Introductory Macroeconomics – Old Question Paper 2014 | Semester: Spring

questionIntroductory Macroeconomics
Old Question Paper
Year: 2014 | Semester: Spring
Pokhara University


Exam 2014 Spring

1. a. “The various issues of macroeconomics are always concerned with economic expansion and contraction.” Explain. [7]
b. Draw the circular flow of income and expenditure in four sector economy. [8]

2. a. What is disposable income? How the national income be measured by income method? [7]
b. The table presents the price of a unit of aggregate output for year 2013 and 2014. Calculate Nominal GDP and Real GDP for year 2014. [8]

Items Output 2013

(Metric Tonnes)

Price 2013


Output 2013

(Metric Tonnes

Price 2014


Rice 2000 40 4000 50
Wheat 5000 25 6000 30

3. a. Explain briefly the classical theory of income and employment. [7]
b. Explain the various determinants of consumption. Suggest to raise marginal propensity to consume. [8]
4. a. Using IS-LM model explain the equilibrium interest rate and income under the following circumstances.
i. The Central Bank decreases money supply. [3]
ii. The Government increases taxes. [3]

b. Behavioural and Structural equations of an economy are given below:
I=50, G=50, X=10, M=5+0.1 Y , b=0.8 and t=0.25.
where I, G, x, M, b and t have their usual meanings.
i. Find the equilibrium level of national income. [3]
ii. Find the foreign trade multiplier. [3]
iii. Find the equilibrium value of import. [3]

5. a. What are the leakages in multiplier? Explain. [7]
b. The rate of interest is at a point where the liquidity preference curve equals the supply of money curve”. Explain. [8]
How equilibrium level of national income is determined by the equality of aggregate demand and aggregate supply in a three sector economy? Explain.

6. a. Define monetary policy. Discuss about the objectives of monetary policy in the developing countries like Nepal. [7]
b. “Inflation may seem natural and inevitable to a person, why is inflation a problem and what exactly are the cost that inflation imposes on a society? Explain. [8]

7. Write short notes on any two: [2×5=10]
a. Characteristics of Business Cycle
b. Macroeconomic Equilibrium
c. Effective Demand

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