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Solved 2025: FYUG Even Semester Exam, 2025 COMMERCE (2nd Semester) Macroeconomics (COMDSM-151)

Subject: Commerce

Paper Code: COMDSM-151

Full Marks: 70

Time: 3 Hours

UNIT-I

Question 1 (Answer any two) 2 x 2 = 4

(a) Define macroeconomics.

Solution:

Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole. It focuses on aggregate changes such as unemployment, national income, GDP, and inflation.

(b) State the meaning of static economic analysis.

Solution: Static economic analysis refers to the study of economic variables at a particular point in time or in a state of equilibrium, where the element of time and the process of change are not considered.

(c) Mention two difficulties of estimating national income.

Solution:

  • Double Counting: The difficulty in distinguishing between final goods and intermediate goods.
  • Non-monetized Sector: In developing economies, many goods and services are exchanged through barter or consumed at home without entering the market.

    • Question 2 (Answer any one) 10

    (a) Define variable. Make a distinction of:

    (i) Dependent and Independent variable: An independent variable is the cause or input that changes on its own, while a dependent variable is the effect or outcome that changes in response to the independent variable

    .

    (ii) Endogenous and Exogenous variable: Endogenous variables are determined within the economic model (e.g., price in a supply-demand model), whereas exogenous variables are determined outside the model (e.g., government policy or weather)

    .

    (iii) Stock and Flow variable: A stock variable is measured at a specific point in time (e.g., total wealth), while a flow variable is measured over a period of time (e.g., annual income)

    .

    OR

    (b) Define national income. Write notes on GNP, NNP and NDP at factor cost and disposable income.

    Solution: National Income is the total value of all final goods and services produced by a country in a year

    .
  • GNP (Gross National Product): Total market value of final goods produced by residents of a country, including net income from abroad.
  • NNP (Net National Product): GNP minus Depreciation.
  • NDP at Factor Cost: The total income earned by factors of production within domestic boundaries, calculated as NDP at market price minus indirect taxes plus subsidies.
  • Disposable Income: The amount of money households have available for spending and saving after income taxes have been accounted for.

    • UNIT-II

    Question 3 (Answer any two) 2 x 2 = 4

    (a) Mention Fisher's equation of exchange.

    Solution:

    MV = PT

    Where M = Money Supply, V = Velocity of Money, P = Price Level, and T = Volume of Transactions

    .

    (b) What do you mean by supply of money?

    Solution: Money supply refers to the total stock of currency (coins and notes) and demand deposits held by the public at a specific point in time

    .

    (c) Define Government budget.

    Solution: A government budget is an annual financial statement showing item-wise estimates of expected revenue and anticipated expenditure during a fiscal year

    .

    Question 4 (Answer any one) 10

    (a) Define money. Discuss the various functions of money.

    Solution: Money is anything that is generally accepted as a medium of exchange and a measure of value

    .

    Primary Functions: Medium of Exchange and Measure of Value

    .

    Secondary Functions: Standard of Deferred Payments and Store of Value

    .

    OR

    (b) What is deflation? Discuss the effects of deflation on the economy.

    Solution: Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit

    .

    Effects: Reduced consumer spending (as people wait for lower prices), increased real value of debt, and potential business failures leading to unemployment

    .

    UNIT-III

    Question 5 (Answer any two) 2 x 2 = 4

    (a) What is Phillips Curve?

    Solution: The Phillips Curve is an economic concept stating that inflation and unemployment have a stable and inverse relationship

    .

    (b) What is stagflation?

    Solution: Stagflation is an economic condition characterized by slow economic growth and relatively high unemployment accompanied by rising prices (inflation)

    .

    Question 6 (Answer any one) 10

    (a) What is inflation? Discuss the cost-push and demand-pull theory of inflation.

    Solution: Inflation is a persistent increase in the general price level of goods and services

    .
  • Demand-Pull Inflation: Occurs when the aggregate demand for goods and services exceeds aggregate supply ("too much money chasing too few goods").
  • Cost-Push Inflation: Occurs when the costs of production (like wages or raw materials) increase, causing producers to raise prices to maintain profit margins.

    • OR

    (b) What is monetary policy? Discuss the various objectives of monetary policy.

    Solution: Monetary policy is the process by which a central bank manages the supply of money and interest rates to achieve macroeconomic goals

    .

    Objectives: Price stability, full employment, economic growth, and stability of foreign exchange rates

    .

    UNIT-IV

    Question 7 (Answer any two) 2 x 2 = 4

    (a) Define aggregate demand.

    Solution: Aggregate demand is the total amount of finished goods and services that consumers, businesses, government, and foreigners want to buy at a given price level

    .

    (c) Define marginal efficiency of capital.

    Solution: Marginal Efficiency of Capital (MEC) is the highest rate of return expected from an additional unit of a capital asset

    .

    Question 8 (Answer any one) 10

    (b) Define multiplier. Explain the working of multiplier along with its limitations.

    Solution: The investment multiplier refers to the ratio of a change in national income to the initial change in investment

    .
    k = 1 / (1 - MPC)

    Working: When investment increases, it generates income for others, who spend a portion of it (based on MPC), creating further income in successive rounds

    .

    Limitations: Availability of consumer goods, full employment level, and leakages like savings or imports

    .

    UNIT-V

    Question 9 (Answer any two) 2 x 2 = 4

    (a) What is involuntary unemployment?

    Solution: Involuntary unemployment occurs when people who are willing and able to work at the prevailing wage rate cannot find a job

    .

    (c) Mention the phases of trade cycle.

    Solution: The four phases are: Recovery, Prosperity (Boom), Recession, and Depression

    .

    Question 10 (Answer any one) 10

    (a) Discuss critically the Keynesian theory of employment.

    Solution: Keynes argued that employment depends on Effective Demand, which is the point where Aggregate Demand Price equals Aggregate Supply Price

    .

    Core Components: Consumption function, Investment function, and the role of the state in managing demand through fiscal policy

    .

    Exam Focus Enhancements

    Exam Tips

  • For Unit-I, always distinguish between Stock and Flow with examples like "Bank Balance" vs. "Monthly Salary".
  • In Keynesian theory questions, emphasize the importance of Effective Demand.

    • Important Formulas List

  • Fisher's Equation: MV = PT
  • Investment Multiplier: k = 1 / MPS or 1 / (1 - MPC)
  • NNP at Factor Cost = NNP at Market Price - Indirect Taxes + Subsidies

    • Common Mistakes

  • Confusing NDP with NNP—remember "D" stands for Domestic and "N" stands for National (which includes Net Factor Income from Abroad).
  • Forgetting that the Phillips Curve represents a short-run trade-off.
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