Introductory Macroeconomics — DU B.A (Prog.) Economics as Major Previous Year Question Papers

1. (a) What is Macroeconomics? Explain the different Macroeconomic issues in p'!! (b) Explain the components of current account of balance of payments. 2. (a) What is the difference between intermediate and final goods and services? measuring GDP? Why is the distinction between intermediate and final goods important for (b) Use the following data to calculate private saving and government saving: Net factor payment from abroad Rs. (-). 50 Government purchase Rs. 1,200 Interest payment on government debt Rs. 200 3. (a). What are the determinants of demand for money. Explain how the demand for and supply of central bank money determines the equilibrium interest rates in an economy with currency and checkable deposits? Explain using formal analysis and diagrams. (b) Define private saving. How can private savings be used in the economy. (9,9) (1) Calculate the equilibrium level of income. (ii) Calculate the Budget Surplus (ii) Suppose t increases to 0.25. What is the new equilibrium level of income? (iv) Calculate the change in budget surplus (v) Can you explain why the multiplier is 1 when t = 1? (b) Compare the classical and Keynesian views on the speed of wage and price (4) 5. (a) Explain the interaction of goods and money markets in determining equilibrium (9) income and interest rate using the IS-LM model. (b). What is a liquidity trap? Explain its implications for macroeconomic policy (9) using a suitable diagram. 6. (a) Why do we call mechanisms such as proportional income taxes and the welfare system as automatic stabilizers? Choose one mechanism and explain carefully how and why it affects fluctuations in output. (9) (b) Consider a one-year bond that promises to pay $100 at maturity. (i) What is the interest rate on the bond if its price today is $75? (i) What is the relation between the price of the bond and the interest rate? (iii) If interest rate is 8% what is the price of the bond today? (3,3,3) 7. Write short notes on any three : (6,6,6) (ii) Factors affecting slope of IS curve (ill) Open Market Operations (iv) Full Employment Budget Surplus D: 1 (Net factor payment from Et7ÍaRU (Transfers): 950 pya (9,9) (bb) zge] ae e see (Open Market Operations) (v) qu due de (Ful Employment Budget Surplus)