LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.A. DEGREE EXAMINATION – ECONOMICS
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FOURTH SEMESTER – APRIL 2006
EC 4500 – MACRO ECONOMIC THEORY
(Also equivalent to ECO503)
Date & Time : 25-04-2006/9.00-12.00 Dept. No. Max. : 100 Marks
PART – A
Answer any FIVE questions in about 75 words each. (5 x 4 = 20 Marks)
- Define Macroeconomics.
- Explain Keynes psychological law of consumption.
- What is inflationary gap?
- Define Marginal efficiency of capital.
- Derive IS curve.
- Differentiate GNP at market prices and GNP at factor cost.
- Given the saving function S = -10 + 0.2y and autonomous investment
I =Rs.50crore. Find the level of consumption.
PART – B
Answer any FOUR questions in about 250 words each. (4 x 10 = 40 Marks)
- Explain the circular flow of income in a four sector open economy.
- Explain and illustrate social accounting and indicate its usefulness as a tool of economic policy.
- What is meant by Liquidity preference? Explain the various motives of liquidity preference
- An economy has the following features
Consumption C = 50 + 0.9y
Tax Revenue T = 100
Investment I = 150 – 50i
Government Expenditure G = 100
Money demand Md = 0.2y – 10i
Money supply Ms = 100
Exports X = 20
Imports M = 10 + 0.1y
- Obtain the IS and LM equations of the economy
- Find out equilibrium income and rate of interest
- Find the balance of trade.
- Explain the concept of Multiplier. How does it work?
- Explain the various methods of measuring National Income.
- State and explain Say’s law of markets.
PART – C
Answer any TWO questions in about 900 words each. (2 x 20 = 40 Marks)
- Explain the nature and scope of Macroeconomics.
- Elucidate Hicksian theory of trade cycle.
- What is meant by trade-off between the rate of inflation and unemployment? Give the Keynesian explanation of this trade-off.
- What do you understand by the equilibrium level of National income? Explain that both saving- investment approach and aggregate demand – aggregate supply approach yield the same level of equilibrium.
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