Introductory Macroeconomics – Old Question Paper 2008 | Semester: Fall

questionIntroductory Macroeconomics
Old Question Paper
Year: 2008 | Semester: Fall
Pokhara University


Exam 2008 Fall

1. a. Briefly explain the scope and importance of macroeconomics. [7]
b. What is national income? Explain the expenditure method of computing national income. [8]

2. a. State Say’s law of market. In what ground Keynes repudiate Say’s law of market? Explain briefly. [8]
b. What is effective demand? How is it determined? [7]

3. Consider a three sector Keynesian economy with following behavioural equations: [4+6+5]

C=50 +0.6 Yd; T=30, I=1000; G=500
Where symbols have their usual meaning; Find
a. equilibrium level of income
b. Derive expression for government expenditure multiplier for same model given above.
c. If tax function is taken instead T=30 +0.2Y, will it alter the equilibrium level of income? Show necessary calculations.

4. Using IS LM model, explain what happens to the equilibrium interest rate and income under the following circumstances. [3×5=15]
a. The Nepal Rastra Bank (NRB) increases money supply while Nepal Government holds the government expenditure and tax constant.
b. Nepal Government increases government expenditure and hold the tax constant while NRB keeps money supply constant.
c. Nepal Government increases government expenditure and NRB increases the money supply.

5. What is meant by inflation? Distinguish between demand pull and cost push inflation with the help of figure. Which type of inflation is more undesirable for the economy? [3+10+2]

6. What are the various objectives of fiscal policy in the developing courtiers like Nepal? Explain how government expenditure can be growth facilitating policy choice? [10+5]

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

a. Average propensity to consume
b. Marginal Efficiency of Capital (MEC)
c. Liquidity preference Theory of Interest
d. Circular flow of income and expenditure in two sector economy

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