Introductory Macroeconomics – Old Question Paper 2007 | Semester: Spring

questionIntroductory Macroeconomics
Old Question Paper
Year: 2007 | Semester: Spring
Pokhara University


Exam 2007 Spring

1. a. “Business decisions cannot be done in isolation without considering macroeconomic environment”. Discuss. [7]
b. Explain the circular flow of income and expenditure in three sector economy. What are the various leakages from and injections to this flow? [8]


2. a. Following (hypothetical) figures show expenditure on output (Rs. In million) by different sector during the year 2006. Compute GDP at Mark Price (MP), GNP at Factor cost and NI. [7]

Household expenditure on domestic goods and services 100 Government sector purchase of foreign goods 5
Household purchase of foreign goods and services 20 Foreigners’ purchase  of domestic goods and services 80
Business sector purchase of Domestic capital goods 40 Depreciation @10% of GDPMP
Business sector import of capital goods 10 Indirect taxes 70
Government sector purchase of domestic goods and services 60 Subsidies 0
Income from abroad 150 Payments abroad 30

b. State Say’s Law of Market. How is it going support the full employment of resources under classical macroeconomic regime? Explain. [8]


3. a. What is multiplier principle? Explain the leakages in multiplier principle. [8]
b. Define investment. Explain the determinants of investment. [7]


4. a. Explain Keynes’s Liquidity preference theory. Is it superior to other theories? [8]
b. Define IS curve and derive it. [7]


5. a. Explain the general theory of employment propounded by Keynes. [8]
b. What is inflation? Distinguish between GDP deflator and CPI (Consumer Price Index). Which of the two is a better measure of inflation? [7]


6. Define fiscal policy? Explain in brief the objectives of fiscal policies developing countries like Nepal. Do you think that fiscal policy is more powerful in facilitating growth than monetary policy particularly developing countries? [15]


7. Write short notes on: (Any Two): [5×2=10]

a. Macroeconomic Equilibrium
b. Phases of Business Cycle
c. Marginal propensity to consume

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