CHRIST UNIVERSITY, BANGALORE-560029

II BA End Semester Examination March 2011

Code: ECO231
Sub:Principles of Macro Economics

Max. Marks: 100

Duration: 3 Hrs
SECTION - A

Answer any TEN Questions.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

10 x 2 = 20

Define GNP.
What is per capita income? Give the formula for its calculation.
What is psychological law of consumption?
Define investment function.
Find out the value of multiplier giver that MPC is 0.80.
What is Laffer curve?
What is supply side economics?
Distinguish between transaction and precautionary motive for holding money.
What are the motives for holding money, according to Keynes?
Distinguish between trough and peak..
What is cost push inflation?
Distinguish between repo and reverse repo rates
SECTION - B

Answer any SIX Questions.

6 x 8 = 48

13. Explain the effect of saving and investment on circular flow of income in a two sector
economy.
14. Discuss the conditions under which the circular flow of income will remain constant.
15. Define Multiplier. The govt has made an additional investment of Rs.1000 crores. Calculate
the increase in income when MPC is 50%, 75% and 80%.
16. Explain the factors influencing the level of investment in the economy?
17. Discuss the main propositions of monetarism.
18. What is liquidity trap?
19. Discuss the effect of inflation on incomes and wealth distribution. Explain why it hurts most
the weaker sections of the society.
20. Explain the concept of cost push inflation. Discuss its major variants.
SECTION - C
Answer any TWO Questions.

2 x 16 = 32

21. How does the addition of the govt sector to the two sector model change the structure of the
circular flows?
22. What is consumption function? Explain the objective and subjective factors which determine
consumption expenditure in the economy.
23. What is monetarism? Describe the essence of monetarism and its assumptions
24. Explain the effects of inflation on production, consumption and distribution.