## Introductory Macroeconomics | Old Question Paper Year: 2011 | Semester: Spring

Pokhara University

**Exam 2011 Spring**

1. a. Define macroeconomics. Discuss its scope and importance. [7]

b. Describe the three sector economy in terms of circular flows of income and expenditure. [8]

2. a. Distinguish between GDP at market price and GDP at factor cost. Explain expenditure methods of computing national income. [8]

b. Mention the difficulties in the measurement of national income. [4]

c. Find out the value of GNP deflator if nominal and real GNP is given as 17.43 million and 11.37 million respectively. [3]

3. a. How the employment and output are determined in classical macroeconomics? [7]

OR

What is effective demand? How employment is determined according to Keynes? Illustrate with diagram.

b. What is consumption function? What are the measures to raise the propensity to consume?

4. Consider the three sector economy with following behavioural equations (where symbols have their usual meaning).

C=1000+0.75 Yd

T=3000

I=2000

G=10,000

a. Find equilibrium level of income. [4]

b. Calculate government expenditure and multiplier. [5]

c. If tax function is T=3000+0.2Y. When equilibrium level of income will alter? [6]

5. a. Suppose the product model is given as [10]

C =100+0.8Y

I=110+0.5i and the money market model is found as Ms=450 ,Md=0.5Y-4i,where symbols have their usual meaning.

Find

i. IS and LM function

ii. Determine equilibrium income (Y) and interest rate (i).

b. Derive Aggregate Demand Curve (AD). [5]

6. a. Explain Keynesian liquidity preference theory of interest. [7]

OR

Illustrate the demand pull inflation and explain various causes of demand pull inflation with respect to Nepal.

b. Distinguish between autonomous and induced investment and explain the determinants of investment. [8]

7. Write short notes on any two: [2×5=10]

a. Monetary policy objectives

b. Leakages of multiplier

c. Phases of business cycles