UGC NET QUESTIONS ECONOMICS

(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)
5. (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)
6. (i) WTO Ministerial Meeting at Cancun
(ii) WTO Ministerial Meeting at Hong Kong
(iii) WTO Ministerial Meeting at Singapore
(iv) WTO Ministerial Meeting at
DohaCodes :
(A) (i) (iii) (ii) (iv)
(B) (iii) (iv) (i) (ii)
(C) (ii) (iii) (i) (iv)
(D) (iv) (ii) (iii) (i)
7. (i) National Rural Employment Guarantee
Programme (N.R.E.G.P.)
(ii) Sampooran Gramin Rozgar Yojana
(SG.R.Y.)
(iii) Antyodaya Anna Yojana (A.A.Y.)
(iv) Pradhan Mantri Gram Sadak Yojana
(P.MG.SY.)
Codes :
(A) (i) (iv) (iii) (ii)
(B) (iii) (i) (ii) (iv)
(C) (iv) (ii) (iii) (i)
(D) (iii) (iv) (ii) (i)
8. Chairman of the Finance Commission
(i) N.K.P. Salve
(ii) C. Rangarajan
(iii) P.V. Rajmannar
(iv) K.C.Niyogi

1.(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)
2. (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)
3. (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)
4. (i) Introduction of Rolling Plan
(ii) The movement from Planning to Market
mechanism
(iii) Feldman-Mahalanobis Model
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Codes :(A) (i) (iv) (iii) (ii)

(B) (iv) (iii) (i) (ii)
(C) (iv) (i) (ii) (iii)
(D) (iii) (i) (iv) (ii)
9. ( i) General theory of employment,
interest and money:
(ii) Affluent society
(iii) Wealth of Nations
(iv) Principles of Economics
Codes:
(A) (iii), (iv), (i), (ii)
(B) (i), (ii), (iii), (iv)
(C) (i), (ii), (iii), (iv)
(D) (iii), (ii), (i), (iv)
10. (i) Milton Friedman's Approach
(ii) Fishers Approach
(iii) Stock Balance Approach
(iv) Keynes Approach
Codes:
(A) (ii), (iii), (iv), (i)
(B) (i), (ii), (iii), (iv)
(C) (iii), (i), (ii), (iv)
(D) (iv), (iii), (i), (ii)

3. Union Excise Duties are a part of Central

Government's :
(A) Non-tax Revenue (B) Tax revenue
(C) Capital receipts (D) None of the above
4. Pump priming' should be resorted to at a
time of :
(A) Inflation (B) Deflation
(C) Reflation (D) None of the above
5. VAT is imposed:
(A) on final stage of production
(B) on first stage of production
(C) directly on consumers
(D) at every stage between production and
consumption
6. Tax on inherited property is an example of
:
(A) Sales Tax (B) Income Tax (C) Wealth
Tax (D) VAT

answers: 1.c 2. b 3. c 4. c5. b6.c 7. 8. b 9.a

10. A

7. When government expenditure exceeds

total government receipts, the budget
deficitis:
(A) positive (B) negative (C) zero (D)
indeterminate

ECONOMICS:PAPER II

8. The Laffer curve demonstrates the

relationship between :
(A) inflation and the nominal interest rate
(B) tax rate and total tax revenues
(C) the real interest rate and investment
demand
(D) none of the above

Sample Questions Part II

1. Vicious Circle of Poverty was proposed
by :
(A) A. Marshall (B) J.M.Keynes
(C) RagnerNurkse (D) M.Friedman
2. In Harrod-Domar model, if the growth
rate of income is 5% and capital-output ratio
is3, then saving rate must be:
(A) 5% (B) 3% (C) 8% (D) 15%

9. Devaluation, other things remaining the

same, will make the balance of payments of
a country worse if the elasticity of exports
2

SACHIDANANDA SAHOO

and elasticity of imports of a developing

country will be:
(A) greater than 1 (B) less than 1 (C) equal
to 1 (D) none of the above

incurred in advertising
(C) transportation cost (D) costs incurred on
window displays
6. Keynesian economics lays more emphasis
on :
(A) monetary policy (B) fiscal policy
(C) interest-rate determination (D) free
market mechanism
7. High-powered money is produced by :
(A) Commercial banks (B) Co-operative
banks
(C) Ministry of Finance (D) Reserve Bank
of India
8. A person who left the job to find another
job would be classified as :
(A) fractionally unemployed
(B) structurally unemployed
(C) cyclically unemployed
(D) no longer in the labour force
9. Second Five Year plan was based on a
model developed by :
(A) C.H. Hanumantha Rao (B) P.C.
Mahalanobis
(C) A.K. Sen (D) K.N. Raj
10. The theory of unlimited supply of labour
was proposed by :
(A) J.M. Keynes (B) Robert Solo
(C) A. Lewis (D) Roy Harrod

10. The secular deterioration of terms of

trade hypothesis initially was advanced by :
(A) RaulPrevisch (B) J.M.Keynes (C) Adam
Smith (D) J.S. Mill

Answers: 1.C, 2. D, 3. B, 4.B, 5. D, 6. C,

7.A, 8.B, 9. B, 10. A
conomics:
Part: II Sample Questions
1. The goods which are non-rival in
consumption are called :
(A) Private goods (B) Free goods
(C) Public goods (D) Non-economic goods
2. A competitive firm achieves long-run
equilibrium in the product market when :
(A) AR = MR (B) MR = AC
(C) MR = MC (D) Price = AR
3. The statement that the compensation
principle of welfare economics is capable of
givingcontradictory results is associated
with the name of :
(A) T.Scitovsky (B) A. Pareto
(C) ABergson (D) P.A Samuelson
4. A rational consumer choosing between
uncertain events will make a choice on
thebasis of:
(A) expected monetary benefits (B)
expected utility
(C) expected prices (D) expected incomes in
future
5. Which of the following is not an element
of selling cost:
(A) salary of the salesmen (B) expenses

Answers: 1.c2. c 3. a 4. b 5.c 6.b 7.d 8. a

(unemployment due to job dearch) 9.b 10. C
ECONOMICS PAPER II SAMPLE
TEST IV (Solved)
1. Chamberlin introduced the concept
of cost known as :
(A) Fixed cost
(B) Floating cost
(C) Selling cost
(D) Variable cost

3
SACHIDANANDA SAHOO

2. If commodities are perfect

substitutes indifference curve
becomes a :

8. Who has propounded the theory of

Unbalanced growth ?
(A) E. Domar
(B) A. K. Sen
(C) A. O. Hirshman
(D) W. A. Lewis

(A) Downward sloping curve

(B) straight line with negative slope
(C) Right angle
(D) Rectangular hyperbola
3. C E S Production function is
associated with the name of one of
the following :
(A) Joan Robinson
(B) B. S. Minhas
(C) Manmohan Singh
(D) A. K. Sen

9. Exclusion principle is not applicable to :

(A) Merit goods
(B) Private goods
(C) Social goods

4. Psychological law of consumption is

given by :

(D) All goods

10. Redemption of Public Debt means :

(A) Milton Friedman

(B) Pigou
(C) Tobin
(D) Keynes

Repayment of Public Debt

Refusal to pay Public debt

5. When interest elasticity of demand

for money is zero the L - M curve is :
(A) Vertical Parallel to Y-axis
(B) Horizontal Parallel to X-axis
(C) Positive Sloping straight line
(D) Negative Sloping straight line
6. Natural rate of unemployment is the
rate of unemployment at which :

Redefining of Public debt in terms of

foreign currency
Linking Public debt with inflation rate
Sample Questions Part II
1. Vicious Circle of Poverty was
proposed by :
(A) A. Marshall (B) J.M.Keynes
(C) RagnerNurkse (D) M.Friedman

(A) Rate of inflation is stable

(B) Rate of inflation is unstable
(C) Rate of inflation is falling
(D) Rate of inflation is rising
7. Knife - Edge Problem arises in :

2. In Harrod-Domar model, if the growth

rate of income is 5% and capital-output
ratio is3, then saving rate must be:
(A) 5% (B) 3% (C) 8% (D) 15%

(A) Solow model

(B) Kaldor Model
(C) Joan Robinson model
(D) Harrod - Domar Model

3. Union Excise Duties are a part of

Central Government's :
4
SACHIDANANDA SAHOO

(A) Non-tax Revenue (B) Tax revenue

(C) Capital receipts (D) None of the
above

(A) greater than 1 (B) less than 1 (C)

equal to 1 (D) none of the above
10. The secular deterioration of terms of
trade hypothesis initially was advanced
by :
(A) RaulPrevisch (B) J.M.Keynes (C)
Adam Smith (D) J.S. Mill

4. Pump priming' should be resorted to

at a time of :
(A) Inflation (B) Deflation
(C) Reflation (D) None of the above

Answers: 1.C, 2. D, 3. B, 4.B, 5. D, 6. C,

7.A, 8.B, 9. B, 10. A
5. VAT is imposed:
(A) on final stage of production
(B) on first stage of production
(C) directly on consumers
(D) at every stage between production
and consumption

PART A
Multiple Choice Questions
(40 marks)
Answer all forty (40) questions.
1. Which of the following statements is true
about a market economy?

6. Tax on inherited property is an

example of :
(A) Sales Tax (B) Income Tax (C)
Wealth Tax (D) VAT
7. When government expenditure
exceeds total government receipts, the
budget deficitis:
(A) positive (B) negative (C) zero (D)
indeterminate
8. The Laffer curve demonstrates the
relationship between :
(A) inflation and the nominal interest
rate
(B) tax rate and total tax revenues
(C) the real interest rate and investment
demand
(D) none of the above

a) Market participants act as if guided by an

invisible hand to produce outcomes that
maximise social welfare.
b) Taxes help prices communicate costs and
benefits to producers and consumers.
c) With a large enough computer, central
planners could guide production more
efficiently than markets.
d) The strength of a market system is that it
tends to distribute resources evenly across
consumers.
2. By definition, autonomous expenditure is not
affected by changes in
a) The price level

9. Devaluation, other things remaining

the same, will make the balance of
payments of a country worse if the
elasticity of exports and elasticity of
imports of a developing country will be:

b) Real GDP
c) The interest rate
d) The foreign exchange rate
5

SACHIDANANDA SAHOO

d) C + I + G + EX
3. If 1998 is the base year for the GDP deflator
a) Nominal GDP is equal to real GDP in 1998

7. If consumption is $25,000 when income is

$21,000, and consumption increases to
$25,900 when income increases to $22,000,
the MPC is

b) Nominal GDP is greater than real GDP in

1998

a) 0.59

c) Nominal GDP is less than real GDP in 1998

b) 0.84

d) None of the above

c) 0.9

4. If real GDP decreased from 1995 to 1996,

then

d) 1.11

a) Only prices decreased from 1995 to 1996

8. Which of the following is held constant along

an AE curve?

b) Output decreased from 1995 to 1996

a) Real GDP.

c) It cannot be determined whether output or

prices or both decreased from 1995 to 1996

b) Consumption expenditure.
c) The price level.

d) Output and prices both must have decreased

from 1995 to 1996
5. Macroeconomics is concerned with
a) Only long-run trends in economic activity.
b) Only short-run fluctuations in the business
cycle.
c) Both long-run trends and short-term
fluctuations in economic activity.

d) All of the above.

9. In a two-sector economy, if the consumption
function is C = 10 + 0.8 Y and planned
investment is $ 15, the equilibrium
expenditure is
a) $ 50
b) $ 150
c) $ 125

d) Only with changes in the overall price level.

d) $ 175
6. Which of the following expressions
represents disposable income ?
a) Y T
b) C + S + T + IM
c) C + I + G

10. Real GDP measures the

a) Value of total production in terms of current
prices
b) Value of goods minus the current services
minus prices
6
SACHIDANANDA SAHOO

c) General upward drift in the final market

output

a) 10%
b) 24%

d) Value of total production in constant prices

c) 2%
11. If disposable income equals zero, we know
that :

d) 2.5%

a) Savings will be positive.

15. Investment is :
b) Savings will be negative.
a) The purchase of shares and bonds.
c) Savings will be zero.
b) The purchase of capital equipment and
structures.

d) None of the above.

12. When economists speak of the demand for
money, which of the following questions
are they asking?

c) When we place our savings in the bank.

a) How much cash do you wish you could have?

16. As the economy nears full capacity, the

short-run aggregate supply curve

d) The purchase of goods and services.

b) How much income would you like to earn?

a) Becomes flatter
c) How much wealth would you like?
b) Becomes steeper
d) What proportion of your financial assets do
you want to hold in noninterest bearing
forms?
13. Which of the following is accurate ?

c) Shifts to the right

d) Shifts to the left

a) When the price level decreases, the value of

money decreases.

17. If equilibrium real GDP is less than its long

run level

b) When the price level decreases, the value of

money increases.

a) There is a recessionary gap

c) When the price level decreases, the value of

money remains the same.

b) The economy is not in short-run

macroeconomic equilibrium
c) The economy is in a below full employment
equilibrium

d) None of the above.

14. If the real interest rate is 5% and the
nominal rate of interest is 7.5% the inflation
rate must be

d) Both (a) and (c) are correct

7
SACHIDANANDA SAHOO

18. The multiplier in an open economy is

-------------------- than in a closed economy
because, as income level increases,
----------------------.

a) There is a budget surplus.

b) There is a budget deficit.
c) Private savings is positive.

a) Greater, there is a wider market available

d) Public savings is positive.
b) Smaller, some of the increase will be used to
buy imports
c) Greater, exports become more attractive to
foreigners
d) Smaller, consumers buy goods that had
previously been sent abroad.

22. An expansionary fiscal policy increases

aggregate demand by :
a) Reducing the interest rate.
b) Increasing autonomous spending.
c) Lowering the demand for money.

19. Which of the following occurs when the

economy is in long run macroeconomic
equilibrium

d) Increasing the money supply.

23. Stagflation is the most difficult
macroeconomic problem to address because

a) Actual real GDP = potential real GDP

b) Actual unemployment rate = natural
unemployment rate

a) If the RBA expands the money supply, the

inflation rate will fall, but so will output,
which is already quite low

c) The labour market is in full employment

equilibrium
d) All of the above
20. The way monetary policy is conducted in
Australia is :

b) If the RBA reduces the money supply, the

output will rise, but so will the inflation rate,
which is already quite low
c) If the RBA expands the money supply, the
inflation rate will rise even higher and
output will fall even lower

a) Changing government expenditure.

b) Changing the money supply, government
purchases and taxation.
c) Varying the reserve ratio.
d) Open market operations to influence the cash
rate.

d) If the RBA reduces the money supply, the

inflation rate will fall, but so will output,
which is already quite low
24. The investment demand curve plots the
relationship between planned investment
expenditure and
a) The nominal interest rate

21. If government spending exceeds tax

collections,

b) The real interest rate

8
SACHIDANANDA SAHOO

c) The price level

28. The Phillips curve suggests that :

d) The real GDP

a) An increase in inflation temporarily increases

unemployment.

25. Frank has just finished school, but has not

yet begun to look for a job. As a result,
a) The unemployment rate increases, and the
labour-force participation rate decreases.
b) The unemployment rate increases, and the
labour-force participation rate is unaffected.
c) The unemployment rate increases, and the
labour-force participation rate increases.

b) A decrease in inflation temporarily increases

unemployment.
c) Inflation and unemployment are unrelated in
the short run.
d) None of the above.
29. A recession is a

d) The unemployment rate is unaffected, and the

labour-force participation rate is unaffected.

a) Negative growth rate in real GDP that lasts

one quarter

26. Cyclical unemployment refers to :

b) Negative growth rate in real GDP that lasts

two weeks

a) That portion of the labour force consisting of

individuals who qualify for employment but
who are temporarily out of work.
b) That portion of the labour force consisting of
individuals who are unemployed because of
business cycle fluctuations.
c) That portion of the labour force consisting of
individuals who would like to work but who
lack skills and other attributes needed to
obtain work.

c) Negative growth rate in real GDP that lasts

two quarters
d) Negative growth rate in real GDP that lasts
two months
30. When the economy is facing high inflation,
the government should
a) Increase spending and taxation
b) Reduce spending and taxation

d) The natural unemployment rate.

c) Increase spending and reduce taxation
27. Structural unemployment is caused by :
d) Reduce spending and increase taxation
a) Friction in the labour force.
b) Cyclical changes in aggregate demand.
c) Technological innovation causing some skills
to become outdated.

31. Profits earned in Australia by foreign-owned

companies are included in its
a) Both GDP and GNP
b) Neither GDP nor GNP

d) Seasonal changes in consumer expenditure.

c) GNP but not GDP
9
SACHIDANANDA SAHOO

c) The private sector has a deficit which must be

financed by borrowing from other sectors.

d) GDP but not GNP

32. The United States placed a limit on the
amount of steel that can be imported into the
United States. This is an example of

d) The government sector balance must also be

negative.
36. More Japanese companies start to invest in
Australia. This will lead to :

a) a tariff.
b) a quota.

a) A decrease in the demand for dollars and an

increase in the demand for yen

c) an export subsidy.
b) An increase in the supply of dollars and a
decrease in the demand for yen.

d) dumping.
33. As real GDP increases

c) An increase in the demand for dollars and an

increase in the supply of yen

a) Exports increase, but imports decrease

b) Imports increase, but exports decrease

d) An increase in the demand for dollars and a

decrease in the supply of yen.

c) Imports increase, but exports are independent

of real GDP

37. The purchasing power parity theory states

that

d) Exports increase, but imports are independent

of real GDP

a) Exchange rates will adjust so that the same

quantity of internationally traded goods can
be bought in all countries with a given
amount of one currency.

34. A nation with a capital account surplus must

be :

b) Interest rates will adjust so that the inflation

rate is equalised in all countries so as to
maintain the relative value of real incomes.

a) A net debtor nation.

b) A net creditor nation.

c) The exchange rate between currency A and B

and between B and C and between C and A
will be such that all three rates are
consistent.

c) A gross creditor nation.

d) None of the above.
35. If private sector investment exceeds private
savings :
a) The private sector has a surplus to lend to
other sectors.

d) The exchange rate between any two

currencies at any one time will be the same
in all foreign exchange dealing centres in
any part of the world.

b) The current account must be in deficit.

10
SACHIDANANDA SAHOO

38. According to the theory of

comparative advantage,
specialisation will benefit
all trading partners,

c) Nominal GDP per person

20. d
d) The growth rate of nominal
GDP per person.

a) Even those that may be

absolutely less efficient
producers.

Answers to MCQs
Autumn 2002

21. b
22. b
23. d

b) Except those that may be

absolutely less efficient
producers.

1. a

24. b

2. b

25. d

c) Except those that may be

relatively more efficient
producers.

3. a

26. b

4. c

27. c

d) Except those that may be

relatively less efficient
producers.

5. c

28. b

6. a

29. c

39. If the Australian dollar

depreciates in the foreign
exchange market :

7. c

30. d

8. c

31. d

a) Foreigners find Australian

goods more expensive.

9. c

32. b

10. d

33. c

11. b

34. a

12. d

35. c

13. b

36. c

14. d

37. a

40. A reasonable measure of

the standard of living in a
country is :

15. b

38. a

16. b

39. b

a) Real GDP per person.

17. d

40. a

b) Real GDP

18. b

b) Foreigners find Australian

goods less expensive.
c) The dollar buys more in the
foreign goods market.
d) Imported goods cost
Australians less.

19. d
11
SACHIDANANDA SAHOO