MID TERM EXAMINATION

Level: Master (Winter Semester) Year: 2020

Program: MBA(Finance) Full Marks: 100
Trimester: III Pass Marks: 60
Course: Macroeconomics and the Global Economy Time: 3 hrs.
Candidates are expected to answer the question in their own words as far as
practicable. The figures in the margin indicate full marks.

Section A
Long Answer Question
Attempt any Three question: (3×20=60)
1. Determine the equilibrium level of national income in a four-sector
economy.
2. Trade deficit has been rapidly increasing in recent years in Nepal. As a
student of economics, what kind of policy measures would you like to
suggest Nepalese government for the reduction of trade deficit? (20)
3. A. Graphically derive IS curve and describe it.
B. Suppose the following functions are given
C= 100+0.8 Y
S= -100+0.2Y
I=120-5i
Ms=120
Md=0.2Y-5i
Where C, S, I, i, Ms, Md are household consumption, total saving, private
investment, interest rate, total money supply and demand for money
respectively. (10+10)
Find
i) The IS-curve equation and show it in graph.
ii) The LM-curve equation and show it in the graph.
iii) Income at general equilibrium
iv) Interest rate at general equilibrium
4. Explain which of the following question is true, false or swings both way.
Start your answer by writing TRUE, FALSE or UNCERTAIN and give
proper justification. Graphs, ideas, data and information can be
supplemented while writing your answer. Creativity will be taken as the
measuring rod for providing marks to this question. (10+10)
 A. Trade deficit has been rapidly increasing in recent years in Nepal. As a
student of economics, what kind of policy measures would you like to
suggest Nepalese government for the reduction of trade deficit?
B. Different social and economic indicators support that Nepal is still far
behind the middle- and high-income countries. There is no reason to
hide that Nepal is one of the poorest countries in the world. The
country is sizeable in terms of population and area. We have
huge potentiality to develop our country completely in ten years
down the road.

Section B
Short Answer Question
Attempt any Four question. (4×10=40)
5. A country XYZ has four sectors and the macroeconomic information is
given below in the equation form.
C= 50+0.8Yd
T=25+0.2 Y
I=20
Government Expenditure=40
Export=35
Import=20+0.05Y
Find
i) Equilibrium Level of Income
ii) Consumption at equilibrium level of income.
iii) Net export at equilibrium level of income
iv) Amount of tax at equilibrium income.
6. How do you analyze the current macroeconomic situation of our country
Nepal?
7. 7. Computing national income is not as easy as we think. While calculating
national income, authority encounters many problems. Regarding this,
discuss on the difficulties in measuring national income.
8. 8. Different reports suggest that economic indicators of Nepal are dismal.
If you are given opportunity to become premier of this country, what kind
of measures would you like to take to lift the country out of the state of
underdevelopment?
9. How do you analyze the circular flow of income in a four-sector economy?
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