B.Com/BBA Macro economics Dec 2024

Description

Macro Economics

December 2024 Examination

 

 

Q1. Imagine you are the financial advisor for a small, closed economy that consists only of households and businesses, with no government or foreign trade. The households provide labor and capital to businesses, and in return, they receive wages and profits. The businesses use these inputs to produce goods and services, which are then sold back to the households. As a financial advisor, you need to analyse the two  sector model approach with hypothetical example.  (10 Marks)

Ans 1.

Introduction

The two-sector model in macroeconomics simplifies an economy into two primary entities: households and businesses. In a closed economy without government intervention or foreign trade, this model emphasizes the interdependence between these two sectors. Households provide factors of production—labor and capital—to businesses in exchange for wages and profits. In turn, businesses utilize these resources to produce goods and services, which households purchase, creating a continuous flow of income and output. Understanding this model is crucial for analyzing the dynamics of production, consumption, savings, and investment in a basic economic setup

 

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Q2. Enumerate the below  terms  – Gross  National Product and Net National Product. You  are given  the following data.  Calculate GNP  and  GDP  at factor  cost,  NNP  and NDP at factor  cost.   (10 Marks)

GNP (MP)	800
Indirect Taxes	60
Subsidies	40
NFIA	200
Depreciation	60
Transfer Payments	20
Retained Earnings of Components	30
Personal Taxes	15
Personal Saving	90

 

Ans 2.

Introduction

Macroeconomic indicators such as Gross National Product (GNP) and Net National Product (NNP) are essential for measuring an economy’s overall performance and well-being. These measures offer insights into the total income generated by a nation’s residents, including earnings from abroad (GNP) and the depreciation-adjusted income available for future use (NNP). Similarly, Gross Domestic Product (GDP) and Net Domestic Product (NDP) focus on domestic economic activities, highlighting the output produced within the geographical boundaries of a nati

 

 

 

Q3a. Classical Macroeconomic theory is based on various assumptions. You are required to elaborate on any four assumptions and explain it in your own words.  (5 Marks)

Ans 3a.

Introduction

Classical macroeconomic theory, a cornerstone of early economic thought, emphasizes self-regulating markets, efficient resource allocation, and the importance of supply in determining economic output. Rooted in the works of Adam Smith, David Ricardo, and John Stuart Mill, this theory is built on key assumptions about the behavior of markets, individuals, and governments. These assumptions lay the foundation for understanding how economies function and adjust without external

 

Q3b.“The multiplier effect is a fundamental concept in macroeconomics, playing a crucial role in understanding how changes in economic activities can influence the overall economy”. In context to the given context, explain the following terms Multipliers, static and dynamic multiplier.  (5 Marks)

Ans 3b

Introduction

The multiplier effect in macroeconomics illustrates how an initial change in spending, investment, or fiscal policy triggers a series of secondary economic activities, amplifying its impact on the overall economy. By understanding the mechanisms of multipliers, policymakers can estimate the ripple effects of their actions on income, output, and employment. The concepts of static and