ST.
XAVIER’S COLLEGE
KOLKATA
(AUTONOMOUS)
2nd SEMESTER EXAMINATION
APRIL – JUNE 2022
B.A./B.Sc.
Friday, May 20, 2022
HECCR2031T 12:00 Noon to 3.00 PM
3 hours
INTRODUCTORY
Full Marks : 80
MACROECONOMICS
PLEASE READ THESE INSTRUCTIONS BEFORE YOU START WRITING:
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.
Only HAND WRITTEN answer scripts (using black or blue ink) on A4 size sheets will be
considered.
Answer in your own words as far as practicable.
Save the scanned pages to a single PDF file and name the document accurately i.e. Roll No_Paper
Code.PDF (example: 147_HPHCR2032T).
Students have to write legibly their answers on A4 size sheets, scanning them and sending the entire
answer script as one PDF file to the following email address (in REPLY mode) within 30 minutes
of the completion of the examination: [email protected]
The scanned answer scripts should have enough clarity to enable evaluation.
On top of each page the following information should be entered by the student: Name, Roll
Number, Paper Code , Date, and Page Number
No multiple submissions would be allowed.
The marks are given in brackets [ ] at the end of each question or part question.
The question paper consists of 3 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
1. Answer ANY TWO: [2×5=10]
(a) Analyse the relationship between NNP at factor cost and total value-added in an
economy. [5]
(b) Explain the Fisher effect when actual inflation is different from expected inflation. [5]
(c) Examine the relation between the price level and transaction velocity of money
in an economy. [5]
2. Answer ANY TWO: [2×15=30]
(a) (i) Show from national income accounting that:
(I) An increase in taxes must imply a change in the net exports, government
expenditure or the saving investment balance.
(II) An increase in disposable personal income must imply an increase in
consumption or an increase in saving.
(III) An increase in both consumption and saving must imply an increase in
disposable income.
{For both (II) and (III) assume there are no interest payments by household or
transfer payments to foreigners}
(ii) Assume that GDP is Rs.6000, personal disposable income Rs.5100 and the
government budget deficit is Rs.200, consumption is Rs.3800 and the trade deficit is
Rs.100.
Calculate
(I) Personal saving and Public saving.
(II) Investment
(III) Government spending [(2+2+1) +(4+3+3)]
(b) (i) Establish the relationship between monetary base and money supply.
(ii) What will be the impact on the money supply if
(I) currency-deposit ratio changes?
(II) reserve -deposit ratio changes? [10+(2×2.5)]
(c) (i) Analyse how hyperinflation can be stopped when the real balance depends on the
nominal interest rate.
(ii) Which is more harmful - expected or unexpected inflation – and why? [10+5]
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MODULE -II
3. Answer ANY TWO: [2×5=10]
(a) Analyze the effect of an increase in government final expenditure on goods and
services in an economy in the long run, using the methodology of comparative
statics. [5]
(b) Use the Keynesian cross to examine the impact of an increase in tax on the level of
equilibrium income. [5]
(c) Analyse the concept of paradox of thrift. [5]
4. Answer ANY TWO: [2×15=30]
(a) Suppose we have a simple Keynesian economy described by the following functions:
C = 50 + 0.8YD; I = 70; G =200; T = -TR + tY; TR =100; t = 0 .20
(i) Calculate the equilibrium level of income and the multiplier in this model.
(ii) Calculate also the budget surplus, BS.
(iii) Suppose that t increases to .25. What is the new equilibrium income? The new
multiplier?
(iv) Calculate the change in the budget surplus. Would you expect the change in the
surplus to be more or less if c =0 .9 rather than 0.8?
(v) Can you explain why the multiplier is 1 when t = 1? [(2+1)+1+(2+1)+(2+4)+2]
(b) (i) Explain the negative slope of the IS curve intuitively.
(ii) Interpret the IS curve with the help of loanable fund theory.
(iii) Explain how and why the income and interest sensitivities of the demand for real
balances affect the slope of the LM curve. [5+5+5]
(c) According to the IS-LM model, what happens to the rate of interest, income,
consumption and investment when
(i) central bank increases the money supply?
(ii) the government purchases increase?
(iii) How will your answer to question 4(c)(i) change if investment does not depend on
the rate of interest. [5+5+5]
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