This document contains 25 questions related to macroeconomics for an economics honors examination. The questions cover a range of macroeconomic topics including calculating national income and its components, determining GDP using different variables, consumption and savings rates, equilibrium GDP, factors that affect GDP, and monetary and fiscal policy topics such as inflation, interest rates, and price indices.

1. ECONOMICS HONOURS EXAMINATION
MACROECONOMICS
SOURAV SIR’S CLASSES
9836793076
1. Calculate Net National Disposable Income from the following data:
Items (Rs. in crore)
(i) National income 3,000
(ii) Saving of private corporate sector 30
(iii) Corporate tax 80
(iv) Current transfers from government administrative
departments
60
(v) Income from property and entrepreneurship accruing to the
government administrative departments 150
(vi) Current transfers from the rest of the world 50
(vii) Saving of non-departmental government enterprises 40
(viii) Net indirect taxes 250
(ix) Direct taxed paid by households 100
(x) Net factor income from abroad (–) 10
1. 2.. Find national income when GDPMP = Rs. 50,000, gross capital formation = Rs.
10,000, net capital formation = Rs. 8,000, capital loss = Rs. 6,000, and excise duty
paid to the Government = Rs. 4,000.
1. 3 Find out marginal propensity to consume and marginal propensity to save from
the following data:
Income
(Rs.)
Savings (Rs.)
100 60
200 100
4
Income Savin
g
Marginal Propensity
to Consume
Average
Propensity to
Consume0 – 20 – –
50 – 10 – –

2. 100 0 – –
150 30 – –
200 60 – –
5 An economy is in equilibrium. The economy’s consumption function is C = 100
+ 0.5Y where C is consumption expenditure and Y is national income. National
income is 1,000. Find out investment expenditure in the economy.
6 List thecapital inputs necessary to produceeach of the
following:
a. cars
b. high school educations
c. plane travel
d. fruits and vegetables
7 In the 1980s Japanese investors made significant direct
and portfolio investments in the United States. At the
time, many Americans were unhappy that this
investment was occurring.
a. In what way was it better for the United States to
receive this Japanese investment than not to receive
it?
b. In what way would it have been better still for
Americans to have done this investment?
8 A farmer sells wheat to a baker for $2. The baker uses
the wheat to make bread, which is sold for $3. What is
the totalcontribution of thesetransactions to GDP?
9 In the year 2001, the economy produces 100 loaves of
bread that sell for $2 each. In the year 2002, theeconomy
produces 200 loaves of bread that sell for $3 each.
Calculate nominal GDP, real GDP, and the GDP deflator
for each year. (Use2001 as the base year.) By what
percentage does each of these three statistics risefrom
one year to the next?
10 What components of GDP (if any) would each of the
following transactions affect? Explain.
a. A family buys a new refrigerator.
b. Aunt Jane buys a new house.
c. Ford sells a Thunderbird from its inventory.
d. You buy a pizza.
e. California repaves Highway 101.
f. Your parents buy a bottleof French wine.
11 One day Barry the Barber, Inc., collects $400 for
haircuts.
Over this day, his equipment depreciates in value by
$50. Of theremaining $350, Barry sends $30 to the
government in sales taxes, takes home $220 in wages,
and retains $100 in his business to add new equipment
in the future. From the$220 that Barry takes home, he
pays $70 in income taxes. Based on this information,
computeBarry’s contribution to the following measures
of income:
a. gross domestic product
b. net national product
c. national income
d. personal income
e. disposable personal income
12 How do unions affect thenatural rate of
unemployment?
13 The Bureau of Labor Statistics announced that in
December 1998, of all adult Americans, 138,547,000
were
employed, 6,021,000 were unemployed, and 67,723,000
were not in the labor force. How big was the labor
force? What was thelabor-force participation rate?
What was theunemployment rate?
14 Thelabor-force participation rateof women increased
sharply between 1970 and 1990, as shown in Figure 26-
3.
As with men, however, there were different patterns for
different age groups, as shown in this table.
ALL WOMEN WOMEN WOMEN WOMEN
WOMEN 25-54 25-34 35-44 45-54
1970 43% 50% 45% 51% 54%
1990 58 74 74 77 71
15 Each of thefollowing situations involves moral
hazard.
In each case, identify the principaland theagent, and
explain why there is asymmetric information. How does
the action described reduce the problem of moral
hazard?
a. Landlords require tenants to pay security deposits.
b. Firms compensate top executives with options to
buy company stock at a given price in the future.
c. Car insurance companies offer discounts to
customers who install antitheft devices in their cars.
16 Supposethat this year’s money supply is $500 billion,
nominal GDP is $10 trillion, and real GDP is $5 trillion.
a. What is the price level? What is thevelocity of
money?
b. Supposethat velocity is constant and the
economy’s output of goods and services rises by

3. 5 percent each year. What will happen to nominal
GDP and the price level next year if the Fed keeps
the money supply constant?
17 Supposethat a country’s inflation rate increases
sharply.
What happens to theinflation tax on theholders of
money? Why is wealth that is held in savings accounts
not subject to a change in the inflation tax? Can you
think of any way in which holders of savings accounts
are hurt by the increase in the inflation rate?
18 Supposethat peopleexpect inflation to equal 3
percent,
but in fact prices rise by 5 percent. Describe how this
unexpectedly high inflation rate would help or hurt the
following:
a. the government
b. a homeowner with a fixed-rate mortgage
c. a union worker in the second year of a labor
contract
d. a college that has invested some of its endowment
in government bonds
19 DEFINE CIRCULAR FLOW OF NATIONAL
INCOME
20 If thetax rate is 40 percent, compute thebefore-tax
real
interest rate and theafter-tax real interest rate in each of
the following cases:
a. The nominal interest rate is 10 percent and the
inflation rate is 5 percent.
b. The nominal interest rate is 6 percent and the
inflation rate is 2 percent.
c. The nominal interest rate is 4 percent and the
inflation rate is 1 percent.
21 EXPLAIN GREESHAM’S LAW.
22.what are the Targets and instruments of
monetary policy..
23 what are the effects of inflation.
24 Define cpi and gnp deflator
25 what are the Index-number problems in
measuring the cost of living