Introductory Macroeconomics – Old Question Paper 2013 | Semester: Spring

7Introductory Macroeconomics
Old Question Paper
Year: 2013 | Semester: Spring
Pokhara University


Exam 2013 Spring

1. a. Define macroeconomics. Explain the basic issues of Macroeconomics which are more concerned with macroeconomics phenomena. [7]
b. How to define withdrawals and injections in an economy? Explain the circular flow of income and expenditure in four sectors economy. [8]

2. a. Summarize the method of estimating national income? Explain the various difficulties of measuring national income in developing countries like Nepal. [8]
b. Explain and illustrate graphically the classical theory of employment and output determination. [7]

3. a. 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. [8]
b. What do you mean by Keynes’s psychological law of consumption? Explain the measures to raise the propensity to consume. [7]

4. a. Define autonomous and induced investment. Explain marginal efficiency of capital. [8]
b. An economy is characterized by the following equations:
C=60+0.9 Yd, I=10, G=0,T=0, X=20 ,M=10+0.05Y where symbols have their usual meaning. Find the equilibrium level of income. Calculate the trade balance and interpret your result. [7]

5. a. What is the effect of export multiplier in the equilibrium level of income of four sector economy? [8]
b. Define Keynes’s liquidity preference theory of interest. How does it been criticized? Explain briefly. [7]

6. a. Using IS- LM model, explain what happens to the equilibrium interest rate and income under the following circumstances [8]
i. The central bank increases money supply.
ii. The government increases taxes.

b. Suppose structural model for the product market is given as [7]
C=200+0.70 200(Y-T) ;I=200- 250i ;G=200 and T=0.25
Similarly, The money market model is given as: Mt=0.6 Y; Msp=200-3500i and Ms=200.
Where, the symbols have their usual meaning. Find, the equilibrium value of income and rate of interest.

7. Write short notes on any TWO: [2X5=10]
a. Demand-pull inflation
b. Four phases of business cycle
c. Tools of fiscal policy

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