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
.