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UGC NET DEC 2008 : ECONOMICS PAPER II

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Signature and Name of Invigilator OMR Sheet No. : ...................................................... (To be filled by the Candidate) 1. (Signature) Roll No. (Name) (In figures as per admission card) Roll No. 2. (Signature) (In words) (Name) Test Booklet No. D 0 1 0 8 PAPER II ECONOMICS Time : 1 hours] Number of Pages in this Booklet : 24 [Maximum Marks : 100 Number of Questions in this Booklet : 50 U Instructions for the Candidates 1. 2. 3. 4. 1. U DU U S U U U U Write your roll number in the space provided on the top of this page. This paper consists of fifty multiple-choice type of questions. At the commencement of examination, the question booklet will be given to you. In the first 5 minutes, you are requested to open the booklet and compulsorily examine it as below : (i) To have access to the Question Booklet, tear off the paper seal on the edge of this cover page. Do not accept a booklet without sticker-seal and do not accept an open booklet. (ii) Tally the number of pages and number of questions in the booklet with the information printed on the cover page. Faulty booklets due to pages/questions missing or duplicate or not in serial order or any other discrepancy should be got replaced immediately by a correct booklet from the invigilator within the period of 5 minutes. Afterwards, neither the question booklet will be replaced nor any extra time will be given. (iii) After this verification is over, the Test Booklet Number should be entered in the OMR Sheet and the OMR Sheet Number should be entered on this Test Booklet. Each item has four alternative responses marked (A), (B), (C) and (D). You have to darken the oval as indicated below on the correct response against each item. Example : A B C 2. - 3. U U U, - S U U U - S U (i) (ii) U DU U U U - S DU U U U U U U S DU / U U U U U S S U U U U U S U U - S U U - S U UQ (iii) - S R OMR U U U U OMR R - S U U 4. U U (A), (B), (C) (D) U U U U U D A B C D (C) U 5. U U I U U- U where (C) is the correct response. 5. Your responses to the items are to be indicated in the Answer Sheet given inside the Paper I booklet only . If you mark at any place other than in the ovals in the Answer Sheet, it will not be evaluated. 6. Read instructions given inside carefully. 7. Rough Work is to be done in the end of this booklet. 8. If you write your name or put any mark on any part of the test booklet, except for the space allotted for the relevant entries, which may disclose your identity, you will render yourself liable to disqualification. 9. You have to return the test question booklet to the invigilators at the end of the examination compulsorily and must not carry it with you outside the Examination Hall. 10. Use only Blue/Black Ball point pen. 11. Use of any calculator or log table etc., is prohibited. 12. There is NO negative marking. D 0108 - S U U U U S U U- U S S U U U U U S U U U , U 6. U U 7. (Rough Work) S DU U U 8. U- S U , U U U U 9. U # U U- S U U U U U # U U U / U Z U S U 11. U ( U U) U U 12. U U 10. 1 P.T.O. ECONOMICS PAPER II Note : This paper contains fifty (50) multiple choice questions, each question carrying two (2) marks. Attempt all of them. 1. The Cobb-Douglas Production Function assumes that the elasticity of substitution is : (A) One (B) Two (C) Three (D) Four 2. A consumer attains his/her equilibrium at the point where : (A) Total Utility5Price (B) Marginal Utility > Price (C) Marginal Utility < Price (D) Marginal Utility5Price 3. Pareto Optimality can take place at any point on : (A) Laffer Curve (B) Engel Curve (C) Contract Curve (D) Lorenz Curve 4. According to Say s Law, unemployment can be removed by : (A) Rise in wages (B) Fall in wages (C) Taxing wages (D) Subsidising wages 5. Which of the following is generally referred to as a broader measure of money supply ? (B) M2 (C) M3 (D) M4 (A) M1 6. In case of proportional relation between consumption and income : (A) APC > MPC (B) APC5 MPC (C) APC < MPC (D) APC 5MPS 7. Indicative Planning is : (A) Rigid (C) Autocratic 8. The (A) (B) (C) (D) 9. In Nurksian formulation of the thesis of the vicious circle of poverty in the context of an underdeveloped country, the inducement to invest is limited by : (A) Lack of savings (B) Lack of investment opportunities (C) Size of the market (D) The policy of the government D 0108 (B) (D) Comprehensive Flexible major difference between Harrod-Domar and Solow models of growth lies in : Substitutability between labour and capital Returns to Scale Returns to variable factor Growth of income 2 S II U (50) S D (2) U 1. - U S (A) 2. (B) (C) 5 (B) > (C) < (D) 5 U U U U ( c U ) U S (A) 4. U U # U (A) 3. (D) U (B) (C) U U (D) U U, U U m U # (A) (B) U U U (C) 5. U U U U U (D) U ? (A) 6. M2 (C) M3 APC > MPC APC < MPC (B) (D) M4 (D) APC5MPC APC5MPS (B) (C) U h U U- U U U U U S (A) U S (B) (C) 9. (D) (A) 8. (B) U S (A) (C) 7. M1 U U (D) h - , c , U U m U h (A) (B) U (C) U U (D) U U D 0108 3 P.T.O. 10. Taxes raised are credited into : (A) Consolidated Fund (C) Public Accounts 11. Items which are of recurring nature are covered under : (A) Capital Budget (B) Revenue Budget (C) Cash Budget (D) Unified Budget 12. The difference between total revenue and total expenditure is called : (A) Capital deficit (B) Revenue deficit (C) Fiscal deficit (D) Budgetary deficit 13. Borrowings from foreigners are known as : (A) Export of goods (B) (C) Capital receipts (D) 14. 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 15. According to Economic Survey 2007-2008, India s exports as per cent of GDP in 20062007 stood at : (A) 11.0 (B) 14.0 (C) 16.0 (D) 19.0 16. The fiscal deficit of the Central Government in India as percentage of GDP in 20062007 stood at : (A) 1.4 (B) 3.4 (C) 5.4 (D) 4.1 17. As per the UNDP s Global Human Development Report 2007, India s relative ranking out of 177 countries in respect of HDI was : (A) 123 (B) 131 (C) 128 (D) 125 18. Gross Domestic Savings as percent of GDP at current market prices in India in 20062007 was : (A) 30.8 (B) 34.8 (C) 37.7 (D) 39.2 19. In a regression equation of X on Y, bxy is equal to : (A) 20. byx (B) (B) (D) Contingency Fund Private Accounts Unrequited receipts Current receipts (C) r r Which of the following averages is known as root-mean square ? (A) Quadratic Mean (B) Harmonic Mean (C) Geometric Mean (D) Combined Mean D 0108 4 (D) r2 by x 10. U # (A) (B) S (C) 11. (D) U (A) 12. (B) (C) U U U (D) U U S U (D) U U U U (A) 13. U U (B) (C) U U (A) (B) U (C) 14. S (D) m U U U U U (A) O (B) h (C) h (D) O 15. 2007-08 U, 2006-07 GDP M U (A) 11.0 (B) 14.0 (C) 16.0 (D) 19.0 16. U U U U U 2006-07 GDP (A) 17. 1.4 (B) 3.4 (C) 5.4 (D) 4.1 2007 U s U U U U U, HDI , 177 U ? (A) 123 (B) 131 (C) 128 (D) 125 18. 2006-07 , U U U GDP (A) 30.8 (B) 34.8 (C) 37.7 (D) 39.2 19. X U Y U , bxy U U (A) 20. byx (B) (C) r r (D) r2 by x (D) - - (M U- -S U) ? (A) D 0108 m (B) 5 (C) P.T.O. Consider the following statements and select the correct answer from the codes given below for questions 21 to 30 (Assertion and Reasoning type item). 21. 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 22. 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) 23. Assertion (A) : According to Hicks, trade cycle occurs due to the interaction between multiplier, and accelerator. In Hicksian business cycle theory, accelerator is impotent in the Reason (R) : 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 24. 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 25. 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) D 0108 6 U U 21 30 ( U U ) U U U 21. (A) : (R) : U , S Z U M U Z m l (A) (B) (A) U (R) , U (C) (A) (R) (D) 22. (A) U (R) (A) (R) , U (A) : (R) : , U (R), (A) S c U U U M S , S , U m U U c U (A) U (B) (A) (R) (C) (A) U (R) (D) 23. (A) U (R) (A) U (R) , U , U (A) : (R), (A) S c U U (R), (A) S c U U U, U U U (R) : U h , U U (A) U (B) (A) U (R) U (C) (A) U (R) (D) 24. (A) U (R) (A) (R) , U (A) : (R) : (R), (A) (R), (A) K U U U U U U U (A) U (R) , U (B) (A) U (R) U (C) (A) (R) (D) (A) U (R) , U (A) : (R) : S c U U (A) 25. S c U U (R), (A) (R), (A) S c U U S c U U U S h U U U (A) (A) (B) (A) U (R) (C) (A) U (R) U (D) (A) U (R) , U D 0108 , U (R) (R), (A) S c U U (R), (A) 7 S c U U P.T.O. 26. Assertion (A) : Low levels of labour productivity exist in underdeveloped countries. Reason (R) : It is due to the lack of physical capital. (A) (B) (A) is true, but (R) is false (C) Both (A) and (R) are true and (R) is the correct explanation of (A) (D) 27. Both (A) and (R) are false Both (A) and (R) are true, but (R) is not the correct explanation of (A) Assertion (A) : In India, more and more farmers are getting pushed out of agriculture. Reason (R) : Their land base is becoming smaller. (A) (B) Both (A) and (R) are false (C) Both (A) and (R) are true, and (R) is the correct explanation of (A) (D) 28. (A) is true, but (R) is false Both (A) and (R) are true, but (R) is not the correct explanation of (A) Assertion (A) : Jagdish Bhagwati stated that a country, in its growth process, would experience immiserizing growth and deterioration of terms of trade . Reason (R) : Income elasticity of demand for the country s exports is high. (A) (B) (A) is false, but (R) is true (C) Both (A) and (R) are true and (R) is the correct explanation of (A) (D) 29. Both (A) and (R) are true (A) is true, but (R) is false Assertion (A) : Coefficient of Concurrent Deviations is calculated between the direction of deviations and not their magnitudes. Reason (R) : If it is desired to study the correlation between two series in a very casual manner. (A) (B) (A) is true, but (R) is false (C) Both (A) and (R) are true, but (R) is not the correct explanation. (D) 30. (A) is false, but (R) is true Both (A) and (R) are true and (R) is the correct explanation. Assertion (A) : James Buchanan viewed that primary burden of public debt is shifted to posterity. Reason (R) : Public debt is paid by taxing the posterity. (A) (A) is true, but (R) is false (B) (A) is false, but (R) is true (C) Both (A) and (R) are false (D) Both (A) and (R) are true and (R) is the correct explanation of (A). D 0108 8 26. (A) : (R) : S U U (A) (B) (A) (R) (C) (A) U (R) U (D) 27. (A) U (R) (A) U (R) , U , U (A) : (R) : (R), (A) (R), (A) S c U U U , ( ) U U U U U U U (A) (A) (B) (A) U (R) (C) (A) U (R) U (D) 28. S c U U (A) U (R) , U , U (A) : (R) (R), (A) S c U U (R), (A) S c U U , h U U U Z U (R) : (A) (B) (A) (C) (A) U (R) U (D) 29. (A) U (R) (A) (R) , U , U (A) : (R) (R), (A) S c U U S U (R) : / M U U (A) (B) (A) (C) (A) U (R) , U (D) 30. (A) (A) U (R) U , U (A) : (R) (R) , U (R), (A) (R), (A) S c U U S c U U U U U S U (R) : U U U (A) (A) (B) (A) (C) (A) U (R) (D) (A) U (R) U D 0108 , U (R) (R) , U (R), (A) 9 S c U U P.T.O. For questions No. 31 to 38, the candidates are required to tick (3) mark the option having the right chronological order. 31. (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 : (A) (iv) (iii) (i) (ii) (B) (i) (iii) (ii) (iv) (C) (ii) (iii) (i) (iv) (D) (iii) (i) (iv) (ii) 32. (i) Peacock-Wiseman hypothesis (ii) Buchanan s An Economic Theory of Clubs (iii) Wagner hypothesis (iv) Findlay Shirras s canons of public expenditure Codes : (A) (i) (iii) (ii) (iv) (B) (iii) (i) (iv) (ii) (C) (ii) (iv) (iii) (i) (D) (iii) (iv) (i) (ii) 33. (i) Inventory Theoretic Approach (ii) Restatement of the Quantity Theory of Money (iii) Fisher s Equation of Exchange (iv) Tableau Economique Codes : (A) (i) (iii) (ii) (iv) (B) (iii) (ii) (i) (iv) (C) (iv) (iii) (i) (ii) (D) (ii) (i) (iv) (iii) 34. (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) D 0108 10 31 38 , U U 31. U S h (ii) U U m- U h (iii) - h (iv) S $ (i) U (A) (B) (C) (D) 32. (iv), (i), (ii), (iii), (iii), (iii), (iii), (i), (i), (ii), (i), (iv), (ii) (iv) (iv) (ii) - $ (ii) h (iii) U (iv) U U U (i) U (A) (B) (C) (D) 33. (i), (iii), (ii), (iii), (iii), (i), (iv), (iv), (ii), (iv), (iii), (i), (iv) (ii) (i) (ii) U U U U (ii) US U U U U U U (iii) U (iv) U (i) U (A) (B) (C) (D) 34. (i), (iii), (iv), (ii), (iii), (ii), (iii), (i), (ii), (i), (i), (iv), (iv) (iv) (ii) (iii) U U (ii) U ( ) U (iii) U - U (iv) (i) U (A) (B) (C) (D) D 0108 (i), (ii), (iii), (i), (iii), (iv), (iv), (iii), (iv), (i), (i), (ii), (ii) (iii) (ii) (iv) 11 P.T.O. 35. (i) Specific Target-group Oriented Programmes (ii) Introduction of Family Planning (iii) Direct Anti-poverty Programmes (iv) Minimum Needs Programme Codes : (A) (ii) (i) (iv) (iii) (B) (i) (iii) (ii) (iv) (C) (iv) (iii) (i) (ii) (D) (iii) (ii) (iv) (i) 36. (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 : (A) (i) (iii) (ii) (iv) (B) (iii) (iv) (i) (ii) (C) (ii) (iii) (i) (iv) (D) (iv) (ii) (iii) (i) 37. (i) National Rural Employment Guarantee Programme (N.R.E.G.P.) (ii) Sampooran Gramin Rozgar Yojana (S.G.R.Y.) (iii) Antyodaya Anna Yojana (A.A.Y.) (iv) Pradhan Mantri Gram Sadak Yojana (P.M.G.S.Y.) Codes : (A) (i) (iv) (iii) (ii) (B) (iii) (i) (ii) (iv) (C) (iv) (ii) (iii) (i) (D) (iii) (iv) (ii) (i) 38. Chairman of the Finance Commission (i) N.K.P. Salve (ii) C. Rangarajan (iii) P.V. Rajmannar (iv) K.C. Niyogi Codes : (A) (i) (iv) (iii) (ii) (B) (iv) (iii) (i) (ii) (C) (iv) (i) (ii) (iii) (D) (iii) (i) (iv) (ii) D 0108 12 35. (i) c U U U U- (ii) U U U (iii) - U (iv) U (A) (B) (C) (D) (i) WTO U U (ii) WTO U U (iii) U WTO U U (iv) 36. (ii), (i), (iv), (iii), (i), (iii), (iii), (ii), (iv), (ii), (i), (iv), (iii) (iv) (ii) (i) WTO U U U (A) (B) (C) (D) (i) M U U U U (N.R.E.G.P.) (ii) U U U (S.G.R.Y.) (iii) (A.A.Y.) (iv) 37. (i), (iii), (ii), (iv), (iii), (iv), (iii), (ii), (ii), (i), (i), (iii), (iv) (ii) (iv) (i) (P.M.G.S.Y.) U (A) (B) (C) (D) 38. (i), (iii), (iv), (iii), (iv), (i), (ii), (iv), (iii), (ii), (iii), (ii), (ii) (iv) (i) (i) (i) . . . (ii) . U U (iii) . . U U (iv) . . U (A) (B) (C) (D) D 0108 (i), (iv), (iv), (iii), (iv), (iii), (i), (i), (iii), (i), (ii), (iv), (ii) (ii) (iii) (ii) 13 P.T.O. Matching item (Questions No. 39 to 46) : This consists of two lists of Events / Theories / Models / Statements, etc. and the other of authors / years. The candidates are required to match an item in one list with an item in the other and mark the correct matching option, given in the code. 39. List-I List-II (a) Limit pricing theory (i) E.H. Chamberlin (b) Selling Costs (ii) Robin Marris (c) Sales maximisation model (iii) J.S. Bain (d) Growth maximising model of the firm (iv) William Baumol Code : (a) (b) (c) (d) (A) (iii) (i) (iv) (ii) (B) (ii) (iv) (i) (iii) (C) (ii) (i) (iv) (iii) (D) (iii) (ii) (iv) (i) 40. List-I List-II (a) Increasing Returns to Scale (i) b1, b2 < 1 (b) Diminishing Returns to Scale (ii) b11b2 > 1 (c) Constant Returns to Scale (iii) b11b2 < 1 (d) Diminishing Returns to Factors (iv) b11b251 Code : (a) (b) (c) (d) (A) (i) (iv) (iii) (ii) (B) (iv) (i) (ii) (iii) (C) (ii) (iii) (iv) (i) (D) (ii) (iii) (i) (iv) D 0108 14 U U / h / U / U U / U -I -II U U U 39. -I -II (a) U h (i) . . U (b) (ii) U U (c) U U (iii) . . (d) h U U (iv) U (a) (b) (c) (d) (A) (iii) (i) (iv) (ii) (B) (ii) (iv) (i) (iii) (C) (ii) (i) (iv) (iii) (D) (iii) (ii) (iv) (i) -I 40. -II (a) h (i) b1, b2 < 1 (b) O (ii) b11b2 > 1 (c) S U (iii) b11b2 < 1 (d) U O (iv) b11b251 U (a) (b) (c) (d) (A) (i) (iv) (iii) (ii) (B) (iv) (i) (ii) (iii) (C) (ii) (iii) (iv) (i) (D) (ii) (iii) (i) (iv) D 0108 15 P.T.O. 41. List-I List-II (a) Revealed Preference hypothesis (i) A. Bergson (b) Quasi rent (ii) B.S. Minhas (c) Elasticity of substitution (iii) A. Marshall (d) Social welfare function (iv) P.A. Samuelson Code : (a) (b) (c) (d) (A) (iii) (i) (ii) (iv) (B) (iv) (iii) (ii) (i) (C) (iv) (i) (ii) (iii) (D) (ii) (iii) (iv) (i) 42. List-I List-II (a) Tableau Economique (i) Richard Stone (b) Life cycle hypothesis (ii) Robert Mundell (c) An open economy version of IS-LM model (iii) Francois Quesnay National income accounting (iv) Franco Modigliani (d) Code : (a) (b) (c) (d) (A) (ii) (iii) (iv) (i) (B) (iii) (i) (ii) (iv) (C) (iii) (iv) (ii) (i) (D) (iv) (iii) (i) (ii) List-I 43. List-II (a) Physical Quality of Life Index (i) W.W. Rostow (b) Organic Composition of Capital (ii) R.F. Harrod (c) Warranted rate of growth (iii) Morris D. Morris (d) Stages of growth theory (iv) Karl Marx Code : (a) (b) (c) (d) (A) (iv) (iii) (i) (ii) (B) (iii) (iv) (i) (ii) (C) (ii) (iii) (i) (iv) (D) (iii) (iv) (ii) (i) D 0108 16 41. -I -II U -I -II (a) U (i) . (b) (ii) . . (c) S (iii) . (d) (iv) . . U (A) (B) (C) (D) (a) (iii) (iv) (iv) (ii) (b) (i) (iii) (i) (iii) (c) (ii) (ii) (ii) (iv) (d) (iv) (i) (iii) (i) -I 42. -II (a) U (i) U U S U (b) (ii) U U U (c) IS-LM U S (iii) (iv) S U (d) U c U U U (A) (B) (C) (D) 43. (a) (b) (c) (d) (a) (ii) (iii) (iii) (iv) (b) (iii) (i) (iv) (iii) (c) (iv) (ii) (ii) (i) (d) (i) (iv) (i) (ii) -I h U h h S (i) (ii) (iii) (iv) -II U . U . U S U U. . U U U U . U U (A) (B) (C) (D) D 0108 (a) (iv) (iii) (ii) (iii) (b) (iii) (iv) (iii) (iv) (c) (i) (i) (i) (ii) (d) (ii) (ii) (iv) (i) 17 P.T.O. 44. 45. List-I (a) Income effect of devaluations (b) Price effect of devaluation (c) A measure to correct disequilibrium in BOP (d) International liquidity Code : (a) (b) (c) (d) (A) (ii) (i) (iii) (iv) (B) (iv) (iii) (ii) (i) (C) (iv) (ii) (i) (iii) (D) (iii) (ii) (i) (iv) 46. List-I (i) nc (b) np (c) nc X (iii) (d) np X (iv) r D 0108 (ii) r r r (b) (iii) (i) (ii) (iv) S.D.Rs Absorption approach List-II CACP Gadgil formula RBI SEBI List-II (a) Code : (a) (A) (ii) (B) (iii) (C) (iv) (D) (iii) (iii) (iv) (i) (ii) (iii) (iv) List-I (a) Regulation of Capital market (b) Selective credit control (c) Minimum support price (d) Plan transfers Code : (a) (b) (c) (d) (A) (iv) (i) (ii) (iii) (B) (iv) (iii) (ii) (i) (C) (ii) (iii) (iv) (i) (D) (iv) (iii) (i) (ii) (i) (ii) List-II Depreciation Elasticity approach (c) (iv) (ii) (i) (i) (d) (i) (iv) (iii) (ii) 18 -I 44. (a) (b) (c) (d) U (A) (B) (C) (D) B.O.P. U U U c U U (a) (ii) (iv) (iv) (iii) (b) (i) (iii) (ii) (ii) (c) (iii) (ii) (i) (i) (ii) (iii) S D Rs (i) (iv) (d) (iv) (i) (iii) (iv) -I 45. -II -II (a) U (i) CACP (b) (ii) U (c) (iii) RBI (d) U (iv) SEBI U (A) (B) (C) (D) (a) (iv) (iv) (ii) (iv) (b) (i) (iii) (iii) (iii) (c) (ii) (ii) (iv) (i) (d) (iii) (i) (i) (ii) -I 46. -II (i) (a) nc (b) np (c) nc X (iii) (d) np X (iv) r (ii) r r r U (A) (B) (C) (D) D 0108 (a) (ii) (iii) (iv) (iii) (b) (iii) (i) (ii) (iv) (c) (iv) (ii) (i) (i) (d) (i) (iv) (iii) (ii) 19 P.T.O. Read the following passage below and answer questions from 47 to 50 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. 47. The obstacles for an industry to compete with more established foreign firms are due to : (A) (B) Lack of Capital and initial small level of output (C) Lack of know-how and initial small level of output (D) 48. Lack of know-how and technology Lack of flexibility. 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 D 0108 20 U U U U U U U 47 50 U U U l U c U S U U ( ) U U U S U l , Z S U U , - l U , U c U U U U M U U , U U U U , M U U U U ( U ) - l U h U h U M h U U - l - U U M U - U l U U U s U U U U U 47. Z S U l (A) (B) U U S U (C) U U S U (D) 48. U l m U U (A) U U (B) U S (C) U U U S (D) U U D 0108 21 P.T.O. 49. Which is appropriate form of trade protection ? (A) (B) Import tariff (C) Export subsidy (D) 50. Export tariff Non-tariff barriers Which of the following is appropriate activity giving rise to external economics ? (A) A direct tax (B) Tariff (C) Trade policies (D) Production subsidy -oOo- D 0108 22 49. U U M ? (A) (B) (C) (D) 50. U- s U ? (A) U (B) (C) U (D) -oOo- D 0108 23 P.T.O. Space For Rough Work D 0108 24

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