IRMA

Institute of Rural Management Anand

Course Name: Macroeconomics
Programme: PGDM(RM-X)3
Date: 10/12/2021 Term - II Roll No.

End Term Examination (Open Book)

Duration of Exam: 2 Hrs Min Weightage:_30_percent Total Marks: 50

Please keep your answers brief and to the point.

Q1. Fill in the blanks by choosing an appropriate option. (1 point each = 5 points)
A. To check for fiscal policy effectiveness, it is important to take in consideration the

slope ofcurve
B. More crowding out happens when the curve is flat, due to high interest

sensitivity.
C. Mature economies havetolerable rate ofinflation (high/medium/low)
D. A small increase in leads to a large increase in overall moneysupply.
E. According to Richard Musgrave,goods individuals should have on the basis of
need rather than the ability to pay.

Q2. State the characteristics and give at least 2 examples each of

A. Public goods (2 points)

B. Common Pool Resources (2 points)
C. Toll goods (2 points)
D. Private Goods (2 points)

Q3. As an economic advisor of the country would you rather focus on increasing your
controlling the inflation in the
nominal GDP (in case of a negative output gap) or

economy? Explain briefly. (6 points)

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 would the
economy, why
to an
n absence of any particular negative shock
y m e n t in the country be higher than the natural rate of unemploy

CAplain in brief how the natural rate of unemplovment is decided. (4 pont

Hcal-cortvat. ?
Q5. What is the effect tariffs imposed in mobile capital-flexible
econ0y
of on imports a

(4 points)

the
Q6. "Domestic Products lose competitive advantage when inflation increases
home country" Explain the sentence. (4 points)

Q7. In the fictional country of Cravova, the government is not very stable and thus even

though the banks offer high interest rates, the corresponding capital investment is low.

Draw its Balance of Payment Curve. (2 points)

Q8. Using appropriate figures and arguments, explain what happens when the central
bank decreases the money supply in an open economy characterized by high capital

immobility and flexible exchange rate regime. Will such a policy measure aimed at
lessening the positive output gap in the economy yield any intended outcome? (8

points)

Q9. Would you agree with some economists' suggestion that labor ought to be treated as
any other commodity and during recessions, there should be a downward revision in

wages? If you have disagreements, what may be the reason(s) for the same? (5 points)

Q10. According to salary.com, the average salary for a software engineer level IIl (a
higher-level position in software design and implementation) in the Silicon Valley area
of California is $108,244. However, Google pays its level ll software engineers an

average salary of $124,248. Explain why Google would pay a salary higher than the

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 the pOSsIDIE
in the area? What are
equilibrium salary for equivalent positions
same

benefits of such a system? (4 points)

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