Macro Economics Analysis and Policy External Correspondence Previous Year Question Paper Year 2006 : IInd Year

SECTION A’

Q. I. What is Consumption Function ? Differentiate between marginal propensity to consume and the average propensity to consume. 10, 10
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Q. 2. Distinguish between autonomous investment and induced investment. What factors influence the decision of the firm with regard to investment? 8, 12
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Q. 3. (a) Write a note on paradox of thrift.

(b) Explain the concept of investment multiplier. What conditions are required for working of multiplier in underdeveloped countries? 6, 14
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Q. 4. Discuss Keynes’ theory of demand for money. 20
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Q. 5. (a) What is inflationary gap ? What measures would you suggest to control this gap ?

(b) “Inflation is unjust, deflation is inexpedient, of the two deflation is worse.” Explain.
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SECTION ‘B’

Q. 6. Prepare an imaginary balance sheet of a commercial bank. Explain how a commercial bank reconciles the objectives of liquidity and profitability? 10, 10
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Q. 7. What are the objectives of credit control in an economy? Discuss the merits of qualitative methods of credit control. 10, 10
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Q. 8. Define incidence of a tax. Explain the incidence of :
(a) Unit tax and

(b) Lump-sum tax

under monopoly, bringing out the role of demand and supply elasticities. 20
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Q. 9. Discuss the objectives of Fiscal Policy in India. What are its limitations? 20
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Q. 10. Write notes on:
(a) Recommendations of the eleventh Finance Commission;

(b) Characteristics of a good tax system. 10, 10
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