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Classical Model - Economic Principles - Past Exam, Exams of Economics

Guru Angad Dev Veterinary and Animal Sciences UniversityEconomics

Classical Model, Aggregate Demand, Aggregate Supply, Keynesian Income, Autonomous Expenditure, Size of the Multiplier, Crowding Out, Fiscal Policy, Labour Productivity, Commercial Banks. Exam paper for economics students.

Typology: Exams

2011/2012

Uploaded on 12/06/2012

abhaya
abhaya 🇮🇳

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ARHOLIADAU EXAMINATIONS
Mai / Mehefin 2010 May / June 2010
EC10610 ECONOMIC PRINCIPLES 2
Time allowed 2 hours.
Answer TWO questions, QUESTION 1 from SECTION A and ONE question from
SECTION B.
Casio FX83ES and FX85ES calculators only may be used.
SECTION A
Question 1 - COMPULORY
a) Explain the relationship shown by the aggregate demand (AD) curve and provide an
account of its slope. (10 marks)
b) Explain the relationship shown by the long-run and short- run aggregate supply (AS)
curves and provide an account of their slopes. (10 marks)
c) Use the AD-AS framework to illustrate how stagflation may be generated in the
economy. Will this persist over time? (30 marks)
(Total 50 marks)
SECTION B
Question 2
a) Use the Keynesian income expenditure model to illustrate and explain the concept of
the autonomous expenditure multiplier. (30 marks)
b) Graphically illustrate and explain the factors that determine the size of the multiplier.
(20 marks)
(Total 50 marks)
Turn Over
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ARHOLIADAU EXAMINATIONS

Mai / Mehefin 2010 May / June 2010

EC10610 ECONOMIC PRINCIPLES 2

Time allowed 2 hours.

Answer TWO questions, QUESTION 1 from SECTION A and ONE question from

SECTION B.

Casio FX83ES and FX85ES calculators only may be used.

SECTION A

Question 1 - COMPULORY

a) Explain the relationship shown by the aggregate demand (AD) curve and provide an account of its slope. (10 marks)

b) Explain the relationship shown by the long-run and short- run aggregate supply (AS) curves and provide an account of their slopes. (10 marks)

c) Use the AD-AS framework to illustrate how stagflation may be generated in the economy. Will this persist over time? (30 marks) (Total 50 marks)

SECTION B

Question 2

a) Use the Keynesian income expenditure model to illustrate and explain the concept of the autonomous expenditure multiplier. (30 marks)

b) Graphically illustrate and explain the factors that determine the size of the multiplier. (20 marks) (Total 50 marks)

Turn Over

Question 3

a) Derive the LM schedule and provide an account of its slope. (20 marks)

b) Illustrate and explain what is meant by ‘crowding out’ in the IS-LM model, using the case of expansionary fiscal policy. (30 marks) (Total 50 marks)

Question 4

a) Explain how employment and output are determined in the Classical Model. (20 marks) b) Use this model to trace and explain the impact of an increase in labour productivity on the economy. (30 marks) (Total 50 marks)

Question 5

a) Explain the concept of the money multiplier in an economy with a monetary base of £500 billion, where, commercial banks aim for a reserve ratio of 20%. (25 marks)

a) Identify and explain the ways in which central banks try to control the money supply. (25 marks) (Total 50 marks)

Question 6

Explain the relationship between unemployment and inflation in both the long-run and short run. (50 marks)

Question 7

a) Use the Keynesian income expenditure model to illustrate the government expenditure multiplier, the autonomous tax multiplier and the balanced budget multiplier. (35 marks)

b) Using the same model explain what happens to the aggregate expenditure schedule if income tax is increased. (15 marks) (Total 50 marks)

END OF PAPER