GATE 2025 Question Paper Humanities & Social Sciences - Economics (XH-C1)

GATE
2025
Question Paper | Answer Key
Graduate Aptitude Test in Engineering
(GATE) is a prestigious national-level exam
that assesses candidates for
comprehensive understanding in various
undergraduate-level subjects in
Engineering, Technology, Science,
Architecture, and Humanities.

General Aptitude
Q.1 – Q.5 Carry ONE mark Each

Q.1 Here are two analogous groups, Group-I and Group-II, that list words in their
decreasing order of intensity. Identify the missing word in Group-II.

Group-I: Abuse → Insult → Ridicule

Group-II: ________ → Praise → Appreciate

(A) Extol

(B) Prize

(C) Appropriate

(D) Espouse

Q.2 Had I learnt acting as a child, I ________ a famous film star.

Select the most appropriate option to complete the above sentence.

(A) will be

(B) can be

(C) am going to be

(D) could have been

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Q.3 The 12 musical notes are given as 𝐶, 𝐶 # , 𝐷, 𝐷# , 𝐸, 𝐹, 𝐹 # , 𝐺, 𝐺 # , 𝐴, 𝐴# , and 𝐵.
12
Frequency of each note is √2 times the frequency of the previous note. If the
frequency of the note C is 130.8 Hz, then the ratio of frequencies of notes 𝐹 # and 𝐶
is:

(A) 6
√2

(B)
√2

(C) 4
√2

(D) 2

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Q.4 The following figures show three curves generated using an iterative algorithm. The
total length of the curve generated after ‘Iteration 𝑛’ is:

Note: The figures shown are representative.

1
Iteration 0:

1 1
Iteration 1: Length of each segment:
3 3

1
1
Iteration 2: 9 Length of each segment:
9

𝑛
(A) 5 2
( )
3

(B) 5 𝑛
( )
3

(C) 5 2𝑛
( )
3

(D) 5 𝑛(2𝑛−1)
( )
3

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Q.5 |𝑥|
Which one of the following plots represents 𝑓 (𝑥 ) = − , where 𝑥 is a non-
𝑥
zero real number?

Note: The figures shown are representative.

f(x)
(A)
(0,1)

x
(0, −1)

f(x)
(B)
(0,1)

x
(0, −1)

f(x)
(C)

(1,0)
x
(−1,0)

f(x)
(D)
(0,1)

x
(0, −1)

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Q.6 – Q.10 Carry TWO marks Each

Q. 6 Identify the option that has the most appropriate sequence such that a coherent
paragraph is formed:

P. Over time, such adaptations lead to significant evolutionary changes with
the potential to shape the development of new species.

Q. In natural world, organisms constantly adapt to their environments in
response to challenges and opportunities.

R. This process of adaptation is driven by the principle of natural selection,
where favorable traits increase an organism’s chances of survival and
reproduction.

S. As environments change, organisms that can adapt their behavior, structure
and physiology to such changes are more likely to survive.

(A) P→Q→R→S

(B) Q→S→R→P

(C) R→S→Q→P

(D) S→P→R→Q

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Q.7 A stick of length one meter is broken at two locations at distances of 𝑏1 and 𝑏2 from
the origin (0), as shown in the figure. Note that 0 < 𝑏1 < 𝑏2 < 1. Which one of the
following is NOT a necessary condition for forming a triangle using the three
pieces?

Note: All lengths are in meter. The figure shown is representative.

(A) 𝑏1 < 0.5

(B) 𝑏2 > 0.5

(C) 𝑏2 < 𝑏1 + 0.5

(D) 𝑏1 + 𝑏2 < 1

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Q.8 Eight students (P, Q, R, S, T, U, V, and W) are playing musical chairs. The figure
indicates their order of position at the start of the game. They play the game by
moving forward in a circle in the clockwise direction.

After the 1st round, 4th student behind P leaves the game. After 2nd round, 5th student
behind Q leaves the game. After 3rd round, 3rd student behind V leaves the game.
After 4th round, 4th student behind U leaves the game. Who all are left in the game
after the 4th round?

Note: The figure shown is representative.

(A) P; T; Q; S

(B) V; P; T; Q

(C) W; R; Q; V

(D) Q; T; V; W

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Q.9 The table lists the top 5 nations according to the number of gold medals won in a
tournament; also included are the number of silver and the bronze medals won by
them. Based only on the data provided in the table, which one of the following
statements is INCORRECT?

Nation Gold Silver Bronze

USA 40 44 41

Canada 39 27 24

Japan 20 12 13

Australia 17 19 16

France 16 26 22

(A) France will occupy the third place if the list were made on the basis of the total
number of medals won.

(B) The order of the top two nations will not change even if the list is made on the basis
of the total number of medals won.

(C) USA and Canada together have less than 50% of the medals awarded to the nations
in the above table.

(D) Canada has won twice as many total medals as Japan.

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Q.10 An organization allows its employees to work independently on consultancy
projects but charges an overhead on the consulting fee. The overhead is 20% of the
consulting fee, if the fee is up to ₹ 5,00,000. For higher fees, the overhead is
₹ 1,00,000 plus 10% of the amount by which the fee exceeds ₹ 5,00,000. The
government charges a Goods and Services Tax of 18% on the total amount (the
consulting fee plus the overhead). An employee of the organization charges this
entire amount, i.e., the consulting fee, overhead, and tax, to the client. If the client
cannot pay more than ₹ 10,00,000, what is the maximum consulting fee that the
employee can charge?

(A) ₹ 7,01,438

(B) ₹ 7,24,961

(C) ₹ 7,51,232

(D) ₹ 7,75,784

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Q.11– Q.17 Carry ONE mark Each

Q.11 Which one of the following numbers is odd one out?

31541 42651 53791 64871 75981

(A) 31541

(B) 42651

(C) 53791

(D) 75981

Q.12 Ankit, Arun, and Ankur have one apple each. Ankur also has one banana. Alam has
one mango and one kiwi. Ankit has just bought one pineapple.

Who has the least number of fruit(s)?

(A) Ankit

(B) Arun

(C) Ankur

(D) Alam

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Q.13 If each vowel in the word RESIDE is changed to its previous letter in the English
alphabet and each consonant is changed to the next letter in the English alphabet,
which one of the following options will be the third from the right?

(A) T

(B) D

(C) S

(D) H

Q.14 Vipul, Ahmad, Santosh, and David are playing Carrom. Vipul and Ahmad are
partners sitting opposite to each other. David faces towards South. If Vipul faces
towards West, then who faces towards the North?

(A) Alam

(B) Santosh

(C) David

(D) Vipul

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Q.15 Consider the following sentence.

What the country needs ____ ____ ____ ____ accordingly.

First and last parts of the sentence are given. P, Q, R, and S are the remaining parts
of the sentence, not necessarily in that order.

P: and change tactics
Q: who would encourage players
R: are coaches and officials
S: to read the game as it progresses

Which one of the following options is correct that gives the most appropriate order
and meaning to the sentence?

(A) QSPR

(B) RQSP

(C) RQPS

(D) SPRQ

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Q.16 A car started from city P at 9.40am. The time taken for the car to reach the city Q
is 4 hours and 50 minutes.

The time of arrival of the car at city Q is

(A) 15:10 Hours

(B) 14:20 Hours

(C) 14:30 Hours

(D) 14:10 Hours

Q.17 P is three years younger than R but one year older than S.

S is one year older than Q but 4 years younger than R.

R is 15 years old.

The age of Q is ____ years (answer in integer).

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Q.18 – Q26 Carry TWO marks Each

Q.18 In a certain code language, ATTITUDE is written as TAUJUEDU and CHILDREN
is written as HCJMENER.

How LANGUAGE is written in that code language?

(A) ALOHVEGA

(B) ALHOVAGA

(C) LAVOHEGA

(D) ALHOVGEA

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Q.19 The table shows the data of 450 candidates who appeared in the examination of
three subjects – Social Science, Mathematics, and Science.

Particulars Number of candidates
Passed in all the three subjects 167
Failed in all the three subjects 60
Failed in Social Science subject 175
Failed in Mathematics subject 199
Failed in Science subject 191
Passed in only Social Science subject 62
Passed in only Mathematics subject 48
Passed in only Science subject 52

How many candidates have passed in at least one subject?

(A) 48

(B) 162

(C) 390

(D) 425

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Q.20 If × means +, + means ÷, − means ×, and ÷ means −,

then 8 × 7 − 8 + 40 ÷ 2 =

(A) 8
3
5

(B) 2
7
5

(C) 7
2
5

(D) 3
8
5

Q.21 Given a series 5, 8, 11, 14, …

If the nth term of the given series is 320, then n (where, n ≥ 1) is

(A) 104

(B) 105

(C) 106

(D) 107

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Q.22 Suppose, your last year taxable income was Rs. 22000. Due to hike in salary, your
taxable income this year is Rs. 34200. The details for tax calculation are given in
the table below.

Income range (Rs.) Tax slab (Rs.)
0 to 5000 2 % of income
Greater than 5000 to 10000 100 + 3 % of income over 5000
Greater than 10000 to 20000 250 + 5 % of income over 10000
Greater than 20000 to 30000 750 + 8 % of income over 20000
Greater than 30000 to 50000 1550 + 10 % of income over 30000
Greater than 50000 to 100000 3550 + 20 % of income over 50000

Consider the appropriate tax slab corresponding to your income. What is the
additional amount of tax you need to pay this year compared to last year?

(A) 1970

(B) 1060

(C) 910

(D) 420

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Q.23 Anand, Hari, and Chris are engaged in one of the three type of occupations – clerk,
teacher, and plumber, not necessarily in that order. Each person is assigned only
one type of occupation. No two or more persons can be assigned same type of
occupation. Clerk is Chris’s cousin. Hari lives next door to the plumber.
Anand, who knows more facts than the teacher, has to drive more than 1 hour to
reach Hari’s home. Identify each of the person’s correct type of occupation, and
accordingly, which one of the following options is correct?

(A) Anand is teacher and Chris is clerk.

(B) Hari is clerk and Anand is plumber.

(C) Chris is teacher and Hari is clerk.

(D) Anand is clerk and Chris is plumber.

Q.24 Many countries are facing water shortage crises in the past few years. A report of
the United Nation has named India among the worst countries for poor quality of
water. The report ranks 122 countries according to the quality of their water as well
as their commitment to improve the situation. Some countries in Europe are
considered the worst because of the quality of its ground water. Rain failed in some
parts of India in the past. The vast areas of Rajasthan, Madhya Pradesh, and Andhra
Pradesh were affected by severe drought. People without water turn desperate and
violent. Consequently, the food godowns were attacked in some of the states.

Based on the details given in the passage, which of the following option(s) is/ are
correct statement(s)?

(A) There is no proof that India is affected by poor quality of water.

(B) A few European countries are suffering due to occurrence of drought.

(C) Lack of access to water can lead to social unrest.

(D) Intense shortage of water is visible in some states of India.

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Q.25 In the following figure, four overlapping shapes (rectangle, triangle, circle, and
hexagon) are given.

The sum of the numbers which belong to only two overlapping shapes is_______.

Q.26 Consider a square field ABCD. The diagonal AC is 50 meter. The cost of laying
grass in the field is Rs. 5 per square-meter. The total cost for laying grass in the field
ABCD is Rs. ________ (rounded off to two decimal places).

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Q.27– Q.44 Carry ONE mark Each

Q.27 In the context of a perfectly competitive market, identify the statement that is
NOT CORRECT.

(A) Producing less than the competitive output lowers welfare.

(B) Producing more than the competitive output lowers welfare.

(C) The welfare is dependent on both price and the competitive output.

(D) If a consumer values the last unit more than its marginal cost of production,
producing an additional unit shall lower welfare.

Q.28 The demand function is given as log 𝑄 = log 𝐴 + 0.5 log 𝑃, where 𝑄 is quantity,
𝑃 is the unit price of the good and 𝐴 is a positive real number. The own price
elasticity of demand is

(A) Perfectly elastic

(B) Perfectly inelastic

(C) Elastic

(D) Inelastic

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Q.29 Which one of the following is part of the unconventional monetary policy?

(A) Repo rate

(B) Quantitative easing

(C) Fractional banking

(D) Reverse Repo rate

Q.30 Which one of the following statements is NOT CORRECT in the context of
Keynesian Absolute Income Hypothesis?

(A) Average Propensity to Consume (APC) plus Average Propensity to Save (APS) is
equal to one.

(B) Marginal Propensity to Consume (MPC) is constant.

(C) Average Propensity to Consume (APC) increases as income increases.

(D) Marginal Propensity to Consume (MPC) plus Marginal Propensity to Save (MPS)
is equal to one.

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Q.31 Let 𝑓(𝑥, 𝑦, 𝑧) = 𝑥 2 𝑦 3 𝑧.

Then,
𝜕𝑓 𝜕𝑓 𝜕𝑓
𝑥 (𝑥, 𝑦, 𝑧) + 𝑦 (𝑥, 𝑦, 𝑧) + 𝑧 (𝑥, 𝑦, 𝑧) =
𝜕𝑥 𝜕𝑦 𝜕𝑧

(A) 𝑓(𝑥, 𝑦, 𝑧)

(B) 2𝑓(𝑥, 𝑦, 𝑧)

(C) 3𝑓(𝑥, 𝑦, 𝑧)

(D) 6𝑓(𝑥, 𝑦, 𝑧)

Q.32 Let 𝑓(𝑥) = −3𝑥 2 (1 − 𝑥) − 3𝑥(1 − 𝑥)2 − (1 − 𝑥)3 .

𝑑𝑓 (𝑥)
Then, =
𝑑𝑥

(A) 3𝑥 2

(B) 3(1 − 𝑥)2

(C) 3𝑥(1 − 𝑥)

(D) 𝑥

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Q.33 In the context of environmental cost-benefit analysis, which of the following
statements is/are NOT CORRECT?

(A) The discount rates do not impact the fixed and variable costs of the project but does
impact the perceived benefits in monetary terms.

(B) The analysis does not incorporate people’s preferences for a policy.

(C) The analysis is dependent on the choice of the discount rates.

(D) The discount rates are not easily observable and choice is often subject to value
judgements.

Q.34 Which of the following statements is/are CORRECT in the context of National
Income Accounting?

(A) Gross Domestic Product (GDP) is the sum of all factor payments.

(B) Net Domestic Product (NDP) is equal to Gross Domestic Product (GDP) minus
depreciation.

(C) Gross National Product (GNP) is equal to Gross Domestic Product (GDP) plus net
income from abroad.

(D) Net National Product (NNP) is equal to Gross National Product (GNP) minus Gross
Domestic Product (GDP).

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Q.35 Consider the following system of linear equations:

𝑥 + 2𝑦 + 3𝑧 = 0

2𝑥 + 𝑝𝑦 = 0

3𝑥 + 2𝑦 + 𝑝𝑧 = 0

The value(s) of 𝑝 for which the system of equations have infinitely many solutions
is/are

(A) 𝑝=1

(B) 𝑝=2

(C) 𝑝=6

(D) 𝑝 = 12

Q.36 Which of the following statements is/are CORRECT?

(A) The difference between Human Poverty Index and the Human Development Index
is that the former measure focuses on deprivations.

(B) The Human Development Index is insensitive to inequalities in the distribution of
human development in the population.

(C) Income-based poverty lines are sufficient to capture the well-being of a country’s
citizens.

(D) Multi-dimensional Poverty Index considers differences in intra-household
distribution of resources.

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Q.37 Which of the following statements is/are the key feature(s) of India’s New Economic
Reforms (1991)?

(A) Liberalization of the economy

(B) Privatization of public sector enterprises

(C) Complete nationalization of all industries

(D) Globalization and increased foreign direct investment

Q.38 A Constant Elasticity of Substitution (CES) utility function is given as:
1
𝑈𝐶𝐸𝑆 (𝑧1 , 𝑧2 ) = (𝑧1𝛿 + 𝑧2𝛿 )
𝛿
where 𝑧1 and 𝑧2 are two goods, and 𝛿 ≤ 1, 𝛿 ≠ 0.

A Quasi-linear (QL) utility function is given as:
𝑈𝑄𝐿 (𝑧1 , 𝑧2 ) = 2𝑧1 + log 𝑧2
where 𝑧1 and 𝑧2 are two goods.

Which of the following statements is/are NOT CORRECT?

(A) The CES utility function is homothetic but the QL utility function is non-
homothetic.

(B) For 𝛿 = 1, the CES utility function is not strictly convex.

(C) The Marginal Rate of Substitution (𝑀𝑅𝑆𝑧1𝑧2 ) for the CES utility function and the
QL utility function are dependent on both 𝑧1 and 𝑧2 .

(D) If 𝑧1 = 𝑧2 , the Marginal Rate of Substitution (𝑀𝑅𝑆𝑧1𝑧2 ) is 2 for both the CES and
the QL utility functions.

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Q.39 Consider a lottery with three possible outcomes:

Outcomes Probability Reward/Win (in INR)

I 0.2 25

II 0.3 50

III 0.5 100

The maximum amount that a risk-neutral person would be willing to pay to play the
above lottery is INR _____________ (in integer)

Q.40 For a closed economy with no government expenditure and taxes, the aggregate
consumption function (𝐶) is given by:

𝐶 = 100 + 0.75 𝑌𝑑

where 𝑌𝑑 is the disposable income.

If the total investment is 80, the equilibrium output is _____________ (in integer)

Q.41 If 𝑋 is a continuous random variable whose probability density function is given by

1
for 1 < 𝑥 < ∞
𝑓𝑋 (𝑥) = {𝑥 2
0 elsewhere

Then the median of 𝑋 is _____________ (in integer)

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Q.42 The inverse demand function for a monopolist is given by

𝑃 = 100 − 𝑘𝑄

where 𝑃 is the unit price of the good, 𝑄 is the quantity and 𝑘 is a constant.

The cost function facing the monopolist is given as 𝐶(𝑄) = 50 + 2𝑄(1 + 𝑄).

If the profit maximizing output is 7, the maximum profit is _____________
(in integer)

Q.43 Consider a simple Keynesian closed economy model with the following
information:

The Marginal Propensity to Consume (MPC) is 0.9 and the initial level of saving is
INR 120. When income rises by INR 100, then the new level of saving will be INR
_____________ (in integer)

Q44. If 𝑋 is a continuous random variable whose probability density function is given by

𝑐𝑥 3 + 0.25 for 0 ≤ 𝑥 ≤ 1, 𝑐 ∈ ℝ
𝑓𝑋 (𝑥) = {
0 elsewhere
Then the value of 𝑐 is _____________ (in integer)

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Q.45 – Q.65 Carry TWO marks Each

Q.45 Consider a three-firms oligopoly market with a linear demand function given by

𝑃 = 25 − 𝑄

where 𝑃 is the unit price and 𝑄 is the total quantity supplied.

The total quantity 𝑄 = (𝑞1 + 𝑞2 + 𝑞3 ), where 𝑞𝑖 is the output from the 𝑖 th firm
with 𝑖 = 1,2,3.

The total cost (𝑇𝐶) curve of firm 𝑖 is given by 𝑇𝐶𝑖 = (𝛼𝑖 + 5𝑞𝑖 ) , where 𝛼𝑖 's are
positive real numbers.

Assuming a Cournot solution exists, the value of 𝑄 is

(A) 9

(B) 15

(C) 12

(D) 21

Q.46 Transfer payments by governments are viewed as

(A) Negative taxes

(B) Indirect taxes

(C) Non-tax revenues

(D) Transfer of wealth

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Q.47 Match Column I with Column II.

Column I Column II
P. Phillips Curve 1. Describes the relationship between devaluation
and trade deficit
Q. Kuznets Curve 2. Describes the relationship between tax revenue and
tax rate
R. Laffer Curve 3. Describes the relationship between rate of
unemployment and inflation
S. J-Curve 4. Describes the relationship between degree of
income inequality and level of per-capita income

(A) (P → 3), (Q → 4), (R → 2), (S → 1)

(B) (P → 3), (Q → 1), (R → 2), (S → 4)

(C) (P → 2), (Q → 1), (R → 3), (S → 4)

(D) (P → 2), (Q → 3), (R → 4), (S → 1)

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Q.48 Consider the following statements:

Statement 1: The new classical policy ineffectiveness proposition asserts that,
systematic monetary policy and fiscal policy actions that change aggregate demand
will not affect output and employment even in short run.

Statement 2: According to Real Business Cycle (RBC) model, the aggregate
economic variables are the outcomes of the decisions made by many individual
agents acting to maximize their utility subject to production possibilities and
resource constraints.

Which one of the following options is CORRECT?

(A) ONLY Statement 1 is TRUE

(B) ONLY Statement 2 is TRUE

(C) BOTH Statements are TRUE

(D) BOTH Statements are FALSE

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Q.49 Consider a two-variables (𝑥, 𝑦) linear regression model

𝑦 = 𝛼 + 𝛽𝑥 + 𝜀
where 𝛼 and 𝛽 are the parameters, and 𝜀 is the error term.

The parameters are estimated using the Ordinary Least Squares (OLS) method.
Let 𝑏 denote the estimated value of 𝛽. If 𝑏 = 0, then which one of the following
statements is CORRECT?

(A) 𝑅 2 can be any real number in (0, 0.5]

(B) 𝑅 2 can be any real number in (0.5, 1)

(C) 𝑅 2 is any positive real number greater than 1

(D) 𝑅2 = 0

Q.50 Let 𝑋1 , 𝑋2 , 𝑋3 , … , be independent and identically distributed random variables with
𝐸[𝑋1 ] = 𝜇.

Let 𝑁 be a positive integer valued random variable with 𝐸[𝑁] = 𝑛.

If 𝑆𝑁 = 𝑋1 + 𝑋2 + ⋯ + 𝑋𝑁 , then 𝐸[𝑆𝑁 ] =

(A) 𝜇

(B) 𝑁𝜇

(C) 𝑛𝜇

(D) 𝜇𝑛

Organising Institute: IIT Roorkee Page 31 of 40

Q.51 A Cobb-Douglas type short-run production function is given by

𝑞 = 2√(𝐿𝐾)

where 𝑞, 𝐿 and 𝐾 are the output, labour and capital, respectively.

̅ . The unit price of 𝐿 is 𝑤 and the unit price of 𝐾 is 𝑟. It is given that
𝐾 is fixed at 𝐾
𝑤 is 12.

Considering the above information, which of the following statements is/are
CORRECT?

(A) The short-run marginal cost is
6𝑞
𝐾̅

(B) The short-run average variable cost is
3𝑞
𝐾̅

(C) To produce 10 units of the output, required 𝐿 is
25
̅
𝐾

(D) ̅ = 3 and 𝑟 = 4, the total cost is 12 + 3𝑞 2
For 𝐾

Organising Institute: IIT Roorkee Page 32 of 40

Q.52 A simple Keynesian open economy model is given by

𝑆+𝑇+𝑀 =𝐺+𝐼+𝑋

where 𝑆, 𝐼, 𝐺, 𝑇, 𝑋, and 𝑀 stands for saving, investment, government expenditure,
taxes, exports and imports, respectively.

If the country has trade surplus, which strategy/strategies among the following will
reduce the trade imbalance?

(A) Everything else being constant, decrease in private saving would reduce trade
surplus.

(B) Everything else being constant, increase in investment would reduce trade surplus.

(C) Everything else being constant, increase in government taxes would reduce trade
surplus.

(D) Everything else being constant, decrease in government spending would reduce
trade surplus.

Organising Institute: IIT Roorkee Page 33 of 40

Q.53 Consider the two scenarios for a small open economy based on the Mundell-
Fleming IS-LM model with floating exchange rate and perfect capital mobility

Scenario I Scenario II

𝑌 = 𝐶(𝑌 − 𝑇) + 𝐼(𝑟 ∗ ) + 𝐺 + 𝑁𝑋(𝑒, 𝑌) 𝑌 = 𝐶(𝑌 − 𝑇) + 𝐼(𝑟 ∗ ) + 𝐺 + 𝑁𝑋(𝑒)

𝑀 𝑀
= 𝐿(𝑟 ∗ , 𝑌) = 𝐿(𝑟 ∗ , 𝑌 − 𝑇)
𝑃̅ 𝑃̅

where 𝑌 is aggregate income, 𝐶 is aggregate consumption, 𝐼 is investment, 𝑟 ∗ is
world interest rate, 𝐺 is government expenditure, 𝑇 is taxes, 𝑁𝑋 is net exports,
𝑒 is exchange rate, 𝑀 is money supply, and 𝑃̅ is general price level.

𝐼 has a negative relationship with 𝑟 ∗ , 𝑁𝑋 depends negatively on both 𝑒 and 𝑌,
and 𝑃̅ is fixed.

Given the above information, which of the following statements is/are CORRECT?

(A) Increase in 𝐺 has no effect on income in Scenario I.

(B) Decrease in 𝑇 lowers income in Scenario II.

(C) Expansionary fiscal policy raises income in Scenario I and Scenario II.

(D) Expansionary fiscal policy raises exchange rate in Scenario I and Scenario II.

Organising Institute: IIT Roorkee Page 34 of 40

Q.54 Which of the following statements is/are CORRECT in the context of Foreign
Exchange Market?

(A) When the value of domestic currency increases vis-à-vis the value of foreign
currency, the domestic currency experiences appreciation.

(B) When the value of domestic currency increases vis-à-vis the value of foreign
currency, the domestic currency experiences depreciation.

(C) When the value of domestic currency decreases vis-à-vis the value of foreign
currency, the domestic currency experiences depreciation.

(D) When the value of domestic currency decreases vis-à-vis the value of foreign
currency, the domestic currency experiences appreciation.

Q.55 Which of the following statements characterize(s) the Indian labour market?

(A) High workforce participation in agriculture

(B) A predominant formal sector employment

(C) Increasing Gig and contractual employment

(D) A dual structure comprising organised and unorganised sector

Organising Institute: IIT Roorkee Page 35 of 40

Q.56 Which of the following statements is/are NOT CORRECT?

(A) According to the “Pollution Haven hypothesis”, trade liberalisation may lead to
reallocation of production to countries where either environmental regulation are
ineffective or altogether absent.

(B) According to the “Porter hypothesis”, stringency in ensuring environmental
standards often induces firms to become more efficient and prevent technological
advancement and innovation.

(C) According to the “Race to the Bottom hypothesis”, the environmental regulation are
progressively made stringent so that economies gain in competition for inward
investments.

(D) According to the “Environmental Kuznets curve hypothesis”, there is an inverted
U-shape relationship between per-capita income and environmental quality.

Q.57 There are two firms in an industry producing a homogeneous product. The market
demand function is given by 𝑃 = 1 − (𝑞1 + 𝑞2 ), where 𝑞1 and 𝑞2 are the output
levels of Firm 1 and Firm 2, respectively.

Firm 1’s cost function is common knowledge and equals zero. Firm 2’s cost function
is private information. Firm 1 believes that Firm 2’s cost function is 0.5𝑞2 with
probability 0.5 and that Firm 2’s cost function is 0.25𝑞2 with probability 0.5.
The firms choose their quantities simultaneously.

Let 𝑞1∗ denote the quantity produced by Firm 1 in the Bayesian Nash equilibrium of
this game. Then, the value of 24𝑞1∗ is _____________ (round off to one decimal
place)

Organising Institute: IIT Roorkee Page 36 of 40

Q.58 Consider a two-person exchange economy where two goods, 𝑥 and 𝑦 are available
in limited quantities of 50 and 100, respectively. The preferences of the two persons,
Anil and Binod are given by the utility functions
0.4 0.6
𝑈Anil (𝑥Anil , 𝑦Anil ) = 𝑥Anil 𝑦Anil
and
0.6 0.4
𝑈Binod (𝑥Binod , 𝑦Binod ) = 𝑥Binod 𝑦Binod

If they decide to share good 𝑦 equally among themselves, the amount of good 𝑥
Anil receives is _____________ (in integer)

Q.59 Let 𝑌 be income, 𝑟 be interest rate, G be government expenditure and 𝑀 𝑠 be money
supply.

Consider the following closed economy IS-LM equations with fixed general price
level (𝑃̅)

IS equation:
𝑌 = 490 + 0.6 𝑌 − 4 𝑟 + 𝐺

LM equation:
𝑀𝑠
= 20 + 0.25 𝑌 − 10 𝑟
𝑃̅
𝑀𝑠
If 𝐺 is 330 and 𝑃̅ is 500, then the equilibrium 𝑌 is _____________ (round off to
one decimal place)

Organising Institute: IIT Roorkee Page 37 of 40

Q.60 Consider the following Harrod-Domar growth equation
𝑠
=𝑔+𝛿
𝜃
where 𝑠 = saving rate, 𝜃 = capital-output ratio, 𝑔 = overall growth rate, and
𝛿 = capital depreciation rate.

If 𝛿 = 0 and 𝑠 = 20%, then to achieve 𝑔 = 10%, the capital-output ratio will be
_____________ (in integer)

Q.61 A coin has a true probability 𝜇 of turning up Heads. This coin is tossed 100 times
and shows up Heads 60 times. The following hypothesis is tested:

𝐻0 : 𝜇 = 0.5 (Null Hypothesis)

𝐻1 : 𝜇 > 0.5 (Alternative Hypothesis)

Using the Central Limit Theorem, the 𝑝-value of the above test is _____________
(round off to three decimal places)

(Hint: If 𝑍 is a random variable that follows a standard normal distribution, then
𝑃(𝑍 ≤ 2) = 0.977)

Organising Institute: IIT Roorkee Page 38 of 40

Q.62 The installation cost (IC) of a solar power plant is INR 89,000. The plant shall be
operational for 5 years. The recurring costs for maintenance of the solar plant per
year is INR 5,000 but the benefits it creates including reduction in emissions
amounts to INR 25,000 per year. These are the only costs and benefits associated
with this project. The social discount rate (𝑟) considered is 4% per year. The year-
wise information is presented below

Year Discount Factor Benefits Costs
(𝑡) (1 + 𝑟)−𝑡 (in ‘000) (in ‘000)
0 1 IC
1 0.96 25 5
2 0.92 25 5
3 0.89 25 5
4 0.85 25 5
5 0.82 25 5

The net present value of the plant is _____________ (in integer)

Q.63 Let 𝑓(𝑥, 𝑦) = −𝑥 2 − 𝑦 2 + 2𝑥 + 4𝑦 + 5.

Let (𝑥 ∗ , 𝑦 ∗ ) denote the solution to the following optimization problem:

Maximize 𝑓(𝑥, 𝑦)

subject to 𝑥 ≥ 0, 𝑦 ≥ 0, 2𝑥 + 𝑦 ≤ 6

Then the value of 𝑓(𝑥 ∗ , 𝑦 ∗ ) is _____________ (in integer)

Organising Institute: IIT Roorkee Page 39 of 40

Q.64 Two players 𝐴 and 𝐵 are playing a game. Player 𝐴 has two available actions 𝑎1 and
𝑎2 . Player 𝐵 has two available actions 𝑏1 and 𝑏2 . The payoff matrix arising from
their actions is presented below.

𝑏1 𝑏2
𝑎1 −1, 3 4, −1
𝑎2 3, −4 −2, 2

Let 𝑝 be the probability that player 𝐴 plays action 𝑎1 in the mixed strategy Nash
equilibrium of the game.

Then the value of 𝑝 is _____________ (round off to one decimal place)

Q.65 If the Marginal Propensity to Consume (MPC) of an economy is 0.75, then the
value of expenditure multiplier will be _____________ (in integer).

Organising Institute: IIT Roorkee Page 40 of 40

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