SAMPLE QUESTIONS.

SECTION-A
1. Answer any five of the following questions: 2x5
(a) As a student of M.E-II how would you define Bank rate
and Repo rate. Citing its current rate, state any two point of
difference between them.

(b) Lara always knits ten sweaters a year to give as birthday

gifts in the orphanage. One year, instead of giving the
sweaters as gifts, she sells them to a local store for 300
dollars each, and the orphans receives no gifts. What is the
effect on GDP?
(c) Nominal GDP is a good measure of economic output. Do
you agree, why or why not?
(d) What are the implications of rate cuts in the current
scenario?
(e) Which measure of money supply is least and most liquid?
Why?
(f) Suppose that the MPC is 0.8 and that $14 trillion of real
GDP is currently being demanded. The government wants
to increase real GDP demanded to $15 trillion at the given
price level. By how much would it have to increase
government spending to achieve this goal?
(g) What is the difference between CRR and SLR?
SECTION-B
2. (a) Suppose that the behavioural equations and identities for [3]
an open economy is given as follows:
C = 1000 + 0.75Yd,
T = 800, I = 1200, G = 900, X = 500,

KIIT-DU/2020/SOT/Spring End Semester Examination-2020 KIIT-DU/2020/SOT/Spring End Semester Examination-2020

 M = 200 + 0.2Y 3. (a) Given that- [3]
a) Personal consumption
Find out the equilibrium level of National Income.
expenditure=1400
How much does the level of income increase as a result of b) I.T = 30
an increase in investment by 100 crore. Calculate the
c) Subsidies= 50
Investment Multiplier.
d) Depreciation=40
What if the net export increases by 50 crore. Calculate the e) Govt. final expenditure=1000
Foreign Trade Multiplier.
f) Export=800
Give your interpretation on the basis of the results derived. g) Import =800
(b) Given the following information: [3] h) NFIA=50.
Transfer Payments = $54 i) Private investment expenditure= 2000
Interest Income (i) = $150 Find out GDP at MP, NDP at MP,
Depreciation = $36 GNP at F.C.
Wages (W) = $67
Gross Private Investment = $124
Business Profits (PR) = $200 (b) What do you understand by CPI and WPI? Use a [3]
Indirect Taxes = $74 hypothetical example to show how CPI is measured.
Rental Income (R) =$75
Net Exports = $18
Net Foreign Factor Income = $12 SECTION-C
Government Purchases = $156
4. (a) " The liquidity trap does not concern itself with the [3]
Household Consumption = $304
Calculate GDP at MP, GDP at FC using the two negative slope of the demand curve for money, rather it is
approaches and NNP at FC. concerned with that part of the curve where it becomes
perfectly interest elastic or flat." How far do you agree
with this statement discuss. Justify your reasoning taking
evidence from the US Fed rate cuts.

(b) Given the Phillips curve relations, what kind of policy [3]
dilemma is faced by the policy makers? How will you
react to the option of making a choice between a high rate
of unemployment and high rate of inflation? Give reasons
for your choice taking into consideration the short run
situation.

5. (a) What do you mean by fiscal policy? What is the crowding [3]
out effect?

KIIT-DU/2020/SOT/Spring End Semester Examination-2020 KIIT-DU/2020/SOT/Spring End Semester Examination-2020

 (b) The recession following the financial crisis of 2008–2009
was a deep one in the United States. Unemployment rose
from about 4.5 percent in early 2007 to 10 percent in late
2009. Worse yet, it lingered at a high level for a long time.
With the aid of a diagram, describe the conventional policy
responses to the recession. What are the limitations of such
policies?
[3] debate is often further extended to the composition of fiscal
policy, i.e. which arm of fiscal policy – taxes or expenditure – is
more effective and Monetary policy with its weapon- repos,
MSF,CRR,SLR is more effective.”
Based on the above analysis what is your stand to curb any
economic disorder?

6. (a) What is the definition of the unemployment rate? How are [3]
part-time workers and discouraged workers treated when *****
calculating the unemployment rate?
(b) In the context of the Corona virus (COV-ID 19) epidemic, [3]
discuss the economic effect on unemployment and GDP
growth of the epidemic in India.

SECTION-D
7. (a) The Budget 2020 targets for fiscal deficit and tax [3]
mobilization appear to be unrealistic. Evaluate?
(b) Can you distinguish between Plan and non-plan [3]
expenditure of an economy. Why is it so that in the present
budget both of them were merged? Give proper reasoning.

8. [6]
“Macroeconomists regularly debate on the optimal mix and
efficacy of monetary and fiscal policy, but with diverse literature
and different schools of thought no consensus exists. Different
schools of thought criticize each other on various aspects of
macro economy, especially on the question of policy
effectiveness. Some, like Friedman, suggest the use of monetary
policy without any fine-tuning efforts of the government
whereas others like Keynes and his followers strongly argue for
the use of fiscal policy in case monetary policy becomes
ineffective. On the contrary, classical economists believe that
markets clear all the time and hence are against any stabilization
policy. Some even argue in favor of status quo because any
recession is just the correction of past errors. The policy efficacy

KIIT-DU/2020/SOT/Spring End Semester Examination-2020 KIIT-DU/2020/SOT/Spring End Semester Examination-2020

KIIT-DU/2020/SOT/Spring End Semester Examination-2020 KIIT-DU/2020/SOT/Spring End Semester Examination-2020