Anes Economic Environment and Policy! PGPM (2012-14) Sections A, B and C End-term Examination, 2012 Maximum Time: 2 hours Faculty: Subhalakshmi Sircar Total Marks: 30 Weightage 30 percent Closed book examination Answer all questions. Assumptions should be logical, practical and feasible. Answers should be precise and concise. 1, What are the fagi6fs that affect the slope ofthe aggregate demand curve? If the responsiveness of demand for money function to interest rate is very small, how would the aggregate demand curve look like and why? 3+3= 6 2. Explain why in a recession an expansionary monetary policy fails to work. 6 3. Consider a cut in aggregate demand because of a reduction in autonomous investment spending. Compare the effects when the wages are completely rigid in the downward direction with the situation when wages are fully flexible. 3+3=6 4. Indian rupee has been depreciating against USD. What are the implications for the current account and the financial account? 3+3=6 |, 5, What is an adverse supply shock? How do the macroeconomic policies be used to tackle such a situation? 2+4 = 6