National Income and Output Determination - Macroeconomics - Economics Previous Year Questions

1

2021 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2021

For an open economy, the ‘twin deficits’ can be expressed by:
[where \(S\) = Savings; \(I\) = Gross Private Investment; \(G\) = Government Expenditures; \(TR\) = Transfer Payments; \(TX\) = Taxes; \(X\) = Exports; \(M\) = Imports and \(NFIA\) = Net Factor Income from Abroad]

A

\(S - I = [G - TR - TX] + [X - M]\)

B

\(I - S = [G + TX - TR] + [M - X]\)

C

\(S - I = [G + TR - TX] + [X - M]\)

D

\(I - S = [TX - G + TR] + [NFIA]\)

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2

2022 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2022

The change in equilibrium output for an equal amount of change in government expenditure and tax revenue is linked to which one of the following multipliers?

A

Expenditure multiplier

B

Balanced Budget multiplier

C

Lum-sum tax multiplier

D

Trade multiplier

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3

2022 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2022

An economy is characterized by the following production function:
\[ Y = AK^{0.25}L^{0.75} \]
where \(K\) denotes capital, \(L\) denotes labour, \(A\) denotes the total factor productivity and \(Y\) denotes output produced. All capital and labour are fully employed.
Suppose that the growth rate of labour is 1%, the growth rate of capital is 4%, and the growth rate of output is 4%. The growth rate of total factor productivity \(A\) is

A

1.5 %

B

1.75%

C

2.25%

D

2.5%

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4

2022 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2022

Suppose the estimated consumption equation of an economy is:
\[ C = 40 + \beta Y_d \]
where \(Y_d\) is the personal disposable income, \(\beta\) is the marginal propensity to consume (\(MPC\)), Government expenditure (\(G\)) is given as 90. Total tax (\(T_x\)) received is \(\delta Y\), where \(Y\) is aggregate output or real income and \(\delta\) is tax to real income proportionality factor. Autonomous investment (\(I_a\)) is given as 80. What are the tax revenue and budget surplus of the government when \(\beta = 0.75\) and \(\delta = 0.20\)? All units are measured in constant rupees.

A

Tax revenue = Rs. 105 and surplus = Rs. 15

B

Tax revenue = Rs. 118 and surplus = Rs. 28

C

Tax revenue = Rs. 110 and surplus = Rs. 20

D

Tax revenue = Rs. 125 and surplus = Rs. 35

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5

2023 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2023

Consider the Keynesian Cross Model with a linear consumption function and a zero tax, where the government purchase is Rs. 100 and the equilibrium income is Rs. 1300. If the government purchase is increased to Rs. 125, the equilibrium income increases to Rs. 1400. Using the given information, the marginal propensity to consume is ______ (round off to two decimal places).

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6

2023 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2023

A labour-augmenting production function is \[ Y = K^{0.32}(A L)^{0.67} \] where \(Y\) = output, \(K\) = capital, \(L\) = labour, and \(A\) = technology. Assume that the growth rate of \(L\) is 1.2 percent per annum, the growth rate of \(K\) is 3 percent per annum, and the growth rate of \(A\) is 1.5 percent per annum. Using the growth-accounting approach, the growth rate of \(Y\) in percent per annum is ________ (round off to two decimal places).

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7

2024 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2024

Which of the following factor(s) do NOT affect output and employment in the classical macroeconomic model?

A

Quantity of money

B

Level of government spending

C

Level of demand for investment goods

D

Technological progress

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8

2024 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2024

Consider the Solow growth model in which output \(Y\) is determined by the production function \(Y_t = 0.2K_t + 0.8L_t\), where \(K\) and \(L\) denote capital and labour used in the production process, and \(t\) depicts time. The depreciation is given by \(\delta K_t\), where \(\delta = 0.2\). Saving is given by \(sY_t\), where \(s = 0.5\). Assume that the population does not grow with time. The steady state capital per unit of labour is ______ (in integer).

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9

2025 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2025

Which of the following statements is/are CORRECT in the context of National Income Accounting?

A

Gross Domestic Product (GDP) is the sum of all factor payments.

B

Net Domestic Product (NDP) is equal to Gross Domestic Product (GDP) minus depreciation.

C

Gross National Product (GNP) is equal to Gross Domestic Product (GDP) plus net income from abroad.

D

Net National Product (NNP) is equal to Gross National Product (GNP) minus Gross Domestic Product (GDP).

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10

2025 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2025

For a closed economy with no government expenditure and taxes, the aggregate consumption function (\( C \)) is given by \( C = 100 + 0.75 Y_d \) where \( Y_d \) is the disposable income. If the total investment is 80, the equilibrium output is ______ (in integer)

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11

2025 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2025

A simple Keynesian open economy model is given by
\( S + T + M = G + I + X \)
where \( S, I, G, T, X, \) and \( M \) stands for saving, investment, government expenditure, taxes, exports and imports, respectively.
If the country has trade surplus, which strategy/strategies among the following will reduce the trade imbalance?

A

Everything else being constant, decrease in private saving would reduce trade surplus.

B

Everything else being constant, increase in investment would reduce trade surplus.

C

Everything else being constant, increase in government taxes would reduce trade surplus.

D

Everything else being constant, decrease in government spending would reduce trade surplus.

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12

2025 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2025

Consider the following Harrod-Domar growth equation \[ \frac{s}{\theta} = g + \delta \] where \(s\) = saving rate, \(\theta\) = capital-output ratio, \(g\) = overall growth rate, and \(\delta\) = capital depreciation rate. If \(\delta = 0\) and \(s = 20\%\), then to achieve \(g = 10\%\), the capital-output ratio will be __________ (in integer)

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13

2025 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences-Economics (XH-C1) 2025

If the Marginal Propensity to Consume (MPC) of an economy is 0.75, then the value of expenditure multiplier will be __________ (in integer).

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14

2026 · Economics · Macroeconomics · National Income and Output Determination

Humanities & Social Sciences - Economics (XH-C1) 2026

Consider a Solow growth model with the production function \(Y_t = K_t^{\alpha} N_t^{1-\alpha}\); \(0 < \alpha < 1\); where, \(Y_t\) is aggregate output at time \(t\); \(K_t\) is aggregate capital stock at time \(t\); \(N_t\) is the number of workers at time \(t\). There is population growth but no technology growth. Let \(0 < s < 1\) be the savings rate, \(0 < n < 1\) be the population growth rate, and \(0 < \delta < 1\) be the rate of depreciation of capital stock.

What is the growth rate of aggregate output at steady state?

A

\(n\)

B

\(s + n\)

C

\(n + \delta\)

D

0

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