Econ.Arthik

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Econ.Arthik

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Econ.Arthik

15 & 16 finance Commission

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Econ.Arthik

Q.3 In the light of Revealed Preference Theory, which of the following axioms are considered? UGC NET [2004]

(a) Rationality
(b) Consistency
(c) Transitivity
(d) Non-satiation

Options:

(A) (a) and (b)

(B) All four

(C) (a) and (c)

(D) (a), (b), and (c)


Explanation

Paul Samuelson's Revealed Preference Theory is based on:

1. Rationality – Consumers choose the most preferred bundle from available alternatives.


2. Consistency – If bundle A is preferred to B once, the consumer should not later prefer B to A under the same conditions.


3. Transitivity – If A is preferred to B and B to C, then A should be preferred to C.



Non-satiation ("more is preferred to less") is not a basic axiom of the original Revealed Preference Theory.

✅ Correct Answer: (D) (a), (b), and (c) are correct

Q.4 Match the Following UGC NET [2004]

Group I

(a) Kinked Demand Curve
(b) Full Cost Pricing
(c) Sales Maximisation
(d) Limit Pricing Model

Group II

(i) Baumol
(ii) Bain
(iii) Sweezy
(iv) Hall & Hitch
(v) Modigliani

Matching

(a) Kinked Demand Curve → Sweezy (iii)

Kinked demand curve theory was developed by Paul Sweezy.


(b) Full Cost Pricing → Hall & Hitch (iv)

Full-cost (mark-up) pricing theory was proposed by Hall & Hitch.


(c) Sales Maximisation → Baumol (i)

William Baumol proposed the Sales Revenue Maximisation model.


(d) Limit Pricing Model → Bain (ii)

Joe S. Bain is associated with the Limit Pricing model.


Therefore:

Group I Group II

(a) Kinked Demand Curve (iii) Sweezy
(b) Full Cost Pricing (iv) Hall & Hitch
(c) Sales Maximisation (i) Baumol
(d) Limit Pricing Model (ii) Bain


✅ Correct Answer: (C)

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Econ.Arthik

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Econ.Arthik

Q1. The laws of returns to scale assume: UGC NET [2004]

(A) Technique of production is unchanged
(B) All units of factors are homogeneous
(C) Returns are measured in physical terms
(D) All of the above

✅ Answer: (D) All of the above

Explanation:
Returns to scale analyze the effect of proportionately increasing all inputs. The assumptions are:

Production technique remains unchanged.

Factor units are homogeneous.

Output and inputs are measured in physical terms.


Therefore, all three statements are correct.


Q2. Payment of interest as a factor reward is explained by: UGC NET [2004]

(A) Productivity Theory
(B) Abstinence Theory
(C) Time Preference Theory
(D) All of the above

✅ Answer: (D) All of the above

Explanation:
Different economists have explained interest through different theories:

Productivity Theory: Interest arises from the productivity of capital.

Abstinence Theory (Senior): Interest is a reward for saving/abstinence from present consumption.

Time Preference Theory (Fisher): Interest arises because people prefer present consumption over future consumption.


Hence, all of the above theories explain interest, so the correct answer is (D).

3 weeks ago | [YT] | 1

Econ.Arthik

Here is a concise breakdown of the key points from the news article regarding the Reserve Bank of India's (RBI) latest directive:

The Core Decision
The Action: The RBI has temporarily withdrawn the interest rate ceiling on fresh and renewed Non-Resident External (NRE) deposits (with tenors of 3 years and above) and Foreign Currency Non-Resident [FCNR(B)] deposits (with tenors of 3 to 5 years).

Timeline: The relaxation came into effect on June 17, 2026, and will remain in place until September 30, 2026.

Primary Objectives
Capital Inflows: To attract more foreign capital into Indian banks.

Currency Stability: To stabilize the Indian Rupee (INR) by boosting foreign exchange reserves.

Lowering Borrowing Costs: By combining this with a concessional foreign exchange swap facility (announced June 5), the RBI is lowering the hedging and funding costs for banks raising funds abroad.

Key Rules & Clarifications
Exclusion: Any funds transferred from an NRO (Non-Resident Ordinary) account to an NRE account will not qualify for this interest rate exemption.

NRE Account Mechanics: This account allows NRI customers to deposit foreign currency, which is maintained in Indian rupees. Both the principal and interest remain freely repatriable (can be transferred abroad at any time).

Market Impact & Expectations
Higher Rates: Banks have already begun raising interest rates on FCNR(B) deposits by 2% to 4%, with many offering rates around 7%.

Inflow Projections: Goldman Sachs estimates that this scheme will attract $30 billion to $50 billion in capital inflows during CY26, mostly materializing in Q3 (July–September).

Current Baseline: Prior to this, NRE deposits stood at $7.94 billion outstanding for FY26, while FCNR(B) deposits stood at a relatively low $946 million.

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Econ.Arthik

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Laffer curve

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