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University of Punjab PU Lahore M.A / M.SC. Economics Part 1 Past Paper of Macro Economics Annual Examination 2010

University of Punjab PU Lahore M.A / M.SC.  Economics  Part 1 Past Paper of Macro Economics Annual Examination 2010

1. Suppose an economy is described by the following set of equations:

a) Find the equilibrium level of National Income and consumption.

b) Find Budget Surplus and balance of trade.

c) Find the value of trade multiplier.

d) How much change in G is required to take income to 1200.

2. a) Derive mathematically or diagrammatically the aggregate demand curve from IS – LM framework in a closed economy.

b) Discuss the impact of fiscal and monetary expansion through aggregate demand on output and prices.

3. a) How the Permanent Income hypothesis of consumption resolves the seemingly contradictory prices of evidence regarding the consumption behavior?

b) Critically evaluate the relative income hypothesis of consumption.

4. a) How does the real business cycle theory explain the role of external shocks in Producing Cyclical fluctuations?

b) What is neutrality of money thesis?

5. a) What is Okun’s law?  Is it possible for the GDP gap to be positive as well as negative? Explain.

b) How is Okun’s law incorporated into the expectations – augmented Philip’s curve?

6. a) How do monetary and fiscal policy differ in a situation of liquidity trap?

b) What are the two lags in the effect of monetary policy?

7. Write short notes on any three of the following:

(a) Crowding out hypothesis.

(b) Stock and flow variables,

(c) Rules versus discretion,

(d) Natural Rate of unemployment.

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