# Introductory Macroeconomics – Old Question Paper 2014 | Semester: Fall

## Introductory Macroeconomics BBA | BBA-BI | BBA-TT | BCIS | BHCM Old Question Paper Year: 2014 | Semester: Fall Pokhara University

Exam 2014 Fall

1. a. Why is macroeconomics called a policy science? Explain the main issues that are focused in macroeconomics study. 
b. Show the circular flow of income and expenditure in an open economy. 

2. a. Define real GDP. How do you differentiate between GDP at factor cost and GDP at market price? 
b. Calculate national and personal income from the following information:

 Items Amount in Rs. Millions Household expenditure on consumption of goods 100 Investment expenditure 50 Government expenditure 60 Income from abroad 150 Depreciation 10% of GDP Indirect taxes 70 Subsidies 10 Payment to abroad 30 Import 10 Export 80

3. a. Explain the summary model of classical theory of output and employment with appropriate diagrams. 
b. Explain the effective demand theory of determination of employment. 

4. a. Define marginal propensity to consume. Illustrate the basic premises of the psychological law of consumption. 
OR
Explain the process of determining equilibrium rate of interest under Liquidity Preference Theory of Interest.

b. Illustrate and explain that what happens in general equilibrium under IS-LM framework: 
i. If government expenditure increases but demand for and supply of money remain constant
ii. If money supply increases but investment and saving remaining same.

5. Suppose a model is given as follows:
C=100 +0.75Yd;(where Yd = disposable income)
I= 250 million, G= 100 million and T= 100 million
Find
a. Equilibrium level of income and saving. 
b. Change in equilibrium income if G increases to 200 and I decreases to 150 million. 
c. Balance budget multiplier. 

6. a. Consider a two sector model with following equations. 
C=20 +0.5Y, I=200-2000i,
Mt =0.5Y, Msp = 105-1500i

Find
i. IS and LM functions
ii. Equilibrium income and interest
b. Define monetary policy. Explain the objectives of monetary policy in developing countries. 

7. Write short notes on any two: [2×5=10]
a. Marginal efficiency of capital
b. Philip’s curve
c. Phases of business cycle. ## Author: Smirti

This site uses Akismet to reduce spam. Learn how your comment data is processed.