ST.

XAVIER’S COLLEGE
KOLKATA
(AUTONOMOUS)

2nd SEMESTER EXAMINATION

JUNE – JULY 2021
B.A./B.Sc.
Tuesday, June 15, 2021
HECCR2031T 12:00 Noon to 3:00 PM
INTRODUCTORY 3 hours
MACROECONOMICS Full Marks : 80

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: heccr2031t2021@sxccal.edu
 In the subject field of your email, please write “Answer Script – Roll No, Paper Code” (example:
“Answer Script – 147, HPHCR2032T”).
 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 4 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
[40 marks]
1. Answer ANY TWO: [2×15 =30]
(a) The following information are given for an economy:
GNP ₹4800
Gross Investment ₹800
Net Investment ₹300
Consumption ₹3000
Govt. Purchase of goods & Services ₹960
National Income ₹3850
Wages & Salaries ₹2920
Proprietor’s income & Rental Income ₹320
Dividends ₹100
Net Interest ₹260
Govt. Budget Surplus ₹30
Social Insurance Contribution ₹380
Personal Interest Income ₹380
Govt. & Business Transfer ₹520
Personal Tax & Non-tax payments ₹600

Calculate
(i) NNP
(ii) Net Export
(iii) Indirect taxes
(iv) Corporate profits
(v) Taxes – Transfer
(vi) Personal Income
(vii) Personal disposable income. [2+2+2+3+2+3+1]

(b) (i) What do you mean by inflation tax? If inflation rises from 6% to 8%, what
happens to real and nominal interest rates according to the Fisher effect?
(ii) Explain the various social costs associated with inflation in an economy. [(2+3) +10]

(c) (i) Derive the money multiplier. What is its economic significance?
(ii) What are the instruments adopted by central bank to control the money supply
in an economy? Explain in your own words how these instruments work. [(4+3) + (3+5)]

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2. Answer ANY ONE: [1×10=10)]
(a) State whether the following are true/false and give reasons for your answer. [2.5 × 4=10]
(i) For a country where GNP exceeds GDP we find that the residents of that
country are earning less abroad than the foreigners are earning in that
country.
(ii) For a particular firm wages and salaries paid to the employees are always a
part of its value added.
(iii) In computing GDP by the value added method, firms producing intermediate
goods should be disregarded.
(iv) In order to measure national income, we consider income from various types
of employment except income from self-employment.

(b) What do you mean by hyperinflation? What are reasons behind hyperinflation?
Explain in your own words how hyperinflation influences the economy. [2+4+4= 10]

MODULE-2
[40 marks]
3. Answer ANY TWO: [2×15=30]
(a) Consider the simple Keynesian model where
C = 50 + 0.8(Y-T)
I̅ = 70
G = 200
T = 100 + 0.2Y
(i) Calculate the equilibrium output and show it in a diagram. [3+3]
(ii) What is the value of the multiplier for autonomous expenditure? [3]
(iii) Give the economic interpretation of the multiplier. [6]

(b) Consider the IS-LM model where

C = 0.8(1-t)Y
t = 0.25
I = 900 – 50r
G = 800
L = 0.25Y – 62.5i
= 500
It is expected that the price level will not change in the short run.
(i) Compute the equilibrium output and rate of interest. [5]
(ii) An investment subsidy increases investment by 10 units. Find the change in the
equilibrium output and the change in investment. [5]
(iii) If the investment subsidy is removed but the tax rate is cut to 0.20, what will be
the change in the equilibrium output and the change in investment? [5]

(c) Trace out the short run effects of an increase in money supply on equilibrium output
using an IS-LM model, supporting your answer with a suitable diagram. [15]

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4. Answer ANY ONE: [10]
(a) Analyze why an autonomous increase in saving may cause a reduction in the
equilibrium output and saving in the Keynesian model.
(b) Do you think that expected deflation might pose an obstacle to the recovery of an
economy after a negative demand shock? Analyze in the IS-LM framework.

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