Economics Paper I

Answer the following questions in about 150 words each : (a) According to Michal Kalecki, how the degree of monopoly and the level of investment interact to determine the functional distribution of income between wages and profits ? (10 marks) (b) Show how the aggregate demand curve is derived in the classical system. Mention its special property. (10 marks) (c) Discuss the term structure of interest and the rule of arbitrage inherent in this. (10 marks) (d) Differentiate between public goods and private goods. What is a ‘Free Rider’ problem ? (6+4=10 marks) (e) What is the crowding-out effect in Fiscal Policy? How can foreign capital mitigate the crowding-out effect? (6+4=10 marks)

(a) Under what conditions, does a market reach equilibrium ? Analyse the differences in stability between Marshallian and Walrasian approaches. (5+15=20 marks) (b) Critically examine the statement, “Pareto optimally does not give a sufficient basis for ordering economic states from the perspective of social welfare”. Can an economy with extreme inequality be considered Pareto efficient ? (10+5=15 marks) (c) The following data are given for a duopoly market : P = 100 – 0·5 (q₁ + q₂) C₁ = 5 q₁ C₂ = 0·5 q₂² Suppose the duopolists recognise the mutual interdependence and decide to act as one group to maximize the total profit of the industry. Find out q₁, q₂, P and the profits of the firms denoted as π₁ & π₂. (15 marks)

(a) The following values for an economy are given : C = 0·8 (1 – t)Y t = 0·25 I = 900 – 50r, G = 800, L = 0·25Y – 62·5r M̄/P = 500, P = 1 The variables have their usual meaning. Find the following : (i) The equilibrium values of Y and r (ii) Slopes of IS and LM curves (iii) Expression of government expenditure multiplier for income in terms of slopes of savings function, investment function and money demand function (iv) If the government expenditure goes up by 240, how much will be the rise in Y in terms of the multiplier derived in the part (iii) above ? (5+4+6+5=20 marks) (b) (i) Show how automatic full-employment is guaranteed in the classical model. (ii) How does Keynes show the possibility of underemployment equilibrium in the labour market ? (7+8=15 marks) (c) Give an outline of the new classical policy ineffectiveness proposition. (15 marks)

(a) Explain the instruments through which the government of any country tries to successfully carry out its three major roles namely, Allocation, Distribution and Stabilization. (20 marks) (b) Discuss the relative effectiveness of capital expenditure versus revenue expenditure in stimulating economic activity. (15 marks) (c) Discuss the major difference of Friedman’s restatement of quantity theory of money from the Keynesian demand for money. (15 marks)

Answer the following questions in about 150 words each : (a) “Import tariffs typically result in a net welfare loss for a country”. Do you agree ? Justify your answer by applying an import tariff for a small economy and a large economy. (4+6=10 marks) (b) In what sense trade can act as an engine of growth ? Elaborate. (10 marks) (c) Throw light on the changing role of markets in economic development of developing countries. How it has affected planning process ? Discuss. (6+4=10 marks) (d) Analyse the role of Research and Development (R&D) in fostering economic growth and strengthening competitiveness in a knowledge-based economy. (10 marks) (e) Explain the “Single Undertaking” principle used in the Doha Round and its implications for WTO negotiations. (10 marks)

(a) Discuss the major differences between Old and New international trade theories. (20 marks) (b) Explain the effect of a monetary expansion on exchange rate in the short and the long run under perfect capital mobility. (15 marks) (c) Explain whether the parallel imports violate provisions of TRIPS and affect the pricing policy of a patent holder MNC. Give reasons why all rich nations do not follow this ? (7+8=15 marks)

(a) Analyse the role of human capital as a driver of economic development in developing countries. How can education and healthcare investment overcome the “Low productivity trap” in developing nations ? (12+8=20 marks) (b) Compare Gunnar Myrdal’s “backwash effects” with Simon Kuznets’ “structural transformation” in the context of developing economies. (15 marks) (c) Explain the factors contributing to the rise of MNCs. Discuss whether their efficiency is driven by superior technology or anti-competitive practices. (15 marks)

(a) “Earth provides enough to satisfy every man’s needs, but not every man’s greed”. Analyse this statement in the context of environmental degradation and the rights of future generations. To what extent does the rapid, industrial-driven depletion of non-renewable resources constitute a violation of intergenerational equity. (8+12=20 marks) (b) What strategies are required for Agriculture Sector transformation to ensure rapid economic development of a developing country ? Discuss. (15 marks) (c) What are the various approaches to Human Development ? Elaborate Basic Needs Approach. (8+7=15 marks)