POKHARA UNIVERSITY

Level: Bachelor                                  Semester: Spring                                   Year: 2023

Programme: BBA/BI/TT/BCIS/BHCM/BHM                                              Full Marks: 100

Course: Introductory Macroeconomics                                                     Pass Marks: 45

Time: 3 hrs.

Candidates are required to answer in their own words as far as practicable The figures in the margin indicate full marks.

                                                                Section "A"

                                                Very Short Answer Questions

                Attempt all the questions. [10×2] 

1. What are injection and leakages in a circular flow diagram of a four sector open economy? 2. Mention basic issues in macroeconomics. 

3. Give a brief concept of nominal GDP.

4. Show the relationship between supply and demand for good according to the classical theory of employment.

5. How does a Keynesian approach to the theory of employment resist the wage cut policy of the classical theory of employment?

6. Given apc = mpc = 0.5. Calculate the value of investment multiplier.

7. Distinguish between the government expenditure multiplier and tax multiplier based on GDP.

8. From the past five years data, which year shows the highest rate of inflation?

       Year:                         2017         2018          2019         2020          2021

       GDP deflator             100           106            113           121             129

9. When is a deflationary gap in the business cycle?

10. Mention three types of budgetary policies.

Answers: https://onlinenotesnepal.com/spring-2023-introductorymacroeconomics-very-short-questions

                                                                   Section "B"

                                                   Descriptive Answer Questions

                     Attempt any six questions. [6×10] 

11. Point out the subject matter of macroeconomics and explain their importance in any economy.

12. Compute GDP, GNPat MP, GNPat FC, NNPat MP and NI from the following data: 

Heads	(Rs. in billions)
Rent and Royalties	950
Compensation to the employees	750
Consumption of fixed capital	200
Mixed Income from Self-employment	225
Interest	630
Corporate Tax	690
Dividend	545
Undistributed profit	(70)
Net Exports	320
Net Factor Income from Abroad	300
Net Indirect Tax	150

13. How employment and output are determined through aggregate demand function and aggregate supply function. Explain. 

14. Explain the main causes of cost inflation. As expected, the cost-push inflation is more dangerous than demand-pull inflation. Clarify.

15. Explain the income determined model in a four-sector economy. 

16. Suppose that the structural equation for the product market and money market in Nepalese economy for 2022 were given as follows: 

C=200+0.75(Y-T), T=80+0.2Y, I=200-2000i, G= Rs 300 billion,Mt= 0.5Y, Msp= 200-2500i, Ms= Rs 400 billion.

      a) Compute the national income and rate of interest at equilibrium. 

       b) It is realized that the Nepalese economy is trapped in an economic recession. In order to remove economic recession, Nepal Rastra Bank has followed expansionary monetary policy and increased money supply by Rs 200 million. Similarly, the Government of Nepal has also implemented expansionary fiscal policy and increased its expenditure by Rs 200 billion. Compute the new income and rate of interest at equilibrium.

17. Define fiscal policy. Explain its objectives.

                                                              Section "C”

                                                          Case Analysis

18. Read the situation given below and answer the questions that follow. [20] 

ADB Estimates Nepal's Economy to Moderate in FY2023

KATHMANDU, NEPAL (4 April 2023)-Nepal's gross domestic product (GDP) growth is projected to slow largely due to tight monetary policy, slackened domestic demand, the unwinding of COVID-19 stimulus, and persistent global headwinds.

There are downside risks to the outlook such as a global downturn hitting Nepal's tourism and remittance receipts," said ADB Country Director for Nepal Arnaud Cauchois. "Accelerating capital budget spending through focused investment planning, financial management, and project readiness will help spur Nepal's economic growth over the years."

Agriculture growth will likely moderate to 2.0% in FY2023, down from 2.3% in FY2022. There has been an increase in paddy output, but winter rainfall has been scanty and will likely affect winter crop yield and overall agriculture output. Industry growth will likely decelerate as higher interest rates, import restriction measures, slowdown in domestic consumption, and a dampened external demand have affected manufacturing and construction subsectors. Services growth will also moderate to 4.4% from 5.9% in FY2022. Credit control measures and hike in interest rates have slowed down real estate, wholesale, and retail trade activities. While tourism growth has been strong, international tourist arrivals are still at half of the pre-pandemic level. 

The country's inflation will edge up to 7.4% in FY2023 from 6.3% in FY2022, despite the tight monetary policy reigning in demand. Inflation is expected to decelerate to 6.2% in FY2024 assuming a normal harvest, subdued oil prices, and a decline in inflation in India.

a) Make clear the trend of GDP Growth Forecast of Nepal from 2022 to 2024.

b) Explain the factors that influenced the fall in real GDP in 2023 and draw a suitable diagram with the help of change in the AD and AS approach.

c) Which type of monetary policy was implemented for what purpose and how was it effective in the economy? Analyse. 

d) Is there any possibility that Nepal will regain economic growth in the years to come? Present your opinions based on the article.