CUET PG Economics Mock Test- 9 - CUET PG MCQ

The H-O theory works on 2 important assumptions:

• One country uses a capital-intensive technique, and the other uses a labor-intensive technique.
• The country using labor-intensive techniques will export labor-intensive products, and the country using capital-intensive techniques will export capital-intensive products.

However, factor intensity reversal happens when the latter assumption is violated. Factor intensity reversal takes place when Country A is labor-intensive and Country B is capital-intensive, but both countries export labor- or capital intensive goods (i.e., the same good).

Government Measures taken to allow greater foreign participation in Industrial Sectors

• Defence Sector: FDI in defence sector is allowed up to 74 per cent through automatic route (from earlier 49percent) for companies seeking new industrial licenses. FDI beyond 74 percent and up to 100 per cent will be permitted under Government route.
• Insurance Sector: Rise in the permissible FDI limit from 49percent to 74percent in Insurance Companies.
• Petroleum & Natural Gas sector: Permit foreign investment up to 100percent.
• Telecom sector: Permit foreign investment up to 100percent.

Singleton set: A set containing one element is called a singleton set. It is represented as A = {1}. Other options are wrong:

• Subset: When all elements of set A belong to the set of B, then A is a subset of B.
• Empty set: a set containing no elements is called an empty set. Also known as void set or null set. This is represented as.

Stage of 'Drive to Maturity'
(A) Investment Rate rises from 10% to 20%.
(B) Import-replacement and export industries start setting up and expanding.
(C)  Population growth rate <growth rate of national income, hence, real per capita income rises.
(D) An economy remains in this stage for around 40 to 60 years.
(E) This stage marks the spread of technical know-how to other sectors, which leads to specialization and division of labor further. This equips the economy to produce almost anything and everything.

• Convenience Sampling involves choosing the respondents at the convenience of the researcher.
• Cluster Sampling indicates the whole population is divided into mutually exclusive and collectively exhaustive sub-groups or clusters.
• Systematic Sampling refers, it arranging all the elements of a population in a particular order. Thereafter, every nth item from the order is being selected
• Judgemental Sampling indicates, the researcher uses his or her own expert knowledge or judgment for selecting the sample

• Bent Hansen's Dynamic Model of Demand Inflation-1951. He attributed inflationary conditions to be prevalent either due to excess demand for goods (i.e, good gap) or due to excess demand for factors (factor gap).
• Dornbusch Overshooting model-1976. It is the theoritical explanation for high levels of exchange rate volatility. It implies that in the short run prices of currencies are flexible. The short term effect on the exchange rate can be greater than the long run effect, so in the short term, the exchange rate overshoots its new equilibrium long term value.
• In the years Indian commemorative coin was issued in 1964 in remembrance of Jawaharlal Nehru's birth anniversary. In the years 2010 and 2011 for the first time ever RS 75, RS 150 and RS 1000 coins were minted in India to commenorate the platinum Jubilee of the RBI, the 150th birth anniversary of the birth of Rabindranath Tagore and 1000 years of Brihadeeswarar Temple, respectively.
• Neo-Classical Theory of Investment-Dale Jorgenson's-1963. It is the modern theory of investment and lays the micro-foundation for aggregate investment function.

Let us analyze the statements individually to get better clarity, Statement I is correct as A dual GST system serves as the foundation for the Indian Goods and Services Tax (GST) paradigm. Within their respective domains, the federal government and state governments are both able to impose and collect GST on the supply of goods and services under this arrangement. The adoption of this dual structure was a response to the federal form of Indian governance, which grants the central and state governments equal authority to impose taxes. Statement II is also correct, as the dual GST model refers to the GST being levied by both Central and State governments. The Goods and Services Tax (GST) imposed by both the Central and State governments is referred to as the "dual GST model" in India. Following this approach, the supply of goods and services inside each level of government's jurisdiction is subject to GST, which can be imposed and collected by both. Thus we can conclude that both Statement I and Statement II are correct

As per official answer key this question was DROP. This question was incomplete. If we use tax multiplier we get
dY/dT = - (0.75) / (1 - 0.75) = - (0.75) / (0.25) = -3
SO, 60 crore is the correct answer

Option A is Correct -The National income is increased and the distribution of national income should be equal.
The Pigouvian welfare condition states that economic welfare improves when:

• National income increases, leading to higher production and employment.
• Income distribution is equal, ensuring fair access to economic benefits.

Why other options are incorrect?

• Increasing expenditure alone does not guarantee welfare if income remains unequal.
• Minimizing production costs does not directly improve welfare unless income and its distribution improve.
• "None of the above" is incorrect since the first option aligns with Pigou’s theory.

The Correct option is C

The correct option is C, 

The correct answer is option B: Both Statement I and Statement II are correct.

• Statement I is valid since public goods are non-rivalrous, meaning one person's use does not reduce availability for others.
• Statement II is also accurate because excluding individuals from using public goods can be challenging or costly.

The correct answer is Option (b): Externalities and market inefficiencies.
The Coase Theorem deals with externalities, which occur when the actions of one party impose unintended costs or benefits on others not directly involved in the transaction. If property rights are clearly defined and transaction costs are minimal, private negotiations can help internalize externalities without requiring government intervention.

Why other options are incorrect:

• Option A: Incorrect, as the Coase Theorem focuses on externalities rather than government intervention in transactions.
• Option C: Incorrect, as it primarily addresses market inefficiencies caused by externalities rather than resource depletion or overuse.
• Option D: Incorrect, as consumer and producer surplus are important in market analysis but are not the central concern of the Coase Theorem.

Consumer surplus is the average of compensating variation and equivalent variation so we can write:
Consumer Surplus = (Compensating Variation (CV) + Equivalent Variation (EV)) / 2
CS = (CV + EV) / 2
= (7.5 + EV) / 2
⇒ 5.5 = (7.5 + EV) / 2
⇒ 11 = 7.5 + EV
⇒ EV = 11 - 7.5
⇒ EV = 3.5 (answer)

The correct option is C,

• Deposit Insurance and Credit Guarantee Corporation of India (DICGC)
• Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
• Reserve Bank Information Technology Private Limited (ReBIT)
• Indian Financial Technology and Allied Services (IFTAS)
• Reserve Bank Innovation Hub (RBIH)