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Amity CampusUttar PradeshIndia 201303

ASSIGNMENTSPROGRAM: BFIA

SEMESTER-II

Subject Name: Macro-Economics for BusinessStudy COUNTRY: SOMALIARoll Number (Reg. No.): BFIA01512010-2013019Student Name: MOHAMED ABDULLAHI KHALAF

INSTRUCTIONS

a) Students are required to submit all three assignment sets.ASSIGNMENT DETAILS MARKSAssignment A Five Subjective Questions 10Assignment B Three Subjective Questions + Case Study 10Assignment C Objective or one line Questions 10

b) Total weight-age given to these assignments is 30%. OR 30 Marksc) All assignments are to be completed as typed in word/pdf.d) All questions are required to be attempted.e) All the three assignments are to be completed by due dates and

need to be submitted for evaluation by Amity University.f) The students have to attach a scanned signature in the form.

Signature : __________________________ Date: 05 – July – 2011

( √ ) Tick mark in front of the assignments submitted

Assignment A’ Assignment ‘B’ Assignment ‘C’

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Macro-Economics for Business

Assignment A

Five subjective questions (2*5 =10 marks)

Q: 1). What do you understand by circular flow of income?Explain with the help of two sector model.

Answer:In economics, the term circular flow of income or circular flow refersto a simple economic model which describes the reciprocal circulation ofincome between producers and consumers.

The economy consists of millions of people engaged in many activities;buying, selling, working, hiring, manufacturing, and so on. Tounderstand how the economy works, it’s useful to find some way tosimplify these activities.

In other words, we need a model that explains, in general terms, how theeconomy is organized and how participants in the economy interact withone another.

This Figure presents a visual model of the Circular Flow Of Income. Inthis model, the economy has two types of decision makers; householdsand firms. Firms produce goods and services using inputs, such aslabor, land, and capital (buildings and machines). These inputs arecalled the factors of production. Households own the factors of productionand consume all the goods and services that the firms produce.

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Households and firms interact in two types of markets. In the markets forgoods and services, households are buyers and firms are sellers. Inparticular, households buy the output of goods and services that firmsproduce. In the markets for the factors of production, households aresellers and firms are buyers. In these markets, households provide firmsthe inputs that the firms use to produce goods and services. Thecircular-flow diagram offers a simple way of organizing all the economictransactions that occur between households and firms in the economy.

The inner loop of the circular-flow diagram represents the flows of goodsand services between households and firms. The households sell the useof their labor, land, and capital to the firms in the markets for the factorsof production. The firms then use these factors to produce goods andservices, which in turn are sold to households in the markets for goodsand services. Hence, the factors of production flow from households tofirms, and goods and services flow from firms to households.

The outer loop of the circular-flow diagram represents the correspondingflow of dollars. The households spend money to buy goods and servicesfrom the firms. The firms use some of the revenue from these sales to payfor the factors of production, such as the wages of their workers. What’sleft is the profit of the firm owners, who themselves are members ofhouseholds, Hence, spending on goods and services flows fromhouseholds to firms, and income in the form of wages, rent, and profitflows from firms to households.

Q: 2). Differentiate between static and dynamic multiplier.

Answer:Multiplier is a ratio expressing the quantitative relationship between theincrease in national income and between the increases in investment,which induces the rise in income.

The concept of multiplier was first developed by F.A. Kahn in early1930s, and refined by Keynes.

F.A. Kahn’s Multiplier is known as Employment Multiplier, and Keynes’Multiplier is known as Investment Multiplier. According to Kahn’sEmployment Multiplier, when government undertakes public works likeroads, railways, irrigation works then people get employment. This isinitial or primary employment. These people then spend their income onconsumption goods. As a result, demand for consumption goodsincreases, which lead to increase in the output of concerned industrieswhich provides further employment to more people. But the process does

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not end here. The entrepreneurs and workers in such industries, inwhich investment has been made, also spend their newly obtainedincome which results in increasing output and employmentopportunities. In this way, we see that the total employment so generatedis many times more than the primary employment.

Keynes’ income multiplier tells us that a given increase in investmentultimately creates total income which is many times the initial increasesin income resulting from that investment. That is why it is called incomemultiplier or investment multiplier. Income multiplier indicates howmany times the total income increases by a given initial investment.

The Value of Multiplier =1/1-MPC

Assumptions of Multiplier Effect

The marginal propensity to consume remains constant throughoutas the income increases.

There is a net increase in investment over the preceding year. There is no any time-lag between the increase in investment and

the resultant increment in income. Excess capacity exists in the consumer goods industries.

The process of multiplier is that an initial change in aggregate demandcan have much greater final impact on the level of equilibrium nationalincome. This is commonly known as the multiplier effect and it comesabout because injections of demand into the circular flow of incomestimulate further rounds of spending. In other words; one person‘sspending is another‘s income, and this can lead to a much bigger effecton equilibrium output and employment.

Static Multiplier implies that change in investment causes in incomeinstantaneously. It means that there is no time lag between the changein investment and change in income.

The moment a Rupee is spent on investment project, society‘s incomeincreases by a multiple of Re 1.

K=1/1-MPC

Dynamic Multiplier indicates that the change in the income as a resultof change in investment is not instantaneous. There is a gradual processby which income changes as a result of change in investment. Theprocess of change in income involves a time-lag.

Since Multiplier process works through the process of income generationand consumption, the time lag involved is the gap between the change inincome and the change in consumption at different stages.

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The Dynamic Multiplier is essentially stage by stage computation of thechange in income resulting from the change in investment till the fulleffect of the multiplier is realised.

Q: 3). Describe briefly the Absolute income hypothesis. Whatare its main properties?

Answer:

Income Hypothesis is mainly about observing consumers’ behaviorproportional to their income. This can be divided into three maincategories.

Permanent Income Hypothesis (PIH) Absolute Income Hypothesis (AIH) and Relative Income Hypothesis (RIH)

The Absolute Income Hypothesis (AIH) is a theory by Keynes based onthe fact that the consumption level of a household depends on itsabsolute level of income, therefore, if income rises, the consumption willalso rise but not necessarily at the same rate.

The (AIH) theory examines the relationship between income andconsumption, and asserts that the consumption level of a householddepends on its not relative but absolute level of income. As income rises,the theory asserts, consumption will also rise but not necessarily at thesame rate.

In its developed form, absolute income hypothesis is still generallyaccepted.

The main properties of Absolute Income Hypothesis (AIH) are:

1) The real consumption expenditure is a positive function of the realcurrent disposable income. This relationship between theconsumption and income makes Absolute Income Hypothesis (AIH).Since this theory of consumption deals with economicalphenomenon in the short-run, it’s treated as a short-run theory.

2) The Marginal Propensity to Consume (MPC) – the proportion of themarginal income consumed – ranges between zero and one.

That is; 0 < MPC < 1(0 and 1 included).

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3) The MPC is less than Average Propensity to Consume (APC), that is;C/Y < C/Y

4) The MPC declines as income increases, that is, the proportion ofincome consumed goes on decreasing.

Q: 4). Why does an increase in the interest cause a decline inthe bond price? What are their effects on the demand formoney?

Answer:

Bond prices move inversely to interest rates. When interest rates go up,bond prices go down and when interest rates go down, bond prices goup. Remember, we’re talking about previously issued bonds trading onthe open market.

The inverse relationship is easy to see with this simple example. Say thata bond is issued for $10,000 for five years with a 5% coupon or interestrate, paid every six months. Then interest rates rise to 6%.

If you want to sell this bond, who would buy it when it is paying 1%below market rates (5% vs. 6%)? You have to sweeten the deal so thebuyer gets a market rate for the bond.

You can’t change the interest rate on the bond. That’s fixed at 5%. Youcan, however change the price you will take for the bond.

The annual payment of $500 ($10,000 x 5%) must equal a 6% payment.Doing the math, you discover that the face value of the bond must bediscounted to $8,333 so that the $500 fixed payment equals a 6% yieldon the buyer’s investment ($8,333 x 6% = $500).

The demand for money depends on how much of financial wealth one iswilling to hold as money rather than in less liquid forms of wealth suchas bonds.

One of the important things that affect the demand for money is themovement in the market price of bonds and interest rates which areinversely related. If the interest rate goes up the opportunity cost ofholding money rises, thus people will invest it in and interest bearingassets such as newly issued bonds, and vice versa.

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Businesses and governments sell bonds when they want to raise money.The supply of bonds increases pushing down bond prices. The demandfor loan-able funds increases pulling up interest rates. Borrowers redeemtheir old bonds when they have excess money balances. The supply ofbonds decreases pulling up bond prices. The demand for loan-able fundsdecreases pushing down interest rates.

Q: 5). What is meant by monetary policy? How does it differfrom fiscal policy?

Answer:

Monetary Policy is Economic strategy chosen by a government indeciding expansion or contraction in the country's money-supply.Applied usually through the central bank, a monetary policy employsthree major tools:

1) Buying or selling national debt2) Changing credit restrictions, and3) Changing the interest rates by changing reserve requirements.

Monetary policy plays the dominant role in control of the aggregate-demand and, by extension, of inflation in an economy, also calledmonetary regime.

Monetary policy differs from Fiscal policy:

1) Monetary policy is usually carried out by the Central Bank andMonetary authorities.

2) Monetary Policy involves:

a) Setting base interest rates, andb) Influencing the supply of money. E.g. Policy of quantitative

easing to increase the supply of money.

3) Fiscal Policy is carried out by the government4) Fiscal Policy involves:

a) Changing Level of government spending, andb) Taxation.

Hence this influences the level of government borrowing.

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Assignment: B

Three subjective Questions

Q: 1). Explain the current account and capital accounttransactions and their implications on the balance of paymentsof a country. (2)

Answer:

International transactions are divided in two types; current and capitaltransactions. Current transactions are those that involve payments orreceipts for the purchase of current goods and services, or in otherwords, for the purchase and sale of claims against countries' currentoutput. The excess of receipts over payments on account of thesetransactions is called the current account balance. Capital transactionsinvolve payments or receipts for the purchase of assets, that is, of claimsagainst countries' future output. The excess of receipts over payments onaccount of capital transactions is called the capital account balance.

The current account measures the net flow of goods and servicesbetween a country and the rest of the world. It consists of four maincategories: goods, services, income, and transfers.

Current account = balance of trade (exports of goods - imports of goods)+ Balance on services (exports of services - imports of services)+ Investment income and dividends+ Net transfers

The current account records transactions in goods and services betweena country and the rest of the world. The capital account recordstransactions in assets – both financial and nonfinancial. Strictlyspeaking, we should refer to the capital and financial account.

Capital and financial account = capital account + financial account +errors and omissions

The balance of payments is an accounting statement that delineates thetransactions between a country and the rest of the world.

The balance of payments is a statistical record, covering a particulartime, of a country’s economic transactions with the rest of the world. Thecurrent account records the net transactions in goods and services while

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the capital account records transactions in assets between countries.The relationship between these concepts is:

Balance of payments = current account – capital account = 0

In other words, if the current account is in surplus, the capital accountshould be in deficit by an equivalent amount, and if the current accountis in deficit, the capital account should be in surplus by an equivalentamount.

The balance of payments has to balance, since it is an accountingstatement it will always balance, that is, the sum of all debits orpayments must equal the sum of all credits or receipts. This isguaranteed by the principles of double-entry bookkeeping. As a result,countries that are net importers of capital (exporters of securities) andhave positive capital account balances will necessarily have equalnegative balances on current account. A country with a current accountdeficit will necessarily have a capital account surplus, and one with acurrent account surplus will have a deficit in its capital account.

Q: 2). Define the IS curve. Derive it graphically and explain therelationship between the interest rate and income. (2)

Answer:

The IS/LM model is a macroeconomic tool that demonstrates therelationship between interest rates and real output in the goods andservices market and the money market. The intersection of the IS and LMcurves is the "General Equilibrium" where there is simultaneousequilibrium in all the markets of the economy. IS/LM stands forInvestment Saving / Liquidity preference Money supply.

The IS (Investment/saving) curve is drawn as a downward-sloping curvewith interest rates as a function of GDP (Y). It is a variation of theincome-expenditure model incorporating market interest rates. In otherwords, IS Curve explains the relation between interest rates and the levelof demand within the economy.

The IS curve shows combinations of interest rates and income consistentwith equilibrium in the demand for goods and services. The negativerelation between the level of interest rates and the level of equilibriumdemand for goods in the short run is the IS curve.

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The IS curve is defined by this equation:

In a closed economy, the IS curve is defined as:

In an open economy the IS curve is defined as:

IS/LM Model attempts to explain the investing decisions made byinvestors given the amount of money they have available and the interestrate they will receive. Equilibrium occurs when the amount of moneyinvested equals the amount of money available for investing.

The IS curve gives policy makers an indication of the effects of interestrates on economic output.

Q: 3). Distinguish between MEC and MEI. Illustrate graphicallythe relationship between MEC and MEI. (2)

Answer:

Marginal efficiency of capital (MEC) is the difference between theexpected yield on one more unit of a type of asset, and the cost ofproducing that unit. The marginal efficiency of that kind of capital whosemarginal efficiency is the largest is the marginal efficiency of capital as awhole.

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As investment increases, the marginal efficiency of capital falls, becausethe cost of producing assets rises and their yield falls as the supply ofcapital rises. Current investment is determined by the amount ofinvestment that will push the marginal efficiency of capital down to therate of interest. At equilibrium, the marginal efficiency of capital willequal the rate of interest.

MEC is that rate of discountwhich equates present value ofnet expected revenue from aninvestment of capital to its cost.It is an annual percentagereturn on the last additionalunit of capital. It represents themarket rate of interest at whichthe investment becomes viable,also called marginalproductivity of capital.

MEC curve is a downwardsloping curve because, as the firm invests more, MEC will fall due todiminishing returns, the first few projects invested in tend to give ahigher rate of returns, with subsequent projects yielding lower and lowerreturns.

Planned investment can change ateach rate of interest. For examplea rise in the expected rates ofreturn on investment projectswould cause an outward shift inthe marginal efficiency of capitalcurve. This is shown by a shiftfrom MEC1 to MEC2 in thediagram below.

Conversely a fall in businessconfidence (perhaps because offears of a recession) would cause a

fall in expected rates of return on capital investment projects, The MECcurve shifts to the left (MEC3) and causes a fall in planned investment ateach rate of interest.

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Marginal Efficiency of Investment (MEI) is the anticipated rate ofreturn on a capital investment project undertaken by a business firm.Businesses typically compare the marginal efficiency of investment,abbreviated MEI, on physical capital with interest rate returns onfinancial capital when deciding to undertake an investment project.Because different investment projects have different returns, businessesoften have a range of alternatives projects from which to choose.Combining all projects throughout the economy gives rise to aninvestment demand curve relating investment expenditures to theinterest rate.

The MEI curve represents the interestelasticity of demand for investment (orcapital goods), or in other words, howresponsive investment is to a change ininterest rates. Interest rates represent thecost of borrowing. Theoretically, the lowerthe rate of interest, the cheaper it is for firmsto finance investment, and the moreprofitable the investment will be. Hence, thelevel of investment will rise.

The relationship between marginal efficiency of capital (MEC) andmarginal efficiency of investment (MEI) is show by the following figure:

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Case study

An Oil Crisis Provoked Policy Dilemma

The sudden increase in the price of crude oil by the OPEC countries hasput India in a fix. To top it, the Finance Ministry which had increased themarket price of LPG and SKO (kerosene) had to partially roll it back, theformer by Rs 10 and the latter by Rs 1 under political pressure. Thismeans the burden on the Union Budget has increased on both gorounds,one because of an increase in the oil price internationally and second,because of the subsidy on petroleum products. All of these will result inan additional burden of Rs 560 crore, a burden which is unbearable,given the present situation of the Central Governments deficit. The fiscaldeficit stands at a figure of 5.6 per cent as against the target of 4.5percent. The situation by all standards is alarming. Some suggested thata temporary cut should be made in the import of crude oil, but this is astraight invitation to a supply of shock inflation, such that not only theprices in the economy go up, but there is a shortfall in the supply ofvarious products including LPG, SKO, HSD (diesel) etc., a situationtotally avoidable by all means.

A more plausible argument was put forward by some other people in thefinance Ministry, that of restructuring so that more emphasis is laidautomatic stabilizers, various direct taxes like income tax, corporate taxetc. The argument that was put forward was, the industry was out ofrecession and corporate income seemed to be on a pick. The exportsector was also booming with a growth rate of 15 percent. All these havea positive impact on the GDP growth rate (through the agricultural sectorseemed to be pulling along without much growth in the services sector).The GDP at market price seemed to grow at an impressive rate of 7percent (whereas the GDP at factor cost was growing only at 6.25percent). All these make the industrial as well as the external sector, agood source of taxation. Ministry officials further said, in the face of asurging fiscal deficit, mainly due to interest repayment, the burden ofgovernment-increased taxation seems inevitable, and one is lucky that atleast two sectors are doing well.

However, the officials seem to have missed one point: a direct tax likeincome or corporate tax, which moves proportionally with the risingincome has a dampening effect on not only the overall industrial andcorporate atmosphere, but the total effect is a multiple of the initial taxburden as it affects the investment multiplier value negatively. Taxingthe export sector also creates a negative multiplier effect. People from the

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ministry seem to face a real dilemma. An increase in such proportionaldirect taxes make them instantaneously richer by Rs 9000 to 12000crore, but there is a risk of putting the country back on yet anotherindustrial slowdown. However, allowing further deficit back on yetanother industrial slowdown. However, allowing further deficit in thebudget is also by no means desirable.

Questions

Q: 1). Discuss the kind of inflation the country might face ifthere is shortage of crude oil in the economy. (2)

Answer:

A country with a shortage of crude oil in its economy faces cost-pushinflation, which happens when costs increase independently of aggregatedemand.

The shortage of crude oil takes the price of oil to its highest levels, soprice of oil and inflation are often seen as being connected in a cause andeffect relationship. As oil prices move up or down, inflation follows in thesame direction. The reason why this happens is that oil is a major inputin the economy - it is used in critical activities such as fuelingtransportation and heating homes - and if input costs rise, so should thecost of end products. For example, if the price of oil rises, then it will costmore to make plastic, and a plastics company will then pass on some orall of this cost to the consumer, which raises prices and thus inflation.

When a shortage of crude oil or any other input material happens, theirprice will inevitably gradually rise. This will increase firms' costs ofproduction and may push up prices of finished goods until alternative ofraw materials is found by the firm, or alternative finished goods is foundby the consumers. This has happened with the fishing industry all overthe world. Water pollution and over-fishing has put many types of fishesbeyond the existence, making some fish-based products under extremepressure, and forcing their prices up. In many countries equivalentproblems have been caused by dissertation and erosion of land whenforests have been cleared. The land quickly becomes useless foragriculture.

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Q: 2). How does a direct proportional tax have a negativemultiplier effect on the economy’s level of income? (2)

Answer:

Direct taxes are taxes imposed directly on the individuals paying them. Itis charged directly on the tax payer. In other words direct tax is that taxwhich is deducted from one’s salary.

Examples of direct taxation include; income tax, capital gains tax,property tax, and inheritance tax.

Direct taxes may be proportional or flat which means all income levelsare taxed at the same rate. It may at first glance appear equitable, butit’s usually considered unfair because it has a regressive effect on thetaxpayer's total income.

Direct Proportional taxes take the same percentage of income from allincome groups. For example, low-income taxpayers would pay 10percent, middle-income taxpayers would pay 10 percent, and high-income taxpayers would pay 10 percent. The sales tax is an example of aproportional tax because all consumers, regardless of income, pay thesame fixed rate.

Tax multiplier is always negative, because the decrease in taxes willincrease the equilibrium national income and vice versa.

Direct proportional taxation has negative multiplier effect on theeconomics level of income, and the reason is simple, direct proportionaltax encourages low level income workers to give up working because theypay much of their income as tax, in other words they pay more than highincome personals; it discourages savings because after paying tax,individuals and companies have less income available to save, and leadto tax evasion. All these will have negative impact on the economy’s levelof income.

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Assignment C

Q: 1). National income is also called:a) NNP at factor cost. (√)b) GNP at factor costc) GDP at factor costd) GDP at market price

Q: 2). In a circular flow of income we havea) Production (√)b) Distributionc) Dispositiond) All of the above

Q: 3). In a four sector economy national income is measured asa) Y=C+I+G+X-M (√)b) Y=C+I+G-X-Mc) Y=C+I+G+Td) Y=C+T+G+X-M

Q: 4). In a two sector economy circular flow of income takesplace between firms anda) Governmentb) Foreign sectorc) Households (√)d) Producers

Q: 5). Which of the following is not a final good?a) Chairb) Bookc) Alumina (√)d) Airplane

Q: 6). Autonomous investment is that investment which is:a) Induced by demandb) Made irrespective of demand and savings. (√)c) Equal to savingsd) Equal to demand

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Q: 7). Which of the following is not considered in calculation ofnational income?a) salary of employees of state electricity boardb) Interest on bank depositsc) Dividend earn on share of any companyd) Pension received by Govt. employees (√)

Q: 8). Direct selling of Govt. securities by Central bank togeneral public is known asa) Open market operations (√)b) Selective credit controlc) Indexationd) Statutory reserve ratio

Q: 9). A systematic record of a c ountry’s external transactionsover a period of one year is calleda) Balance of Payments (√)b) Balance of tradec) Foreign traded) Export import difference

Q: 10). Difference in the value of export and import of good iscalleda) Balance of Paymentsb) Balance of trade (√)c) Foreign traded) Exchange rate

Q: 11). What is the nature of capital transaction?a) Flow (√)b) Stockc) Both flow and stockd) None

Q: 12). Keynes multiplier is known asa) Fiscal Multiplierb) Acceleratorc) Investment Multiplier (√)d) Employment Multiplier

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Q: 13). The Value of Multiplier isa) k =1/1-MPC (√)b) k=1-MPC/1c) k=1/1-MPSd) k=1-MPS/1

Q: 14). What is the formula of Aggregate Consumption?a) Aggregate Consumption=C+mpsb) Aggregate Consumption= C + mpc (Y) (√)c) Aggregate Consumption=C+Id) Aggregate Consumption=C+S

Q: 15). What is the shape of MEC curve?a) Downward sloping (√)b) Upward slopingc) ‘U’ shapedd) Hyperbolic

Q: 16). The Permanent Income Hypothesis (PIH) decomposesmeasured total disposable income, y, into ……………a) yp and yt (√)b) yp and cpc) cp and ctd) yp and cp

Q: 17). Relative Income Hypothesis is given by which economist?a) Dusenberry (√)b) Modglianic) Pigoud) Fisher

Q: 18). Linear form of Consumption function can be expressed asfollowsa) C = f (Y)b) C = a + bY (√)c) C = a + bId) C = Y – S

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Q: 19). The Chicago school has broadened the definition ofmoney to include which components”a) Currency, cheque-able demand deposits, time deposits.

(√)b) currency, cheque-able demand depositsc) Cheque-able demand deposits, time deposits.d) Currency, time deposits.

Q: 20). Philips curve shows the relation betweena) Consumption and investmentb) Income and consumptionc) Inflation and unemployment (√)d) Consumption unemployment

Q: 21). Q.21 The formula for obtaining the present value (V), orthe capitalized value, of a constant income stream is given by-a) V = R/i (√)b) V = R*ic) V = i/Rd) None

Q: 22). ______________ It is levied as a percentage of the totalvalue of the imported commodity.a) Specific Dutiesb) Compound Dutiesc) Sliding Scale Dutiesd) Ad Valorem Tariff (√)

Q: 23). The formula of Current account Balance is-a) CAB = X - M + NY + NCT (√)b) CAB = X + M + NY + NCTc) CAB = X - M - NY + NCTd) CAB = X - M + NY – NCT

Q: 24). The new framework of monetary policy known as'Competition and Credit Control' was introduced in which year-a) 1990b) 1980c) 1971 (√)d) 1950

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Q: 25). A contractionary fiscal policy occurs whena) G < T (√)b) G = Tc) G > Td) None

Q: 26). Under this policy approach the target is to keep inflation,under a particular definition such as Consumer Price Index,within a desired range.a) Price level targetingb) Inflation targeting (√)c) Monetary aggregatesd) Gold Standard

Q: 27). Which function of money removes the difficulty of doublecoincidence of wants?a) Medium of exchange (√)b) Measure of valuec) Standard of deferred paymentsd) All of the above

Q: 28). C + DD + OD = --------?a) M1 (√)b) M2c) M3d) M4

Q: 29). Barter system suffered froma) Lack of common measure of valueb) Lack of double coincidence of wantsc) Difficulty in storage of extra goodsd) All of the above (√)

Q: 30). The meaning of ‘fisc’ (in English) is –a) Inflationb) State treasury (√)c) State Borrowingd) State Expenditure

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Q: 31). A deflationary fiscal stance happens when thegovernment runs a -a) Neutral budgetb) Budget deficitc) Budget surplus (√)d) None

Q: 32). The term "macroeconomics" was coined by whicheconomist?a) Ragnar Frisch (√)b) Alfred Marshallc) Samuelsond) Chamberlin

Q: 33). Which method is very suitable for the primary sectorsuch as agriculture, industries etc.a) Expenditure methodb) Income Methodc) Product method (√)d) All of the above

Q: 34). In which year Modigliani was awarded the Nobel Prize ineconomicsa) 1980b) 1985 (√)c) 1975d) 1982

Q: 35). MEC stands fora) Maximum efficiency of capitalb) Minimum efficiency of capitalc) Marginal efficiency of capital (√)d) d)Mild efficiency of capital

Q: 36). Who has classified the approaches to the definition ofmoney under four categories:a) H.G. Johnson (√)b) Keynesc) Fisherd) Marris

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Q: 37). The Chicago approach of money was pioneered by –a) Robinsb) Milton Friedman (√)c) Schumpeterd) Boumal

Q: 38). Bank deposits include three kinds of deposits-a) Current account deposits, net deposits, time deposits.b) Current account deposits, saving bank deposits, time

deposits (√)c) Current account deposits, post office deposits, time depositsd) Current account deposits, national deposits, time deposits

Q: 39). The income method of measuring national income isappropriate for thea) Tertiary and service sectors.b) Primary and secondary sectorc) Primary and tertiary sectord) Secondary and tertiary sector (√)

Q: 40). Which formula of Net National Product at market price iscorrect?a) NNP mp = GDP mp – Depreciation (√)b) NNP mp = GNP mp – Depreciationc) NNP mp = NNP fc – Depreciationd) None