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SECOND YEAR SELECTION EXAMINATION 2019

ECONOMICS HONOURS

Paper III-A — Microeconomics

Teacher’s Name: Full Marks – 50

Miss Somdatta Goswami. Time – 2 hours.

Group - A

1. Answer any five questions:4x5=20

a) What is the relationship between (i) marginal cost of output and the marginal product

of labour? (ii) average product of labour and the marginal product of labour?

b) You are an employer seeking to fill a vacant position on an assembly line. Are you

more concerned with the average product of labour or the marginal product of labour

for the last person hired? If you observe that your average product is just beginning to

decline, should you hire any more workers? What does this situation imply about the

marginal product of your last worker hired?

c) If the firm’s average cost curves are U-shaped, why does its average variable cost

curve achieve its minimum at a lower level of output than the average total cost

curve?

d) What does it mean to say that a person is risk averse? Why are some people likely to

be risk averse, while others are risk lovers?

e) Orange juice and apple juice are known to be perfect substitutes. Draw the appropriate

price-consumption (for a variable price of orange juice) and income-consumption

curves.

f) Can a set of indifference curves be upward sloping? If so, what would this tell you

about the two goods?

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g) Explain the monotonicity and convexity axioms and their implications for the shape

of the indifference curves.

h) A consumer spends his entire budget on two goods: X and Y. (i) True or false: An

increase in the price of X will lead the consumer to purchase less X. (ii) True or false:

An increase in the price of X will always lead a consumer to purchase more Y.

Group B

Answer any five questions.

2.a)“The marginal rate of technical substitution between two inputs is equal to the ratio of

themarginal products of the inputs” — Explain.

(4)

b) Can you call the producer’s long run expansion path the counterpart of a consumer’s price

consumption curve? (2)

3. Suppose that a consumer has a demand function for milk of the form: X = 10 + M/10P.

Originally his income is $120 and the price of milk is $3 per quart. Now suppose the price of

milk falls to $2 per quart. Calculate the Substitution Effect and the Income Effect as a result

of this price change using the Slutsky approach. (6)

4. a) What is the principle of Revealed Preference? (2)

b) When prices are (P1, P2) = (1,2) a consumer demands (X1, X2) = (1,2) and when prices

are (Q1, Q2) = (2,1) the consumer demands (Y1,Y2) = (2,1). What can you infer about the

behaviour of the consumer from this information? Explain. (4)

5. a) What is meant by a “monotonic transformation”? Explain with an example. (2)

b)Would a monotonic transformation of the utility function of the form𝑢(𝑥1, 𝑥2) = 𝑥1𝑐𝑥2

𝑑

change the marginal rate of substitution? (4)

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6. The production function for the personal computers of Apple is given by the following

function: 𝑞 = 10𝐾0.5𝐿0.5, whereq is the number of computers produced per day, K ishours of

machine time and L is hours of labour input. Apple’s competitor Microsoft is using the

production function𝑞 = 10𝐾0.6𝐿0.4

a) If both companies use the same amounts of capital and labour, which will generate

more output?(2)

b) Assume that capital is limited to 9 machine hours, but labour is unlimited in supply.

In which company is the marginal product of labour greater? Explain. (4)

7. a) Compare fixed versus sunk costs of production. (3)

b) Prove that a profit-maximising firm will always minimise costs. (3)

8. Suppose a consumer’s income is I = Rs. 1000 per period and she purchases only two

commodities: Food (F) and Clothing ( C ). Their prices are denoted by PF and PC

respectively.

a) Suppose PF = Rs. 10 and PC = Rs. 5. Plot the budget line equation. (2)

b) Explain the slope of the budget line. (2)

c) If the consumer purchases the bundle (50,20), indicate this commodity bundle in a

diagram and explain. (2)

9.Suppose that you consume two things: football games and french fries. Your income is $60,

the price of football games is $20, and the price of a serving of fries is $10. Consider this

table of marginal utilities:

Quantity MU from football MU from serving of fries

1 200 100

2 150 75

3 100 50

4 50 20

5 25 10

6 20 5

a)What is the opportunity cost of going to a football game?(3)

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b) Yourfriend Sallynotesthatifyouconsumeonefootballgame,and one serving of fries, the

marginal utility per dollar spent from both goods is 10. So is this the equilibrium? (3)

SECOND YEAR SELECTION EXAMINATION- 2019

ECONOMICS (HONOURS)

PAPER IIIB (MACROECONOMICS)

Full Marks: 50

Time: 2 Hrs

Dr. Suranjana Mitra

Group A

1. Attempt any five questions: 4*5=20

(i) Suppose that the government increases taxes and government purchases by equal

amounts.What happen to the interest rate and investment in response to this balanced-

budget change? Does your answer depend on the marginal propensity to consume?

(ii) Suppose the expected inflation is 5% and real interest rate agreed upon by the

borrower and the lender 5%, what will be the nominal interest rate?

If actual inflation turns out to be 7%, who will be the gainer and loser?

(iii) Suppose that a country experiences a reduction in productivity-that is an adverse

shock to the production function.

a. What happens to the labour demand curve?

b. How would this change in productivity affect the labour market-that is employment,

unemployment and real wages-if the labour market was always in equilibrium?

c. How would this change in productivity affect labour market if unions prevented real

wages from falling?

(iv) Show how the IS and LM curves can be shifted to get an increase in output without a

change in interest rates. What kind of mix of monetary and fiscal policy is needed to do

this? Will a reduction in interest rate, while holding output constant, do this?

(v) In the Keynesian cross, assume that the consumption function is given by

C=200 +0.75(Y-T). Planned investment is 100 and government purchases and taxes are

both 100.

(a) What is the equilibrium level of income?

(b) If the government purchases increase to 125, what is the equilibrium level of income?

(c) What level of government purchases is needed to achieve an income of 1600?

(vi) Suppose that the money demand function is (M/P)d =1000 -100r, where r is the

interest rate in percent. The money supply M is 1000 and the price level P is 2.

(a) What is the equilibrium interest rate?

(b) If the Central Bank wishes to raise the interest rate to 7%, what money supply should

it set?

(vii) Consider the following functions: C=50+0.8Yd; I=70; G=200; TR= 100; t=0.2.

(a) Suppose that‘t’ rises to 0.25, calculate the change in the budget surplus. Would you

expect the change in the budget surplus to be more or less if C=0.9 instead of 0.8?

Explain.

(b) Can you explain why the multiplier is 1 when t=1.

(viii) Suppose MPC is 0.9 and tax rate is 0.3. Find out the multiplier. If investment

decreases by Rs.10 billion, by how much will GDP decline?

Group B

Attempt any five questions: 6*5=30

2. (i) Examine what happens to consumption, investment and the interest rate when the

government increases taxes.

(ii) Examine the impact of a decline in the income velocity of circulation of money in

the classical model.

3. (i) Elucidate the difference between transaction and speculative demand for money.

(ii) Credit market decision making is based on nominal interest rate. Explain your

agreement and disagreement.

4. (i) In terms of the IS-LM framework, briefly explain the phenomenon of crowding out

effect resulting from fiscal expansion.

(ii) Do you think that the IS-LM framework violates neutrality of money? Explain

briefly.

5. (i) Why is the Phillip’s relation considered an alternative expression of aggregate

supply?

(ii) Using the Phillips relation, explain what are the factors that determine inflation?

6. Differentiate between adaptive and rational expectation. Under rational expectation,

the Phillips relation fails to hold. Why? What is the implication of this failure for the

supply curve?

7. With rational expectation, the neutrality of money holds true. Explore this statement.

8. Pointing to the differences in the assumptions, explore the difference between the two

extremes of Classical and Keynesian aggregate supply.

9. (i) Why is inflation like a tax?

(ii) Printing money is a good option for meeting government debt/expenditure. Do

you agree?

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SECOND YEAR SELECTION EXAMINATION 2019

ECONOMICS HONOURS

Paper IV-A — Development Theory

Teacher’s Name: Full Marks – 50

Miss Somdatta Goswami.

Mr. Mainak Bhattacharjee. Time – 2 hours.

Group - A

1. Answer any ten questions:2x10=20

a) Indicate any two of Kuznets’s characteristics of growth.

b) Define the notion of “capability” as explained by Amartya Sen.

c) Indicate one of the major determinants of resource shift from the primary to the

secondary sector on the basis of the Clark-Fisher Theory.

d) Explain the concept of “take-off” as described by Rostow.

e) “HDI points clearly that disparities in income are greater than disparities in other

indicators of development” — True or False?

f) What is the poverty trap?

g) What is absolute poverty?

h) What is meant by the “economic dependency burden”?

i) “Minimal Government is the best Government” is the central argument of which

neoclassical strand of thought? Explain.

j) How important is the role of value premises in Development Economics?

k) What is meant by efficiency wage?

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l) How would you define the existence of surplus labour in an economy?

m) Mention any two principles that a good measure of inequality should conform to.

n) What is Lorenz criterion? Does Gini coefficient satisfy this criterion?

o) In what manner does poverty gap ratio differ from income gap ratio?

Group B

Answer any three questions.

2.a)“There can be economic growth without economic development” — Explain. (3)

b) “As an index of economic development the per capita income is a bad choice for an

economy”. Do you agree? Give arguments. (7)

3. “Despite the existence of a diverse set of developing nations, they have some common

characteristics” — Explain and critically analyse. (10)

4. Analyse the significance of Kaldor’s growth laws in showing the relationship between

industrial growth, GDP growth and productivity growth in an economy? (10)

5. State the assumptions made in the Lewis model. Why can this model be considered as

being dynamic in nature? Discuss how does this model explain the process of

industrialdevelopment in a less developed economy? What implication will the taxing of

urban workers and using this proceeds for providing subsidy to the rural sector have for the

expansion of modern sector as indicated in this model? (2+2+3+3)

6. Consider a dual economy with modern sector (M) and rural sector (R) producing a single

good .Given labour is the only factor of production, the production technology used by the

modern sector is given by and that used by rural sector is given by. Moreover assume the

labour force is economy consists of 100 units of labour and the real wage is autonomously

given as = 10; while the real wage in T sector (is flexible at which all available all available

remain employed.

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(a) Determine the allocation of aggregate labour stock of this economy between M and R

along with the output being produced in each sector and real wage in R sector during short

run.

(b) Determine the allocation of aggregate labour stock of this economy between M and R

along with the output being produced in each sector in the long run if the labour perfect

mobile across the sectors with new jobs come up in M sector in each period.

(c) Now suppose in some period there is involuntary unemployment is R sector. Find the out

this level unemployment when = 3 and the amount of subsidy that government need to

disburse to restore full employment.(3+3+(2+2))

HONOURS SELECTION EXAMINATION 2019

ECONOMICS

PAPER IV (GROUP-B)

Teacher: Mrs. Rupa Ghosh

MARKS: 50

TIME:2Hrs

Candidates are required to give answers in their own words as far as practicable

The figures in the margin indicate full marks

Section-A

1. Answer any ten questions: 2x10

a. State any two basic features of Indian economic planning.

b. Mention two indicators of regional inequality in India.

c. Identify any two causes of structural backwardness of Indian economy on the eve of

planning.

d. State two main reasons for the failure of the Nehru- Mahalanobis plan.

e. Mention the basic arguments of the fifth five-year plan.

f. How do you define a sharecropper?

g. What is MRTP Act?

h. What is Structural Adjustment Programme of IMF?

i. What is Plan Holiday?

j. Distinguish between the concepts of Marketed Surplus and Marketable Surplus of food

grains.

k. What is Operation Barga?

l. What is New Technology in Indian Agriculture?

m. What is deindustrialization?

n. What is PL-480?

o. What is Niti Ayog?

Section-B

Answer any three questions

2. Describe the features of Indian economy on the eve of independence with reference to the

colonial rule 10

3. Do you think that Green Revolution was partially successful? Justify your answer. 10

4. Explain the structural constraints faced during implementation of development planning in

India. 10

5. What do you mean by land reform? What are the different objectives of land reform? To

what extent land reform was successful in India? (2+3+5)

6. Discuss the Farm size productivity debate in India. (10)