>'--_-i -3SffF, SVKM'S NMMS Srfu{* Llisi3UAUR°Sl ft-_ `,)? KIRIT P. MEHTA SCHOOL OF LAW / SCHOOL 0F L 1 S0I` J! +---=* AcademicYear:2021L2022 Program#A.,LL.B.(HONS.)/B.B.A.,LL.B.(HONS.) Year: I Semester: II Subject: Economics 11 Batch: 2021-2026 Date : 08 July 2022 Time:11:00 am to 01:00 pin 2 (hrs) Marks : 50 No. of pages: 02LJ FINAL EXANINATION Instructions: Candidates should read carefully the instructions printed on the question paper and on the cover of the Answer Book, which is provided for their inse. 1) In all questions to be attempted. -: ;) fingsuwr:I it: ::::kne:?oqnutehs::|Tgi: E:::as|:: i:ndiacf::sfiL|Tamg:.rke. 4) Crisp, Precise and to the point answers written in good handwriting will be appreciated Section A Q1. Why cost-push inflation is less amenable to macroeconomic policy changes? (5 marks) Q2. A. What is the difference between GDp deflator and the wholesale price index? (2 Marks) 8. Only one Product X is produced in the country. Its output during the year 2012 and 2013 was 100 units and 110 units respectively. The market price of the product during the year was Rs 50 and Rs 55 per unit respectively. Calculate the percentage change in real GDP and nominal GDP in year 2013 using 2012 as the base year. (3 marks) \ Section 8 im Q3. In Government of India's budget for the year 2013-14, finance minister prc)posed to raise the excise duty on cigarettes. He also proposed to increase income tax on individual earning more than Rs. one crore per armum. Identify and explain the types of taxes proposed by the finance minister. Was the objective only to earn revenue for the Government? What possible welfare objectives could the Govemlnent be considering? (2+1+2= 5 marks) Q4. Consider the consumption function: C = 600 +.9YD where c represents consumption and YD represents disposable income. To begin, assume there is no government, investment, or foreign spending. Further, assume taxes are originally set to zero so YD and Y are equal. a. Write a mathematical equation expressing savings as a function of income. (1 mark) Page 1 of 2 b. What is the equllibriun level of income and consumption in this economy? (1 mark) c. How much savings occurs in this equilibrium? -(1 mark) d. Imagine that the citizens of this country impose an income tax of 10% on themselves. h other words, for each Rupee of income earned, the citizens must pay 10 paise of it to the govemmentbeforetheycanspendtheremainderoftheirmoney.Afterimposingthistax,what is the new value of equilibriuni income and consumption in this economy? (2 marks) Section C (Attempt any 2 out of 3) Q5.Moreliberalmonetarypolicyhasinitiatedtheconceptof`Today`scredit&tomorrowcash', whichisofferingthefinancialproducts®ersonalloans,homeloans,carloans....etc.)without takingintoaccount,theuseofmoneyforproductiveandunproductiveuses'. |,|^.>->--e _-_ ---_ _ _ , _ 1e ___ ____ I 1__Inthisreferencediscusstheeffectiv6ness-ofiustrunentsofmonetarypolicyusedby (10 marks) Reserve bank of India in controlling inflation. Q6.Describethecircularflowofincomeinatwo-sectoreconomyexplainingtheirm?rand outer loops? What is the significance of injections and leakages in macroeconomic (10 marks) system? --_I ----- __-r___ {J . I . _ I_1_ _ 1_ .--,-,, a Q7.ExplainusingtheAD/ASfianeworkthesholtruntrade-offbetweentheinflationrateandthe unemploymentrate.Alsoexplainwhysuchatrade-offdoesn'texistinthelongrun. (10 Marks) Section D Q8.A.Ifyouweretodecidewhethertobuydomesticgoodsorforeigngoods,whichexchangeratewould be more relevant -Nominal exchange rate oR Real exchange rate? Elucidate (2 marks) I 8.Wiuyoualwaysappreciateariseinexchangerateasameanstoboostourexports?Justify (2 marks) C.Howwiuyoucommentonthestatementthatincreaseindomesticinterestrateleadstoan appreciation of domestic curency? (2 marks) D.Isimprovementinexchangerateofthecountry`scurrencyalwaysbeneficialforBalanceof /^ ___ ___,-_\ (2 marks) Payment? Comment E.Isrisingreserveoflndia`sforeignexchangeasignofrisingproductionactivityintheeconomy? (2 marks) Page 2 of 2