Introductory Macroeconomics — DU B.A. (Hons.) Economics Previous Year Question Papers

(a) What happens to the equilibrium rate of interest in the following situations? Use suitable diagram in the context of IS- LM framework. (i) Decrease in nominal income (i) Decrease in money supply. (b) Explain fiscal policy and monetary policy and how are they used to stabilize the economy. (9,9) 2. (a) What is the demand for Central bank money? Using appropriate diagram explain the equilibrium in the market for central bank money. (b) Distinguish between real and nominal GDP with suitable examples. (12,6) 3. (a) (b) Give an outline of the steps involved in the estimation of National Income with the help of value-added method or production approach. What is GDP deflator? How is it different from consumer price index? (a) Calculate the equilibrium level of income. (b) Calculate the Budget Surplus. (c) Suppose G increases to 176 crs. What is the new equilibrium level of income? (d) Calculate the change in budget surplus. (e) Calculate the value of government expenditure multiplier. (f) Show the impact of change in G on equilibrium income with the help of a diagram. (3,3,3,3,3,3) 5. (a) What do you mean by open market operations? How does central bank use open market operations to control prices? Use diagrams. (9) (b) Suppose the economy is operating at equilibrium with Y=1000. If the government undertakes a fiscal change whereby the tax rate t increases by 0.05 and government spending increases by 50, will the budget surplus go up or down? Why? (9) Consider an economy with the following equations : Money demand : L = 0.5Y – 20r Money supply: M = 500 (i) Derive IS equation. (ii) Derive LM equation. (iii) Find equilibrium income and interest rate. (3+3+3) 7. Write short notes on any three: (6,6,6) (i) Balance of payments (ii) Full Employment Budget Surplus (iii) Liquidity Trap (iv) Keynesian and classical wage price adjustment # (Money demand) : L = 0.5Y - 20r 3 (Money supply): M = 500 (1 V¡ RU a 38 (Full Employment Budget Surplus) (i) # ·§ (Balance of payments) (iii) aRMal ve (Liquidity Trap) → → → (Keyesian and classical wage price adjustment) (6,6,6)