GATE 2021 Question Paper XH C1 Humanities and Social Sciences - Economics

General Aptitude (GA)
Q.1 – Q.5 Multiple Choice Question (MCQ), carry ONE mark each (for each wrong
answer: – 1/3).

Q.1 Consider the following sentences:
(i) After his surgery, Raja hardly could walk.
(ii) After his surgery, Raja could barely walk.
(iii) After his surgery, Raja barely could walk.
(iv) After his surgery, Raja could hardly walk.
Which of the above sentences are grammatically CORRECT?

(A) (i) and (ii)

(B) (i) and (iii)

(C) (iii) and (iv)

(D) (ii) and (iv)

Q.2 Ms. X came out of a building through its front door to find her shadow due
to the morning sun falling to her right side with the building to her back.
From this, it can be inferred that building is facing _________

(A) North

(B) East

(C) West

(D) South

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Q.3 M

O N

In the above figure, O is the center of the circle and, M and N lie on the
circle.
The area of the right triangle MON is 50 cm2.
What is the area of the circle in cm2 ?

(A) 2π

(B) 50π

(C) 75π

(D) 100π

Q.4 "  " means" − ",
" " means" ",

If 
" " means" + ",
" " means" ",

then, the value of the expression  2  3  ( ( 4  2)  4) =

(A) -1

(B) -0.5

(C) 6

(D) 7

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Q.5 “The increased consumption of leafy vegetables in the recent months is a
clear indication that the people in the state have begun to lead a healthy
lifestyle”
Which of the following can be logically inferred from the information
presented in the above statement?

(A) The people in the state did not consume leafy vegetables earlier.

(B) Consumption of leafy vegetables may not be the only indicator of healthy
lifestyle.

(C) Leading a healthy lifestyle is related to a diet with leafy vegetables.

(D) The people in the state have increased awareness of health hazards causing by
consumption of junk foods.

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Q. 6 – Q. 10 Multiple Choice Question (MCQ), carry TWO marks each (for each wrong
answer: – 2/3).

Q.6 Oxpeckers and rhinos manifest a symbiotic relationship in the wild. The
oxpeckers warn the rhinos about approaching poachers, thus possibly
saving the lives of the rhinos. Oxpeckers also feed on the parasitic ticks
found on rhinos.
In the symbiotic relationship described above, the primary benefits for
oxpeckers and rhinos respectively are,

(A) Oxpeckers get a food source, rhinos have no benefit.

(B) Oxpeckers save their habitat from poachers while the rhinos have no benefit.

(C) Oxpeckers get a food source, rhinos may be saved from the poachers.

(D) Oxpeckers save the lives of poachers, rhinos save their own lives.

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Q.7

A jigsaw puzzle has 2 pieces. One of the pieces is shown above. Which one
of the given options for the missing piece when assembled will form a
rectangle? The piece can be moved, rotated or flipped to assemble with the
above piece.

(A)

(B)

(C)

(D)

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Q.8 The number of hens, ducks and goats in farm P are 65, 91 and 169,
respectively. The total number of hens, ducks and goats in a nearby farm Q
is 416. The ratio of hens:ducks:goats in farm Q is 5:14:13. All the hens, ducks
and goats are sent from farm Q to farm P.
The new ratio of hens:ducks:goats in farm P is_____

(A) 5:7:13

(B) 5:14:13

(C) 10:21:26

(D) 21:10:26

Q.9

The distribution of employees at the rank of executives, across different
companies C1, C2, …, C6 is presented in the chart given above. The ratio of
executives with a management degree to those without a management degree
in each of these companies is provided in the table above. The total number
of executives across all companies is 10,000.
The total number of management degree holders among the executives in
companies C2 and C5 together is_____.

(A) 225

(B) 600

(C) 1900

(D) 2500

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Q. 10 Five persons P, Q, R, S and T are sitting in a row not necessarily in the
same order. Q and R are separated by one person, and S should not be
seated adjacent to Q.
The number of distinct seating arrangements possible is:

(A) 4

(B) 8

(C) 10

(D) 16

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Reasoning and Comprehension (XH-B1)
Q.1 – Q.5 Multiple Choice Question (MCQ), carry ONE mark each (for each wrong
answer: – 1/3).

Q.1 According to a recent article in a medical journal, consuming curcumin
(from turmeric) significantly lowers the risk of COVID-19. The researchers
draw this conclusion from a study that found that people who consumed
one or more teaspoons of curcumin extract everyday were half as likely to
be diagnosed with the disease as people who did not consume curcumin.
Which of the following, if true, most weakens the argument in the article?

(A) In another study, people who were given a zinc supplement everyday were more
than four times less likely to be diagnosed with COVID-19 as those who did
not.

(B) All the participants in this study were from the same state where no other spices
or herbs are consumed.

(C) The participants who consumed curcumin were also more likely to exercise than
those who did not.

(D) In another study, COVID-19 patients who were given curcumin were no more
likely to recover than others.

Q.2 Froot Inc. carried out an internet advertisement campaign for its new
beverage CocoLoco. After the campaign, the director of the advertising
company conducted a survey and found that the CocoLoco sales were
higher than that of TenderJoos a competing product from Joos Inc. The
agency concluded that the internet advertising campaign is more effective
than advertising through other media.
Which of the following statements could strengthen the conclusion above
by the agency?

(A) A ₹2 discount was offered on CocoLoco during the campaign period.

(B) CocoLoco sales were higher than those of TenderJoos before the internet
campaign.

(C) A newspaper advertisement campaign the previous year did not increase
CocoLoco sales.

(D) During the campaign for CocoLoco, Joos Inc. did not advertise TenderJoos at
all.

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Q.3 An e-commerce site offered a deal last month conditional on the customer
spending a minimum of ₹500. Any customer who buys 2 kg of fresh fruit
will receive a hand mixer and any customer who buys 2 kg of fresh
vegetables will receive a vegetable chopper.
Which of the following is NOT a possible outcome of the above?

(A) A customer purchased 3 kg of fresh fruit and did not receive a vegetable
chopper.

(B) A customer purchased items for ₹500 which included 1 kg of vegetables and
received a hand mixer.

(C) A customer purchased items for ₹500 which included 2 kg of vegetables and 1
kg of fruit and received a hand mixer.

(D) A customer purchased items for ₹300 which included 2 kg of fruit and received
neither a hand mixer nor a vegetable chopper.

Q.4 Writers of detective fiction often include an incompetent detective as a foil
for the brilliant investigator-protagonist as they follow different paths in
trying to solve the crime. In the individual accounts, the incompetent
detective is frequently distracted by the culprit’s careful plans, while the
competent investigator solves the case after a final confrontation. Analysts
of such fiction believe that the authors select this story-telling technique to
provide readers with more complexities in the form of misleading clues,
while figuring out the crime.
Which of the following statements most logically follows from the passage
above?

(A) A detective story is considered well-written if the brilliant investigator is
accompanied by an incompetent detective.

(B) Writers of detective fiction use the contrast of an incompetent detective to
mainly show how complex the investigation is.

(C) Writers of detective fiction never write stories where the incompetent detective
solves the case.

(D) Writers of detective fiction use two investigative accounts to make it difficult
for the reader to figure out the outcome.

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Q.5 The first (P1) and the last (P6) parts of a single sentence are given to you.
The rest of the sentence is divided into four parts and labelled (L,M,N,O).
Reorder these parts so that the sentence can be read through correctly and
select one of the options given.
P1: Studies of several Sahitya Akademi award winners show that…
L: or encounter professional
M: and invariably develop a strained relationship with other literary figures
N: they often publish very little
O: after winning the prize
P6: …envy and rivalry.
The correct order is:

(A) NOLM

(B) MLON

(C) ONML

(D) MOLN

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Q.6 – Q.10 Multiple Choice Question (MCQ), carry TWO mark each (for each wrong
answer: – 2/3).

Q. 6 Gerrymandering refers to the targeted redrawing of election
constituencies so as to benefit a particular party. This is especially
important where the electoral system is “first past the post” in each
constituency (i.e. one winner is selected in each constituency based on a
majority of votes won) and where there is no other provision for
proportional representation (as for example in the German system). For a
simple illustration of gerrymandering, if a region consists of districts 1, 2,
3, …, 9 with districts 1, 2, 3, 4, 5, 6 favouring party P and 7, 8, 9 favouring
party Q, then grouping of districts to constituencies as {1,2,3}, {4,5,6},
{7,8,9} will give two seats to party P and one seat to party Q, whereas the
grouping {1,2,7}, {3,4,8}, {5,6,9} will give all three seats to party P, as they
will secure a majority in each constituency.
Which of these statements can be deduced from the above?

(A) Gerrymandering implies that constituency boundaries can sometimes be drawn
to favour one party over the other.

(B) Gerrymandering implies that proportional representation is impossible when
districts are grouped to form constituencies.

(C) To counteract gerrymandering political parties should concentrate on districts
where they are favoured.

(D) The grouping of districts to constituencies has very little impact on
proportional representation.

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Q. 7 X-ray examination of a recently discovered painting that some authorities
judge to be a self-portrait by Michelangelo revealed an under-image of a
woman’s face. Either Michelangelo or some other artist must have
repainted over the first painting that had now been seen on the canvas.
Because the woman’s face also appears on other paintings by
Michelangelo, this painting is determined to indeed be an authentic
painting by Michelangelo.
Which of the following assumptions must be made in reaching the
conclusion above?

(A) When an already painted canvas of an artist is used, the second artist using that
canvas for a new painting is usually influenced by the artistic style of the first.

(B) Several painted canvases that art historians attribute to Michelangelo contain
under-images that appear on at least one other of Michelangelo’s paintings.

(C) Subject or subjects that appear in authenticated paintings of Michelangelo are
rather unlikely to show up as under-images on painted canvases not attributed
to Michelangelo.

(D) No painted canvas can be attributed to a particular artist with certainty without
an X-ray analysis.

Q. 8 This season _______ tourists visited Ladakh than last season; however,
______ to be the biggest tourist destination in India. The tourism
department explains that the number of tourists to India has ______
relative to previous years, ________ have chosen to visit Ladakh.
Select the correct sequence of phrases to fill in the blanks to complete the
passage above.

(A) more / for the first time in many seasons it does not appear / increased / and it
seems that most

(B) fewer / as in the past, it appears / in fact decreased / but it seems that only a
small proportion

(C) fewer / for the first time in many seasons it appears / in fact decreased / but it
seems that most

(D) more / this season as well, it appears / in fact decreased / but it seems that a
large proportion

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Q. 9 Reorder the sentences in (1) – (5) such that they form a coherent
paragraph.
(1) In fact, dozens of languages today have only one native speaker still
living, and that person's death will mean the extinction of the language: It
will no longer be spoken, or known, by anyone on earth.
(2) Many languages are falling out of use and are being replaced by others
that are more widely used in the region or nation, such as English in
Australia or Portuguese in Brazil.
(3) Many other languages are no longer being learned by new generations
of children or by new adult speakers.
(4) An endangered language is one that is likely to become extinct in the
near future.
(5) Unless the trends are reversed, these endangered languages will
become extinct by the end of the century.
(Adapted from What is an Endangered Language by A. Woodbury.)

(A) 2 3 1 4 5

(B) 2 3 5 4 1

(C) 4 1 5 2 3

(D) 4 2 3 1 5

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Q. 10 The first (P1) and the last (P6) parts of a single sentence are given to you.
The rest of the sentence is divided into four parts and labelled L,M,N,O.
Reorder these parts so that the sentence can be read correctly and select
one of the sequences below.
P1: For a little while…
L: it was a common belief
M: right after the treaty of Versailles
N: that Germany had caused World War I not just by her actions
O: held by analysts and politicians alike
P6: … but by also encouraging Italy in her own aggressions.

(A) LMNO

(B) MLON

(C) LNMO

(D) MOLN

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Q.11 – Q.15 Multiple Select Question (MSQ), carry TWO mark each (no negative marks).

Q. 11 After Florentino Ariza saw her for the first time, his mother knew before
he told her because he lost his voice and his appetite and spent the entire
night tossing and turning in his bed. But when he began to wait for the
answer to his first letter, his anguish was complicated by diaorrhea and
green vomit, he became disoriented and suffered from sudden fainting
spells, and his mother was terrified because his condition did not resemble
the turmoil of love so much as the devastation of cholera. Florentino
Ariza’s godfather, an old homeopathic practitioner who had been Tránsito
Ariza’s confidant ever since her days as a secret mistress, was also
alarmed at first by the patient’s condition, because he had the weak pulse,
the hoarse breathing, and the pale perspiration of a dying man. But his
examination revealed that he had no fever, no pain anywhere, and that his
only concrete feeling was an urgent desire to die. All that was needed was
shrewd questioning, first of the patient and then of his mother, to conclude
once again that the symptoms of love were the same as those of cholera. He
prescribed infusions of linden blossoms to calm the nerves and suggested a
change of air so he could find consolation in distance, but Florentino Ariza
longed for just the opposite: to enjoy his martyrdom.
(Adapted from Love in a Time of Cholera by Gabriel García Márquez.)
The author of the passage is implying that:

(A) Homeopathy cures love.

(B) The doctor could not distinguish between love and cholera.

(C) The doctor could distinguish between love and cholera.

(D) The symptoms of love and cholera are similar.

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Q. 12 Now, it is clear that the decline of a language must ultimately have
political and economic causes: it is not due simply to the bad influence of
this or that individual writer. But an effect can become a cause,
reinforcing the original cause and producing the same effect in an
intensified form, and so on indefinitely. A man may take to drink because
he feels himself to be a failure, and then fail all the more completely
because he drinks. It is rather the same thing that is happening to the
English language. It becomes ugly and inaccurate because our thoughts
are foolish, but the slovenliness of our language makes it easier for us to
have foolish thoughts.
(Adapted from Politics and the English Language by George Orwell.)
The illustration of the man who takes to drink is used to underscore which
of the following ideas in the passage above?

(A) Political and economic causes control deterioration of language.

(B) Foolish thoughts are enabled by inaccurate language.

(C) Effect of an action becomes the cause in a cyclic pattern.

(D) Drinking enables people to have foolish thoughts and slovenly language.

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Q. 13 It is a pity that Caste even today has its defenders. The defences are many.
It is defended on the grounds that the Caste System is but another name
for division of labour, and if division of labour is a necessary feature of
every civilised society, then it is argued that there is nothing wrong in the
Caste System. Now the first thing to be urged against this view is that
Caste System is not merely division of labour. It is also a division of
labourers. Civilised society undoubtedly needs division of labour but
nowhere is division of labour accompanied by this unnatural division of
labourers into watertight compartments, grading them one above the
other. This division of labour is not spontaneous or based on natural
aptitudes. Social and individual efficiency requires us to develop the
individual capacity and competency to choose and to make his own career.
This principle is violated in so far as it involves an attempt to appoint tasks
to individuals in advance, not on the basis of trained original capacities,
but on that of birth. Industry undergoes rapid and abrupt changes and an
individual must be free to change his occupation and adjust himself to
changing circumstances, to gain his livelihood. (Adapted from Annihilation
of Caste by Dr. B.R. Ambedkar.)
Which of the following observations substantiate the arguments found in
the passage above?

(A) Newer generations are unable to change and move away from low-paying
family professions, even with changed economic circumstances.

(B) Sedentary desk jobs are considered to have more value and are in greater
demand than those involving manual labour.

(C) The government’s jobs guarantee programme makes low-level management
jobs available across all industries to all graduates in the nation.

(D) A bus driver becomes an app creator and, in the course of one month, reaches
one million downloads on Playstore with a four-star rating.

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Q. 14 Imagine that you’re in a game show and your host shows you three doors.
Behind one of them is a shiny car and behind the others are goats. You
pick one of the doors and get what lies within. After making your choice,
your host chooses to open one of the other two doors, which inevitably
reveals a goat. He then asks you if you want to stick with your original
pick, or switch to the other remaining door. What do you do? Most people
think that it doesn’t make a difference and they tend to stick with their
first pick. With two doors left, you should have a 50% chance of selecting
the one with the car. If you agree, then you have just fallen afoul of one of
the most infamous mathematical problems – the Monty Hall Problem. In
reality, you should switch every time which doubles your odds of getting
the car. Over the years, the problem has ensnared countless people, but
not, it seems, pigeons. The humble pigeon can learn with practice the best
tactic for the Monty Hall Problem, switching from their initial choice
almost every time. Amazingly, humans do not!
(Adapted from an article by Ed Yong in Discover Magazine.)
Which of the following conclusions follow from the passage above?

(A) Humans calculate the probability of independent, random events such as the
opening of a door by dividing the specific outcomes by the total number of
possible outcomes.

(B) Humans find it very difficult to learn to account for the host’s hand in making
the event non-random and, thereby, changing the outcome of the event.

(C) Calculating probabilities is difficult for humans but easy for pigeons; which is
why the pigeons succeed where the humans fail.

(D) Humans are governed by reason, but pigeons are irrational and only interested
in the outcome and will do whatever it takes to get food.

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Q. 15 The truth is that, despite the recent success of car-makers P and Q, India’s
automobile industry is in a state not that different from the bad old days of
the license-permit quota raj when two carmakers dominated a captive
domestic market with substandard vehicles and with very little, if any,
research and development, and low to negligible productivity growth.
High tariff barriers have certainly induced foreign automobile makers to
enter the Indian market by setting up local operations, but this so-called
“tariff jumping” foreign investment has produced an industry that is
inefficient, operating generally at a low scale, and whose products are not
globally competitive either in terms of cost or of innovation. It is
noteworthy that the automobile parts industry, which has faced low tariffs
(as low as 12.5%) and has been largely deregulated, has been
characterised by higher productivity and much better export performance
than the completely-built units’ sector in the years since liberalisation.
(Adapted from an Op-Ed in The Mint.)
Which of the following statements can be inferred from the above?

(A) Low tariff barriers increase productivity.

(B) Tariff jumping leads to increases in productivity.

(C) Deregulation has worked for the automotive parts industry and therefore should
be applied to completely-built units.

(D) P and Q do not invest enough in research and development.

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Q.1 – Q.20 Multiple Choice Question (MCQ), carry ONE mark each (for each wrong
answer: – 1/3).

Q.1 A firm finds that for the product that it produces, its (own) price elasticity of
demand is 4. Currently, the firm is selling 2000 units per month at ₹ 5 per
unit. If it wishes to increase its sales by 10%, it must

(A) lower its price by 4%

(B) lower its price by 2%

(C) lower its price by 2.5%

(D) increase its price by 2%

Q.2 "Inflation increases the average level of prices". Which of the following
is(are) necessarily implied by this statement:
(i) The prices of commodities exceed income
(ii) Money supply grows at a higher rate than the real GDP

(A) Only (i)

(B) Only (ii)

(C) Both (i) and (ii)

(D) Neither (i) nor (ii)

Q.3 For the production function 𝑸 = 𝑭(𝑲, 𝑳) = √𝑲𝑳 with 𝑷𝑲 = 𝟒 and 𝑷𝑳 = 𝟐,
find the values of K and L that will minimize the cost of producing 2 units of
output.

(A) 𝐾 = 2√3 ; 𝐿 = 3√2

(B) 𝐾 = 2√2 ; 𝐿 = √2

(C) 𝐾 = √2 ; 𝐿 = 2√2

(D) 𝐾 = 2 ; 𝐿 = 2

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Q.4 If the sum of price elasticities of imports and exports of a country exceeds
unity, then a depreciation of domestic currency will ultimately result in

(A) contraction in trade deficit of the country

(B) widening of trade deficit of the country

(C) an uncertain net effect on the trade balance

(D) a huge outflow of foreign portfolio capital from that country

Q.5 To determine the relationship between 𝒚 and 𝒙𝟏 , Rohit estimated two
different OLS models. In the first model, Rohit regressed 𝒚 on 𝒙𝟏 and 𝒙𝟐 as
given below
𝒚 = 𝜷𝟎 + 𝜷𝟏 𝒙𝟏 + 𝜷𝟐 𝒙𝟐 + 𝒖 (1)
In the second model, Rohit regressed 𝒚 only on 𝒙𝟏 as given below
𝒚 = 𝜹𝟎 + 𝜹𝟏 𝒙𝟏 + 𝒗 (2)
The estimated coefficients of 𝒙𝟏 in the above two models are exactly same.
From this observation we can state conclusively that
(i) 𝑪𝒐𝒗(𝒙𝟏 , 𝒚) = 𝟎
(ii) 𝜷̂𝟐 = 𝟎
(iii) 𝑪𝒐𝒗(𝒙𝟐 , 𝒙𝟏 ) = 𝟎
̂𝟐 is the estimated coefficient of 𝒙𝟐 in the equation (1)
where 𝜷

(A) Only (i) is true

(B) Only (ii) is true

(C) Either (ii) or (iii) or both are true

(D) Neither (ii) nor (iii) is true

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Q.6 XYZ Co. Ltd. is a costless monopoly from suburban Mumbai producing
and selling exotic mushrooms. The demand for mushrooms is given by
𝑸 = 𝟕𝟎𝟎 − 𝟏𝟎𝟎𝑷. Do you agree that XYZ will have a maximum possible
total revenue of ₹1500?

(A) Yes, the maximum possible total revenue is ₹1500

(B) No, the maximum possible total revenue is less than ₹1500

(C) No, the maximum possible total revenue is more than ₹1500

(D) No, the maximum possible total revenue cannot be estimated

Q.7 In a demand function estimation of a good 𝑿, a researcher collected data on
various households’ consumption of good 𝑿 (𝑸𝒙 ) for various price levels. The
researcher also collected data on household income (𝑴) and household size
(𝑺). The estimated regression result is
𝐥𝐨𝐠 𝑸𝒙 = −𝟎. 𝟑𝟒𝟓(𝟎. 𝟏𝟏𝟏) − 𝟏. 𝟓𝟒𝟑(𝟐. 𝟑𝟒𝟓) 𝐥𝐨𝐠 𝑷𝒙
+ 𝟏. 𝟏𝟐𝟑(𝟎. 𝟎𝟏𝟐) 𝐥𝐨𝐠 𝑴 + 𝟎. 𝟐𝟑𝟒(𝟎. 𝟏𝟐𝟑) 𝐥𝐨𝐠 𝑺
where 𝑷𝒙 is price per unit of 𝑿. The values in the parentheses are the standard
errors of the estimated coefficients. From the estimation one can conclude that

(A) the demand for good 𝑋 is highly elastic

(B) 𝑋 is an inferior good

(C) the estimated price elasticity of demand is not statistically significant

(D) the estimated price elasticity of good 𝑋 is 2.345

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Q.8 Consider a duopoly market in which the market demand function is as
follows: 𝑷 = 𝟒𝟎 − 𝑸. For the two firms producing with identical marginal
costs of 10, the Bertrand-Nash equilibrium price will be:

(A) 40

(B) 10

(C) 20

(D) 30

Q.9 What would be the consequences for the OLS estimator if heteroscedasticity
is present in a regression model but ignored? Assume that all the other
classical assumptions are valid.

(A) It will be biased

(B) It will be inconsistent

(C) It will be unbiased but inefficient

(D) It will be unbiased but inconsistent

Q.10 Walras’ Law implies that if there are N markets in the economy, then one
only needs to find equilibrium prices in

(A) N − 2 markets

(B) N − 1 markets

(C) N + 1 markets

(D) all the N markets

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Q.11 There are many reasons why a poor country may fail to catch up with a rich
neighbour. Which of the following is NOT one of these reasons?

(A) The poor country may have more rapid population growth

(B) The rich country may have more human capital

(C) The poor country may have a higher saving ratio

(D) The rich country through trade may be more integrated with the world economy

Q.12 In a two country model, an increase in foreign country’s national income
generally leads to:

(A) increased exports and increased domestic output

(B) decreased exports but increased domestic output

(C) decreased exports and decreased domestic output

(D) increased exports but decreased domestic output

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Q.13 Piku faces a lottery with outcomes of ₹24, ₹12, ₹48 and ₹6 given by the
following probability distribution

Lottery Outcome ₹24 ₹12 ₹48 ₹6

𝐏𝐫𝐨𝐛𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐨𝐟 𝐎𝐮𝐭𝐜𝐨𝐦𝐞 𝟐⁄ 𝟑⁄ 𝟏⁄ 𝟎
𝟔 𝟔 𝟔

She is indifferent between the lottery and receiving ₹28 with certainty. Given
the information we can conclude that Piku is a

(A) risk lover

(B) risk averse

(C) risk neutral

(D) hedger

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Q.14 Consider a regression model 𝒚 = 𝜷𝟎 + 𝜷𝒙 + 𝒖 where the continuous variable
𝒚 is regressed on a dummy variable 𝒙, which takes the value either 1 or 0.
However, the model was estimated using the instrumental variable (IV)
estimation method, wherein the indicator variable 𝒛 is used as an instrument
of x.
Let
̅𝟏 and 𝒚
𝒚 ̅𝟎 be the sample averages of 𝒚 when 𝒛 takes the value 𝟏 and 0,
respectively
̅𝟏 and 𝒙
𝒙 ̅𝟎 be the sample averages of 𝒙 when 𝒛 takes the value 𝟏 and 0,
respectively
̅𝟏 and 𝒚
𝒚 ̅𝟎 be the sample averages of 𝒚 when 𝒙 takes the value 𝟏 and 0,
respectively
𝒛̅𝟏 and 𝒛̅𝟎 be the sample averages of 𝒛 when 𝒙 takes the value 𝟏 and 0,
respectively
Then the estimated coefficient of 𝜷𝑰𝑽 is

(A) 𝑦̅1 −𝑦̅0
𝑦̅ 1 −𝑦̅ 0

(B) 𝑦̅1 −𝑥̅1
𝑦̅0 −𝑥̅ 0

(C) 𝑦̅1 −𝑦̅0
𝑥̅ 1 −𝑥̅ 0

(D) 𝑦̅1 −𝑦̅0
𝑧̅ 1 −𝑧̅ 0

Q.15 Assuming that external economies exist, when demand increases in a
perfectly competitive market, in the long-run, the price of the product

(A) rises above the initial price (before the demand increase) and quantity increases

(B) remains the same as the initial price (before the demand increase) and quantity
increases

(C) falls below the initial price (before the demand increase) and quantity increases

(D) equals the initial price (before the demand increase) and quantity decreases

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Q.16 Consider an individual who maximizes her expected utility having Bernoulli
utility function 𝒖(𝒘) = 𝜶 − 𝜷𝒆−𝒓𝒘 ; 𝒘 > 𝟎 𝐢𝐬 𝐰𝐞𝐚𝐥𝐭𝐡. The individual
displays _________________ relative risk aversion.

(A) constant

(B) increasing

(C) decreasing

(D) uncertain

Q.17 For an open economy, the ‘twin deficits’ can be expressed by:
[where S = Savings; I = Gross Private Investment; G = Government
Expenditures; TR = Transfer Payments; TX = Taxes; X = Exports; M =
Imports and NFIA = Net Factor Income from Abroad]

(A) 𝑆 − 𝐼 = [𝐺 − 𝑇𝑅 − 𝑇𝑋] + [𝑋 − 𝑀]

(B) 𝐼 − 𝑆 = [𝐺 + 𝑇𝑋 − 𝑇𝑅] + [𝑀 − 𝑋]

(C) 𝑆 − 𝐼 = [𝐺 + 𝑇𝑅 − 𝑇𝑋] + [𝑋 − 𝑀]

(D) 𝐼 − 𝑆 = [𝑇𝑋 − 𝐺 + 𝑇𝑅] + [𝑁𝐹𝐼𝐴]

Q.18 If expectations about inflation are formed as per the rational expectations
hypothesis, then the short-run Philips curve will be

(A) negatively sloped

(B) parallel to the vertical axis

(C) parallel to the horizontal axis

(D) coinciding with the NAIRU

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Q.19 As economic development proceeds, income inequality tends to follow a(n)
_________ curve.

(A) asymptotically convex

(B) inverted U-shaped

(C) V-shaped

(D) S-shaped

Q.20 India has the highest amount of foreign debt in the form of

(A) Non Resident Indian (NRI) Deposits

(B) Commercial Borrowings

(C) Loans taken from the International Monetary Fund

(D) Loans taken from the Bank of England

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Q.21 – Q.25 Multiple Choice Question (MCQ), carry TWO mark each (for each wrong
answer: – 2/3).

Q. 21 𝟑 𝟏
Let A and B be two events with probabilities 𝑷(𝑨) = 𝟒 and 𝑷(𝑩) = 𝟑 ;
then which of the following options is true?

(A) 3 1
𝑃(𝐴 ∩ 𝐵) ≥ 𝑚𝑎𝑥. [ , ]
4 3
(B) 1 1
≥ 𝑃(𝐴 ∩ 𝐵) ≥
3 12
(C) 3 1
≥ 𝑃(𝐴 ∩ 𝐵) ≥
4 3
(D) 3 1
𝑃(𝐴 ∩ 𝐵) ≥ 𝑚𝑖𝑛. [ , ]
4 3

Q. 22 𝟏
If 𝑺𝟐 = 𝒏−𝟏 ∑𝒏𝒊=𝟏(𝒙𝒊 − 𝒙
̅)𝟐 is an unbiased and consistent estimator of the
𝟏
population variance, then one can conclude that 𝑺 = √𝒏−𝟏 ∑𝒏𝒊=𝟏(𝒙𝒊 − 𝒙
̅)𝟐 is
a(an) ______________ estimator of the population standard deviation.

(A) unbiased and consistent

(B) biased and consistent

(C) unbiased and inconsistent

(D) biased and inconsistent

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Q. 23 Consider the following demand−supply model, where
Demand function: 𝑷 = 𝑸𝟐 − 𝟏𝟐𝑸 + 𝟑𝟓
Supply function: 𝟒𝑷 − 𝟑𝑸 = 𝟎
The stable market equilibrium price-quantity combination will be

(A) (𝑃 ∗ , 𝑄 ∗ ) = (3, 4)

(B) (𝑃 ∗ , 𝑄 ∗ ) = (105 , 70)
16 8

(C) (𝑃 ∗ , 𝑄 ∗ ) = (6, 8)

(D) (𝑃 ∗ , 𝑄 ∗ ) = (14, 3)

Q. 24 Trisha’s consumption preference on biryani (𝒙) and pudding (𝒚) is given by the
utility function 𝑼(𝒙, 𝒚) = 𝒙 + 𝟒𝒚. The price per unit of biryani is ₹2 and the
price per unit of pudding is ₹3. Trisha’s total income is ₹120. However, she faces
an extra quantity constraint as she is not allowed to consume biryani more than
60 units and pudding more than 30 units. The optimum quantity of biryani and
pudding consumed by Trisha is

(A) (𝑥 ∗ , 𝑦 ∗) = (30, 20)

(B) (𝑥 ∗ , 𝑦 ∗) = (15, 30)

(C) (𝑥 ∗ , 𝑦 ∗) = (30,15)

(D) (𝑥 ∗ , 𝑦 ∗) = (60, 0)

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Q. 25 Consider a Cournot type n-firm natural spring oligopoly where the market
demand for natural spring water is given by 𝑷(𝑸) = 𝒂 − 𝑸, 𝒂 > 𝟎. The n firms
are symmetric. Each firm incurs a bottling cost of 𝑪𝒊 = 𝒄𝒒𝒊 , c > 0 and 𝒂 > 𝒄 .
The equilibrium market price will be

(A) (𝑛 + 1) 𝑛(𝑛 + 1)
+
𝑎 𝑐
(B) 𝑎 𝑛𝑐
+
(𝑛 + 1) (𝑛 + 1)

(C) 𝑛𝑎 𝑛𝑐
+
(𝑛 + 1) (𝑛 + 1)

(D) (𝑎 − 𝑐) 𝑐
+
(𝑛 + 1) 𝑛(𝑛 + 1)

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Q.26 – Q.30 Multiple Select Question (MSQ), carry TWO mark each (no negative marks).

Q. 26 Goods and Services Tax (GST) is

(A) a ‘destination based’ consumption tax

(B) an origin based tax assigned to the State of origin where the sale takes place

(C) an indirect tax

(D) a modified form of value added tax

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Q. 27 Consider an intersection of roads without any traffic light. Two cars A and B
approach an intersection and they want to proceed as indicated by respective
arrows in the following diagram. If both proceed without stopping and there is
an accident, then A would have a payoff of −100 and B would have a payoff of
−500 (since B is responsible for the accident). If one stops, and the other proceeds
then the payoff is: −5 and 10, respectively. If both of them stop, then it takes a
little longer to reach their respective destinations, they have a payoff of −5 each.
Find the Pure Strategy Nash Equilibrium (PSNE) of the players (Car drivers).

(A) (Car A, Car B) = (Stop, Stop)

(B) (Car A, Car B) = (Stop, Proceed)

(C) (Car A, Car B) = (Proceed, Stop)

(D) (Car A, Car B) = (Proceed, Proceed)

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Q. 28 A Government Security (G-Sec)

(A) is a tradeable instrument issued by the Central Government

(B) is a tradeable instrument issued by State Governments

(C) can have maturity of only more than one year

(D) cannot be considered as ‘gilt-edged’ instrument

Q. 29 If a country has flexible exchange rate regime with perfect capital mobility, then
according to the Mundell-Fleming Model, an expansionary fiscal policy will lead
to

(A) no change in output

(B) reduced net exports

(C) appreciation of nominal exchange rate

(D) expansion of output

Q. 30 The basic tenets of ‘Monetarism’ are

(A) acceptance of the ‘quantity theory’ approach to macroeconomic analysis

(B) a strict rule based monetary policy

(C) a monetary approach to the balance-of-payments and exchange-rate theory

(D) an active stabilization policy through expansionary monetary/fiscal policies

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Q.31 – Q.40 Numerical Answer Type (NAT), carry TWO mark each (no negative marks).

Q.31 Two farmers, Rohit and Harish, graze their animals on a common land. They
can choose to use this common resource ‘lightly’ or ‘heavily’ and the resulting
strategic interaction may be described as a simultaneous-move game. The payoff
matrix is given below:

Harish

Graze Graze Heavily
Lightly
Rohit
Graze Lightly 40,40 20,55

Graze Heavily 55,20 30,30

The minimum value of the discount rate (where the discount rate is less than one)
under infinite repetition of the game where the threat strategy (“Graze lightly if
the opponent also grazes lightly, whereas, if the opponent renege then always
graze heavily in all the future periods”), is a Sub-game Perfect Nash Equilibrium
(SPNE) and, both the farmers graze their animals lightly is ______________
(round off to one decimal place).

Q. 32 Suppose Vijay has purchased a high-speed car worth ₹1000000. During the
purchase, an Insurance company has shared the latest available road safety
survey, wherein it is mentioned that, due to heavy congestion on roads, there is
40% chance of an accident within the first year of car purchase resulting in loss
of the car value by 60%. Vijay’s utility function for wealth (𝑾) is given
by 𝑼(𝑾) = 𝒍𝒏(𝑾). If Vijay plans to buy an accident insurance having a
premium of 30%, then he will purchase an insurance of ₹ ____________ (round
off to the nearest integer).

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Q. 33
Consider the following Table.

Other Bankers'
Cash Currency
Currency in Deposits Deposits Demand Time
Month with with the
Circulation with the with the Deposits Deposits
Banks Public
RBI RBI

April 2523 98 2425 40 457 1582 12988

May 2611 98 2513 42 468 1565 13112

June 2661 94 2567 39 484 1573 13141

(All values are in Rupees Thousand Crore)
Based on the given data, the average Broad Money Multiplier for the period
April - June is ____________ (round off to three decimal places).

Q. 34 Consider two regression models estimated on a sample of 350 observations.
𝒚 = 𝜷𝟎 + 𝜷𝟏 𝒙𝟏 + 𝜷𝟐 𝒙𝟐 + 𝜷𝟑 𝒙𝟑 + 𝜷𝟒 𝒙 𝟒 + 𝜷𝟓 𝒙𝟓 + 𝒖 ---------(1)
𝒚 = 𝜶𝟎 + 𝜶𝟏 𝒙𝟏 + 𝜶𝟐 𝒙𝟐 + 𝒗 ---------(2)
The 𝑹𝟐 in model (1) is 𝑹𝟐𝟏 = 𝟎. 𝟑𝟓𝟐𝟏 and in model (2) is 𝑹𝟐𝟐 = 𝟎. 𝟐𝟑𝟏𝟒. The value
of the test statistic to test the 𝑯𝟎 : 𝜷𝟑 = 𝜷𝟒 = 𝜷𝟓 = 𝟎 is ________________(round
off to three decimal places).

Q. 35 Consider a competitive market where the demand and supply functions are
given by 𝒒𝑫 = 𝟏𝟐 − 𝟐𝑷 𝐚𝐧𝐝 𝒒𝑺 = 𝟒𝑷, respectively. The tax rate per unit of
output that maximizes the tax yield (revenue) is ___________ (in integer).

Q. 36 Suppose the demand for a new pharmaceutical drug, on which the manufacturer
has a patent monopoly, is given by: 𝑸 = (𝟏𝟎𝟎 − 𝑷)𝑨𝟎.𝟓; where Q is output, P is
the price and 𝑨 is advertising expenditure. Production cost of the patented drug
is given by: 𝑪(𝑸) = 𝟔𝟎𝑸. At the firm’s optimal choices, the ratio of advertising
expenditure to sales revenue for the pharmaceutical product will be 1: ____ (in
integer).

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Q. 37 Let the rate of inflation in an economy be 4.2%, the growth rate of velocity of
money be 2% and, the growth rate of real GDP be 6%. According to Milton
Friedman’s ‘k’ percent rule, the rate of growth of money supply for
maintaining stable prices will be _____________(round off to one decimal
place).

Q. 38 The long-run cost function of all identical firms in a perfectly competitive
industry is given by: 𝑪 = 𝟐𝟓𝒒 − 𝟑𝒒𝟐 + 𝟏. 𝟓𝒒𝟑
The market demand function is: 𝑷 = 𝟐𝟓𝟎𝟎 − 𝟎. 𝟐𝟓𝑸
The number of firms in the industry at equilibrium is __________(in integer).

Q. 39 Given below is an inter-industry transactions matrix. If final demand for the
agriculture sector changes from 150 units to 300 units and for the manufacturing
sector changes from 120 units to 200 units, then the output of the agriculture
sector should be __________ units (in integer).

User
Total
Final
Output
Agriculture Manufacturing Demand
Producer

Agriculture 500 350 150 1000

Manufactu
320 360 120 800
ring

Q. 40 Consider that a sample of size 3 is randomly drawn from a population that takes
only two values, equally likely: − 1 and 1. Let 𝒛 = 𝐦𝐚𝐱 .(𝒙𝟏 , 𝒙𝟐 , 𝒙𝟑 ) where
𝒙𝟏 , 𝒙𝟐 , 𝒙𝟑 are the sample observations. The expected value of z, 𝑬(𝒛) is
__________ (round off to two decimal places).

END OF THE QUESTION PAPER

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