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GATE Economics

The Graduate Aptitude Test in Engineering (GATE) is an examination that primarily tests the comprehensive
understanding of economics for admission into the Masters Program and Recruitment by some Public Sector
Companies

Paper Code for Economics: XH-C 1

Pattern of Examination:

Particulars Details

Examination Mode Computer Based Test (CBT)

Duration 3 Hours

Sections General Aptitude (GA) + Candidate’s Selected Subject

Type of Questions (a) Multiple Choice Questions (MCQ) (b) Multiple Select
Questions (MSQ) and/or Numerical Answer Type (NAT)
Questions

Questions for testing these abilities Recall, Comprehension, Application, Analysis & Synthesis

Number of Questions 10 (GA) + 55 (subject) = 65 Questions

Distribution of Marks in paper XH (Humanities and General Aptitude: 15 Marks + Subject Questions: 85 Marks =
Social Sciences) Total: 100 Marks

Marking Scheme Questions carry 1 mark and 2 marks

Negative Marking For a wrong answer chosen in a MCQ, there will be negative
marking.
For 1-mark MCQ, 1/3 mark will be deducted for a wrong
answer.
For 2-mark MCQ, 2/3 mark will be deducted for a wrong
answer.
NO negative marking for MSQ & NAT.

Syllabus:
XH – B1: Reasoning and Comprehension (Compulsory for all XH Candidates)

This part is to test the candidate’s ability to comprehend and interpret written information – skills that are critical to
research in the Humanities and Social Sciences. The section will not directly test language competence in terms of
grammar, vocabulary etc. The focus is instead on critical reasoning (similar to what is often found in exams like LSAT,
GRE, GMAT etc.) and analysis of the text and its stylistic and rhetorical structure. Questions of this section XH-B1 will
test the following skills:

Reading Comprehension – ability to understand complex language material in short paragraphs and answer questions
regarding them.
Expression – questions on stylistic and rhetorical aspects of a short passage including corrections or modifications of
particular sentences.
Analytical reasoning – ability to understand relationships in statements or short passages and being able to draw
reasonable conclusions/inferences from them.
Logical reasoning – Thinking critically to evaluate or to predict an argument, identify the main and supporting arguments,
predict outcomes etc.

XH – C1: Economics

C1.1 Microeconomics: Theory of Consumer Behaviour: Cardinal Approach and Ordinal Approach; Consumer
Preferences; Nature of the utility function; Marshallian and Hicksian demand functions; Duality Theorem. Slutsky
equation and Comparative Statics. Homogeneous and Homothetic Utility Functions; Euler’s Theorem. The Theory of
Revealed Preference: Weak Axiom of Revealed Preference and Strong Axiom of Revealed Preference, Theory of
Production and Costs: Short-run and Long-run Analysis, Existence, Uniqueness and Stability of Market Equilibrium:
Walrasian and Marshallian Stability Analysis. The Cobweb Model, Decision making under uncertainty and risk.
Asymmetric Information: Adverse Selection and Moral Hazard. Theory of Agency costs. The Theory of Search, Non-
Cooperative games: Constant sum game, Mixed Strategy & Pure Strategy, Bayesian Nash Equilibrium, SPNE, Perfect
Bayesian Equilibria., Theory of Firm: Market Structures — Competitive and Non-competitive equilibria and their
efficiency properties. Structure-Conduct-Performance Paradigm, Factor Pricing: Marginal productivity Theory of
Distribution in Perfectly Competitive markets; Theory of Employment in Imperfectly Competitive Markets —
Monopolistic Exploitation, General Equilibrium Analysis. Welfare Economics: Fundamental Theorems, Social Welfare
Function. Efficiency Criteria: Pareto-Optimality.

C1.2 Macroeconomics: National Income Accounting: Closed Economy Concepts and Measurement and Open Economy
Issues, Determination of output and employment: Classical & Keynesian Framework, Theories of Consumption:
Absolute Income Hypothesis, Relative Income Hypothesis, Life Cycle Hypothesis, Permanent Income Hypothesis and
Robert Hall’s Random Walk Model; Investment Function Specifications – Dale Jorgenson’s Neoclassical Theory of
Capital Accumulation and Tobin’s, Keynesian Stabilization Policies, (Autonomous) Multipliers and Investment
Accelerator, Demand and Supply of Money, Components of Money Supply, Liquidity Preference and Liquidity Trap,
Money Multiplier, Interest Rate determination, Central Banking, Objectives, Instruments (Direct and Indirect) of
Monetary Policy, Prudential Regulation, Quantitative Easing (Unconventional Monetary Policy), Commercial Banking,
Non-Banking Financial Institutions, Capital Market and its Regulation, Theories of Inflation and Expectations
Augmented Phillips Curve, Real Business Cycles, Adaptive Expectations Hypothesis, Rational Expectation Hypothesis
and its critique. Closed Economy IS – LM Model and Mundell Fleming Model: Monetary and Fiscal Policy Efficacy. The
Impossible Trinity.

C1.3 Statistics, Econometrics and Mathematical Economics: Probability Theory: Concepts of probability, Probability
Distributions [Discrete and Continuous], Central Limit Theorem, Index Numbers and Construction of Price Indices,
Sampling Methods & Sampling Distribution, Statistical Inferences, Hypothesis Testing, Linear Regression Models and
the Gauss Markov Theorem, Heteroscedasticity, Multicollinearity and Autocorrelation, Spurious regressions and Unit
roots, Simultaneous Equation Models – recursive and non-recursive. Identification Problem, Differential Calculus and
its Applications, Linear Algebra – Matrices, Applications of Cramer’s Rule, Static Optimization Problems and
Applications, Input-Output Model, Linear Programming, Difference equations and Differential equations with
applications

C1.4 International Economics: Theories of International Trade, International Trade under Imperfect Competition, Gains
from Trade, Terms of Trade, Trade Multiplier, Tariff and Non-Tariff barriers to trade; Dumping and Anti-Dumping
Policies, GATT, WTO and Regional Trade Blocks; Trade Policy Issues, Balance of Payments: Composition, Equilibrium
and Disequilibrium and Adjustment Mechanisms, Foreign Exchange Market and Arbitrage, Exchange rate
determination, IMF & World Bank.

C1.5 Public Economics: Market Failure and Remedial Measures: Asymmetric Information, Public Goods, Externality,
Regulation of Market – Collusion and Consumers’ Welfare, Public Revenue: Tax & Non-Tax Revenue, Direct & Indirect
Taxes, Progressive and non-Progressive Taxation, Incidence and Effects of Taxation, Public expenditure, Public Debt
and its management, Public Budget and Budget Multiplier, Tax Incidence, Fiscal Policy and its implications,
Environment as a Public Good, Market Failure and Coase Theorem, Cost-Benefit Analysis.

C1.6 Development Economics: Theories of Economic Development: Adam Smith, David Ricardo, Karl Marx, J.
Schumpeter, W. Rostow, Balanced & Unbalanced Growth, Big Push Approach, Indicators of Economic Development:
HDI, SDGs, MDGs, Poverty and Inequalities – Concepts and Measurement Issues, Social Sector Development: Health,
Education, Gender, Fertility, Morbidity, Mortality, Migration, Child Labor, Age Structure, Demographic Dividend, Models
of Economic Growth: Harrod-Domar, Solow, Ramsey, Technical progress – Disembodied & Embodied, Endogenous
Growth Models.

C1.7 Indian Economy: Economic Growth in India: Pattern and Structure, Agriculture, Industry & Services Sector: Pattern
& Structure of Growth, Major Challenges, Policy Responses, Rural & Urban Development – Issues, Challenges & Policy
Responses, Flow of Foreign Capital, Trade Policies, Infrastructure Development: Physical and Social; Public-Private
Partnerships, Reforms in Land, Labour and Capital Markets, Poverty, Inequality & Unemployment, Functioning of
Monetary Policy in India, Fiscal Policy in the Indian context: Structure of Receipts and Expenditure, Tax reforms-Goods
and Services Tax, Issues of Growth and Equity, Fiscal Federalism, Centre-State Financial Relations and Finance
Commissions of India; Sustainability of Deficits and Debt, The Fiscal Responsibility and Budget Management Act
2003, Demonetization and aftermath. India’s balance of payments, Composition of India’s Trade, Competitiveness of
India’s exports, India’s exchange rate policy.

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