(Download) UPSC IAS Mains Exam 2018
Exam Name: UPSC IAS Mains Economics (Paper-I)
Time Allowed: 3 Hours
Q.1 Answer the following questions in about 150 words each?
a) Does a monopolistically competitive market lead to excess capacity under
b) Using the IS-LM model, show how expected deflation may cause equilibrium
output to remain at less than full-employment level.
c) Is stagflation a logical outcome of Keynesian orthodoxy? Give reasons for
d) What is high-powered money? Explain how changes in short-term monetary
policy affect high – powered money and money multiplier.
Q.2 a) Explain why in a duopoly model of collusion, each firm has an incentive
to cheat the other.
b) Show how a dominant firm with a competitive fringe can act as a price
leader in an oligopoly market.
c) Give an outline of Kaldor’s theory of distribution. Also explain the
implications of an increase in the wage level and a reduction in the saving rate
on the distribution of income.
Q.3 a) In the simple Keyneaian model, if consumption and investment are both
functions of income, how would the multiplier be affected?
b) What is hysteria? Explain the impact of hysteresis in Gradualist
Monetarist and Eclectic Keynesian frame works.
c) How will you derive the real aggregate demand curve using the New
Q.4 a) What is interest rate targeting? Explain using the concept of Taylor
b) In an open economy with high capital mobility, monetary management can be
a successful tool to increase output. Explain.
c) The burden of tax depends upon the elasticity of demand and supply of a
commodity or service. Explain with suitable examples.
Q.5 Answer the following questions in about 150 words each:
a) Under what conditions will devaluation create trade surplus and increase
output in the simple Keynesian frame work?
b) What are shadow prices? Why are these preferred over market prices in
c) In Harrod’s model of growth, if the expected growth rate exceeds the
warranted growth rate, what will be the relation between the actual growth rate
and the expected growth rate?
d) How to externalities lead to market failure? How can this situation be
e) Give an outline of a model of speculative attack under fixed exchange
Q.6 a) Explain, with the help of diagram, how Haberier’s theory of
opportunity cost is an improvement over the comparative cost theory of Ricardo.
b) Architecture quota on import and an equal-import tariff are equivalent in
a competitive market but not under monopoly. Explain.
c) What is Doha Development Agenda? Explain how it negotiated TRIPS and TRIMS
Q.7 a) Development of human capital may lead to constant returns and propel
an economy to self-sustaining economic growth. Explain.
b) Kuznets hypothesis predicts decline in income inequalities in the long
run. In recent decades do trends in income inequalities in developed and
developing economies support this hypothesis? Give reasons for your answer.
c) Examine Arthur Lewis model of economic development with unlimited supplies
of labour. What is A.K Sen’s critique of that approach?
Q.8 a) Explain why the market and the state have complementary roles in
b) How does rural economic activity create environmental degradation in
c) What policies would you suggest to combat negative environmental