Introductory Macroeconomics – Old Question Paper 2012 | Semester: Spring

questionIntroductory Macroeconomics
Old Question Paper
Year: 2012 | Semester: Spring
Pokhara University


Exam 2012 Spring

1. a. Define Macroeconomics. Describe the importance of macroeconomics. [8]
b. Explain the circular flow of four sector economy. [7]

2. a. Write how you account the National Income called Gross National Product (GNP) through the expenditure method. [7]
b. Define investment. Distinguish between autonomous investment and induced investment. [8]

3. a. State and explain the Keynesian psychological law of consumption. [8]
b. How the two determinants of the effective demand are considered as the key factors to the process of determining the level of employment in the economy? Explain.

4. a. In a two sector model, suppose C=50+0.90 Y,I=Rs 100-5i, L=0.40Y-25i and M=Rs150. Find the value of equilibrium national income and new equilibrium national income as interest rate decreases by 2%. [8]
b. Consider the following four sector economy with the following behavioural equations. [7]
C=75+0.75 Yd
I = 120 million
G = 90 million
X = 50 million
M = 20+0.2 Y
T = 50 + 0.25 Y
i. Find the equilibrium level of income?
ii. How much additional government expenditure will be required to increase the equilibrium of income by 20 million?
5. a. What is inflation? Describe the demand pull inflation and cost push inflation. [8]
b. State and explain the prosperity and depression phase of trade cycle. [7]
6. a. Give a brief concept of discretionary fiscal policy. Explain the main objectives of fiscal policy. [8]
b. What do you know about the factor market? Explain how the equilibrium takes place in this market with the help IS-LM curves. [7]

7. Write short note on any two : [2×5=10]
a. Investment multiplier
b. MEC and MEI
c. Write about Determinants of demand for liquidity according to Keynes.

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