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Old Question Paper
Year: 2013 | Semester: Spring
Exam 2013 Spring
1. a. Define macroeconomics. Explain the basic issues of Macroeconomics which are more concerned with macroeconomics phenomena. 
b. How to define withdrawals and injections in an economy? Explain the circular flow of income and expenditure in four sectors economy. 
2. a. Summarize the method of estimating national income? Explain the various difficulties of measuring national income in developing countries like Nepal. 
b. Explain and illustrate graphically the classical theory of employment and output determination. 
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. 
b. What do you mean by Keynes’s psychological law of consumption? Explain the measures to raise the propensity to consume. 
4. a. Define autonomous and induced investment. Explain marginal efficiency of capital. 
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. 
5. a. What is the effect of export multiplier in the equilibrium level of income of four sector economy? 
b. Define Keynes’s liquidity preference theory of interest. How does it been criticized? Explain briefly. 
6. a. Using IS- LM model, explain what happens to the equilibrium interest rate and income under the following circumstances 
i. The central bank increases money supply.
ii. The government increases taxes.
b. Suppose structural model for the product market is given as 
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