NTA UGC NET/JRF Exam, Dec. 2019 Economics (Shift-I)

Total Questions: 95

1. Arrange in chronological order the following economists in relation to their contribution to the Theory of Consumer Behaviour. Choose the correct answer:

Correct Answer: (d) A. Marshall, J.R. Hicks, R.G.D. Allen, P. Samuelson and R. Stone.
Solution:

Economist in relation to their contribution to the theory of consumer behaviour.

Economist & TheoryYear
A. Marshall – Law of demand1890
J.R. Hicks – Indifference curve1932
R.G.D. Allen – Indifference curve1934
P. Samuelson – Revealed Preference theory1938
R. Stone – National Income accounting1982

2. Among normal cost curves which one of the following curve does not have a minimum point?

Correct Answer: (d) Average fixed cost
Solution:

Average Fixed Cost- It is the fixed per unit cost in the production process. The shape of AFC is rectangular hyperbola. As the quantity of output of a good increases, fixed cost, remains the same and therefore average fixed cost per unit of output continuously decreases.

Therefore the average fixed cost curve does not have a minimum except in the sense that it is asymptotic of zero.

3. The 'Compensation Criterion' which says that state A is socially preferable to state B, if those who gain from the change can compensate the loosers and yet end up with surplus welfare gain is attributed to:

Correct Answer: (b) N. Kaldor
Solution:

Compensation criterion-This principle is also known as the Kaldor-Hicks criterion and is attributed to Kaldor during the 1930s.

According to this principle, there are two states state 1 and state 2.

State two is socially preferable to state one of those who gain from such a move can compensate those who lose, i.e. if gainers can bribe the losers to accept state two and yet be better off in state two.

It was mainly to judge the changes in social welfare when an economic change benefits some people and harm other.

4. In which of the following products, problem of adverse selection is encountered ?

Correct Answer: (d) Both (1) and (2)
Solution:

Hence, the problem of adverse selection is encountered in both markets for insurance and the market for credit.

5. Given the saving function S= -20 + 0.2Y and autonomous investment (I) = Rs. 100 million, the equilibrium level of consumption would be:

Correct Answer: (b) 600
Solution:

At equilibrium level
I = S
100  = -20 + 0.02Y
100 + 20 = 0.2Y
0.2Y = 120
Y = 1200/2 = 600

6. For which of the following consumption function, the value of the income multiplier K= 4?

Correct Answer: (c) C = 200 + .75Y
Solution:


So, MPC value 0.75 is given in equation C = 200 + 0.75Y so, 3ʳᵈ is the correct option.

7. The inventory approach to the transaction demand suggests that the transaction component of the demand for money is :

Correct Answer: (d) Negatively related to interest rate
Solution:

The inventory approach to the transaction demand is given by William J. Baumal. The transaction component of the demand for money is negatively related to interest rate.

8. Friedman's modern Quantity Theory of Money concludes that changes in aggregate spending are primarily determined by changes in

Correct Answer: (a) The money supply
Solution:

Friedman's Modern Quantity Theory of money concludes that changes in aggregate spending are primarily determined by changes in the money supply. Thus Friedman says there are four factors which determine the demand for money.

They are price level, real income, rate of interest and rate of interest and rate of increase in the price level.

9. For an exactly identified equation, the order condition that should be fulfilled in that equation must:

Correct Answer: (a) Exclude one less than the total number of endogenous variables in the model
Solution:

If, K - M = G - 1, the equation is exactly identified.
K-M>G - 1, The equation is over-identified.
K-M<G - 1, The equation is under-identified
In an equation, G = total no. of equations (total number of endogenous variables)
K = No. of total variables in the model.
M = No. of variables included in a particular equation.

Hence, for an exactly identified equation, the order condition that should be fulfilled is that equation must exclude one less than the total No. of endogenous variables in the model.

10. Analysis of variance is carried out by using:

Correct Answer: (d) F- test
Solution:

The F-test in one-way analysis of variance (ANOVA) is used to assess whether the expected value of a quantitative variable within several pre-defined groups differ from each other.