Macro economics june 2021

1. Macro Economics
June 2021 Examination
1. Explain the Base and Majour Importance of Macro Economics (10 Marks)
Ans 1.
INTRODUCTION:
Macroeconomics is basically that branch of economics where the economy or economic
aspects are dealt with as a whole, in an aggregate, in toto. In other words, it doesn’t study
individual firms or industry rather studies the economic system as a whole. Mainly, the
aggregates are studied in Macroeconomics. These aggregates include National Income, Its
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2. 2. Explain the Two Sector Model of Economy with its Genesis & Circular Flow of
Income in 2 Sector Economy. (10 Marks)
Ans 2.
INTRODUCTION:
An economy is a territorial area or limits within which the activities of production,
distribution, consumption takes place. It is an area where the demand arises, and in order to
fulfill that demand, the production of goods and services happens. The concept of the
economy has been explained by economists in various ways; two sector model of the
economy is one of them where there exist only two sectors, i.e., Producer and the Household.
3.a. You are given the following data. Calculate GNP and GDP at factor cost. (5 Marks)
GNPMP 600
Indirect Taxes 50
Subsidies 30
NFIA 100
Depreciation 50
Transfer payments 15
Retained Earnings of Companies 25
Personal Taxes 15
Personal Savings 80
Ans 3a.
INTRODUCTION:

3. National income refers to the income-generating in the country within a single financial year.
It even includes all kinds of payments and expenditures on the part of citizens. Payments like
wages, rent, interest, and everything are included in that. It thus means the total money flow
in the economy.
3.b. Explain Various Assumptions of Classical Macro Economics Theory. (5 Marks) –
Ans 3b.
INTRODUCTION:
The classical theory of macroeconomics is fundamentally based on the idea of self-regulation
that the economy is self-regulating. According to this doctrine, the economy is either at or
quite near to the real GDP of the nation.
ASSUMPTIONS OF CLASSICAL MACROECONOMICS THEORY:
There are basically three assumptions which are taken by economists like Adam Smith while
drafting the Classical theory of Macro Economics: