Name of subject-in-charge(s): ATUL AGRAWAL
Paper (Subject Name): MACRO-ECONOMICS
Paper Code:214 BCOM 106
Terminal Test March 2024
BCOM Semester-II
Paper Code: 888106 Time: 2 ½
Hours
Paper Title: MACROECONOMICS
Max. Marks: 60 Marks
(NOTE: INFLUENCING EVALUATOR BY GIVING NAMES, SYMBOLS ETC. IN
ANSWER BOOK WOULD BE TREATED AS UFMS)
PART A
1. B 2. B 3. (B) 4. (B) 5. (B) 6. (A) 7. (A) 8. (D) 9. (C) 10. (A)
11. 12. (D) 13. (C) 14. (A) 15. (B) 16. 17. (A) 18. 19.(D) 20. (B)
(C) (D) (C)
21. 22. (D) 23. (C) 24. (C) 25. (C) 26. (B) 27. (D) 28. 29.(A) 30. (D)
(C) (C)
Select the most appropriate answer (10 X 1)
1. In an open economy where government spending was $30 billion, consumption was $70
billion, taxes were $20 billion, and GDP was $100 billion this year, investment spending
was $10 billion. As a result, there was:
a) net capital inflow of $10 billion. b) net capital outflow of $10 billion.
c) net capital inflow of $20 billion. d) net capital outflow of $20 billion.
2. If the marginal propensity to save (MPS) is small, it will
a) make the spending multiplier smaller. b) make the spending multiplier larger.
c) not affect the value of the spending multiplier. d) increase the interest rate.
3. Alice’s disposable income increases by $1000, and she spends $600 of it. Alice’s
a) MPS is 0.4 and she saves $400. b) MPC is 0.4 and she saves $400.
c) MPS is 0.4 and she saves $600. d) MPC is 0.6 and she consumes $400.
4. Aggregate demand will shift to the right, if:
a) the aggregate price level increases. b) government purchases increases.
c) there is an increase in taxes. d) there is a decrease in the money supply.
5. A movement from point C on AD2 to point A on AD1 may have been the result of
a) an increase in investment demand due to optimistic GDP forecasts.
b) a decrease in investment due to pessimistic GDP forecasts.
c) decreases in the taxes paid by businesses.
d) lower interest rates.
6. In the long run, the aggregate price level has:
a) no effect on the quantity of aggregate output.
b) a positive effect on the quantity of aggregate output.
c) a negative effect on the quantity of aggregate output.
d) an impact on aggregate output but no impact on employment.
7. If the short-run macroeconomic equilibrium is _________ of the economy's potential
output, then there is a(n) ________ and the aggregate price level is expected to ________.
a) to the right; inflationary gap; rise
b) to the right; recessionary gap; rise
c) to the left; inflationary gap; fall
d) to the left; recessionary gap; fall
8. If the price level rises in the figure below, which will take place?
a) None of the answer choices provided will take place.
b) AD curve will shift to the left.
c) SRAS curve will shift to the right.
d) SRAS curve will shift to the left
9. Which would likely cause the short-run aggregate supply curve to shift to the left?
a) decrease in consumer spending
b) decrease in the price of imported oil
c) increase in the price of imported oil
d) increase in consumer spending
10. Hyperinflation refers to
a) Continuous price rise
b) Steep price rise
c) Decrease in price
d) None of these
[Link] refers to
a) Increase in price b) Decrease in price
c) steep increase in price d) slow increase in price
12. Components of Aggregate demand are
a) Consumption b) Investment
c) Government Expenditure d) All of these
13. Stagflation means
a) Inflation
b) Unemployment
c) Inflation and Unemployment
d) Inflation and employment
[Link] who are unskilled but jobs are available is called as
a) Frictional unemployment
b) Structural unemployment
c) Disguised Unemployment
d) None of these
15.Y = C + I + G +___
a. MX b. NX c. RX d. VX
[Link] Export means
a) Exports + Imports
b) Exports
c) Imports
d) Exports – Imports
17. A high marginal propensity to consume implieswhichof the following?
a) Asmallchangeinconsumptionwhenincomechanges
b) Ahighsavingsrate
c) Ahighmarginaltaxrate
d) An equilibrium level of income near fullemployment
e) Alowmarginalpropensitytosave
[Link] of the following changes will shift theinvestmentdemandcurvetotherightEXCEPT
a) adecreaseinthecorporateincometaxrate
b) an increase in the productivity of new capitalgoods
c) anincreaseintherealinterestrate
d) anincreasein corporateprofits
e) anincreasein realgrossdomesticproduct
[Link] a reduction in aggregate supply is followed byan increase in aggregate demand, which of
thefollowingwill definitelyoccur?
a) Outputwillincrease.
b) Outputwilldecrease.
c) Outputwillnotchange.
d) Thepricelevelwillincrease.
e) Thepricelevelwilldecrease.
[Link] of the following combinations of changesin government spending and taxes is
necessarilyexpansionary?
Government
Spending Taxes
a) Increase Increase
b) Increase Decrease
c) Decrease Notchange
d) Decrease Increase
e) Decrease Decrease
[Link] an economy consisting of households andbusinesses only, which of the following
isconsistent with the circular flow of income andproduction?
a) Households are producers of goods andservicesandconsumersofresources.
b) Households are users of resources, andbusinessesaresourcesofsaving.
c) Households are suppliers of resources andconsumersofgoodsand services.
d) Businesses are users of taxes, and householdsaresources oftaxes.
e) Businesses are suppliers of resources andconsumersofgoodsandservices.
[Link] of the following will lead to a decreaseina nation’smoneysupply?
a) Adecreasein incometaxrates
b) Adecreasein thediscountrate
c) An open market purchase of governmentsecuritiesby thecentral bank
d) Anincreasein reserverequirements
e) An increase in government expendituresongoods andservices
[Link] of the following will most likely lead to adecreasein inflationaryexpectations?
a) Adecreasein themarginalpropensitytosave
b) Adecreasein imports
c) Adecreaseinthemoneysupply
d) Anincreaseinthegovernmentbudgetdeficit
e) Anincreasein thepricesofrawmaterials
[Link] an upward-sloping short-run aggregatesupply curve, an increase in
governmentexpenditurewill most likely
a) reducethepricelevel
b) reduce the level of nominal gross domesticproduct
c) increaserealgrossdomesticproduct
d) shift the short-run aggregate supply curve totheright
e) shift both the aggregate demand curve andthe long-run aggregate supply curve to
theleft
[Link]-
runeffectsofanincreaseingovernmentexpenditures?
UnemploymentRate InflationRate RealGrossDomesticProduct
a) (A)Increase b) Increase c) Increase
d) (B)Increase e) Increase f) Decrease
g) (C)Decrease h) Increase i) Increase
j) (D)Decrease k) Decrease l) Increase
m) (E)Nochange n) Decrease o) Increase
26. An increase in the wage rate:
a) Will usually lead to more people employed
b) Will decrease total earnings of employees if the demand for labour is wage elastic
c) Is illegal in a free market
d) Will cause a shift in the demand for labour
27.A decrease in the supply of labour is likely to lead to:
a) A lower equilibrium wage and lower quantity of labour employed
b) A lower equilibrium wage and higher quantity of labour employed
c) A higher equilibrium wage and higher quantity of labour employed
d) A higher equilibrium wage and lower quantity of labour employed
[Link] means
A) GDP – depreciation B.) GDP + depreciation
C) NNP – depreciation D.) GNP – depreciation
29.“ Supply creates its own demand” is the idea of
A. JB Say B. Samuelson C) JM Keynes D) Milton Friedman
[Link] increase in which of the following wouldcause the aggregate demand curve to shift
totheleft?
a) Consumeroptimism
b) Population
c) Costofresources
d) Incometaxes
e) Netexports
PART B
Q 2) Write short notes on any TWO of the following: (2 x 5)
1. State the difference between Stagflation and Hyperinflation.
2. Explain the Circular flow of Income using four sector model.
3. Explain the value-added method of National Income calculation and precautions
involved in measuring the National Income.
4. Explain the different types of Unemployment prevalent in the economy.
5. What is Business Cycle? Explain through diagram.
6. What are the factors affect Investment function? Discuss.
Q 3) Answer any FOUR out of the following questions: (4 x 10)
1. Explain the National Income using Expenditure Method.
2. Discuss the Keynes theory of Four sector model.
3. Explain the reasons for Great Depression and how was it removed?
4. Why do economists use real GDP instead of nominal GDP to calculate economic
well- being.
5. Trace out the effect of autonomous expenditure on equilibrium output in simple
Keynesian model. What happens to equilibrium income if MPC rises or falls.
6. Explain the Accelerator Multiplier theory.
7. Differentiate between Residential Investment and Inventory Investment.
