MCQ
In the two-sector model, what links agriculture and non-agriculture?
A. Wage rates
B. Terms of trade
C. Government subsidies
D. Investment levels
B. Terms of trade
Theme: Dual-Sector Growth
Balanced growth means both agriculture and non-agriculture grow together.
Inter-sectoral terms of trade refer to price ratios between industrial and agricultural goods.
India’s agricultural sector has grown faster than its service sector in recent decades.
India’s agricultural sector has grown faster than its service sector in recent decades.
This type of growth happens when agriculture and non-agriculture expand together without major price distortions.
Options:
A. Unbalanced growth
B. Balanced growth
C. Stagnant growth
D. Structural growth
B. Balanced growth
Agriculture prices rise sharply due to industrial demand.
Question: What is the likely immediate effect?
A. Balanced growth restores itself
B. Industrial growth slows
C. Service sector overtakes industry
D. Investment crashes
B. Industrial growth slows
Why does a demand-constrained economy not grow smoothly?
A. Output is limited by total spending
B. Labour supply is unlimited
C. Technology grows exponentially
D. Government investment is always fixed
A. Output is limited by total spending
Theme: Demand-Constrained Economy
High debt levels can lead to slower investment.
Falling debt immediately reduces output and demand.
Business cycles occur because credit and investment fluctuate over time.
Falling debt immediately reduces output and demand.
When investment increases output through spending feedbacks, but growth still moves in cycles, the economy is said to face this constraint.
Options:
A. Supply-constrained growth
B. Demand-constrained growth
C. Capital-constrained growth
D. Credit-driven growth
B. Demand-constrained growth
Investment increases in a demand-constrained economy.
Question: What happens next in the short run?
A. Output rises via multiplier effect
B. Prices immediately fall
C. Debt disappears instantly
D. Technology stagnates
A. Output rises via multiplier effect
In post-liberalisation India, growth driven by rich consumers can have which effect?
A. Inequality may rise
B. All sectors hire more workers
C. Agricultural sector overtakes services
D. Technological progress slows automatically
A. Inequality may rise
Theme: Inequality & Rich-Led Growth
Inequality reduction always improves productivity in the long run.
Growth after liberalisation was fuelled by rich consumers’ spending.
Luxury goods industries often use labour-displacing technology.
Inequality reduction always improves productivity in the long run.
This form of growth in post-liberalisation India was led by luxury consumption and advanced technology, benefiting mainly the rich.
Options:
A. Export-led growth
B. Demand-led growth
C. Rich-led growth
D. Tech-intensive growth
C. Rich-led growth
Luxury goods industries expand using labour-displacing technology.
Question: Which of the following is a consequence?
A. Job creation increases automatically
B. Productivity rises but employment may not
C. Agricultural prices fall
D. Service sector shrinks
B. Productivity rises but employment may not
In auctions with asymmetric synergy, what happens if bidders value combinations differently?
A. Expected revenue depends on the degree of asymmetry
B. Revenue is fixed regardless of bids
C. All bidders always pay the same price
D. Synergy has no effect on strategy
A. Expected revenue depends on the degree of asymmetry
Theme: Auctions & Behavioral Economics
In auctions with asymmetric synergy, bidders may value combinations of items differently.
Positive synergy means the combined value of items is less than the sum of individual items.
Cognitive effort influences how players behave in experiments with strategic decisions.
Positive synergy means the combined value of items is less than the sum of individual items.
This concept describes how the wage gap widens because skilled workers benefit more from technology and trade.
Options:
A. Skill premium hypothesis
B. Wage rigidity theory
C. Human capital paradox
D. Productivity trap
A. Skill premium hypothesis
Bidders in an auction value item combinations differently (asymmetric synergy).
Question: What is the effect on expected revenue?
A. Revenue is independent of bidders’ preferences
B. Revenue depends on the degree of asymmetry
C. Revenue always increases
D. Revenue decreases automatically
B. Revenue depends on the degree of asymmetry