1 Macroeconomics and Business Environment :Section-E Evaluation Component-1: QUIZ Max. Marks: 20 Duration: 60 min.

Instructions: Tick mark the correct option(s) in the sheet itself. In the given space after each question write your explanation. Talking, copying, or peeping into others sheet will lead u towards zero marks. All the MCQs carry 0.5 marks and all the numerical are of 3 marks each.
1. Which of the a. b. c. d. following is a final good or service? Flowers bought at the market by a florist Meat bought by a restaurant Fertilizer purchased by a farm supplier Diesel fuel bought for a delivery truck e. A haircut paid for by a student

1. GDP per head may be an imperfect measure of economic welfare because it excludes _________ a. the value of leisure b. externalities c. untraded goods d. changes in the distribution of income all are correct 1. The equation C=20+0.9Yd predicts that consumption is a) 90 when disposable income is 100 b) 100 when disposable is 90 c) 110 when disposable income is 100 or d) 180 when disposable income is 200 1. Which of the following statement is not true a. Household sector includes consumers and labour both b. Consumption is also a part injection in the income stream c. Investment and Exports are injections in the income stream d. Financial sector reinvests the savings of households in firms either by advancing loans or purchasing equity e. None of the above 2. From the following given table calculate the blank columns. Household Consumption (C) 176 263 384 514 722 967 754 427 624 271 091 940 Househ old Saving (S) 4778 12433 7230 6878 5072 1462 Marginal propensity to consume (%) (MPC) 0.918847 1.044856 1.002722 1.008766 1.014903 Marginal propensity to save (%) (MPS) 0.081153 -0.04486 -0.00272 -0.00877 -0.0149

Year 1990 1993 1996 1999 2002 2005

Disposable Income (Yd) 181 275 391 521 727 969 532 860 854 149 163 402

Based on the information given in the Table below answer the questions 6-8
Items in Rs.Crores Private final consumption expenditure Government final consumption 2006-07 (current prices) 2312105 427007 2007-08 (current prices) 2607584 477697 2006-07 (1999-2000 prices) 1826490 306420 2007-08 (1999-2000 prices) 1977876 327747

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expenditure Gross fixed capital formation Change in stocks Valuables Exports imports discrepancies Subsidies less indirect taxes depreciation Gross National product at factor cost 1346501 96103 49709 915674 1040797 39508 355747 492313 3760285 1598078 109321 59211 1005065 1151739 7930 409494 434468 4281795 954350 64091 38091 641228 770961 57663 253062 314661 2845156 1085618 68541 43404 689636 830006 35950 275905 341679 3109361

3. Calculate the GDP at market price and at factor cost for the year 2006-07 and 2007-08 in current and base year prices from the expenditure method. 4. Calculate the difference between GDP and GNP. What is this difference known as? 5. Calculate the GDP Deflator for the two years and the inflation rate in 2007-08 Answer Table.
Items in Rs.Crores I. GDP market Price=1+2+3+4+5+67+8 II. GDP factor cost= I-9 2006-07 (current prices) 4145810 3790063 2007-08 (current prices) 4713147 4303653 2006-07 (1999-2000 prices) 3117372 2864310 2007-08 (1999-2000 prices) 3398766 3122861

III. National Income= NNP at 3267972 3847327 2530495 2767682 factor cost= 11-10 IV. Net factor Income from -29778 -21858 -19154 -13500 Abroad V. GDP Deflator 132.23 137.81 VI. Inflation 4.22 VII.Gross National product at 3760285 4281795 2845156 3109361 factor cost 1. If the inflation rate, as measured by the CPI, over the past year was 5%, a basket of goods and services that cost _____ a year ago would be equivalent to _______ at the current price level. a. b. c. d. $200,000, $210,000 $150,000, $155,000 $50,000, $55,000 $200,000, $201,000

1. Calculate the multipliers value if MPC= 0.92 and 0.75 and calculate the value of multiplier if MPS=0.78. How do you interpret the multiplier values? Ans: higher the mpc higher the multiplier and higher the mps lower the multiplier. When mpc=0.92 multiplier=12.5, when mpc=0.75, multiplier=4 and when mps=0.78 multiplier =1.28 2. Value of the investment multiplier will depend on which of the following? a. Higher the level of Autonomous Consumption higher the value of multiplier b. Higher the level of autonomous investment, higher the multiplier c. Higher the level of mpc and autonomous investment higher the value of multiplier d. Higher the level of savings, higher the level of investment multiplier 1. Which of the following is / are true? 2

3 a. Interest income on bonds, securities are not included in national income but in personal income b. Indirect taxes are not included in national income but direct taxes are not deducted c. Household work, black market activities and and social work is not included in national income accounting because they are not transacted through markets d. Expenditure on Intermediate goods and transfer payments are included in the national income accounting 1. Find out the true statement from the following: a. Micro economist focus on the economy as a whole whereas macroeconomist holds total income as constant.
b. Macroeconomist spend much time analyzing how total income changes, and how changes in income cause changes in other modes of economic behavior, whereas microeconomists spend a great deal of time and energy investigating how people form their expectations and change them over time. c. Microeconomists consider the possibility that decision makers might change the quantities they produce before they change the prices they charge, whereas macroeconomists don't worry much about how decision makers form their expectations. d. Microeconomists as well as macroeconomists both assume that economic adjustment occurs first through prices that change to balance supply and demand

1. A backward shift in the aggregate demand curve of the world economy, according to Rich Miller is taking place because of which of the following factors? a. Declining consumer spending and wealth, rising unemployment and tightening credit b. Despite interest rate cuts investments are not increasing due to the weakening of the financial systems c. Ripple effect created through shaky stock markets and stricter borrowing norms imposed on household lending d. Slowing down of US and European economies has affected the exports demand for emerging markets like China India and others. 1. Which of the following statements are true: a. Classical economists relied more on demand side of the economy whereas Keynesians emphasize more on the supply side and monetarists believe money supply can only bring equilibrium in the economy b. Classical economist followed the says law of demand, while Keynesians stressed more on investment multiplier by government spending and monetarist stressed more on interest rate mechanisms. c. Classical economist believed that supply creates its own demand, while Keynesians believed that investment multiplier is more important to increase aggregate demand while monetarist believed in the effectiveness of monetary policy d. Classical economist and Keynesian both believed that expectation plays an important role for the macroeconomic equilibrium while monetarists believed in the strong financial systems.

All the MCQs carry 0.5 marks and all the numerical are of 3 marks each.
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