ST.

XAVIER’S COLLEGE
(AUTONOMOUS)
KOLKATA

3rd SEMESTER EXAMINATION

NOVEMBER – DECEMBER 2019
BA/BSc
Saturday, November 16, 2019
HECCR3061T 1:00 PM to 4:00 PM
3 hours
INTERMEDIATE
Full Marks : 80
MACROECONOMICS - I

READ THESE INSTRUCTIONS FIRST:

• Of the questions attempted, the answers to only the first required number of questions (as stipulated
in the question paper) will be evaluated. So please do not attempt extra questions.
• Use fountain pen or ball-point pen of blue or black ink.
• Answer in your own words as far as practicable.
• Do not write anything on the question paper other than your Roll No.

At the end of the examination, fasten all your work securely together.
The marks are given in brackets [ ] at the end of each question or part question.

The question paper consists of 2 pages.

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 Of the questions attempted, the answers to only the first required number of
questions (as stipulated in the question paper) will be evaluated.
So, PLEASE DO NOT ATTEMPT EXTRA QUESTIONS.

MODULE-I [40 MARKS]

1. Answer ANY TWO questions. [2×5=10]
(a) Will the AD curve be more elastic if IS is steeper?
(b) What would be the shape of AS curve in CKM if supply of labour is not sensitive to real
wage rate?
(c) Explain the shape of the Aggregate Demand curve if investment is interest inelastic,
but consumption demand is interest elastic.

2. Answer ANY TWO questions. [2×15=30]

(a) How will you derive the Philips curve using the sticky price model? How will you
explain the sacrifice ratio in terms of Okun’s law and Philips curve? [8+7]
(b) What will be the effect of fall in rate of growth of money supply on output and
inflation in presence of rational expectation and credible policy making?
(c) Explain the shape of aggregate supply curve in presence of full wage indexation. What
will be the effects of an increase in money supply on output and price level in this
case? Explain using CKM. [8+7]

MODULE-II [40 MARKS]

3. Answer ANY TWO questions. [2×5=10]
(a) Consider the short run open economy simple Keynesian model without capital
flows. Show that under flexible exchange rates the model is equivalent to the closed
economy simple Keynesian model.
(b) Explain how the exchange rate is determined by market forces in an open economy
under perfect capital mobility.
(c) What is uncovered interest parity condition? Given the equilibrium output in an
open economy, how is the free-market exchange rate determined under the
uncovered interest parity condition? [2+3]

4. Answer ANY TWO questions. [2×15=30]

(a) Suppose that the price level is a weighted average of prices of domestic and foreign
goods. How will an increase in political instability affect the equilibrium exchange
rate and output? [8+7]
(b) Analyse the effect of a permanent increase in money supply on the short run and
long run equilibrium exchange rates. [8+7]
(c) Show that under purchasing power parity and interest parity conditions, a currency
depreciates in the foreign exchange market when its interest rate rises relative to
foreign interest rates.

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