What is the marginal propensity to import when M = 60 + 0.06Y? What is the relationship between the marginal propensity to import and the aggregate demand function?
Marginal propensity to import is the fraction of additional income spent on imports.
It is given that M = 60 + 0.06Y
Therefore, marginal propensity to import (m) = 0.06. It reflects induced imports; that is the part of the total imports, which is a function of income. Since the marginal propensity to import negatively affects the aggregate demand function, when income increases the aggregate demand decreases. This is because the additional income is spent on foreign goods and not on domestic products.
Differentiate between devaluation and depreciation.
What is a barter system? What are its drawbacks?
Write down some of the limitations of using GDP as an index of welfare of a country.
Explain the relation between government deficit and government debt.
From the following data, calculate Personal Income and Personal Disposable Income.
Rs (crore)
(a) Net Domestic Product at factor cost 8,000
(b) Net Factor Income from abroad 200
(c) Undisbursed Profit 1,000
(d) Corporate Tax 500
(e) Interest Received by Households 1,500
(f) Interest Paid by Households 1,200
(g) Transfer Income 300
(h) Personal Tax 500
Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.
Give the relationship between the revenue deficit and the fiscal deficit.
Discuss the issue of deficit reduction.
Are fiscal deficits inflationary?
What is the difference between ex ante investment and ex post investment?
Would the central bank need to intervene in a managed floating system? Explain why.
We suppose that C = 70 + 0.70Y D, I = 90, G = 100, T = 0.10Y (a) Find the equilibrium income. (b) What are tax revenues at equilibrium income? Does the government have a balanced budget?
The value of the nominal GNP of an economy was Rs 2,500 crores in a particular year. The value of GNP of that country during the same year, evaluated at the prices of same base year, was Rs 3,000 crores. Calculate the value of the GNP deflator of the year in percentage terms. Has the price level risen between the base year and the year under consideration?
Distinguish between stock and flow. Between net investment and capital which is a stock and which is a flow? Compare net investment and capital with flow of water into a tank.
Differentiate between balance of trade and current account balance.
Differentiate between devaluation and depreciation.
Suppose the exchange rate between the Rupee and the dollar was Rs. 30=1$ in the year 2010. Suppose the prices have doubled in India over 20 years while they have remained fixed in USA. What, according to the purchasing power parity theory will be the exchange rate between dollar and rupee in the year 2030.
Suppose C = 100 + 0.75Y D, I = 500, G = 750, taxes are 20 per cent of income, X = 150, M = 100 + 0.2Y . Calculate equilibrium income, the budget deficit or surplus and the trade deficit or surplus.
Explain the relation between government deficit and government debt.
Describe the four major sectors in an economy according to the macroeconomic point of view.