CIVIL SERVICES ECONOMICS QUESTIONS

C.S.E. ECONOMICS (Prelim.)


1. Which of the following index numbers satisfies both time-reversal test and
factor-reversal test?
(a) laspeyre’s index number
(b) Paasche’s index number
(c) Fisher’s index number
(d Drobish and Browley index number

2. Match list 1 (r value) with List II (Interpretation) and select the correct
answer using the code give below the lists
List 1 List II
A. 0.26 I. High negative relation
B. -0.35 2. Low positive relation
C. 0.89 3. High positive relation
D. 0.98 4. Low negative relation
5. No relation
A B C D A B C D
(a) 3 I 5 2 (b) 2 4 I 3
(c) 2 I 5 3 (d) 3 4 I 2

3. Consider the following statements about range
1. It is a measure of variability.
2. It is very easy to calculate.
3. It is not influenced by the extreme values.
4. It is not based on all the observations.
Which of the statements given above is/are correct?
(a) J only (b) I and 2
(c) 2 and 3 (d) I, 2 and 4

4. The average consumption expenditure of 100 families is Rs. 1500 and the
variance in consumption expenditure is 90.What is the coefficient of
variation in consumption expenditure?.
(a) 0.6 (b) 2
(c) 6 (d) 9

5. When is the average deviation minimum?
(a) When deviations are taken from the moving averages
(b) When deviations are taken from the arithmetic mean
(c) When deviations are taken from the mode
(d) When deviations are taken from the median

6. What is the correct sequence of variability in descending order of magnitude in
the Lorenz curve of income distribution of three groups (A, Band C) of persons
given above?
(a) A - B - C (b) B - C - A
(c) C-A-B (d) C-B-A

7. Match List I (Measures of Dispersion) with List II (Characteristics) and
select the correct answer using the code. given below the lists:
List I List II
A. Range 1. Relative measure of dispersion
B. Variance 2. Uses limited information
C. Coefficient of variation 3. Standard deviation
D. Inter-quartile range 4. Lower than range
5. Greater than range
A B C D A B C D
(a) 2 3 I 4 (b) 1 4 5 3
(c) 2 4 1 3' (d) I 3 5 4

8. 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
(c) 2 and 3 (d) 1, 2 and 3

9. Let EERx and EERm denote the effective exchange rates, respectively, for
exports and imports. A country is said to be following an import-substituting
strategy of development if
(a) EERx> EERm (b) EERx < EERm (c) EERx> 1 (d) EERm> I

10. In the initial stages of planned development starting from its Second Five
Year Plan, the strategy of development adopted by India was based on
which of the following?
1. Heavy industries 2. Export promotion
3. Light industries 4. Import substitution
Select the correct answer using the code given below':
(a) 1 and 2 (b) 3 and 4
(c) I and 4 (d) 2 and 3

11. The targeted growth rate of income for an economy is 8% per annum. The
capital-output ratio is assumed to be 3.5 : 1.The domestic savings generated
are 25% of income in the economy. What is the current account deficit
consistent with the targeted growth rate?
(a) 2% of income (b) 3% of income
(c) 3.5% of income (d) 4% of income

12. The static argument for free trade ignores certain factors with dynamic
implication to welfare. Which are such factors?
1. Learning by doing.
2. Spillover to other industries. 3. Increasing returns.
Select the correct answer using the code given below:
(a) 1 and 2 (b) I and 3
(c) 2 and 3 (d) I, 2 and 3

13. which one of the following sequences correctly depicts " the vicious circle of
poverty?
(a) Low income - low investment - low demand – capital deficiency
(b) Low investment - low income - low demand – capital deficiency
(c) Low investment - low income - low savings – capital deficiency.
(d) Low income - low demand - low investment – capital deficiency' ,

14. In the Harrod's model of growth, if GA = 10% and Gw = 8%; what will this
lead to ?
(a) Boom (b) Deflation,
(c) Recession (d) Unemployment

15. The World Bank's Environmentally Sustainable Development Division has
developed Green Index. Which one of the following is not a constituent of
this index?
(a) Produced assets (b) Natural resources
(c) Social assets' (d) Human assets

16. According to population experts, the possible demographic bonus may
accrue to India by 2016 A.D. Which phenomenon are they referring to ?
(a) A sharp drop in the total population
(b) A well-balanced sex ratio
(c) A decline in both birth and death 'rates
(d) A surge in the population in the productive age group

17. 'What is the long-term objective of National Population Policy (NPP), 2000 ?
(a) To bring the Total Fertility Rate (TFR) to replacement levels
(b) To achieve a stable population at a level consistent with the requirement of
sustainable economic growth
(c) To address the unmet needs for contraception;
(d) To cover the entire population in the reproductive age I with contraceptive
and health care '

18. According to the 2001 Census, what is the total work participation rate in
India?
(a) 37,.64% (b) 39.3%
(c) 43.1% (d) 46.9%

19. Which variable is not included in the calculation of composite RDI by
UNDP?
(a) Adjusted real GDP per capita (PPP$ Index)
(b) A deprivation index
(c) Life expectancy index'
(d) Educational attainment index

20. Which one of the following exhibits the feature of occupational distribution
of population in India according to the 2001 Census?
(a) Rapidly increasing importance of secondary and tertiary sectors and relative
stability of the primary sector
(b) Rapidly increasing importance of primary sector
(c) Rapidly declining importance of primary sector and increasing importance of
tertiary sector
(d) Relative stability of all three sectors – primary, secondary and tertiary

21. Why is social and economic dualism so pronounced in India?
(a) Poor adoption of technology in certain productive sectors of the economy
(b) Sectoral disparity in investment
(c) Lacunae in policy framework in social and economic sectors
(d) Inadequate financial supply to the core sectors of the economy

22. Consider the following statements:
New strategy adopted by the Government of India in Tenth Plan for alleviating
poverty relates to
1. income generation orientation, by way of mobilizing savings and developing
the self-help groups.
2. distribution of assets and providing cheap loan.
3. employment orientation by way of food for work.
4. enhancing public investment in agriculture sector.
Which of the statements given above are correct?
(a) 1, 2 and 4 (b) 2, 3 and 4
(c) 1 and 3 (d) 1,.2, 3 and 4

23. Which sector in India has got maximum amount (US $ million) of external
commercial borrowings approvals as for 2003-04 ? .
(a) Financial Institutions (b) Power
(c) Telecom (d) Others including exports

24. Which one of the following is the share of India's exports in world trade in
2003 (%)?
(a) 0.5 (b) 0.8
(c) 1.0 (d) 1.5

25.Table: Balance of Payments of India
(Rs. Crores)
No. Item 1990-91 2000-01
1. Imports 50,086 270,663
2. Exports 33,153 205,287
3. Trade Balance -16,933 - 65,376
4. Invisible (Net) -433 53,945
5. Current Account (NET) - 17,366 -11,431
From the Table, can it be concluded that there is a decline in the current account
deficit of the country during the period 1990-91 to 2000-01 ?
(a) No, since imports are greater than exports
(b) Yes, since exports of goods increased more than the imports of goods
(c) No, since imports of goods increased more than the exports of goods
(d) Yes, since there is an increase in net invisible earnings

26. Which one of the following items has the highest growth rate in U.S. $ of
exports from India during 2003-04 ?
(a) Gems and jewelry
(b) Textiles including Ready Made Garments (RMG)
(c) Engineering goods
(d) Chemicals and related products
27. Consider the following statements:
What does the current account of payments of India consist of ?
1. Visible balance of trade (merchandise).
2. Services: tourism, transport, software service.
3. Portfolio investment: loans, banking capital, NRI deposits.
Which of the statements given above are correct?
(a) 1, 2 and 3 (b) 1 and 2
(c) 2 and 3 (d) 1 and 3

28. Match List I (Types of Investments) with List II (Nature of Investment) and
select the correct answer using the code given below the lists:
List I
A. Direct foreign investment
B. Foreign portfolio investment
C. Commercial Loans
D. Foreign Institutional assistance
List II
1. Purchase of the country's stocks,
bonds and currencies by
foreigners
2. Investments in productive assets
of the country by foreigners
3. Raising loans from foreign
financial institutions
4. Provision of financial by
assistance a foreign government
/institution

A B C D A B C D
(a) 4 1 3 2 (b) 2 3 I 4
(c) 2 1 3 4 (d) 4 3 1 2

29. Match List I (Year of launching) with List II (Scheme) and select the correct
answer using the code given below the lists:
List I
A. 1999
B. 1994
C. 2001
D. 2000
List II
1. Sampoorna Grameen Rozgar Yojana
2. District Rural Industrial Project
3. Swarna Jayanti Gram Swarojgar Yojana
4. Pradhan Mantri Gram Sadak Yojana
5. Swarna Jayanti Shahari Rozgar Yojana
A B C D A B C D
(a) 3 2 1 4 (b) 4 1 5 2
(b) 3 1 2 4 (d) 4 5 1 2

30. Which one of the following is not the reason for generation and perpetration
of inequalities of income and wealth?
(a) Skewed distribution of means of production
(b) Rural-urban disparities
(c) Ineffective government control
(d) Support base of the government
31. In a closed economy model, consider a situation where MPC rises from 0.8
to 0.9, and the rate of proportional income tax rises from 0. I to 0.2. How
does the investment multiplier change?
(a) It rises from 25/7 to 5 (b) It falls from 5 to
2517
(c) It does not change (d) It falls from 25/7 to 3

32.
S
I
0 I
0
Which of the .following statements are correct in respect of the figure given
above?
1. Investment is autonomous.
2. Saving does not depend on income.
3. Saving-income relationship is linear.
4. Investment depends on income.

Select the correct answer using the code given below:
(a) I and 2 (b) 2 and 4
(c) I and 3 (d) 3 and 4

33. In a Keynesian two-sector model with consumption dependent on income
and a given autonomous investment, what will an increase in propensity to
save lead to?
(a) Decrease in income and decrease in savings
(b) Decrease in income with unchanged savings
(c) Increase in income with increase in savings
(d) Increase in income with unchanged savings

34. Consumption and saving functions are given as :
C= 100 + 0.2Y
S = -100 + 0.8Y
What is the value of the investment multiplier?
(a) 80 (b) 50
(c) 5. (d) 1.25

35. Consider the following statements:
According to the Neo-classical theory of investment, higher the rental cost of
capital,
1. lower is the real interest rate.
2. lower is the depreciation rate of capital.
3. higher is the real interest rate.
4. higher is the depreciation rate of capital.
Which of the statements given above are correct?
(a) 1 and 2 (b) 3 and 4
(c) 1 and 4 (d) 2 and 3

36. Consumption function is given as :
C = 20 + 0.54Y
What is the corresponding saving function?
(a) S = 20 + 0.46Y
(b) S = -20 + 0.46Y
(c) S = -20 - 0.46Y
(d) S = -20 + 0.54Y


37. Consider the following statements:
According to the life-cycle hypothesis, assuming a linear consumption function,
other things remaining the same, an increase in life expectancy will
I. increase the marginal propensity to consume.
2. decrease the marginal propensity to consume.
3. leave the marginal propensity to consume unchanged
4. decrease the average propensity to consume.
Which of the statements given above is/are correct?
(a) 1 and 4 (b) 2 and 4

(c) 3 and 4 (d) 3 only


38.
LM
.
P
0
In the diagram given above, what does the point P indicate? '
(a) Excess demand in the goods market
(b) Excess supply in the goods market
(c) Excess demand in the money market
(d) Equilibrium rate of interest and income

39. According to Milton Friedman, an increase in the growth rate of money
stock will
(a) Only lower the nominal interest rate
(b) Only raise the nominal interest rate
(c) At first lower the nominal rate of interest, but eventually raise the rate of
inflation and the nominal rate of interest, never affecting the growth rate of
output
(d) At first lower the nominal rate of interest and raise the rate of inflation and
the rate of growth of output, but eventually only raise the rate of inflation and
the nominal rate of interest

40. Liquidity preference function has different regions.
What is its interest elasticity in the region of liquidity trap?
(a) Infinity (b) Between 0 and I
(c) Unity (d) Zero

41. What is the correct logical sequence of the following?
1. Households and business find that they have excess money balances.
2. Interest rates on securities drop, and/or prices of goods and services increase.
3. Demand for securities and/or goods and service Increases.
4. Net inflow of remittances from abroad increases the domestic money supply.
Select the correct answer using the code given below:
(a) 4 - 3 - I - 2 (b) 2 - 1 - 3 - 4
(c)
4- 1 - 3 - 2 (d) 2 - 3 - 1 - 4

42. Which of the following does
not give rise to transaction demand for money?
(a) Households to purchase food
(b) Firms to pay wages
(c) Firms to pay purchase raw materials
(d) Subsistence producers who consume their entire output

43. When does the central bank increase the minimum statutory cash reserve
ratio of the commercial banks?
I. When the economy is in deflationary condition.
2. When the economy is experiencing inflation.
3. When the central bank aims credit expansion.
4. When the central bank aims credit contraction.
Select the correct answer using the code given below:
(a) 1 and 3 (b) 1 and 4
(c) 2 and 3 (d) 2 and 4

44. A central bank uses the followil1g methods of credit control:
1. Bank rate policy.
2. Open market operations.
3. Variable reserve ratio.
4. Fixation of margin requirement.
Which of the above methods are included in the category of quantitative methods
of credit control?
(a) 1 and 2 (b) 2 and 3
(c) 1, 2 and 3 (d) 3 and 4

45.
In
the diagram given above, Yo and Po indicate income and price of the initial
equilibrium, respectively, while Y
1 and P1 denote the new equilibrium of income
and price, respectively. DD is the demand curve; So and S
1 denote the initial and
new supply curves, respectively. What type of inflation is indicated?
(a) Demand-pull inflation (b) Cost-push inflation
(c) Mark-up inflation (d) Hyper inflation

46. What does the term 'benign inflation' imply?
(a) A mild rate of inflation (b) An unexpected inflation
(c) A mark-up inflation (d) A spiraling inflation

47. Match List I (Type of Income Determination) with List II (Fiscal Multiplier)
and select the correct answer using the code given below the lists:
A B C D A B C D
(a) 4 1 2 3 (b) 3 2 5 4
(c) 4 2 5 3 (d) 3 f 2 4

48. Which of the following are considered as All India Financial Institutions
(AlFIs)?
1. Five all-India development banks.
2. Two specialized financial institutions.
3. Six investment institutions.
4. ICICI and UTI.
Select the correct answer using the code given below:
(a) I, 2, 3 and 4 (b) 1, 2 and 3
(c) 1 only . (d) 2 and 4

49. Consider the following statements regarding Collateralized Borrowing and
Lending obligation (CBLO) - a recent product of Clearing Corporation of
India (CCIL):
1. The CBLO is like a repo, i.e., it can be interpreted as borrowing backed by
securities as collateral.
2. Issued at a discount to face value, CBLOs always redeem at par, similar to
treasury bills or zero coupon bonds. .
3. Its maturities range from 1 year to 5 years. Which of the statements given
above is/are correct?

(a) 1, 2 and 3 (b) 2 and 3
(c) 1 and 2 (d) 1 and 3

50. Which one of the following features of the Real Time Gross Settlement
(RTGS) system is
not correct?
(a) Payments are settled transaction by transaction
(b) Settlement of funds is revocable
(c) Settlement is done in real time
(d) It is a fully secure system which uses digital signatures and public encryption
for safe and secure message transmission

51. When was the first countrywide Economic Survey undertaken by the
Central Statistical Organisation (CSO) ?
(a) 1970 (b) 1974
(c) 1977 (d) 1982

52. Consider the following statements:
1. Non-banking financial entities comprise Non banking financial companies
(NBFCs), Mutual benefit financial companies, and Mutual Benefit companies
2. Non-banking financial entities are regulated in India by Department of
Company Affairs.
3. Rates offered by NBFCs on NRI depositst cannot exceed those prescribed for
Scheduled Commercial Banks
Which of the statements given above is/are correct?
(a) 1 and 2 (b) 2 only
(c) 1 and 3 (d) 1, 2 and 3

53. Consider the following factors:
1. Equity capital 2. Re-invested earnings
3. Other direct capital .
According to the RBI, definition of FDI includes which of the above categories
of capital flows?
(a) 1 only (b) 1 and 2
(c) 1, 2 and 3 (d) 2 and 3

54. In the year 2003-04, to which of the following regions were India's total
exports in dollar terms the largest?
(a) West Europe (b) Asia and Oceania
(c) Latin American countries (d) Africa

55. Under the new defined contribution pension system for new entrants to
Central Government Service (excluding defence services) approved by the
Government, three options are being made available for investment of
funds. Which one of the following is
not among these three options?
(a) Investment predominantly in fixed income instruments and some investment
in equity
(b) Greater investment in equity
(c) Equal investment in fixed income and equity instruments
(d) Investment in government bonds only

Directions:
The following 6 (six) items consist of two statements, one labeled as
the 'Assertion (A)' and the other as 'Reason (R)'. You are to examine these two
statements carefully and select the answers to these items using the code given
below:
(a) Both A and R are individually 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) A is true but R is false
(d) A is false but R is true

56. Assertion (A)
A change of income distribution in favour of profit earners
leads to an increase in growth rate.
Reason (R)
Profit earners have a higher propensity to save as compared to
wage earners.

57. Assertion (A)
Fisher Index Number is the geometric mean of Laspeyres and
Paasche indices.
Reason (R)
It satisfies both time-reversal and factor-reversal tests.

58. Assertion (A)
According to the monetary approach, an excess supply of
domestic money is reflected in a deficit in balance of
payments.
Reason (R)
According to the monetmy approach, an excess supply of
domestic money induces economic agents to increase
spending.

59. Assertion (A)
The burden of a specific tax on .a product produced by a firm
under pure competitive market conditions cannot be shifted on
to the buyers in the short run.
Reason (R)
A firm under pure competitive market. conditions is only one
firm among a , large number of firms in the industry of the
product and price is given by the industry.

60. Assertion (A)
There would be neither a short-run nor a long-run trade-off
between inflation and unemployment, which can be exploited
by the policy maker for purposes of stabilization through
demand management policies, if the economic agents'
expectations about inflation are rational.
Reason (R)
The Rational Expectations hypothesis postulates that economic
agents optimally use all the information they have, including
information about government policies, when forecasting the
future.

61. Assertion (A)
There would not be an active role for the government to use
contra-cyclical stabilization policy, if real business cycle
theory provided a valid i explanation of business cycles.
Reason (R)
The real business cycle theory asserts that cyclical fluctuations
in output and employment are the result of the optimising
behaviour of economic agents in response to a variety of real
shocks impinging on the economy, with markets adjusting
rapidly and remaining always in equilibrium.

62. Which one of the following gives the correct relationship between Marginal
Cost (MC) curve and the Average I Cost (AC) curve?
(a) When the AC curve is falling, MC curve is above it.
(b) When both the AC and MC curves are rising, the MC curve rises slowly than
the AC curve.
(c) If the AC curve is U -shaped, then the corresponding MC curve cuts the AC
curve at the minimum point.
(d) If the AC curve shows a constant relationship between the variables, then the
corresponding MC curve cuts the AC curve at its highest point.

63. Match List I (Concept) with List II (Characteristics) and select the correct
answer using the code given below:
List I List II
A. Long-run average cost curve 1. Excludes fixed costs
B. Isoquant. 2. Relates to constant costs
C. Marginal cost curve 3. Envelope to a series of curves
D. Horizontal supply curve 4. Convex to the origin
5. Concerns total cost
A B C D A B C D
(a) 3 4 l 2 (b) 2 1 5 3
(c) 3 1 5 2 (d) 2 4 1 3

64. Consider the following statements:
1. Income effect is positive in case of normal goods.
2. Income effect is zero for superior goods.
3. Income effect is negative in case of inferior goods.
4. All Giffen goods are inferior goods, but not all inferior goods are Giffen
goods.
Which of the statements given above are correct?
(a) 1 and 2 (b) 2 and 3
(c) 1, 2 and 3 (d) 1, 3 and 4

65. Which one of the following statements is correct in respect of cross elasticity
of demand between two commodities?
(a) When two goods are perfect substitutes, cross elasticity of demand is zero.
(b) When two goods are perfectly independent of each other, cross elasticity of
demand is infinity.
(c) When two goods are complementary, cross elasticity
of demand is positive.
(d) When
two goods are jointly demanded, cross elasticity of demand is negative.

66. What is the sufficient condition for equilibrium for a perfectly competitive
firm?
(a) Marginal revenue = Marginal
cost
(b) Marginal
cost surve should cut the marginal revenue curve from below
(c) Marginal
cost curve should cut the marginal revenue curve from above
(d) Marginal revenue = Average
cost

67. With which one
of the following is the doctrine of excess capacity not
associated?
(a) Perfect competition (b) Monopolistic competition
(c) Monopoly (d) Oligopoly

68. What is the shape
of the demand curve for the product of an individual firm
in a competitive market?
(a) Horizontal straight line (b) Downward sloping
(c) Vertical straight line (d) Upward sloping

69. Which
of the following are assumed by the product exhaustion theory of
distribution?
I. A linear homogenous production function.
2. Each factor is paid according
to its market price.
3. Each factor is paid according
to its marginal productivity.
4. There may be any number
of factors of production.
Select the correct answer using the
code given below:
(a) I and 2 (b) 2' and 3
(c) I, 2 and 3 . (d) I, 3 and 4

70. Which one
of the following is correct according to the Ricardian theory ?
(a) Rent is equal
to the cost of production of the marginal land
(b) Rent is a pure surplus over and above the
cost of production
(c) Rent is equal
to the oppurtunity cost of a factor of production
(d) Rent is equal to the market price of a factor of production