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Model question paper II

Section A (30 marks)


Part I: Essay

(15 marks)

Write an essay of 300-350 words on one of the topics given below. Marks will be deducted
for wrong grammar and spelling and poor punctuation and sentence construction. Use technical
terms only after defining them.
Sustainable Agriculture Development and Industrialization
Monetary Policy in the context of High Inflation Rate
Role of Financial Sector in Economic Development
(1 X 10 = 10 marks)

Section A :Part II
1.

2.

2 men and 3 women can do a piece of work in 10 days while 3 men and 2 women can do the
same work in 8 days. In how many days can 2 men and 1 woman do the same work?
a)
b) 12
c)
d) 10
1
1
12
12
2
4
Question 2-5
Two bugs are climbing a slippery wall. At time zero, both are at the bottom of the wall. Bug
A climbs at the rate of 3 inches per minute. Bug B climbs at the rate of 4 inches per minute.
Due to the slippery wall, however, Bug A slips back 1 inch every 2 inches climbed and Bug B
slips back 1.5 inches every 2 inches climbed. Moreover, Big A takes a rest of 1 minute after
every 2 minutes and Big B, a rest of 1 minute after every 3 minutes. Assume that slipping
occurs continuously when climbing
At what height (from the bottom) do the two bugs meet each other?
a) Do not meet
b) 3 inches
c)
5 inches
d) 8 inches

3.

What is the widest gap achieved between the bugs, within the first 10 minutes?
a) 2 inches
b) 3 inches
c) 2.5 inches d) 1.5 inches

4.

If the wall is 1 foot high, when Bug A reaches the top, how far is Bug B behind?
a) 3 inches
b) 2 inches
c)
2.5 inches
d) 3.5 inches

5.

What is the average speed (per minute) of Bug A for the first 9 minutes?
b) 1.75 in/min c) 2 in/min d) ) 0.75 in/min
a) 1 in/min

6.

A bullock cart can travel at the rate of 4 kmph for the first two hours of a trip. After the first
two hours, the bullock carts speed drops to 3 kmph. How many hours will it take the
bullock cart to travel 20 km?
1
a) 5
b) 4 1
c)
d) 5 1
5
2

Continue
1

Model question paper II

Contd. Section A: Part II


7.

M people agreed to purchase a gift for Rs. D. If three people drop out, how much more (in
Rs.) will each have to contribute towards the purchase of the gift?
3D
3D
MD
D
a)
b)
c)
d)
M

3M

3M M

M 3

8.

In a town 25% families own a phone and 15% own a car, 65% families own neither a phone
nor a car. 2000 families own both a car and a phone. Consider the following statement in
this regard:
1) 10 % families own both a car and a phone.
2) 35 % families own neither a car nor a phone.
3) 40,000 families live in the town.
Which of the above statements are correct?
a) 1 and 2
b) 2 and 3
c) 1 and 3
d) 1, 2 and 3

9.

A complete cycle of a traffic light takes 60 seconds. During each cycle the light is green for
25 seconds, yellow for 5 seconds, and red for 30 seconds. At a randomly chosen time, the
probability that the light will not be green is
a) 1/4
b) 7/12
c) 1/3
d) 5/12

10.

If 44+14= 15 & 107+15 = 46, what is 28 + 6?


a) 22
b) 13
c) 11

d)

17

Section B (1 X 40 = 40 marks)
1.

A private telecom company decides to introduce a video-phone. Students, who are writing
GIPEs entrance test, are all friends and would like to stay in touch. A students desire to buy a
video-phone depends upon how many other students buy a video-phone. Video phones cost
Rs. 160 a piece (ignore usage costs). There are 1000 students indexed by i from 1 to 1000.
Student i has value vi = i. Student i has utility (in Rs.) for buying a video phone of (vi .
n/1000), where n is the total number of students buying a video phone. If everyone believes
that n = 500, which students will be willing to buy the phone?
a) All the students will buy
c) All the students with vi above 320 will
buy
b) All the students with vi above 500 will buy d) None will buy.

2.

An American tourist in India pays Rs.25 for a burger which costs him $1 in the U.S. But he
knows that market exchange rate is $1 = Rs.40. How does he solve the puzzle?
a)
Goods are cheaper in India
b) He got a premium when $1 was converted into Rs.40.
c)
He is confronted with two rates: purchasing power parity rate and market determined
rate
d) None of the above
Continue
2

Model question paper II

Contd. Section B
3.

There are two goods: x1 and x2. Income triples and the price of good x1 doubles.
What is the maximum increase of price of good x2 such that no one is worse off?
a)
triple the price
c) no change
b) double the price
d) cant say

4.

Rakesh and Ramesh consume clothes (C) and food (F) only. Rakeshs utility function is U (C, F)
= aA ln C + bA ln F , and Rameshs utility function is U (C, F) = aB ln C + bB ln F . aA ,bA , aB ,bB >
0 . The price of clothes is PC , and the price of food is PF . At the optimal level of consumption
what would be the marginal rates of substitution (MRS) of clothes for food of Rakesh and
Ramesh?
a)
MRSRakesh = MRSRamesh
c) MRSRakesh > MRSRamesh
Rakesh
Ramesh
b) MRS
MRS
d) MRSRakesh < MRSRamesh

5.

Which of the following method values the final goods and services produced during a year, by
aggregating the values imparted to the intermediate products at each stage of production by
the industries and productive enterprises in an economy?
a)
b)

6.

7.

Income method
Input method

c)
d)

Output method
Saving method

The average rate of inflation in USA and Japan between the years 1960-73 is 3.2% and 6.1%
respectively, then the growth rate of
c)
Japan will be more
a) a) No definite conclusion can be made
b) b) USA will be more
d)c) Japan will be less
d)
Raman only consumes two goods: X and Y. If X is a Giffen good for Raman, then for Raman
Y must be a
a)
inferior good
c) normal good
b) superior good
d) Giffen good

8.

Which of the following would likely have the least direct influence on a countrys current
account?
a)
inflation
c) exchange rates
b) national income
d) a tax on income earned from foreign stock

9.

Suppose the demand function for sugarcane is Qd = 10 2P, and supply function is Qs = 3P
5. Calculate the original market equilibrium price and quantity. If government sets the support
price PS = 4 then what would be the amount of quantity to be purchased by the government to
restore equilibrium?
a)
4 units
c) 0 unit
b) 7 units
d) 5 units
Continue
3

Model question paper II


Contd. Section B
10.

Which of the following variables will come under stock variables?


a)
Consumer price index
c) Money supply
b) Gross domestic product
d) Both (a) and (c) above

11.

Suppose for a monopolist, the cost function is C(X) = 2X2 and the demand function is
X=12 - 0.25P. The level of output that maximises the monopolists profits is
a)
10
c) 12
b) 4
d) 8

12.

You have two plants. Plant A has costs c(y) = y2 and Plant B has costs c(y) = 2y2. What is the
joint cost curve?
a)
y2
c) 5y2/9
2
b) 2y
d) 3y2

13.

14.

Q 13-15
Suppose that the demand for cars in India has the following form: CD = 9P-1, where C is
millions of cars. The supply of cars in India takes the following form: CS = P. The
international price of cars is P*= 2.
What is the price elasticity of demand for cars?
a)
-1
c) -2
b) -1/2
d) -9
What is the price of cars in a closed economy?
a)
9
b) 1

c)
d)

3
9/2

15.

If there were no restrictions how many cars would be imported, how many would be
produced?
a)
4
c) 4.5
b) 2
d) 0

16.

If you know that the price of Canadian dollars in Japan is 100, then you also know that in
Canada one yen costs:
a)
CAN$.10.
c) CAN$1.00
b) CAN$.01.
d) CAN$.05.

17.

Depreciation of currency will worsen a countrys balance of payments if sum of the


absolute values of the demand elasticities for the countrys exports and imports is
a)
greater than unity
c) equal to unity
b) less than unity
d) none of the above

Continue

Model question paper II


Contd. Section B
18.

There are two economies A and B and the labor cost of producing unit output of two
Commodities 1 & 2 is

1
2
a)
b)
c)
d)

A
15
20

B
35
45

Country A has comparative advantage in producing commodity 1 and B in 2


Country A has comparative advantage in producing commodity 2 and B in 1
Neither country has any comparative advantage but A has absolute advantage
None of the above

19.

The multiplier effect means that a given change in _____ expenditures will change equilibrium
_____ by an amount _____ than the initial change in autonomous expenditures.
a)
autonomous; income; greater
c) induced; income; greater
b) autonomous; income; less
d) induced; employment; greater

20.

In an economy aggregate monetary resources are equal to the sum of


i)
RBI currency notes in circulation
iii) Time deposits with banks
ii) Rupee coins and notes and small coins in iv) Demand deposits with banks and other
circulation
deposits with RBI
a)
Both (i) and (ii) above
c)
Only (i) and (ii) and (iii) above
b)
Only (ii) and (iii) and (iv) above
d)
All of (i) and (ii) and (iii) and (iv)
above

21.

Out of the following whose analysis started with the recognition that the total quantity
demanded of an economys output was the sum of four types of spending: consumer
expenditure, planned investment spending, government spending, and net exports.
a)
John Maynard Keynes
c)
Milton Friedman
b)
Sir John Hicks
d) Paul A. Samuelson

22.

Another term for Adam Smiths division of labour is:


a)
exchange
c)
Specialization
b) economic growth
d) trade

23.

Milton Friedman advocated the use of monetary growth rules for all the following reasons
EXCEPT which one?
a)
b)
c)
d)

Variations in monetary growth are a major source of instability in the economy.


Lags in discretionary monetary policy are long and variable.
The private sector economy is inherently stable.
The velocity of money is highly unstable.
Continue
5

Model question paper II

Contd. Section B
24.

25.

The Recardian law of rent implies that


a)
Rent is not a part of price
b) Rent is charged over and above the price

c)
d)

Rent is not a cause of price


Rent has to be subtracted to arrive at
price

Mr. Jack has the utility function U ( x1 , x 2 ) = x1 + x 2


a)

Mr. Jack has lexicographic preferences

c)

b)

Mr. Jack has homothetic preferences

d)

Mr. Jack does not have homothetic


preferences
None of the above

26.

Under the Cash Balance Approach, Cambridge economists stated that when demand for
money increases, people will -------------expenditure on goods and services, which will in turn
bring ------------ the general price level and ---------- value of money.
a)
Reduce, down, raise
c)
Reduce, down, decline
b) Increase, up, decline
d) Reduce, up, raise

27.

Economists define investment as the purchase of


a)
a new physical asset such as a new machine or a new house.
b) any physical asset, whether new or not, used by business to increase production.
c)
any physical asset used by business to increase production and the repurchase of
common stock.
d) business spending on capital and household spending on durable goods.

28.

The following change will result in an appreciation of the rupee


a)
An increase in imports
c)
An increase in Indian interest rates
b) An increase in remittances
d) An increase in American interest rates

29.

Monetarists and Keynesians disagree on which aspect of the money transmission mechanism
a)
effect on investment
c)
effect of prices
b) effect of the interest rate
d) effect on aggregate demand

30.

The inflation rate is 1% and the unemployment rate is 14%. What would a Keynesian
economist recommend for economic policy?
a)
increasing the money supply
c)
increasing federal spending
b)
decreasing the money supply
d) decreasing the discount rate

31.

Fishers demand theory of money is otherwise called as:


a)
Transaction approach of money
c)
Cash balance approach of money
b) Quantity theory of money
d) Both Transaction approach of money
and Quantity theory of money as well
Continue
6

Model question paper II

Contd. Section B
32.

Which of the following statements is NOT a difference between the classical and Keynesian
monetary theories?
a)
Keynes emphasized the role of the speculative demand for money, whereas classical
economists focused on the transactions demand.
b) Classical economists use the quantity theory channel, while Keynesians use the interest
rate channel.
c)
Keynesian analysis emphasizes the long run, whereas the classical economists focus on
the short run.
d) The classical approach says that monetary changes directly affect the price level, while
the Keynesian approach states that changes in money affect the economy only indirectly
through changes in interest rates and investment.

33.

Which of the following is NOT the function of the RBI in India?


a)
Regulator of currency and lender of last
c)
Custodian of excess reserve of the
resort
commercial banks
b) Fiscal Agent and Advisor to the Govt. of d) Clearing house for Transfer and
India
settlement

34.

Keynes was especially interested in explaining movements of _____ because he wanted to


explain why the Great Depression had occurred and how government policy could be used to
increase _____in a similar economic situation.
a)
aggregate output; wages
c)
wage rates; wages
b) aggregate output; employment
d)
wage rates; employment

35.

Which one of the following monetary policies would be appropriate for the central bank of a
country during an inflationary period?
a)
Decrease the required reserve ratio
c)
Sell by the central bank government
bonds on the open market.
b) Decrease the bank rate.
d) Increase the money supply

36.

If government purchases increase by 100, and the purchases are financed by an increase in
autonomous net taxes of 100, and the MPC = 0.5, then in the simple Keynesian model
a)
c)
aggregate output will increase by 100.
aggregate output will not change.
b) aggregate output will decrease by 100.
d)
the effect on aggregate output
cannot be determined without further
information

37.

If the economy is on the LM curve, but is to the right of the IS curve, then the _____
market is in equilibrium, but aggregate _____ exceeds aggregate _____.
a)
c)
goods; output; demand
money; output; demand
b) goods; demand; output
d) money; demand; output
Continue
7

Model question paper II

Contd. Section B
38.

If SBI has total deposits of Rs 40 million and the reserve ratio is 20%, what is the total amount
that the money supply can increase by if SBI lends out all the money that it can?
a)
Rs 200 million
c)
Rs 40 million
b) Rs 42 million
d)
Rs 160 million

39.

The primary component of the current account is the:


a)
balance of trade
c)
balance of money market flows
b) balance of capital market flows
d) unilateral transfers

40.

During the millennium scare of 2000, Surendra reduced his monthly spending by Rs1, 000
and buried his money in the backyard. If the MPC is 0 .75, how much did national income
fall?
a)
c)
Rs1,000
zero
b) Rs 4,000
d) It actually increased Rs 4,000.
Section C

1.

2.

(1 X 30 = 30 Marks )

Before planting a crop for the next year, a producer does a risk assessment. According to her
assessment, she concludes that there are three possible net outcomes: a $7,000 gain, a $4,000
gain, or a $10,000 loss with probabilities 0.55, 0.20 and 0.25 respectively. The expected profit
is:
a)
$3,850
c)
$2,150
b) $3,650
d)
$2,500
Evaluate Lt

x0

a)
b)

1+ x 1 x
x

2
0

c)
d)

3.

The simple probability of an occurrence of an event is called the


a)
Bayesian probability.
c)
Marginal probability.
b) Joint probability.
d) Conditional probability.

4.

What is the probability that a value chosen at random from a particular population is larger
than the median of the population?
a)
0.25.
c)
1.0.
b) 0.5.
d) 0.67.

5.

The first three terms of a geometric progression are 5 , 3 5 , and


7
12
a)
c)
5
5
9
b) 1
d)
5

5 . The fourth term is

Continue
8

Model question paper II

Contd. Section C
6.

If A and B are mutually exclusive events, then P(A or B) = P(A) + P(B). How does the
calculation of P(A or B) change if A and B are not mutually exclusive?
a)
P(AB) must be subtracted from
c)
[P(A) + P(B)] must be multiplied by
P(A) + P(B).
P(AB).
b) P(AB) must be added to P(A) + P(B).
d) [P(A) + P(B)] must be divided by P(AB)

7.

For children between the ages of 18 months and 29 months, there is approximately a linear
relationship between height and age. The relationship can be represented by: Y = 64.93 +
0.63(x), where Y represents height (in centimeters) and X represents age (in months). Joseph is
22.5 months old and is 80 centimeters tall. What is Josephs residual?
a)
79.1
c)
+0.9
b)
-0.9
d) 56.6

8.

Other things being equal, the width of a 90% confidence interval will be
a)
Maybe wider or narrower depending on c)
Wider than 95% confidence interval
the population variance
b) The same width as a 95% confidence
d) Narrower than 95% confidence
interval
interval

9.

ANOVA uses the


a)
t-statistic
b) F statistic

10.

Evaluate

c)
d)

Binomial distribution
z- statistic

c)
d)

2 log 2
1

1 x

1 + x dx
0

a)
b)

2 log 2 1
1 2 log 2

11.

In a goodness of fit test, if the expected and observed frequencies are close to one another,
then most likely
a)
The null hypothesis may be accepted or
c)
The alternative hypothesis would be
rejected
accepted
b) The null hypothesis would be rejected
d) The null hypothesis would be accepted

12.

Leo C. Swartz, a taxi driver in Chicago, has found that the weather affects his customers
tipping. If it is raining, his customers usually tip poorly. When it is not raining, however, they
usually tip well.. Which of the following is true?
a)
Tips and weather are statistically
c)
P (good tip / rain) is larger than P(bad
independent.
tip / rain).
b) The weather conditions Leo cited are
d) None of these
not mutually exclusive.
Continue
9

Model question paper II

Contd. Section C
13.

Which of the following is a necessary condition for use of a Poisson distribution?


a)
Probability of one arrival per second is
c)
The number of arrivals in any 1-second
constant.
interval is independent of arrivals in
other intervals.
b) The probability of two or more arrivals
d) All of these.
in the same second is zero.

14.

If f (a, b) = a 2 + b 2 , then f [2, f (3,4 )] = ?


a)
29
b) 629

c)
d)

129
81

15.

A third of Kavithas mark in Maths equals half of her marks in Hindi. If she got 150 marks in
the two subjects together how many marks did she get in Hindi?
a)
30
c)
90
b) 60
d) 75

16.

To test the significance of an individual slope coefficient we use


a)
F-test
c)
The exponential distribution
b) Chi-square test
d) t-test

17.

For a negatively skewed distribution


a)
Mean = Median
b) Mean > Median

18.

Which of the following statements is NOT true?


a)
In a symmetric distribution, the mean c)
and the median are equal.
b)

19.

c)
d)

The first quartile is equal to the twenty- d)


fifth percentile.

Mean < Median


None of the above
In a symmetric distribution, the median
is halfway between the first and the
third quartiles.
The median is always greater than the
mean.

The term test scores of 15 students enrolled in a Business Statistics class were recorded in
ascending order as follows:
4, 7, 7, 9, 10, 11, 13, 15, 15, 15, 17, 17, 19, 19, 20
After calculating the mean, median, and mode, an error is discovered: one of the 15s is really a
17. The measures of central tendency which will change are:
a)
the mean only
c)
the mode only
b) the mean and mode
d) the median only

Continue

10

Model question paper II

Contd. Section C
20.

Which of the following could never be described by a binomial distribution?


a)
The number of defective widgets
c)
The amount of water used daily by a
produced by an assembly process.
single household.
b) All of these could always be described by d) The number of people in your class
a binomial distribution.
who can answer this question correctly.

21.

The chances that you will be ticketed for illegal parking on campus are about 1/3. During the
last nine days, you have illegally parked every day and have NOT been ticketed (you lucky
person)! Today, on the 10th day, you again decide to park illegally. The chances that you will
be caught are:
a)
greater than 1/3 because you were not c)
less than 1/3 because you were not
caught in the last nine days.
caught in the last nine days.
b) equal to 1/10 because you were not d) still equal to 1/3 because the last nine
caught in the last nine days.
days do not affect the probability.

22.

2 1
Find the Eigen values of A =

3 4
a)
1, 3
b) 3, 5

c)
d)

1, 5
3, 1

23.

On which of the following interval(s) must the function f (x) = 2+x2 x3 have a root?
a)
[1, 2]
c)
[1, 0]
b) [2, 3]
d) [0, 1]

24.

What is the rank of the matrix?


1
4
3
2
a)
b)

25.

2
4
6
4

1
0
0
2

2
0
0
4

0
1

The exponential distribution is


a)
Described by its degrees of freedom
b) The sum of squared independent normal
variables

c)
d)

3
2

c)
d)

A discrete distribution
A continuous distribution determined
by its parameter

Continue
11

Model question paper II

Contd. Section C
26. Assume that a die is rolled twice in succession and that you are asked to draw the probability
tree showing all possible outcomes of the two rolls. How many branches will your tree have?
a)
6
c)
42
b) 12
d) 36
27.

If 6*5 = 15 and 8*9 = 36, what is 19*6?


a)
34
b) 46

c)
d)

57
62

28.

Cans of soft drinks cost $0.30 in a certain vending machine. What is the expected value and
variance of daily revenue (Y) from the machine, if X, the number of cans sold per day has
E(X) = 125, and Var(X) = 50 ?
a)
E(Y ) = 37.5 , Var(Y ) = 4.5
c)
E(Y ) = 37.5 , Var(Y ) = 15
b) E(Y ) = 37.5 , Var(Y ) = 15
d) E(Y ) = 37.5 , Var(Y ) = 50

29.

Which of the following would likely be a seasonal component of a time series?


a)
Law suits
c)
Recessions
b) Population growth
d) Holidays

30.

Last year a small statistical consulting company paid each of its five statistical clerks $22,000,
two statistical analysts $50,000 each, and the senior statistician/owner $270,000. The number
of employees earning less than the mean salary is:
a)
7
c)
4
b) 5
d) 6
********************

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