FYUG Even Semester Exam, 2025 ECONOMICS: ECOIDC-151
UNIT-I
Question 1 (Answer any four) 1 x 4 = 4 Marks
(a) Define circular flow.
Circular flow of income is an economic model that depicts how money and goods/services move through different sectors of the economy in a continuous loop.
(b) Who is regarded as the father of macroeconomics?
John Maynard Keynes is regarded as the father of macroeconomics
.(c) What do you mean by four-sector economy?
A four-sector economy consists of Households, Firms, Government, and the Foreign Sector (rest of the world)
.(d) Give two examples of flow variable.
- Income
- Investment
(e) Who is the author of "The General Theory of Employment, Interest and Money"?
John Maynard Keynes
.Question 2 (Answer any one) 2 Marks
- Fallacy of Composition: What is true for an individual may not be true for the whole economy .
- Heterogeneity of Units: Aggregates may hide disparities within different sectors of the economy .
| Basis | Stock | Flow |
|---|---|---|
| Meaning | Measured at a specific point in time. | Measured over a period of time. |
| Example | Wealth, Capital. | Income, Investment. |
Question 3 (Answer any one) 8 Marks
Differences: Microeconomics studies individual units like firms or consumers, while Macroeconomics studies the economy as a whole (aggregates like GDP and inflation)
.Interdependence: Macroeconomic trends (like interest rates) affect microeconomic decisions (firm investment), and microeconomic behaviors (household savings) determine macroeconomic outcomes (total national savings)
.UNIT-II
Question 4 (Answer any four) 1 x 4 = 4 Marks
(a) Define national income.
National income is the total value of all final goods and services produced by a country's residents in a given financial year.
(b) Problem of double counting: Counting the value of a product more than once (at both intermediate and final stages) during national income estimation
.(c) Net indirect tax: The difference between Indirect Taxes and Subsidies (NIT = Indirect Tax - Subsidies)
.(d) Disposable income: The amount of money that households have available for spending and saving after income taxes have been accounted for
.Question 6 (Answer any one) 8 Marks
In a two-sector economy consisting of Households and Firms:
- Households provide factor services (land, labor, capital) to firms .
- Firms provide goods and services to households .
- Money flows as factor payments from firms to households and as consumption expenditure from households back to firms .
UNIT-III
Question 7 (Answer any four) 1 x 4 = 4 Marks
(b) "Supply creates its own demand." Who said this? J.B. Say.
(d) Fisher's equation of exchange: MV = PT
.(e) Invisible hand: Adam Smith's concept describing the self-regulating nature of the marketplace
.Question 9 (Answer any one) 8 Marks
The classical theory assumes that the economy always operates at full employment in the long run
. It relies on Say's Law and wage-price flexibility to correct any temporary unemployment.UNIT-IV
Question 10 (Answer any four) 1 x 4 = 4 Marks
(a) Effective demand: The point where aggregate demand equals aggregate supply in the Keynesian model
.(b) Inverse relationship between MPC and multiplier: False. There is a direct relationship between MPC and the multiplier.
(e) If MPS = 0.75, find Multiplier (K): K = 1 / MPS = 1 / 0.75 = 1.33
.Question 12 (Answer any one) 8 Marks
Keynes identified three motives for holding money:
- Transaction Motive: For day-to-day transactions .
- Precautionary Motive: For unforeseen contingencies .
- Speculative Motive: To take advantage of future changes in interest rates .
UNIT-V
Question 15 (Answer any one) 8 Marks
- Bank Rate: The rate at which RBI lends to commercial banks . [span_35](start_span)
- Open Market Operations (OMO): Buying and selling of government securities [span_35](end_span).
- Cash Reserve Ratio (CRR): The percentage of deposits banks must keep with the RBI .
- Statutory Liquidity Ratio (SLR): The percentage of deposits banks must maintain in liquid assets .