Bangladesh University of Professionals (BUP)

Faculty of Business Studies (FBS)

Department of Business Administration in Finance and Banking
3rd Semester Final Examination (Jan – Jun 2020)
BBA in Finance & Banking, Batch-2019
Macro Economics (ALD2102)

Time: 2 hours SECTION: A & B Full Marks: 50

Instructions
• Answer any 05 (Five) questions.
• Marks shown against each question are in brackets.
• Answer all parts of each question consecutively.
• Any sort of unfair means in the examination is strictly prohibited.

Question No. 1 (5+5 = 10)

a. "The micro vs. macro distinction in economics is not based solely on size." Do you agree?
Give examples.

b. Aggregate demand can be stimulated both by monetary and fiscal policy. Do you agree? If
so, try to guess why the fiscalist and the monetarists should differ as to the instrument to be
used.

Question No. 2 (03+03+04 = 10)

a. A car produced in an earlier period is sold as a used car in the current period. As a national
income accountant would you include its value in current year's GDP? Why? Why not?

b. "The consumer price indexes use fixed quantity weights". Do you agree? Why?

c. Distinguish between gross and net investment. Why is the concept of net investment
important in the context of productive capacity of a country?

Question No. 3 (04+03+03 = 10)

a. What happens to the consumption function if MPC raises at all income levels, but the
autonomous consumption is unchanged? Use diagram for your answer.

b. In terms of Permanent Income Hypothesis, would you consume more of your festival
bonus if,

i) you knew that there was a bonus every year,

ii) This was the only year your bonuses were given out.

c. Discuss how the rate of interest can influence the volume of consumer spending.

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Question No. 4 (03+04+03 = 10)

a. Explain how the paradox of thrift arises and when it is valid.

b. What does the LM curve represent? Explain how this curve can be geometrically derived.

c. How is the interest sensitivity of the demand for money related to the slope of the LM
curve?

Question No. 5 (04+06 = 10)

a. 'No market economy, however efficient, can get rid of natural unemployment'. Explain the
comment.

b. What measures can be taken to reduce frictional unemployment. Briefly discuss what can
be done to reduce Structural unemployment rate.

Question No. 6 (04+03+03 = 10)

a. What is the impact of inflation on savers, borrowers and lenders?

b. How is GDP implicit deflator used to measure rate of inflation?

c. Find the similarity and difference between cost-push and demand-pull inflation.

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