is poor because it is poor" implies that a circular constellation of forces tend to act and react upon one another in such a way as to keep a poor country in a state of poverty." Explain the theory behind the statement with illustrations.
(Comment for solution.)
15. What are the reasons for holding money in the Keynesian system? Define and explain the speculative demand for money and liquidity trap. Explain the relation between speculative demand for money and the interest rate.
(Comment for solution.)
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