Economics 2022 Paper I 50 marks 150 words Compulsory Explain

Q5

Answer the following questions in about 150 words each: (a) Stating major assumptions in the Kaldor model of distribution, establish that share of profits in national income depends on the ratio of investment to total output. (10 marks) (b) Explain the quantitative methods of credit control adopted by the central bank. (10 marks) (c) Under Partial equilibrium analysis, discuss the consumption and revenue effects of tariffs. (10 marks) (d) Show that in Domar's growth model, in equilibrium, path of investment is exponential. (10 marks) (e) With appropriate examples, discuss the difference between the flow and the stock concept of renewable resources. Can the availability of one of these two resources be less for the consumption of future generations ? Justify your answer. (10 marks)

हिंदी में प्रश्न पढ़ें

निम्नलिखित प्रत्येक प्रश्न का उत्तर लगभग 150 शब्दों में दीजिए : (a) वितरण के काल्डर प्रारूप की प्रमुख मान्यताओं को स्पष्ट करते हुए सिद्ध कीजिए कि राष्ट्रीय आय में लाभ का हिस्सा कुल उत्पादन में निवेश के अनुपात पर निर्भर करता है । (10 अंक) (b) एक केन्द्रीय बैंक द्वारा साख नियंत्रण हेतु अपनाई गई परिमाणात्मक विधियों की व्याख्या कीजिए । (10 अंक) (c) आंशिक संतुलन विश्लेषण के अन्तर्गत प्रशुल्क के उपभोग एवं राजस्व प्रभावों की चर्चा कीजिए । (10 अंक) (d) डोमर के आर्थिक वृद्धि प्रारूप में साम्य की अवस्था में दर्शाइए कि विनियोग पथ चरघातांकी होता है । (10 अंक) (e) नवीकरणीय संसाधनों के सन्दर्भ में प्रवाह तथा स्टॉक अवधारणा के मध्य अन्तर की उचित उदाहरणों सहित चर्चा कीजिए । क्या इन दोनों संसाधनों में से एक की उपलब्धता भविष्य की पीढ़ियों के उपभोग के लिए कम हो सकती है ? अपने उत्तर के औचित्य को स्थापित कीजिए । (10 अंक)

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Directive word: Explain

This question asks you to explain. The directive word signals the depth of analysis expected, the structure of your answer, and the weight of evidence you must bring.

See our UPSC directive words guide for a full breakdown of how to respond to each command word.

How this answer will be evaluated

Approach

This multi-part question demands precise derivation and explanation across five distinct theoretical domains. Allocate approximately 30 words (20% time) per sub-part, opening with Kaldor's saving function assumptions for (a), then systematically working through RBI's CRR/SLR mechanisms for (b), tariff diagrammatic effects for (c), Domar's differential equation derivation for (d), and renewable resource intergenerational equity for (e). Prioritize mathematical proofs in (a) and (d) while ensuring policy-connected examples in (b), (c), and (e).

Key points expected

(a) Kaldor model: State assumptions (classical savings function, full employment, two-class economy); derive P/Y = I/s_p·Y showing profit share depends on investment-output ratio via algebraic manipulation
(b) Quantitative credit control: Explain CRR, SLR, open market operations, and bank rate with their transmission mechanisms; cite RBI's 2023-24 monetary policy stance
(c) Tariff effects: Draw partial equilibrium diagram showing consumption loss (deadweight loss triangle) and revenue gain (rectangle); distinguish protective vs. revenue tariffs with India's 2022 customs duty rationalization
(d) Domar growth: Derive dI/dt = s·δ·I from investment-capacity relationship; solve differential equation to show I(t) = I₀e^(sδt) proving exponential path
(e) Renewable resources: Contrast flow (solar radiation, wind) vs. stock (groundwater, soil fertility) with Indian examples; analyze groundwater depletion in Punjab/Haryana affecting future availability despite renewability

Evaluation rubric

Dimension	Weight	Max marks	Excellent	Average	Poor
Concept correctness	25%	12.5	Precisely states Kaldor's behavioral assumptions (s_w ≈ 0, s_p > s_w); correctly identifies CRR/SLR/OMO/bank rate as quantitative tools; accurately distinguishes consumption vs. revenue effects in tariff analysis; rigorously derives exponential solution from Domar's differential equation; clearly demarcates flow vs. stock renewable resources with correct examples	Mentions most assumptions but confuses Kaldor with Kalecki; lists credit control methods but blurs quantitative/qualitative distinction; describes tariff effects without clear separation; states Domar result without derivation; gives examples but muddles flow/stock categorization	Confuses Kaldor with classical distribution theory; lists qualitative methods (margin requirements, moral suasion) as quantitative; describes only protective effect of tariffs; states linear growth in Domar; fails to distinguish renewable resource categories or gives incorrect examples
Diagram / model	15%	7.5	Draws Kaldor's linear savings function diagram showing intersection determines profit share; sketches standard tariff partial equilibrium with consumption triangle (b+d) and revenue rectangle (c); illustrates Domar's capacity expansion path; uses appropriate renewable resource extraction curves for stock resources	Describes diagrams verbally without clear axes labels; draws tariff diagram but confuses consumer surplus loss with government revenue; mentions Domar's model without graphical representation; gives textual description without visual aid for resource concepts	Omits diagrams entirely or draws incorrect supply-demand relationships; mislabels areas in tariff analysis; no attempt at Domar's investment path visualization; completely ignores diagrammatic requirements where specified
Quantitative reasoning	25%	12.5	Rigorous algebraic derivation: from S = s_w·W + s_p·P and I = S, establishes P/Y = (I/Y)/s_p; solves Domar's dI/dt = sδI to obtain exponential form; calculates precise deadweight loss expressions for tariffs; quantifies sustainable extraction rates for renewable stocks	States final formulas without intermediate steps; mentions exponential growth without solving differential equation; describes tariff effects qualitatively; gives numerical examples without showing relationships	Incorrect algebraic manipulation in Kaldor derivation; confuses exponential with linear growth; arithmetic errors in calculating areas; no quantitative treatment of renewable resource availability over time
Indian / empirical examples	15%	7.5	Cites RBI's 2023-24 CRR at 4.5% and recent repo rate adjustments; references India's 2022 customs duty restructuring on electronics/gold; uses Punjab-Haryana groundwater depletion (CRISIL data: 70% blocks over-exploited) or solar/wind capacity expansion as concrete renewable examples; mentions NABARD's role in rural credit	Generic mention of RBI without specific rates; vague reference to 'Make in India' tariffs without specifics; general statement about water scarcity without regional data; mentions solar energy without capacity figures	No Indian examples; uses developed country central banks (Fed, ECB) for credit control; gives hypothetical or irrelevant examples; completely omits empirical grounding where question invites it
Policy implication	20%	10	For (a): discusses how investment-led growth increases inequality; for (b): analyzes RBI's inflation-growth trade-off in post-COVID context; for (c): evaluates Atmanirbhar Bharat's tariff rationalization; for (d): connects Domar's knife-edge to Harrod and sustainable planning; for (e): proposes PM-KUSUM or groundwater regulation for intergenerational equity	Brief mention of policy relevance without depth; states that tariffs protect industry without evaluating; notes that groundwater needs conservation without specific mechanism; generic statement about sustainable development	No policy implications drawn; treats all parts as purely theoretical exercises; fails to address intergenerational equity question in (e); ignores contemporary relevance of monetary and trade policy

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