UP PCS Combined Lower Subordinate (Pre) Exam, 2004

U.P. PCS Combined Lower Subordinate (Pre.) Exam., 2004
Economics : Solved Paper
(Held on 25-5-2008)

1. Which of the following is a measure of quantitative credit control ?
(A) Moral suasion
(B) Bank rate
(C) Regulation of consumer credit
(D) Fixation of margin requirements on specific securities

2. On whose recommendation, S.B.I. was established ?
(A) Gorewala Committee
(B) Niyogi Committee
(C) Lakdawala Committee
(D) V. K. R. V. Rao Committee

3. Who has given the equation ?
P = kR/M {C + R (1 – C)} (Symbols have usual meanings)
(A) Pigou
(B) Keynes
(C) Fischer
(D) Robertson

4. R.B.I. was nationalised in the year—
(A) 1935
(B) 1947
(C) 1949
(D) 1951

5. Which of the following is not a flow concept ?
(A) Wages
(B) Wealth
(C) Income
(D) Dividend

6. Which pair of economists have considered P as representing price level in giving the cash balances equation ?
(A) Pigou and Robertson
(B) Marshall and Robertson
(C) Marshall and Pigou
(D) Pigou and Keynes

7. Of the following, which is not a source of public revenue ?
(A) Public borrowing
(B) Taxes
(C) Subsidies
(D) Surpluses of public undertakings

8. Tax is added to price when—
(A) Demand is perfectly elastic
(B) Demand is highly inelastic
(C) Supply is highly elastic
(D) Supply is perfectly elastic

9. Fiscal Deficit is equal to—
(A) Current Income – Current Expenditure
(B) Capital Receipts – Capital Payments
(C) Total Income – Total Expenditure
(D) Current Income – (Current Expenditure + Capital Expenditure)

10. An indirect tax is levied on—
(A) Commodities
(B) Services
(C) Imported goods
(D) All of the above

11. When a Government spends more than its revenue collection, such excess is referred to as—
(A) Budget deficit
(B) Fiscal deficit
(C) Revenue deficit
(D) Primary deficit

12. Which of the following fulfills the criterion of horizontal and vertical equity in taxation ?
(A) Expediency Approach
(B) Ability-to-pay Approach
(C) Benefit Approach
(D) Socio-Political Approach

13. Which of the following measures is not included in monetary measures used for removing the imbalances in balance of payment ?
(A) Deflation
(B) Restrictions on exports
(C) Exchange control
(D) Devaluation

14. Devaluation will help in improving the balances of payments of a country if the sum of the elasticity of demand for imports and exports is—
(A) Zero
(B) Equal to one
(C) Less than one
(D) More than one

15. Which of the following items is not included in a country’s balance of payments ?
(A) Import and export duties
(B) Shipping servies
(C) Interest received from abroad
(D) Tourists’ expenditure

16. Match List-I with List-II and select the correct answer using the codes given below the lists—
List-I
(a) Absolute Advantage
(b) Employment Multiplier
(c) Comparative Cost Theory
List-II
1. Keynes
2. Adam Smith
3. Kahn
4. Ricardo
Codes :
(a) (b) (c)
(A) 1 3 2
(B) 2 1 4
(C) 2 3 4
(D) 4 1 2

17. Free international trade leads to equalisation of—
(A) Prices in both the countries
(B) Commodities of both the countries
(C) International price with domestic price
(D) None of the above

18. The concept of ‘Offer Curves’ has been given by—
(A) Marshall – Edgeworth
(B) H. Singer
(C) W. A. Lewis
(D) A. Young

19. Trade can arise between the countries because of differences in—
(A) Technology
(B) Factor Endorsement
(C) Tastes
(D) All of the above

20. A country is advised to devalue its currency only when its exports face—
(A) Unit elasticity of demand
(B) Inelastic demand in foreign markets
(C) Elastic demand in foreign markets
(D) Perfectly inelastic demand

21. Which of the following represents the correct combination of sexratio in India in 1951 and 2001 ?
(A) 941, 933
(B) 946, 933
(C) 946, 927
(D) 972, 933

22. The proportion of rainfed agriculture to the net sown area in India is about—
(A) 45 per cent
(B) 75 per cent
(C) 50 per cent
(D) 60 per cent

23. As per the N.S.S. 61st round, poverty ratio in India for the year 2004-05 is estimated at—
(A) 23•6 per cent
(B) 32•4 per cent
(C) 27•5 per cent
(D) 16•0 per cent

24. The recommendations of the 12th Finance Commission covers the period—
(A) 2007–12
(B) 2006–11
(C) 2005–10
(D) 2004–09

25. The problem of unemployment in rural areas is taken care of by—
(A) National Rural Employment Guarantee Scheme
(B) Sampoorna Gramin Rozgar Yojana
(C) Swarnjayanti Gram Swarojgar Yojana
(D) All of the above

26. Which one of the following method is not used by N.S.S.O. for the measurement of unemployment in India ?
(A) Current Monthly Status
(B) Current Weekly Status
(C) Current Daily Status
(D) Usual Principal Status

27. Rate of increase in India’s national income (at 1993-94 prices) has been highest during—
(A) Sixth Five Year Plan
(B) Seventh Five Year Plan
(C) Eighth Five Year Plan
(D) Ninth Five Year Plan

28. Assertion (A) : Buoyancy has been witnessed in tax receipts from direct taxes in the past few years.
Reason (R) : Government has taken several measures in the area of direct taxes.
Out of the above—
(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) (A) is true, but (R) is false
(D) (A) is false, but (R) is true

29. Which Five Year Plan of India was terminated one year before the time schedule ?
(A) Third
(B) Fourth
(C) Fifth
(D) Sixth

30. The meaning of the ‘core sector’ in planning is—
(A) Agriculture
(B) Selected basic industries
(C) Defence industries
(D) Iron and Steel industries

31. Who gains in inflation ?
(A) Saver
(B) Creditor
(C) Debtor
(D) Pension-holder

32. India’s imports and exports in 2005-06 were highest with—
(A) Asia and Oceania
(B) America
(C) Russia
(D) West Europe

33. Consumer’s surplus is maximum for which types of commodities ?
(A) Luxury goods
(B) Comforts goods
(C) Necessities
(D) Equal for all types of goods

34. A firm may be considered to be of optimum size when—
(A) Its fixed and average costs are equal
(B) Its average cost is at a minimum
(C) Its total cost and total revenue curve coincide
(D) It is faced with a horizontal demand curve

35. The Slustky equation shows—
(A) Change in price alters consumers’ expenditure pattern
(B) Change in income alters consumer’s expenditure pattern
(C) Change in price as well as income alter consumers’ expenditure pattern
(D) Demographic change alters consumers’ expenditure pattern

36. When the price of an ‘inferior goods’ declines—
(A) Income effect is negative while substitution effect is positive
(B) Income effect is positive while substitution effect is negative
(C) Both income and substitution effects are negative
(D) Both income and substitution effect are positive

37. Under imperfect competition price in the long run is—
(A) Greater than the average cost
(B) Equal to the average cost
(C) Less than the average cost
(D) Equal to the marginal cost

38. Which of the following is not a U-shaped curve ?
(A) AFC curve
(B) AVC curve
(C) AC curve
(D) MC curve

39. The name of J. S. Mill is associated with which of the following theory of wages ?
(A) Wage Fund Theory
(B) Iron Law of Wages
(C) Subsistence Theory
(D) Marginal Productivity Theory

40. If the price elasticity of demand is 0•5, a 10 per cent increase in price leads to—
(A) 50 per cent decrease in demand
(B) 5 per cent decrease in demand
(C) 20 per cent decrease in demand
(D) 5 per cent increase in income

41. A consumer is in equilibrium only when—
(A) Indifference curve is convex to the origin
(B) Indifference curve is a straight line
(C) Indifference curve is tangent to the price line
(D) None of the above

42. Which of the following conditions is not correct under monopolistic competition ?
(A) Large number of sellers
(B) Differentiated product
(C) Effective barriers against the entry of firms
(D) Non-price competition

43. Of the following, which one is known as Gossen’s Second Law ?
(A) The law of diminishing marginal utility
(B) Engel’s law of consumption
(C) The principle of consumer’s surplus
(D) The law of equi-marginal utility

44. Which of the following represents the correct relationship among
MR, AR and ed ?
(A) ed = AR – MR/AR
(B) ed = MR/AR – MR
(C) ed = AR/MR – AR
(D) ed = AR/AR – MR

45. In which of the markets, the relation p = AR = MR holds true ?
(A) Monopolistic competition
(B) Perfect competition
(C) Monopoly
(D) Duopoly

46. Which factor among the following, creates obstacle in measuring correct estimate of national income ?
(A) Existence of non-monetised sector
(B) Inflation
(C) Under-employment
(D) Low rate of savings

47. Which one of the following statement is correct for consumption function propounded by Keynes ?
(A) Consumption increases in equal amount as income rises
(B) Consumption increases in proportional amount as income rises
(C) Consumption increases slower than income
(D) Consumption increases faster than income

48. Which of the following economists has first introduced the term ‘Social accounting’ in place of ‘national income accounting’ ?
(A) J. R. Hicks
(B) V. K. R. V. Rao
(C) Alfred Marshall
(D) K. E. Boulding

49. Incremental Capital-output Ratio is equal to—
(A) Increase in Capital Increase in output
(B) Increase in output Increase in Capital
(C) Increase in output Total output
(D) Capital Stock Total output

50. Disposable income is equal to—
(A) GNP – Depreciation
(B) NNP – Indirect Taxes + Economic Subsidies
(C) Personal Income – Personal Direct Taxes
(D) None of the above

51. ‘Liquidity trap’ refers to—
(A) Unitary elastic liquidity preference curve
(B) Perfectly inelastic liquidity preference curve
(C) Inelastic liquidity preference curve
(D) Perfectly elastic liquidity preference curve

52. Which of the following relationships correctly represent the acceleration principle as defined by Paul A. Samuelson ?
(A) Iut = β Δ Yt – 1
(B) Iut = β (Ct – Ct – 1)
(C) Iut = β (Yt – Yt – 1)
(D) Iut = β (Ct – 1 – Ct – 2)

53. According to Keynes, investors prefer holding money rather than bonds when they expect—
(A) Interest rates to fall
(B) Bond prices to rise
(C) Interest rates to rise
(D) Interest rates to remain constant

54. Who among the following, held the view that ‘savings and investment are always equal but they are not always in equilibrium’ ?
(A) J. M. Keynes
(B) A. Marshall
(C) K. Wicksell
(D) D. Robertson

55. Net National Product (NNP) is equal to—
(A) GNP – Foreign Aid
(B) GNP – Depreciation
(C) GNP – Total Taxes
(D) GNP – Indirect Taxes

56. The most important item of expenditure of the Union Government in India is—
(A) Subsidies
(B) Defence
(C) Wages and salaries
(D) Interest payments

57. Public Debt constitutes—
(A) External public debt
(B) External liabilities and external commercial borrowings
(C) National debt and other miscellaneous debt for which the government is ultimately responsible
(D) Both (B) and (C) above

58. The direct effect of deficit financing is—
(A) It leads to extra money supply which in turn pushes up prices
(B) It leads to extra money supply which in turn makes market more and more competitive
(C) The price situation comes under complete control
(D) Demand and supply both increase

59. A progressive tax—
(A) Imposes the same amount of tax on every individual
(B) Imposes a higher percentage of tax as income rises
(C) Imposes a higher percentage of tax as income decreases
(D) Imposes the same percentage of tax on every individual

60. On which of the following assumptions the comparative cost theory of trade is based on ?
(A) The labour theory of value
(B) Two nations and two commodities
(C) Zero transportation cost
(D) All of the above

61. Who is credited with developing the concept of ‘income terms of trade’ ?
(A) Jacob Viner
(B) G. S. Dorrance
(C) J. S. Mill
(D) F. W. Taussig

62. Which of the following items will be called as a visible item in the balance of payment ?
(A) Export of the commodities
(B) Freight charges of the shipping
(C) Capital investment by the foreigners
(D) Government expenditure in foreign countries

63. The terms of trade is the name given to—
(A) The excess of imports over exports
(B) Unilateral trade agreements between countries
(C) The comparative advantage of one country over another in the production of certain goods
(D) The relationship between prices of imports and prices of exports

64. Fiscal deficit as a percentage of GDP in the Union Budget, 2007-08 is estimated at—
(A) 3•8 per cent
(B) 4•0 per cent
(C) 3•3 per cent
(D) 4•5 per cent

65. The law of Equi-Marginal Utility states—
(A) MUx/Px > MUy/Py > MUz/Pz
(B) MUx/Px = MUy/Py = MUz/Pz
(C) MUx/Px <>y/Py <>z/Pz
(D) MUx.Px = MUy.Py = MUz.Pz

66. For a monopolist, the slope of the total cost curve is 12 and the average cost is 15 at that level of output. For maximum profit, the marginal revenue will be—
(A) 12
(B) 27
(C) 3
(D) 15

67. Food subsidy as a percentage of GDP in India is at present—
(A) Less than 0•5 per cent
(B) Between 0•5–1•0 per cent
(C) Between 1•0–3•0 per cent
(D) Between 3•0–5•0 per cent

68. In which of the following states, the population is least as per 2001 Census ?
(A) Andhra Pradesh
(B) Bihar
(C) Madhya Pradesh
(D) Rajasthan

69. The term ‘demographic dividend’ applies to—
(A) Declining total fertility rate
(B) Declining crude birth rate
(C) Young population and a declining dependency ratio
(D) Increasing life expectancy at birth of females only

70. Pradhan Mantri Gram Sadak Yojana (PMGSY) was launched in—
(A) 2000
(B) 1999
(C) 2001
(D) 2004

71. When price of a normal goods falls, more of it is purchased because of—
(A) Positive substitution effect only
(B) Positive income effect only
(C) Both (A) and (B) above
(D) None of the above

72. Match List-I and List-II and select the correct answer using the codes given below—
List-I (Programme)
(a) Swarnajayanti Gram Swarojgar Yojana
(b) Swarnajayanti Shahri Rojgar Yojana
(c) Prime Minister’s Rojgar Yojana
(d) Golden Jubilee Rural Housing Finance Scheme
List-II (Year of Launch)
1. 1999
2. 1997
3. 1993
4. 1997–98
Codes :
(a) (b) (c) (d)
(A) 1 2 3 4
(B) 1 3 2 4
(C) 2 1 3 4
(D) 4 3 1 2

73. Which of the following economists has called the ‘Law of Equi-marginal Utility’ as ‘Principle of Income Allocation’ ?
(A) Leibhafsky
(B) Leftwich
(C) Marshall
(D) Koopmans

74. The other name by which the Average Revenue Curve is known, is—
(A) Indifference Curve
(B) Income Consumption Curve
(C) Demand Curve
(D) Envelope Curve

75. For a normal commodity, the substitution effect is—
(A) Always positive
(B) Always negative
(C) Zero
(D) Either positive or negative

76. In the Cobb-Douglas production function, the elasticity of substitution between factors is—
(A) Zero
(B) Equal to one
(C) Less than one
(D) Greater than one

77. Total utility is maximum at a point when marginal utility is—
(A) Positive
(B) Negative
(C) Positive but decreasing
(D) Zero

78. Who among the following is the first to use the term ‘Knife-edge’ in the theory of economic growth ?
(A) Rostow
(B) Solow
(C) Harrod
(D) Kaldor

79. Match List-I and List-II and select the correct answer using the codes given below the lists—
List-I
(a) Amartya Sen
(b) Hirschman
(c) Rostow
(d) G. Myrdal
List-II
1. Stages of Growth
2. Unbalanced Growth
3. Cumulative Circular Causation
4. Choice of Technique
Codes :
(a) (b) (c) (d)
(A) 1 2 3 4
(B) 4 1 3 2
(C) 4 2 1 3
(D) 3 2 4 1

80. Which Indian Five Year Plan ensured higher growth rate as compared with targeted growth rate ?
(A) Fifth Plan
(B) Fourth Plan
(C) Second Plan
(D) Eighth Plan

81. Sustainable Development means—
(A) Minimizing poverty
(B) Maximizing current per capita income
(C) Sustaining low budget deficits
(D) Growth without sacrificing the needs of the future generation

82. Who has said, “Development is the result of human efforts” ?
(A) Adam Smith
(B) Harrod
(C) Lewis
(D) Schumpeter

83. ‘Misery Index’ represents—
(A) Sum of rate of inflation and rate of unemployment
(B) Product of rate of inflation and rate of unemployment
(C) Proportion of very poor to poor living below the poverty line
(D) Both the above (B) and (C)

84. According to 2001 Census, which State has the highest density of population in India ?
(A) Uttar Pradesh
(B) West Bengal
(C) Kerala
(D) Maharashtra

85. The total receipts of the State Governments as per cent of G.D.P. in India currently lies in the range of—
(A) Between 6-10 per cent
(B) Between 10-15 per cent
(C) Between 15-20 per cent
(D) Between 25-30 per cent

86. Which one was the most important item of export/foreign exchange earnings in 2005-06 ?
(A) Engineering Goods
(B) Textiles
(C) Gems and Jewellery
(D) Agriculture and Allied products

87. Which among the following taxes, has been the most elastic source of tax revenue in India in recent years ?
(A) Excise duty
(B) Service tax
(C) Custom duty
(D) Corporation tax

88. Which of the following is the most important source of financing the gross fiscal deficit of the Government of India ?
(A) Market borrowings
(B) Loans from the State Government
(C) Loans from the financial institutes
(D) Loans from Provident Funds

89. The definition of Small Scale Industry in India is based on—
(A) Sales of a unit
(B) Investment in machines and equipments
(C) Market coverage
(D) Export capacity

90. Read the following features of Indian Economy—
1. Domestic savings rate has been increasing.
2. Foreign exchange resources have been rising.
3. Growth rate has accelerated in recent years.
Which of the aforesaid is correct?
(A) 1 only
(B) 2 only
(C) 1 and 2
(D) 1, 2 and 3

91. If the value of marginal propensity to consume is 0•75, the value of investment multiplier would be—
(A) 4
(B) 3
(C) 2
(D) 1

92. The transaction demand for money is a function of—
(A) Rate of interest
(B) Income
(C) Profit
(D) Expectations

93. According to Keynes, Investment depends on—
(A) Size of income and propensity to consume
(B) Marginal efficiency of capital and size of income
(C) Marginal efficiency of capital and rate of interest
(D) Propensity to consume and rate of interest

94. Increase in real national income takes place when—
(A) Savings of the public increases
(B) Prices of goods increase
(C) Supply of money in the economy increases
(D) Total production in the economy increases

95. For a hypothetical economy, the Net National Product is Rs. 10,000 crores, Indirect taxes are Rs. 1,500 crores and subsidy is Rs. 800 crores. The value of national income will be—
(A) Rs. 7,700 crores
(B) Rs. 9,300 crores
(C) Rs. 10,800 crores
(D) Rs. 12,300 crores

96. The difference between ‘GDP’ and ‘NDP’ is—
(A) Net Indirect Tax
(B) Government Revenue
(C) Consumption of Fixed Capital
(D) Net Capital Formation

97. The ‘liquidity trap’ shows that—
(A) Interest rate will fall further
(B) Interest rate cannot fall further
(C) Interest rate must rise and bond prices fall
(D) Interest rate must fall and bond prices rise

98. Which of the following concept of money supply is called ‘Broad Money’ in India ?
(A) M1
(B) M2
(C) M3
(D) M4

99. The empirical relationship between the rate of unemployment and the rate of inflation in the short run was formalized by—
(A) A. W. Phillips
(B) James Tobin
(C) Paul Samuelson
(D) John Maynard Keynes

100. Scheduled bank is that bank which is—
(A) Nationalised
(B) Not-nationalised
(C) Based at foreign country
(D) Included in the Second Schedule of R.B.I.

Answers with Hints
1. (B) 2. (A) 3. (A) 4. (C) 5. (B)
6. (B) Marshall’s equation is M = kPy while that of Robertson’s is P = M/kT. P in these equation represents price level.
7. (C) 8. (B) 9. (D) 10. (D) 11. (C)
12. (B) 13. (A) 14. (D) 15. (A)
16. (C) The concept of multiplier was developed by J. M. Keynes as easy as 1929, R. F. Kahn developed it in 1931.
17. (A) 18. (A) 19. (B) 20. (C) 21. (B)
22. (D) 23. (C) 24. (C) 25. (D) 26. (A)
27. (C) 28. (A) 29. (C) 30. (B) 31. (C)
32. (A) 33. (C) 34. (B) 35. (A) 36. (A)
37. (A) 38. (A) 39. (A) 40. (B) 41. (C)
42. (C) 43. (D) 44. (D) 45. (B) 46. (A) 47. (C)
48. (A) 49. (A) 50. (C) 51. (D) 52. (B) 53. (A) 54. (A)
55. (B) 56. (D) 57. (D) 58. (A) 59. (B) 60. (D) 61. (B)
62. (A) 63. (D) 64. (C) 65. (B) 66. (A)
67. (C)
68. (D) Population of various states is as under :
Rajasthan – 5•65 crore
Madhya Pradesh – 6•03 crore
Andhra Pradesh – 7•62 crore
Bihar – 8•29 crore
Hence the correct answer is (D).
69. (C) 70. (A) 71. (C) 72. (A) 73. (C) 74. (C) 75. (B) 76. (B) 77. (D) 78. (C) 79. (C)
80. (D) Growth rate against the target in various Five Year Plan Target Achieved
(a) Fifth Plan – 5•5 5•0
(b) Fourth Plan – 5•7 3•8
(c) Second Plan – 5•0 4•3
(d) Eighth Plan – 5•6 6•8
Thus answer (D) is correct.
81. (D) 82. (A) 83. (B)
84. (B) Density of population in various states :
(A) Uttar Padesh 690
(B) West Bengal 903
(C) Kerala 819
(D) Maharashtra 315
Hence the correct answer is (B) West Bengal.
85. (B) 86. (A) 87. (D) 88. (A) 89. (B)
90. (D) 91. (A) 92. (B)
93. (C) Following factor determine the investment :
(i) Rate of Interest
(ii) Marginal efficiency of capital and
(iii) Cost of capital assets.
Thus answer (C) is correct.
94. (D)
95. (D) Net National Income is termed as National Income. Thus the question’s formating is basically wrong. However, Net National Product at market price = Net National Product at Factor cost + Indirect taxes + Transfer (subsidy). In that case answer (D) is appropriate.
96. (C) 97. (A) 98. (C) 99. (A) 100. (D)

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