Pokhara University||Introductory Macroeconomics Spring 2017||

Introductory Macroeconomics Spring 2017

This is the question set along with answers of Introductory Macroeconomics Spring 2017, which was taken by Pokhara University.

Introductory Macroeconomics Spring 2017


Introductory Macroeconomics Spring 2017

Level:  Bachelor Semester – Spring Year          : 2017
Program: BBA/BBA-BI/BBA-TT/BCIS/BHCM Full Marks: 100
Course: Introductory Macroeconomics Pass Marks: 45
Candidates are required to give their answers in their own words as far as practicable.
The figures in the margin indicate full marks.


Section “A”

Very Short Answer Questions

  Attempt all the questions. 10×2
1 What is macroeconomics? 2
2 What are the leakages and injections in the circular flow model? 2
3 What is the essence of say’s law of market? 2
4 The value of MPC lies between 0 and 1. Justify. 2
5 State the Keynes’s psychological law of consumption. 2
6 Define the consumption and saving equations. 2
7 Write any four characteristics of depression phase of business cycle. 2
8 Mention the instruments of monetary policy. 2
9 What type of fiscal policy is considered as expansionary fiscal policy? 2
10 Define inflationary gap. 2


Section “B”

Descriptive Answer Questions

  Attempt any six questions 6×10
11 Explain various issues of macroeconomics.  
12 What is NI? Explain the various difficulties to measurement of NI.  
13 Define GDP and calculate NI at market price and factor cost from the following data.

Items Rs (in corers)
Net indirect tax

Capital consumption allowances





Wages & salaries








14 Explain the principle of effective demand. Is it possible to raise the employment to the full employment in the Keynesian theory? Justify.  
15 Suppose the behavioral equations for an economy are given as follows:

C= 100+ 0.75Yd , I= 300, T= 50+0.25Y, G= 150

i.                Find the equilibrium level of income.

ii.              Find government expenditure multiplier and determine equilibrium income if government expenditure increased by 50.

16 What is demand-pull inflation Explain the causes of demand-pull inflation.  
17 Define fiscal policy. Explain the objectives of fiscal policy in developing countries like Nepal.  


Section “C”

Case Analysis

  Read the situation given below and answer the questions that follow.  
  Nepal Government, Ministry of Finance, Economic Survey – 2016/17, Jun 2017

From the perspective of economic growth, current fiscal year 2016/17 has been encouraging. Economy has expanded as a result of increase in agricultural production due to favorable monsoon, speed up in reconstruction works and resolution of energy crisis.

Likewise, additional factors contributing in the expansion of economic activity include the commercialization of agriculture, stability oriented politics, reduction in closures and strikes, and reform in government policies and programs.

GDP at base prices is estimated to grow by 6.94 percent in current fiscal year 2016/17. Such growth rate remains 2.97 percent in FY 2014/15 and at 0.01 percent in 2015/16.

Economic growth rate has averaged 4.2 percent in the last ten years. The growth rate remained low in most of the fiscal year. The growth rate of 6.94 percent in the current fiscal year is the highest recorded growth in the last ten years. This growth rate is the highest since FY 1994/95.

Likewise, agriculture and non-agriculture sector growth averaged 3.2 percent and 4.7 percent respectively in last ten years. Similarly, industrial and service sector growth averaged 2.8 percent and 5.3 percent respectively in the last ten years. In this period, the growth of agriculture and industrial sector was not achieved as expected. However, the growth rate of the service sector remained satisfactory.

In fiscal year 2016/17, the share of the agriculture sector in GDP stood at 29.37 percent, while that of non-agriculture sector was 70.63 percent.

The share of the agriculture sector in GDP has been in declining trend in the last 15 years. Such share was 34.3 percent on average during the period from FY 2002/03 to FY 2006/07 and declined to 34.1 percent in next consecutive five years (FY 2007/08- FY 2011/12). It was declined further to 31.4 percent in subsequent five years’ period from FY 2012/13 to FY 20016/17.

Likewise, the share of the non-agriculture sector averaged 65.7 percent, 65.9 percent, and 68.6 percent respectively during the period FY 2002/03-FY 2006/07, FY 2007/08- FY 2011/12 and FY 2012/13-FY 2016/17. Nepalese economy is in the stage of structural transformation as a result of decreasing share of agriculture sector against gradual increment in the share of non-agriculture sector in GDP. The service sector has expanded at a high rate in the non- agriculture sector.


a)    What is the situation analysis about?

b)    Point out the factors that contribute to speed up the economic growth in FY 2016/17

c)    What is your comment about the growth trend of Nepalese economy? What are the principal factors for the slow growth of Nepalese economy in the previous years?

d)    What do you mean by the term structure of the economy as mentioned here? What changes can you observe in the structure of Nepalese economy?


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