UGC NTA NET/JRF Exam, June-2023 Economics (Shift-I)

Total Questions: 100

11. In the extreme case of liquidity trap

Correct Answer: (b) Most of the investors will show bearish behaviour
Solution:

A liquidity trap is an economic situation where interest rates are extremely low, and people prefer to hold cash instead of investing or spending. This can happen when a country is trying to recover from a recession and the government lower interest rates to encourage borrowing and spending.

However, when interest rates are already close to zero, lowering them further has no effect on borrowing patterns. In the extreme case of liquidity trap most of the investors will show bearish behaviour.

12. A company has 140 employees, of which 30 are supervisors, 80 of the employees are married, are 20% of the married employee are supervisors. If a company employee is randomly selected, what is the probability that the employee is married and is a supervisor?

Correct Answer: (d) 0.1143
Solution:

Total no. of employees = 140
30 are supervisors.
married employees = 80
20% of employees (80) = supervisors. employees.
So, (20/100)×80 = 16
Probability that employees are married and is supervisor.
= 16/140 = 0.114285
= 0.1143.

13. Which of the following is/are true about paradox of thrift?

A. Paradox of thrift was popularized by J. M. Keynes.
B. It states that personal savings can be detrimental to overall economic growth.
C. It shows the relationship between output growth and rate of unemployment.
D. It shows the relationship between inflation and rate of interest.
E. It states that individuals saving during an economic recession leads to fall in aggregate demand.
Choose the correct answer from the option given below:

Correct Answer: (d) A, B, E only
Solution:

The Paradox of thrift is an economic theory that states that when people save more money, it can lead to a decrease in the economy's overall saving.

This is because when people save more, consumption deceases, which leads to decrease in aggregate demand. This can then lead to a decrease in employment and income, which can further reduce the economy's total saving.

Following correct statement about paradox of thrift-
(1) Paradox of thrift was popularized by J.M. keynes.
(2) It states that personal saving can be detrimental to overall economic growth.
(3) It states that individuals saving during an economic recession leads to fall in aggregate demand.

14. Given the income multiplier formula m = 1/1-MPC, lower the marginal propensity to save,

Correct Answer: (a) Higher will be the multiplier effect
Solution:

m = 1/1-MPC = 1/MPS

higher the value of MPS lower the value of multiplier, lower the value of MPS higher the value of multiplier. example, (MPS), = 0.5
Notes: -
1. When MPC is zero then MPS is 1(one) and k is also 1.
2. When MPC is 1 then MPS is 0(zero) and K is infinity.
3. Value of k can vary from 1 to ∞.

15. Which of the following is not true in case of incidence of tax:

Correct Answer: (c) One would be in a better position to avoid the tax and leave the seller with a larger part if demand is inelastic while supply is elastic.
Solution:

Case of incidence tax Imagine a $ 1 tax on every barrel of apples a farmer produces. It the farmer is able to pass the entire tax an to consumers by raising the price by $ 1, the product (apples) is price inelastic to he consumer.

In this example, consumers bear the entire burden of the tax- the tax incidence falls on consumers.
Important point- Not true in case of incident tax.
⇒ One would be in a betters position to avoid the tax and leave the seller with a larger part if demand is inelastic while supply is elastic.

16. Which of the following are recommendations of the Narasimham Committee, 1991.

A. Deregulation of the interest rate structure.
B. Need for greater use of information technology.
C. Permitting only private sector banks to access the capital market.
D. Freedom to appoint chief executive and officers of the banks.
E. Capital adequacy implemented in stages. norms were
Choose the correct answer from the option given below:

Correct Answer: (c) A, D and E only
Solution:

Narasimham committee 1991. After economic liberalisation, a significant government challenge was enhancing bank efficiency and competitiveness.

To address this, the finance Minister established the Narasimham Committee, led by М Narasimham, a former RBI Governers.

* Recommendation of the Narasimham Committee 1991.
(1) Deregulation of the interest rate structure.
(2) Freedom to appoint chief executive and officers fo the banks.
(3) Capital adequacy norms were implemented in stages.

17. The concept of "excess sensitivity" and "excess smoothness" are explained by following statement(s).

A. 'Excess sensitivity' refers to a situation where consumption over responds to temporary income shocks.
B. 'Excess smoothness' refers to a situation where consumption under responds to temporary income charges.
C. With excess sensitivity, anticipated rise in income is associated with relatively small change in consumption.
D. With excess smoothness, changes in aggregate income are associated with relatively large changes in aggregate consumption.
E. 'Excess sensitivity' and 'Excess smoothness' are related to the empirical evidences of permanent income hypothesis.
Choose the correct answer from the option given below:

Correct Answer: (d) A, B, E only
Solution:

In economics, excess sensitivity and excess smoothness are two concepts that describe how consumption relates to income:
• Excess sensitivity
When consumption is more sensitive to changes in current income than expected. This can be explained by the idea that house holds make consumption decision more frequently than they are observed.

• Excess Smoothness:- When changes in aggregate income are associated with relatively small changes in aggregate consumption. This is also known as the excess smoothness puzzle.

* Important Point
The concept of "excess sensitivity" and "excess smoothness' are explained by the following statements-
(A) Excess sensitivity refers to a situation where consumption over responds to temporary income shocks.
(B) "Excess smoothness" refers to a situation where consumption under responds to temporary income changes.
(C) With excess sensitivity, anticipated rise in income is associated with relatively large change in consumption not small change.
(D)With excess smoothness, change in aggregate income are associated with relatively small changes in aggregate consumption not large changes.
(E) 'Excess sensitivity' and 'Excess smoothness' are related to the empirical evidences of permanent income hypothesis.

18. What is the motto of 18ᵗʰ G-20 meeting?

Correct Answer: (a) One Earth, One Family, One Future
Solution:

The motto of G-20 18th meeting is One Earth, One family, One future.
Note:- G-20 India Presidency

India's G20 logo juxtaposes planet Earth with the lotus, India's national flower and the theme is 'Vasudhaiva Kutumbakam' or 'One Earth-one familyOne future'

The G20 Logo draws inspiration from the vibrant colours of India's national flag-saffron, white and green, and blue.

19. Which of the following constitutes India's strategy to combat climate change in the backdrop of its stand at the 26th session of the conference of the Parties (COP 26) to the UNECCC held in Glasgow. U.K.

A. phasing out of coal-based thermal power generation by 2030.
B. reduction of the carbon intensity of Indian economy by 45 percent by 2030, over 2005 levels.
C. capping Indian economy total final energy consumption in absolute levels.
D. achieving the target of net zero emissions for India by 2070.
E. promoting lifestyle for environment to combat climate change.
Choose the correct answer from the option given below:

Correct Answer: (c) B, D. E only
Solution:

Following that constitutes India's strategy to combat climate change in the backdrop of its stand at the 26th sessions of the conference of the parties (CoP26) to the UNFCCC held in Glasgow, U.K.
(1) Reduction of the carbon intensity of Indian economy by 45% by 2030, over 2005 levels.
(2) Achieving the target of net zero emissions for India by 2070.
(3) Promoting lifestyle for environmental to combat climate change.
Note:-
(i) Reach 500GW Non-Fossil energy capacity by 2030.
(ii) So per cent of its energy requirements from renewable energy by 2030.
(iii) Reduction of total projected carbon emissions by one billion tonnes from now to 2030.
(iv) Reduction of the carbon intensity of the economy by 45% by 2030, over 2005 levels. (v) Achieving the target of net zero emissions by 2070.

20. Which of the following is/are correct about Walrasian demand function?

A. The Walrasian demand function X (P, W) is homogenous of degree zero if X (αP, αW) = X (P, W) for any P, W and α > 0.
B. The Walrasian demand function X (P, W) is homogenous of degree on if X (αP, αW) = αX (P, W) for any P, W and α > 0.
C. The Walrasian demand function X (P, W) satisfies Walras' law if for every P >> 0 and W > 0, we have P.X = W for all X ∈ X (P, W).
D. Walras' law says consumer fully expends his wealth.
E. If price and wealth both change in same proportion, then individual consumption choice does not change.
Choose the correct answer from the option given below:

Correct Answer: (d) A, C, D, E only
Solution:

A, C, D, & E are correct option.
Note:-The Walrasian demand function, x(p,w), is a function that specifies the demand for a good for every possible price vector, p, and wealth level, w. It has
following properties.

Weak axiom of revealed preference: For any two price -wealth situations, (p, w) and (po, wo), if p. x (po, wo) ≤ w and x(p, w) ≠ x(po, wo), then po. x(p, w) > wo.
Homogeneity of degree zero.
x(p, w) = x(αp,αw) for all α > 0.

The Walrasian demand function is equal to the derivatives of indirect utility function multiplied by correcting term that normalizes by the marginal utility
of wealth.