Published by: Dikshya
Published date: 27 Mar 2023
POKHARA UNIVERSITY
Level: Bachelor Semester: Spring Year: 2018
Programme : BBA/BBA-BU/BCIS/BHCM/BBA-TT Full Marks: 100
Course: Introductory Macroeconomics Pass Marks: 45
Time: 3hrs
Candidates are required to give their answers in their own words as far as practicable. The figures in the margin indicate full marks.
Section "A"
Very Short Answer Questions
Attempt all the questions. 10*2
1. List out the basic macroeconomic issues.
2. Find out the value of GDP deflator when real GDP is 117.43 million and nominal GDP is 111.3 million.
3. Define Say's market law.
4. Define voluntary and involuntary unemployment.
5. Define induced investment.
6. Calculate the equilibrium level of national income from following consumption and investment functions:
C = 200+0.7Y and I=100+ 0.1Y
7. Write any four characteristics of depression phase of business cycle.
8. What do you mean by paradox of thrift?
9. What do you mean by cheap and dear monetary policy?
10. What is cash reserve ratio (CRR)?
Section "B
Descriptive Answer Questions.
Attempt any six questions 6×10
11. Explain the importance of macroeconomics. What are its limitations? Explain.
12. Construct a diagram of circular flow of income and expenditure in an open economy. Explain the linkages between household sector, business sector, financial sector, government sector and foreign sector.
13. What is effective demand? How is it determined? Explain in terms of aggregate demand (AD) and aggregate supply (AS) function.
14. Define consumption function. Discuss about the Keynesian psychological law of consumption with the help of a hypothetical schedule and graph.
15. What is multiplier? Derive multiplier under two sector economy and present diagrammatically as well.
16. Suppose structural model for the product market is given as:
C= 100+0.75(Y=T)
I=200-200i
G=100 and
T = 0.2Y
Similarly, the money market model is given as
Ms = 200
Mt = 0.5Y
Msp= 100 – 2500i
Where the symbols have their usual meanings. Find the equilibrium value of income and rate of interest.
17. Define inflation. Discuss about the effects of inflation on consumption, production and distribution.
Section "C
Case Analysis
18. Read the case situation given below and answer the questions that follow: [20]
Economic growth has gained momentum since 2016/17. The economy is estimated to have grown by 5.9 percent in 2017/18 while such growth was 7.4 percent in 2016/17. Despite a sluggish agricultural growth of 2.8 percent due to the flood in Terai region at the beginning of the fiscal year, the economy achieved an encouraging growth in 2017/18. This level of growth was attained on account of industrial output growth of 8.8 percent and service sector's growth of 6.6 percent. With the improvement in the growth trajectory, the size of the economy has reached Rs. 3 trillion.
For the last two years, the ratio of Gross Domestic Savings to Gross Domestic Product (GDP) has been increasing. Such a ratio is estimated to have reached 15.0 percent in 2017/18. Gross national savings to GDP is estimated to stand at 43.9 percent in 2017/18. A higher national savings ratio is witnessed mainly due to the remittance inflow. Gross capital formation ratio is estimated to have reached 51.8 percent and resource gap is expected to remain 7.8 percent of GDP. Net export to GDP is estimated to have deteriorated slightly further to negative 36.7 percent in 2017/18.
In the last two years, inflation has remained contained. Average consumer price inflation that stood at 4.5 percent in 2016/17 declined to 4.1 percent in eleven months of 2017/18.
The recurrent expenditure of the government till 9 July 2018 stood at 84.29 percent of the budget estimates and capital expenditure at 60.55 percent. Altogether, the total expenditure of the government stood at 76.20 percent of the budget estimates as of 9 July 2018. Likewise, revenue mobilization of the government during the period stood at 93.15 percent of the annual target of Rs 730 billion.
In 2017/18, the government mobilised gross domestic debt of Rs. 144.75 billion and made a repayment of Rs. 37.52 billion. Accordingly, the net domestic debt of the government stood at Rs. 107.23 billion in 2017/18, which is 3.6 percent of GDP.
Current account deficit amounted to Rs. 209.21 billion, 7.0 percent of GDP, in eleven months of 2017/18. An escalation in import compared to export raised the trade deficit to Rs. 1033.04 billion, which is 34.4 percent of GDP. In the review period, workers' remittances increased 7.3 percent. A modest growth in remittance inflow coupled with mounting trade deficit has resulted in an upsurge of current account deficit. The overall balance of payments that had remained in surplus in 2016/17 by Rs. 82.11 billion turned negative by Rs. 4.34 billion in eleven months of 2017/18. However, the banking sector has sufficient foreign exchange reserves to sustain the prospective import of goods and services for 9.6 months.
Answer the following questions:
a) Define economic growth. 2
b) Has the Nepalese economy achieved encouraging growth during the last two years? Give your answer with reasons. 3
c) What do you mean by remittance? Is the Nepalese economy dependent upon remittance? Answer with reasons. 3
d) What is the situation of net export to GDP in Nepal? 2
e) What is government expenditure? How is government expenditure financed in Nepal? 3
f) Distinguish between recurrent expenditure and capital expenditure. Which one is greater in Nepal? 3
g) Explain the situation of Nepalese balance of trade and balance of payment with reference to the above case. 4