Introductory Macroeconomics | Old Question Paper Year: 2012 | Semester: Fall
Exam 2012 Fall
1. a. Define macroeconomics and explain the major issues of macroeconomics. 
b. Describe the three-sector economy in terms of circular flows of income and expenditure. 
2. a. Distinguish between the factor income method and the outlay method of measuring national income. 
b. Mention the difficulties in the measurement of national income. 
c. Find out the value of GNP deflator in nominal and real GNP are given as 117.43 million and 111.37 million respectively.
3. a. Explain the Classical Theory of employment and output. 
What is effective demand? On what ground Keynes said there is high unemployment in the economy? Explain.
b. What is the consumption function? Explain the Keynesian psychological law of consumption. 
4. a. Suppose the behavioural equations for an economy are given as follows:
C=100+ 0.75 Yd
where, symbols have their usual meanings:
i. Find the equilibrium level of national income.
ii. Determine government expenditure multiplier and obtain ∆Y if ∆G=50.
b. Explain MEC with suitable example.
5. a. Give the concept of money market and interpret the liquidity preference theory of interest with the help of the diagram. 
b. (i)What is inflationary Gap? Illustrate (ii) Differentiate between CPI and PPI with example. 
6. a. Suppose the product market model is given as 
I=110-0.5i and the money market model is found as Ms=450 , Md=0.5Y-4i,where symbols have their usual meaning.
Determine the level of income(y) and interest rate (i) at the point of general equilibrium.
b. What is demand pull inflation? What factors contribute demand pull inflation? Explain. 
Explain the objectives and instruments of fiscal policy with reference to Nepal. 
7. Write short notes on any two: [2×5=10]
a. Phases of business cycles
b. Derivation of AD curve
c. Macroeconomic equilibrium