Macro Economics BBA Second Year Third Semester Examination 2012

BBA SECOND YEAR THIRD SEMESTER EXAMINATION, 2012

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MACRO ECONOMICS

SUBJECT CODE : 2104

Time—3 hours

Full marks—70

[N.B. —­The figures in the right margin indicate full marks. Different parts of each question must be answered sequentially.]

Part A—Short Questions

(Answer any five questions)

Marks—6×5=30

1.         Briefly explain the various approaches for measuring National Income.

2.         How do you derive a LM curve from money market equilibrium? Discuss.

3.         Explain the various instruments of monetary policy? What should be the   objectives of monetary policy in a developing country like Bangladesh?

4.         Distinguish between short run consumption function & long run consumption function? If MPC = 0.8, what will be the value of multiplier?

5.         What is crowding our effect in what situation there occurs a complete crowding out and when economy does not face any crowding out even after increase in government expenditure?

6.         What are the determinants of Aggregate supply? Explain the shape of AS curve in the Short run and long run.

7.         Write an arbitrary consumption function and draw a diagram from that equation.

Part—B Broad Questions

(Answer any five questions)

Marks—10×4=40

8.         (a) Contrast between GDP at market price and GDP at factor cost.

            (b) You have given the following data:

Consumption                                                890

Government expenditure                350

Depreciation                                     300

Investment                                         500

Corporate retained earnings           225

Indirect business taxes                    110

Net foreign factor income               110

Net export                                         200

Transfer payment                             150

Personal tax                                        50

            Req. : Find GDP, GNP, NI and PI

9. (a) Determine rate of interest and output by commodity and money market equilibrium.

   (b) Show the effectiveness of fiscal and monetary policy in three region IS-LM model.

10. (a) What are the problems of double counting and transfer payment involved in the estimation of GNP and how to get rid of them?

      (b) Briefly describe the law of Walras.

      (c) How do you different between GOP at market price and GDP at factor cost?

11. (a) Assume a hypothetical closed economy with the following information:

            Demand for money = 20y-5i

            Real money supply = 10,000

            Investment = 100-0.25i

            Consumption = 100 +0.75y

Government expenditure = 300

(i)                Derive the IS and LM equation. Also find out the equilibrium level of income and interest rate.

(ii)             How are the equilibrium income and interest rate affected when income responsiveness of the demand for money rises 20 to 30?

(iii)           Find what happens to the IS curve, when the value of MPC decreases 0.75 to 0.65.

(iv)           Find what happens to the LM curve, when interest sensitivity of demand for money increase 5 to 10.

      (b) What is money? Point out the function of money.

12. (a) Prove that MPC+MPS=1

      (b) What is velocity of money? Discuss different types of demand for money.

      (c) Why AD is downward sloping?

13.       Write short notes on (any five):—

            (a) Commodity market;

            (b) Cost push inflation;

            (c) Business cycle;

            (d) Budget surplus;

            (e) Balance of payment;

            (f) Foreign Exchange Market;

            (g) Consumer Price Index (CPI).