Previous Year Paper Solution | Indian Economic Service Exam 2018 | General Economics - II

Section - A

1. Answer the following questions in about 100 words each:

Marks: 6 × 5 = 30



(a) Compare and contrast the notion of equilibrium in classical and Neoclassical thought.

(Comment for solution.)


(b) Consider an economy with three final goods industries X, Y and Z. In 2016 and 2017, the prices per unit, P, and outputs q, in units of X, Y, Z, per year were as follows:
(i) What are the GDP levels in both years in current prices and 2016 prices?
(ii) BY what percentage has the economy grown in real terms ? BY what percentage have prices increased?

(Comment for solution.)


(c) Explain the neutrality of money.

(Comment for solution.)


(d) Describe the roles played by banks and stock markets in economic growth.

(Comment for solution.)


(e) Discuss Poverty-Growth-Inequlity triangle in the process of sustainable economic development.

(Comment for solution.)


(f) The following table provides the productivity of two countries : India and Bangladesh in terms of production of paddy and textiles. Since India appears to enjoy more efficiency in production of both the goods, do you think that trade is not beneficial between the two countries ? Justify your answer.

(Comment for solution.)



Section - B

Answer any SIX out of the following NINE questions in about 200 words each.

Marks: 15 × 6 = 90



2. What are the similarities between and the differences in the Keynesian and the Monetarist models ?

(Comment for solution.)


3. Explain the basic features of Kaldor's model of growth and distribution.

(Comment for solution.)


4. Discuss W. W. Rostow's stages theory of economic development.

(Comment for solution.)


5. Describe the elements of an Optimal Insurance Contract.

(Comment for solution.)


6. State and prove the Stolper Samuelson Theorem in international trade. What is the magnification effect ?

(Comment for solution.)


7. With respect to devaluation. briefly explain the J curve effect.

(Comment for solution.)


8. How far can Trade Related Intellectual Property Rights (TRIPS) encourage innovations in developing countries ?

(Comment for solution.)


9. What are the salient features of the Eurozone Crisis ?

(Comment for solution.)


10. Discuss the importance of inequality-adjusted human development index (IHDI) and gender inequality index (GII) in connection with the status of overall human development in an economy.

(Comment for solution.)




Section - C

Answer any FOUR of the following SIX questions in about 300 words each:

Marks: 20 × 4 = 80



11 (i). Consider a hypothetical economy (all figures in lakhs crores for the year 2017) where consumption spending was Rs. 100, government spending was Rs. 50,

(Comment for solution.)


11 (ii). In an economy, the cash reserve ratio is 0.2, the cash deposti ratio is 0-6. There is Rs. 375 in currency and Rs. 125 in commercial bank reserves. Calculate the money supply.

(comment for solution.)


12. Derive the steady state equilibrium growth path in the Solow model. What happens to the system when technical progress is introduced ?

(comment for solution.)


13. What is the Liquidity Trap ? Discuss the effectiveness of fiscal and monetary policy in the context.

(comment for solution.)


14. Assume that there are following changes occurring in open economy separately. Find their effects on national income and Balance of Trade, individually, assuming that marginal propensity to save is 0.1 and marginal propensity to import in the economy is 0.15 Find the effects of :

(i) Domestic investments increase by Rs. 100 crores
(ii) Exports increase by Rs. 100 crores
(iii). Imports increase by Rs. 100 crores

Q. No. - 15 Characterize the role of a financial instrurnent in the financial crisis of 2008.

(comment for solution.)


Q. No. - 16 State briefly the roles of the IMF and World Bank in shaping the framework of economic development from the Second World War to the present.

(comment for solution.)


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