# Pokhara University || Fall 2016 introductory Macroeconomics||

##### This is the question set along with the answers of Fall 2016 Introductory Macroeconomics which was taken by the Pokhara University (PU).

Fall 2016 Introductory Macroeconomics

POKHARA UNIVERSITY

Fall 2016 Introductory Macroeconomics

 Level:  Bachelor Semester – Fall Year: 2016 Programme: BBA/BBA-BI/BBA-TT/BCIS/BHCM Full Marks: 100 Course: Introductory Macroeconomics Pass Marks: 45 Time:  3hrs.

Fall 2016 Introductory Macroecomomics

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”

Attempt all the questions. 10×2
1 Macroeconomics is the study of the big hump. Justify. 2
2 What is per capita income? 2
3 What is the meaning of voluntary and involuntary unemployment? 2
4 The consumption curve passes above the origin, why? 2
5
 What is the relationship between the household sector and the business sector?
2
6
 What is meant by Marginal Efficiency of Capital (MEC)?
2
7 Give a brief concept of the inflationary gap. 2
8 Suppose in a country investment increases by Rs. 100 million and consumption function is given as C=10+0.6Y. How many increases will there take place in income? 2
9 List any four leakages of the multiplier. 2
10 What is a paradox of thrift? 2

Section “B”

Attempt any six questions 6×10
11 What is macroeconomics? Distinguish between macroeconomics and microeconomics.
12 What is national income? Explain the difficulties to the measurement of national income.
13
 The principle of effective demand is the basis of the theory of employment. How does it repudiate Say’s law and Full Employment Theory? Explain.
14 Define cost-push inflation with the major causes. How is the cost-push inflation different from the demand full inflation?
15 In a two-sector model, suppose C=100+0.50Y, I=Rs.100-2i,Lt=20,Mt=50 Msp=0.40Y-10i and Ms=Rs.100. Where C is consumption, I is Investment, Mt is Transaction demand for money, Msp is Speculative demand for money and Ms is the Money supply. Find,

1. Is equation and LM equation
2. The value of equilibrium national income and Interest rate

The equilibrium national income as interest rate increases by 5%.

16 What are the instruments of monetary policy? Describe the role of monetary policy in developing countries.
17 Explain the disagreeable situation of the business cycle. How Fiscal policy can tackle this situation?

Section “C”

Case Analysis

18
 Read the situation given below and answer the questions that follow.                                                                                                                                                                                     (20) Nepal Government, Ministry of Finance, Economic Survey – 2014/15 July 2015 The real GDP is estimated to grow by 3.0 percent at basic prices against the revised estimate of 5.0 percent for the fiscal year 2014/15. Due to a decrease in food production caused by unfavorable climate, slow-down on economic activities after the earthquake, and negative impact on industry and services sector, the economic growth rate has remained low in the fiscal year 2014/15 as compared to the previous fiscal year 2013/14. Production of the agriculture sector is estimated to grow by 1.9 percent in the fiscal year 2014/15. Such growth was 2.9 percent in the fiscal year 2013/14. The non-agriculture sector is estimated to grow by 3.6 percent in the fiscal year 2014/15, while this sector had grown by 6.3 percent in the fiscal year 2013/14. Among the non-agriculture sector, the growth rate of the industry and services sector is estimated to remain at 2.6 percent and 3.9 percent respectively in the fiscal year 2014/15, while these figures were 6.2 percent and 6.3 percent respectively in the fiscal year 2013/14. The structure of the Nepalese economy has been changing gradually. The contribution of agriculture and industry sectors to GDP showed a declining trend while that of the services sector showed the opposite. From the sectoral perspective, in the fiscal year 2014/15, the contributions of the primary sector to nominal GDP are estimated to remain at 32.3 percent. Contribution of the agriculture sector to GDP at current prices stood at 37.4 percent in FY 2001/02. Similarly, the contribution of the secondary sector to nominal GDP decreased from 17 percent in FY 2001/02 to 14.5 percent in the fiscal year 2014/15. The contribution of the tertiary sector to nominal GDP increased from 45.1 percent in FY 2001/02 to 53.2 percent in the fiscal year 2014/15. Distinguish between the terms growth of nominal GDP and real GDP. Why did economic growth slow-down for Nepal in the fiscal year 2014/15? Mention the contribution of various sectors to Nepalese GDP growth in the fiscal year 2014/15. What changes can be observed in the status of various sectors in FY 2014/15 as compared to the fiscal year 2013/14? What do you mean by the term structure of the economy as mentioned here? How is the structure of the Nepalese economy been changing? What does it indicate?

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