APPSC Paper I · Assistant Statistical Officer Paper II · Topic 2
2 APPSC Paper I International Economics questions with answers
27 questions from APPSC ASO 2025 Paper II question paper with answers and APPSC ASO Paper II Mock 1 with answers. Try each one, then tap Show answer.
Previous-paper questions are as in the original paper. Medha AI wrote the answers and explanations.
2.1Trade theory: free trade & protectionNotes
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Which of the following is most likely not the benefit accrued due to Foreign trade ?
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Answer D. Increase in the government expenditure on infrastructure
Specialisation, technology transfer and wider markets are direct gains from trade; higher government spending on infrastructure is a fiscal decision, not a benefit that trade itself brings.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q4, final key
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Given below are two statements, one is labelled as Assertion (A) and the other is labelled as Reason (R):
Assertion (A): Free trade zones promote trade without any restriction between countries agreed to it.
Reason (R): The countries agree to free trade because both exporting and importing mutually gain from trade.
In the context of the above two statements, which one of the following is correct?
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Answer A. Both (A) and (R) are true and (R) is the correct explanation of (A)
Members of a free trade area remove barriers among themselves, and they do so because each side gains from trade, so R explains A.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q6, final key
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In which of the following situations does Aid work better than Trade?
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Answer B. For relief in case of emergency
In emergencies such as disasters or famine, quick aid brings relief that trade cannot; specialisation, productivity and market access are gains from trade.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q9, final key
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Which of the following is NOT an argument for moving to protectionism from free trade?
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Answer D. To control the inflation
Infant industry, protecting domestic labour and correcting a BoP deficit are standard arguments for protection; tariffs raise import prices, so protection tends to raise, not control, inflation.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q32, final key
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Under labour theory of value, the value of a good is determined by:
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Answer A. Amount of labour going into production of 1 unit of a good, ignoring the role of capital
In the classical labour theory of value (used in Ricardo's comparative advantage), a good's value depends only on the labour needed to make it.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q44, final key
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India imports 50 units of a machine, each valued at ₹3,000. The compound duty is ₹200 per unit plus 10% ad valorem. What is the total duty payable?
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Answer D. ₹25,000
Specific part = 50 × ₹200 = ₹10,000. Ad valorem part = 10% of (50 × ₹3,000 = ₹1,50,000) = ₹15,000. Compound duty = ₹10,000 + ₹15,000 = ₹25,000.
Source: Standard method; answer and every option computed and checked in Python
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If the import volume index is 130 and the export volume index is 104 (base = 100), the gross barter terms of trade (Taussig) are
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Answer D. 125
Gross barter terms of trade = (Qm / Qx) × 100 = (130 / 104) × 100 = 125.
Source: Standard method; answer and every option computed and checked in Python
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Which one of the following has NOT been offered as an explanation of the Leontief paradox?
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Answer C. US tariffs mainly protected the capital-intensive industries of the US
The usual explanations are human capital (Kravis, Kenen), natural resources (Vanek), factor-intensity reversal and US trade barriers. The trade-barrier argument is that US tariffs protected labour-intensive industries, which reduced labour-intensive imports; the reverse statement is not an explanation.
Source: Salvatore, International Economics, Ch. 2–5 (trade theory); B.A. Economics, International Economics
2.1Sources of economic growthNotes
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Capital does NOT boost economic growth in which of the following ways?
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Answer D. It is required for changing taste and preferences of the consumer
Capital raises output by making labour more productive and by building transport, communication, industry and agriculture; it has no role in changing consumer tastes.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q10, final key
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Match the List – I with List – II and select the correct answer from the options given below:
List-I List-II A. Retained earnings i. Investment in skill development and education B. Human capital creation ii. Profits reinvested by the company instead of distributing as dividend C. Equity financing iii. Investment in infrastructure and building D. Physical capital iv. Raising funds by selling shares Show answerHide answer
Answer D. A-ii, B-i, C-iv, D-iii
Retained earnings are reinvested profits, human capital comes from education and skills, equity financing raises money by selling shares, and physical capital is infrastructure and buildings.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q19, final key
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Consider the following statements:
Statement A: The increasing size of market enables the division of labor which in return lead to increase in the productivity.
Statement B: Productivity of labor increases if more output can be produced using the same units of labor
Which of the statements given above is/are correct?
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Answer C. Both Statements A and B are correct
As Adam Smith noted, a wider market allows greater division of labour and higher productivity; labour productivity is output per unit of labour, so more output from the same labour means higher productivity.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q25, final key
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If human capital is created, then what does it mean?
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Answer A. That with same human capital more quantity of product can be produced
Human capital formation (education, skills, health) raises the productivity of workers, so the same human resources can produce more output.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q29, final key
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Match List I (economist) with List II (contribution):
List I:
A. Ragnar Nurkse
B. W. Arthur Lewis
C. Robert Solow
D. T.W. Schultz
List II:
1. Human capital
2. Vicious circle of poverty
3. Development with unlimited supplies of labour
4. Neoclassical growth model
Select the correct answer using the code given below.
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Answer D. A-2, B-3, C-4, D-1
Nurkse (1953) explained low capital formation by the vicious circle of poverty; Lewis (1954) the dual economy with unlimited labour; Solow (1956) the neoclassical model; Schultz (1961) human capital.
Source: M.L. Jhingan, The Economics of Development and Planning
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Which of the following pairs of concept and economist is NOT correctly matched?
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Answer C. Low-level equilibrium trap : Ragnar Nurkse
Nelson's low-level equilibrium trap links population growth and per capita income; Nurkse is associated with the vicious circle of poverty and balanced growth.
Source: M.L. Jhingan, The Economics of Development and Planning; R.R. Nelson (1956); K.J. Arrow (1962); P. Romer (1990)
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A country invests 30% of its GDP and its GDP grows at 7.5% a year. What is its incremental capital-output ratio (ICOR)?
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Answer D. 4
ICOR = (I / Y) / (ΔY / Y) = 30% / 7.5% = 4: four units of investment are needed per unit of extra output.
Source: Standard method; answer and every option computed and checked in Python
2.1Bretton Woods, IMF, World Bank & WTONotes
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Which of the following is NOT a key feature of a good International Monetary system?
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Answer D. Equilibrium distribution of income within each nation of the world
A good international monetary system promotes trade and investment flows and an equitable share of gains among nations; income distribution inside each country is a domestic matter.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q11, final key
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Which of the following is the objective of International Development Association, one of the associations of World Bank?
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Answer A. To assist poorer countries of the world in removal of poverty
IDA, the World Bank's soft-loan window set up in 1960, gives concessional loans and grants to the poorest countries to reduce poverty.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q30, final key
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While the immediate cause of the collapse of Bretton woods system is BOP deficits of the United States, the fundamental cause lies in the interrelated problems between which of the following features?
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Answer A. Liquidity, adjustment and confidence
The Bretton Woods system broke down because of the linked problems of liquidity, adjustment and confidence (the Triffin dilemma): reserve growth depended on US deficits, which eroded confidence in the dollar.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q45, final key
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Which of the following pairs of report and publishing institution is NOT correctly matched?
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Answer C. Global Economic Prospects : IMF
The World Economic Outlook and the Global Financial Stability Report are IMF flagships; the World Development Report and Global Economic Prospects are World Bank publications.
Source: IMF and World Bank publication pages (imf.org, worldbank.org)
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Consider the following statements about the New Development Bank (NDB):
1. The agreement to set up the NDB was signed at the BRICS summit held at Fortaleza, Brazil, in 2014.
2. The five founding members hold equal shares in the NDB's initial subscribed capital.
Which of the statements given above is/are correct?
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Answer C. Both 1 and 2
The NDB agreement was signed at the 6th BRICS summit in Fortaleza (July 2014); the bank is headquartered in Shanghai and its first president was India's K.V. Kamath. Brazil, Russia, India, China and South Africa each subscribed an equal share (US$10 billion each of the initial US$50 billion).
Source: New Development Bank, 'About us' (ndb.int)
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Consider the following statements about the Bretton Woods system:
1. Member currencies had par values against the US dollar and were to be kept within a band of ±1% around them.
2. The Jamaica Accords of 1976 restored fixed par values after the breakdown of 1971.
Which of the statements given above is/are correct?
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Answer A. 1 only
Bretton Woods was an adjustable-peg system with ±1% bands around dollar parities. The Jamaica Accords (1976) did the opposite of restoring parities: they legalised floating exchange rates and demonetised gold (Second Amendment, 1978).
Source: Salvatore, International Economics; M.L. Jhingan, International Economics
2.2Balance of payments & exchange rates
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Match the following economic concepts with their correct descriptions:
(i) Economic Terms:
1. Balance of Payments (BoP)
2. Balance of Trade (BOT)
3. Autonomous Transactions
(ii) Descriptions:
A. Difference between the value of exports and value of imports of goods.
B. Summaries the economic transactions of an economy with the rest of the World
C. Occur due to economic reasons independent of the state of the Balance of Payments
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Answer C. 1 → B, 2 → A, 3 → C
BoP records all transactions with the rest of the world, BoT is exports minus imports of goods, and autonomous transactions happen for their own economic motives regardless of the BoP position.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q16, final key
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Which of the following is recorded on the credit side of the balance of payment?
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Answer B. Financial inflows
Any transaction that brings foreign exchange into the country, such as capital or financial inflows, is a credit entry; imports, outflows and transfers paid abroad are debits.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q31, final key
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Under the flexible exchange rate system, in case of deficit, for balance of payment adjustment, which of the following is the appropriate policy?
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Answer A. Depreciation
Under floating rates a deficit lowers the currency's market value (depreciation), making exports cheaper and imports dearer; devaluation is the deliberate cut under a fixed rate system.
Source: APPSC Assistant Statistical Officer 2025, Paper II (Notification 12/2024), Q46, final key
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Consider the following statements:
I. Devaluation is a reduction in the value of a currency by government action under a fixed exchange rate system.
II. Depreciation is a fall in the value of a currency caused by market forces under a flexible exchange rate system.
III. Revaluation makes the domestic currency cheaper for foreigners.
Which of the statements given above is/are correct?
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Answer C. I and II only
Statements I and II are correct. Revaluation makes the domestic currency costlier, not cheaper.
Source: NCERT Class 12 Introductory Macroeconomics ch.6 (Open Economy)
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Assertion (A): The SDR is a currency used by member countries to pay for goods in international markets.
Reason (R): The SDR is an international reserve asset created by the IMF to supplement member countries' official reserves.
Choose the correct answer using the codes below.
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Answer D. A is false, but R is true
A is false and R is true. The SDR is not a currency for buying goods; it is a reserve asset (a book-keeping entry) that can be exchanged among official holders for usable currencies.
Source: PW Indian Economy, BoP & Foreign Exchange chapter
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Consider the following statements about instruments of foreign capital:
I. Foreign Currency Convertible Bonds are rupee-denominated bonds issued abroad.
II. External commercial borrowings are loans raised by Indian entities from non-resident lenders.
III. ECBs are regulated by the Reserve Bank of India.
Which of the statements given above is/are INCORRECT?
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Answer D. I only
Statement I is incorrect: FCCBs are issued in a foreign currency and can be converted into equity; rupee-denominated bonds issued abroad are masala bonds. Statements II and III are correct.
Source: PW Indian Economy, BoP & Foreign Exchange chapter
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