-Sample Paper-

Sample Paper
B.A. Economics
Fundamentals of Macro Economics - I (ECON144)-Semester I
Mapped Subjects

[Max Marks: 70]

Note: Attempt Questions from all sections as directed.

Section A - Attempt any Two questions out of Four. Each question carries 7.50 marks. [15
Marks]

Question No: 1

Total consumer expenditure (C) 60000

Gross investment (I) 20,00
Government expenditure (G) 15000
Exports (X) 10000
Imports (M) 7000
Net factor Income from abroad 800
Subsidies 1200
Capital consumption 1500

Given the information above, calculate the values for:

ii) GNP at market price
 iv) NI

Question No: 2

Describe the many challenges in calculating national income in underdeveloped countries

Question No: 3

Briefly Explain the following-

a- Marginal Propensity to consume
b- Average Propensity to consume
c- Marginal Propensity to Save
d- Average Propensity to Save

Question No: 4

Explain Circular Flow of Income in Four Sector Economy in detail.

Section B - Compulsory Questions. Each question carries 7.50 marks. [15 Marks]

Paragraph No: 1

A key role of central banks is to conduct monetary policy to achieve price stability (low and stable
inflation) and to help manage economic fluctuations. The policy frameworks within which central
banks operate have been subject to major changes over recent decades.

Since the late 1980s, inflation targeting has emerged as the leading framework for monetary policy.
Central banks in Canada, the euro area, the United Kingdom, New Zealand, and elsewhere have
introduced an explicit inflation target. Many low-income countries are also making a transition
from targeting a monetary aggregate (a measure of the volume of money in circulation) to an
inflation targeting framework. More recently, amidst growing concern about eroding policy space
in a context of lower equilibrium interest rates and falling inflation expectations, major central
banks have been reviewing their monetary policy frameworks
Central banks conduct monetary policy by adjusting the supply of money, generally through open
market operations. For instance, a central bank may reduce the amount of money by selling
government bonds under a “sale and repurchase” agreement, thereby taking in money from
commercial banks. The purpose of such open market operations is to steer short-term interest rates,
which in turn influence longer-term rates and overall economic activity. In many countries,
especially low-income countries, the monetary transmission mechanism is not as effective as it is
in advanced economies. Before moving from monetary to inflation targeting, countries should
develop a framework to enable the central bank to target short-term interest rates.

Following the global financial crisis, central banks in advanced economies eased monetary policy
by reducing interest rates until short-term rates came close to zero, which limited the option to cut
policy rates further (i.e., limited conventional monetary options). With the danger of deflation
rising, central banks undertook unconventional monetary policies, including buying long-term
bonds (especially in the United States, the United Kingdom, the euro area, and Japan) with the aim
of further lowering long term rates and loosening monetary conditions. Some central banks even
took short-term rates below zero.

In response to the COVID-19 pandemic, central banks have taken unprecedented policy actions to
ease monetary policy across the globe, provide ample liquidity to core funding markets, and
maintain the flow of credit. To mitigate stress in currency and local bond markets, many emerging
market central banks used foreign exchange interventions and deployed, for the first time, asset
purchases programs

Question No: 1

What is monetary policy and how does it affect you? Describe the different monetary policy
instruments.

Question No: 2

Explain how contractionary monetary policy affects the economy.

Section C - Compulsory Questions. Each question carries 2.00 marks. [40 Marks]

Question No: 1

Which of the following is/are the goals of macroeconomics---------

Option: 1

Stability of Prices
Option: 2

To Achieve Higher Level of GDP

Option: 3

To Achieve Higher Level of Employment

Option: 4

All of the above

Question No: 2

Who wrote the book “General Theory of Employment, Interest and Money”?

Option: 1

Prof. J. N. Keynes
Option: 2

Prof. J. M. Keynes
Option: 3

Alfred Marshall
Option: 4
None of the Above

Question No: 3

The term ‘macro’ has been derived from--------------

Option: 1

French word ‘makros’ which means large

Option: 2

English word ‘makros’ which means large

Option: 3
Greek word ‘makros’ which means small
Option: 4

Greek word ‘makros’ which means large

Question No: 4

“The supply creates its own demand”. This is the famous law of----

Option: 1

Market (Say’s Law of Market)

Option: 2

Supply
Option: 3

Demand

Option: 4

None of the above

Question No: 5

In broad terms the difference between microeconomics and macroeconomics is that

Option: 1

microeconomics studies the effects of government taxes on the national unemployment

rate
Option: 2

macroeconomics studies the effects of government regulation and taxes on the price of
individual goods and services whereas microeconomics does not.
Option: 3

they use different sets of tools and ideas.

Option: 4

microeconomics studies decisions of individual people and firms and macroeconomics

studies the entire national economy

Question No: 6

According to Keynes, equilibrium is attained when

:Option: 1

AD>AS
Option: 2

AD=C
Option: 3

AD=AS
Option: 4

AD<AS

Question No: 7

. Higher the value of MPS

,Option: 1

Lower will be the value of multiplier;

Option: 2

Higher will be the value of multiplier

Option: 3

No effect will be on multiplier;

Option: 4
None of the above

Question No: 8

Which Of The Following Is Not A Quantitative Tool Of Monetary Policy:

Option: 1

SLR
Option: 2

Reverse Repo Rate

Option: 3

CRR
Option: 4

Moral Suasion

Question No: 9

Which Of The Following Is A Fiscal Policy Tool:

Option: 1

Taxation
Option: 2

CRR
Option: 3

SLR
Option: 4
Open Market Operation
Question No: 10

Which of the following is an assumption of fisher’s equation:

Option: 1

Constant Velocity of Money

Option: 2

Constant Volume of Trade or Transactions

Option: 3

Price Level is a Passive Factor

Option: 4

All of the above

Question No: 11

How inflation affects the price of the commodities?

Option: 1

First the price decreases later on increases

Option: 2

Price of the commodities decreases

Option: 3

Price of the commodities increases

Option: 4

None of the above

Question No: 12

Which Of The Following Is Not A Quantitative Tool Of Monetary Policy:

Option: 1
SLR
Option: 2

CRR
Option: 3

Repo Rate
Option: 4

Moral suasion

Question No: 13

According to Keynes the relationship between money supply and price is -----------–................
Option: 1

No relationship

Option: 2
Direct Relationship

Option: 3

Non-proportional

Option: 4
Proportional

Question No: 14

Which is not a function of money-

Option: 1

Medium of Exchange

Option: 2
Store of Value

Option: 3

Unit of account to measure

Option: 4

Regulating money supply

Question No: 15

Credit Control policy is been framed by------------.

Option: 1

State Bank of India

Option: 2

Reserve Bank of India

Option: 3

Indian Bank
Option: 4
None of the above

Question No: 16

Which of the following is not a qualitative method of credit control ?

Option: 1

Moral Suasion

Option: 2
Credit Rationing

Option: 3
Margin Requirements

Option: 4

Lending Rates

Question No: 17

Govt. taxing and spending policies are called:

Option: 1

Monetary policy
Option: 2

Fiscal Policy
Option: 3

Commercial policy
Option: 4

Finance Policy
Question No: 18

The slope of the consumption function is called

Option: 1

autonomous consumption when income is zero

Option: 2

Average propensity to consume

Option: 3

Marginal Propensity to consume

Option: 4

All of the above

Question No: 19

The expenditure multiplier is the ratio of

Option: 1

The change in the money supply to a change in the monetary base.

Option: 2

The change in equilibrium output to a change in the autonomous expenditure.

Option: 3

The change in equilibrium output to a change in the monetary base.

Option: 4

The change in the money supply to a change in the autonomous expenditure.

Question No: 20

Real GDP is nominal GDP adjusted for:

Option: 1

Imports
Option: 2

changes in prices

Option: 3

Population

Option: 4

None of the above