MODEL EXAMINATION 2011

HSE II

PART III E CONOMICS

TIME- 2.5 HOURS COOL OF TIME -15 MINUTES

1.Explain how each of the following events affects an economys PPC (a)The number of unemployed workers increases (b)New technology is introduced 2.Find the odd one out and justify (a)Butter and jam, Shoes and socks, Tea and Coffee (b)Income tax, Corporate Tax, wealth Tax, sales tax score-2

(Sc ore-2)

3. Suppose a consumers preferences are monotonic. What can you say about her preference Ranking over the bundles (7,7) ,(7,6), and (6,6) 4. Calculate GNP and National Income NDP Depreciation Net income from abroad Indirect Tax Subsidies 5. Complete the following BUDGET 7000 CR 800 400 300 200 score-3 score-2

6. Deficit budget=are, Suppose there

Receipts=Expenditure=----

Receipts>Expenditure=--------

6.Suppose only two firms manufacturing vehicles in India TATA and Ashok Leyland., What form of market is this? 7 .If C= 40+0.8y , I=60, G=40, T=50,X=90,M=50+0.05y (a) Find equilibrium level of income (b) What happens to equilibrium level of income And net export balance when Govt. purchase increases from 40 to 50? 8. Classify the following under appropriate heads. Shipping, Petrol, insurance, tea, rubber, banking Score-2 Score-5 Score-1

9.The diagram shows the demand for and supply of pulses in 2006.As a result of drought , the production of pulses decreased by 25% in 2007.

(a)Indicate the change diagrammatically (b)Show the changes in equilibrium quantity and price. Score-2

10.If change in autonomous expenditure= 80 cr, MPC=0.6 calculate the change in income. Score-2 11. Fill in the blanks (a) Net investment = Gross investment (b) M3=M1+--------------------------Gross fiscal deficit = Total expenditure- ---------------------------

(d)TC=TR=-------------------

12.A bond promises Rs.400/ at the end of two years with no intermediate return. Interest rate is 5% per annum. What is the present value of the bond. Score-3

13. Observe the following diagram and (a) identify the point of optimal choice of the consumer (b) Give reasons Score-3

14. The Govt. has decided to impose unit tax for sugar. How does it affect it the price and quantity supplied? Score-2 15. Complete the following table Units of labour 0 1 2 3 4 MP 10 12 14 14 TP AP

12 Score-2

16. Calculate Ex-ante aggregate demand when autonomous expenditure is Rs.60/cr and MPS=0.3 And level of income 3000 cr. State whether the economy is in equilibrium or not. Score-3

17. Let the production function of a firm be Q=2L K . Find out the maximum output with 25 units of L and100 units of K. Score-3 18. Explain the relationship between speculative demand for money and rate of interest with suitable diagram. Score-6 19.GDP as an indicator of economic welfare has some limitations. What are they? Score-3 20.at the market price of Rs.10/, a firm supplies 4 units of output. The market price increases to Rs.30 and price elasticity is 1.25. What quantity will the firm supply at the new price? Score-3 21. The market demand schedule for a commodity and the TC for a monopoly firm producing the commodity is given. Calculate the following. Quantity Price TC 1 52 10 2 44 60 3 31 90 4 26 100 5 22 102 6 19 105 7 16 109 8 13 115 125

(a) MR and MC schedules.(b)The quantities for which MR and MC are equal. The equilibrium quantity of output and the equilibrium price of the commodity.(d) The TR, TC and total profit in equilibrium. Score-8 22.explain the circular flow of income in 2 Sector model? Identify h real flow and money flow. Score-5 23. Classifywith appropriate titles. Raw cotton, wheat, bread, car, tyre, shirt 24. Identify the cost curves given below Score-2

25. Match the following.

1-c / 1-c

Tax multiplier

-c / 1-c 1/(1-c)

Foreign trade Multiplier Balanced budget multiplier

1/(1-c+M)

Expenditure multiplier Score-4

26.The income of a consumer, is given as Rs.40/ , good one is priced as Rs.8/ and good 2 is Rs. 5/ respectively. (a) Write the equation of budget line and draw the budget line (b) How does the budget line change when income increases to Rs.80,while price remain constant (c)Show the change in budget line when price of good one alone increases (d)show the change in budget line when price of good 2 alone decreases. Score-5