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Application No:
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Exam Date: 05-Oct-2020
Exam Time: 09:00-12:00
Examination: 1. Course Code - Ph.D.
2. Field of Study - INTERNATIONAL TRADE AND
DEVELOPMENT (ITDH)
SECTION 1 - SECTION 1

Question No.1 (Question Id - 13)
Consider a model with core inflation, t = *+[Yt - Yf ] where t is period t inflation, * is core inflation, Yt is
period t output and Yf is full employment output. If core inflation is set at the previous (t - 1) period's inflation,
then :
(A)
When unemployment changes from 0 to a positive number, inflation becomes negative.
(B)
When unemployment changes from 0 to a positive number, inflation falls but may be positive.

(C)
The relation between unemployment and inflation definitely becomes positive.
(D)
Output always remains at full employment output.
Question No.2 (Question Id - 10)
(A)
V = x - lnx + y - lny (Correct Answer)
(B)
V = xy - + xy -
(C)
V = x - + y -
(D)
V = x - ex + y - ey
Question No.3 (Question Id - 17)
Let X and Y be random variables with joint probability density function f(x,y) = x + y, where X in [0, 1] and Y in
[0, 1]. Then the covariance of X and Y is :
(A)
- 1/3
(B)
- 1/21
(C)
- 7/144
(D)
Case Study - 4 to 6 (Question Id - 48)
Suppose you want to examine if fertility rates change overtime. Consider a regression of the number of children a woman
has, on the mother's characteristics such as age and education. You have data for years 2005, 2010 and 2015 and
therefore include year dummies to check for changes over time. Consider the following models :
Model I : Children = 0 + 1 age + 2 age2 + 3 education + 4 year2010 + 5 year2015 + 1;
Model II : Children = 0 + 1 age + 2 age2 + 3 education + 4 year2010 + 5 year2015 + 6 education*year2010 +
7 education*year2015 + 2
Question No.4 (Question Id - 49)
Refer to the previous question. Assume that model II above satisfies the assumptions of the classical
regression model. To test whether the effect of education for a woman is the same in 2010 and 2015, the Null
hypothesis is :
(A)

(B)
3 = 6 = 7
(C)
4 = 5
(D)
4 = 0
Question No.5 (Question Id - 50)
Refer to the previous question. Assume model I satisfies the classical regression model. To test that the effect
of age on the number of children is constant, the Null hypothesis is :
(A)
1 + 2 = 0
(B)
1 = 2 = 0
(C)
(D)
2 - 1 = 0
Question No.6 (Question Id - 51)
Refer to question no. 48. Assume model II satisfies the classical regression model. To test that year does
not affect the number of children, the Null hypothesis is :
(A)
6 = 7 = 0
(B)
4 = 5 = 6 = 7
(C)
4 + 5 = 0
(D)
4 = 5 = 6 = 7 = 0 (Correct Answer)
Question No.7 (Question Id - 45)
The wage productivity model (Mirrlees, 1971),which states that worker's productivity is positively related to
his/her level of consumption, explains :
A. Persistence of involuntary unemployment and wage rigidity in surplus labour economies.
B. Persistence of voluntary unemployment and wage rigidity in surplus labour economies.
C.Wage dispersion.
Choose the most appropriate answer from the options given below :
(A)
A only
(B)
B only
(C)
B and C only
(D)
A and C only (Correct Answer)
Question No.8 (Question Id - 1)
(A)
b=A -1 c
(B)
b= - A -1 c (Correct Answer)
(C)
Ac=b
(D)
Ac= -b
Question No.9 (Question Id - 47)
Refer to the previous question. Suppose the farmer needs to borrow `L' at interest rate `i'. The total debt is R =
(1 + i)L. Assume that effort is not verifiable and not contractible, and the farmer does not repay anything if the

output fails. If the farmer offers his wealth W < L as collateral then the optimum choice of effort is :
(A)
x* = ln(Q + W - R)
(B)
(C)
x* = (Q + W - R)eax
(D)
x* is indeterminate
Question No.10 (Question Id - 33)
A price normalization is required while solving for a competitive equilibrium because of :
(A)
The Walras law.
(B)
The homogeneity properties of the Marshallian demands of the consumers and the supplies of

(C)
Both 1 and 2.
(D)
Monotonicity properties of consumer preferences.
Question No.11 (Question Id - 4)
Consider the profit maximization problem :
(p)=maxy py-C(y)
Where y is the output, p is price of the output and C(y) is the minimum cost function. Let the profit maximizing
supply function be denoted by y=Y(p). Which of the following is true :
(A)
(B)
(C)
(D)
Question No.12 (Question Id - 42)
Consider the following regression model y = X + u, where E(XTu 0). Suppose it is possible to find a data
matrix Z such that :
A. The variables in Z are correlated with those in X
B. E(ZTu = 0). A consistent estimator of will be :
Choose the correct answer from the options given below :
(A)
(B)
(C)
(D)
Question No.13 (Question Id - 28)
"The presence of menu costs ensures that AD policy is able to affect output." This statement :
(A)
Is always true
(B)
Is always false
(C)
Is only true if firms have relatively acyclical marginal cost curves and relatively steep marginal

(D)
Is only false if firms have relatively acyclical marginal cost curves and relatively steep marginal

revenue curves
Question No.14 (Question Id - 25)
If the nominal rate of interest on a bond is 18%, the inflation rate is 10% and the individual is in 50% tax
bracket, the after-tax real return on the bond would be equal to :
(A)
13%
(B)
8%
(C)
4%
(D)
Question No.15 (Question Id - 16)
Involuntary unemployment can occur :
(A)
In a model where only prices are rigid, whenever there is a negative AD shock.
(B)
In a model where only nominal wages are rigid, whenever there is a negative AD shock.

(C)
In a pure classical "quantity theory of income" model.
(D)
When workers' reservation wage is higher than the market wage.
Question No.16 (Question Id - 3)
Which of the following statements is/are consistent with Hirschman's theory of unbalanced growth ?
A. A country should selectively promote the development of the key sectors of the economy.
B. Backward and forward linkages induce the development of new industries.
Choose the most appropriate answer from the options given below :
(A)
A only
(B)
B only
(C)
A and B both (Correct Answer)
(D)
None of the above
Question No.17 (Question Id - 26)
(A)
(B)
(C)
(D)
Question No.18 (Question Id - 12)

(A)
(B)
0
(C)
(D)
a
Question No.19 (Question Id - 19)
Given the regression model :
yt = + x1t + x2t + ut
which of the following auxiliary regressions would be most appropriate to test for autocorrelation using an
auxiliary regression ?
(A)
(B)
ut = a + but-1 + vt (Correct Answer)
(C)
ut = a + bx1t + cx2t + vt
(D)
ut = a + bx1t + cx2t + dx1t x2t + vt
Question No.20 (Question Id - 22)
Under the assumption of uncovered interest parity, suppose the domestic interest rate increases from 5% to
15% , and there is a fixed exchange rate system. This can happen if :
(A)
The level of the international interest rate increases by 5%.
(B)
Agents are expecting a nominal appreciation of 5%.
(C)
Agents are expecting a nominal depreciation of 5%.
(D)
Both (1) and (3) above hold. (Correct Answer)
Question No.21 (Question Id - 32)
Assuming that all consumers are identical if cross price elasticities of demand are zero, then minimizing dead-
weight losses due to commodity taxes involves :
(A)
Lower rates of taxes on commodities with more inelastic demands.
(B)
Higher rates of taxes on commodities with more inelastic demands. (Correct Answer)
(C)
Higher rates of taxes on commodities which are disproportionately consumed by the rich.
(D)
None of the above.
Question No.22 (Question Id - 8)
(A)
The unique Nash equilibrium in a one shot game is for both firms to compete. (Correct Answer)
(B)
The unique Nash equilibrium in a one shot game is for both firms to collude.
(C)
The game only has a mixed strategy equilibrium.
(D)
This game has multiple pure strategy equilibria.
Question No.23 (Question Id - 24)
(A)
kSS = 35, ySS = 22, cSS = 14.4
(B)
kSS = 30, ySS = 15, cSS = 10.2
(C)
kSS = 40, ySS = 20, cSS = 15.2

(D)
kSS = 36, ySS = 18, cSS = 12.6 (Correct Answer)
Question No.24 (Question Id - 37)
(A)
(B)
(C)
(D)
* = 1 - (Correct Answer)
Question No.25 (Question Id - 18)
A candidate is taking a multiple choice examination with four choices given in the answer. The probability that
the candidate has knowledge of the correct answer is 0.5. When the candidate has no knowledge of the
answer, he/she chooses one answer at random. If the question is answered correctly, then the probability that
the candidate knew the correct answer is :
(A)
1/2
(B)
3/4
(C)
(D)
1/4
Question No.26 (Question Id - 38)
(A)
(B)
(C)
(D)
Question No.27 (Question Id - 35)
Let f : A A be a continuous function whose domain and range are both set A Rn. Then the Brouwer's
fixed point theorem says that f has a fixed point, that is, there exists x A such that f (x) = x if :
(A)
Set A is non-empty, closed, and convex
(B)
Set A is non-empty, bounded, and convex
(C)
Set A is non-empty, compact, and convex (Correct Answer)

(D)
Set A is non-empty, open, and bounded
Question No.28 (Question Id - 34)
Consider a technology of a thermal power plant that uses coal as an input to produce a bad output CO2 along
with a good output, electricity. As usage of coal increases, the maximum amount of electricity and the
minimum amount of CO2 that the thermal power plant can produce, increase. This implies that the technology
of the thermal power plant violates :
(A)
Output free disposability of the good output
(B)
Output free disposability of the bad output
(C)
Input free disposability of coal
(D)
Both 2 and 3 above (Correct Answer)
Question No.29 (Question Id - 9)
Consider the same payoff matrix as in the previous question. Suppose the interaction between the firms is
repeated indefinitely. What is the threshold value of (the discount factor) needed for a grim trigger strategy
to ensure collusion ?
(A)
1
(B)
0.5
(C)
0.8
(D)
Question No.30 (Question Id - 15)
Suppose money is neutral only in the long run. This implies :
(A)
If the economy is open, the nominal exchange rate in the long run will depreciate in the same
proportion as money supply expands. (Correct Answer)

(B)
If the economy is open, the real exchange rate in the long run will depreciate in the same proportion
as money supply expands.
(C)
There will be no short run changes in exchange rates.
(D)
The AS curve is vertical in the short run and upward sloping in the long run.
Question No.31 (Question Id - 20)
Assume that the consumption function is C = c0 + c1(Y - T), where c0 is autonomous consumption, c1 is
marginal propensity to consume, Y is output and T is taxes. Suppose both taxes and money supply increase
in a manner that output is constant in equilibrium (assume further that c1 < 1). These policy changes will lead
to :
(A)
An increase in investment and a decline in government spending.
(B)
An increase in investment and an increase in private saving.
(C)
An increase in investment and a decrease in private consumption. (Correct Answer)
(D)
A decrease in investment and an increase in public saving.
Question No.32 (Question Id - 31)
Suppose x Rn denotes an input vector, y > 0 denotes the amount of output, and T Rn+1 denotes the
production technology. Which of the following is true if the technology satisfies non-decreasing returns to
scale ?
(A)
(x, y) T (x, y) T for all [0, 1]
(B)
(x, y) T (x, y) T for all 1 (Correct Answer)
(C)
(x, y) T (x, y) T for all 0
(D)
None of the above
Question No.33 (Question Id - 44)
Suppose a firm hires labourers to do 5000 units of work and the labourers spend all their income on food. The
capacity curve of the labourers is such that for all payments up to 100, capacity is zero and then begins to
rise by 2.5 units for every additional Rupee paid until an income of 600 is paid. After 600, an additional
Rupee paid out increases the capacity by only 1 unit until total income paid out is 1000. After 1000,
additional payments have no effect on work capacity. To minimize costs, the number of workers hired by the
firm and the amount it pays to each of them respectively, is :
(A)

(B)
5; 500
(C)
10; 300
(D)
20; 200
Question No.34 (Question Id - 6)
(A)
(B)
(C)
(D)
Question No.35 (Question Id - 30)
Which of the following is/are true when a production technology satisfies the assumption of input free
disposability ?
A. Holding all other inputs fixed, using more of a given input does not reduce production of outputs.
B. Isoquants of the technology are non-positively sloped.
C. Some inputs can be unproductive.
D. At a competitive equilibrium, price of all inputs are non-negative.
Choose the correct answer from the options given below :
(A)
A only
(B)
B only
(C)
A, B and D only (Correct Answer)
(D)
A, B, C and D
Question No.36 (Question Id - 7)
Consider a 2-good world. Goods X and Y have prices PX and PY. Amrit consumes only good X.
Which of the following statements must be true ?
(A)
Amrit's indifference curves between X and Y must be concave to the origin.
(B)
Amrit's MRS (marginal rate of substitution) between X and Y must be greater than
PX/PY for positive X and Y. (Correct Answer)
(C)
Amrit's indifference curves between X and Y must be L-shaped.
(D)
X must be cheaper than Y.
Question No.37 (Question Id - 21)
Consider the following two-period overlapping generations model. Individuals consume in both periods 1 and
2, but work only in period 2. The inter-temporal utility of the representative individual in period 1 is given as :
U=ln c1+[ln c2 + ln(1 - n2 )+ln g2 ],
where c1 and c2 are consumption in two periods. k1 (which is given) and k2 are the stocks of capital in
periods 1 and 2, n2 is work and g2 is government expenditure in period 2. g2 is funded by a lumpsum tax in
period 2. Production in periods 1 and 2 are : y1=Rk1=c1+ k2, and y2=Rk2+n2=c2+g2. Then, the private
sector equilibrium solutions for c1 and c2 will be :
(A)
(B)
(C)

(D)
Question No.38 (Question Id - 11)
In the previous question, which of the following statements holds true ?
(A)
There is no fixed point
(B)
(C)
The only fixed point is (0,0)
(D)
Question No.39 (Question Id - 41)
Pick the correct statement :
The underlying equation for Augmented Dickey-Fuller (ADF) test is :
(A)
(B)
(C)
(D)
Question No.40 (Question Id - 27)
In the Keynesian view :
(A)
The short-run and long-run Phillips curves are downward sloping.
(B)
The short-run Phillips curve is vertical but the long-run Phillips curve is downward sloping.
(C)
The short-run Phillips curve is downward sloping but the long-run Phillips curve is vertical.

(D)
Both the short-run and long-run Phillips curves are vertical.
Question No.41 (Question Id - 2)
Consider the optimization problem :
Max f (x, y, z) subject to 4x +2y +2z 12 and 2x+3y+z 12
Suppose x=1, y=2 and z=2 is a solution. Then at this solution,
(A)
Constraint 1 is non-binding while constraint 2 is binding
(B)
Both constraints 1 and 2 are binding
(C)
Constraint 1 is binding while constraint 2 is non-binding (Correct Answer)
(D)
Both constraints 1 and 2 are non-binding
Question No.42 (Question Id - 5)
The ethical principles of inequality measurement - anonymity, population, relative income, and transfers :
(A)
Are enough to compare any two income distributions in terms of relative inequality.
(B)
Are not enough to compare any two income distributions in terms of relative inequality.

(C)
Only anonymity and population principles are enough.
(D)
Relative income and transfers principles are enough .
Question No.43 (Question Id - 39)
A time series yt is an AR(2) process if :
A. The autocorrelation function of yt decays exponentially.
B. The partial autocorrelation function of yt becomes insignificant after two lags.

C. The autocorrelation function of yt becomes insignificant after two lags.
D. The partial autocorrelation function of yt decays exponentially.
E. None of the above.
Choose the correct answer from the options given below :
(A)
E only
(B)
B and C only
(C)
A and B only (Correct Answer)
(D)
A and D only
Question No.44 (Question Id - 46)
Suppose the output of a self-financed and risk-neutral farmer is stochastically related to the effort level x.
Output is Q with the probability p(x) =1 - e-ax and 0 otherwise. The utility cost to the farmer of providing the
effort is x. The farmer requires `L' amount of funds. The optimal choice of effort x* by the farmer will be :
(A)
(B)
x* = ln Q
(C)
x* = Qeax
(D)
None of the above
Question No.45 (Question Id - 36)
(A)
(B)
(C)
(D)
Question No.46 (Question Id - 40)
Consider a covariance stationary AR(2) process : Yt = C + 1 Yt-1 + 2Yt-2 + t, where is iid(0, 2); |1|< 1, |
2|< 1. Then, the covariance of Yt is :
(A)
(B)
(C)
(D)

Question No.47 (Question Id - 43)
Which of the following is/are used as an indicator in calculating the global Multidimensional Poverty Index
(MPI) ?
A. Maternal mortality
B. Nutrition
C. Electricity
D. School attendance
Choose the most appropriate answer from the options given below :
(A)
A, B and C only
(B)
A, C and D only
(C)
B, C and D only (Correct Answer)
(D)
All four indicators
Question No.48 (Question Id - 14)
Consider the Lucas imperfect information model assuming unit price elasticity of demand. Let VM and VZ
denote the variances of monetary and preference shocks respectively. Let - 1 denote the elasticity of
marginal disutility of labor supply. Then as the producer observes a change in the price of his own product,
(A)
His labor supply response increases as VM/VZ falls and falls (Correct Answer)
(B)
His labor supply response increases as VM/VZ rises and falls
(C)
His labor supply response increases as VM/VZ falls and rises
(D)
His labor supply response increases as VM/VZ rises and rises
Question No.49 (Question Id - 23)
According to supply-side economists, a permanent increase in the saving rate will :
(A)
(B)
Lead to a temporary increase in output per worker.
(C)
Lead to a decline in output per worker.
(D)
No change in output per worker.
Question No.50 (Question Id - 29)
(A)
Stable
(B)
Unstable
(C)