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Introductory Macroeconomics – Old Question Paper 2008 | Semester: Spring

Introductory Macroeconomics9
Old Question Paper
Year: 2008 | Semester: Spring
Pokhara University


Exam 2008 Spring

1. a. Give the concept of macroeconomics. Discuss its scope and importance. [8]
b. How income and expenditure flow in a three sector closed economy? Discuss [7]

2. a. What is national income? How gross national product (GNP) is counted by expenditure method? [7]
b. Do you agree with Say’s law? Explain it in the context of classical model of output and employment. [8]

3. a. How is effective demand determined according to Keynes? [7]
b. Highlight the role of APC and MPC in Keynes’ consumption function. [8]

4. a. In the Keynesian cross (closed economy), assume that the consumption function is given by C=100+0.8(Y-T).If investment expenditure is 100, government expenditure is 150 and tax is 100,
what is the equilibrium level of income? [8]
b. Define aggregate demand price and aggregate supply price. Is it possible to raise the employment to the full employment level in the Keynesian theory? Explain. [7]

5. Using LS-LM model, explain what happens to the interest rate and income under the following circumstances.
a. The central bank increases Cash Reserve Ratio (CRR). [5]
b. The government increases income tax. [5]
c. Both CRR and income tax are increased simultaneously. [5]

6. a. State the factors behind the demand-pull inflation. What policy instruments are used to overcome inflation? [10]
b. Discuss the different phases of business cycle. [5]

7. Write short notes on (Any Two)
a. Marginal efficiency of investment
b. Paradox of thrift
c. Macroeconomic Equilibrium


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