12ECA001 Exam questions PDF

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PRINCIPLES OF MACROECONOMICS (12ECA001) Summer 2013

2 Hours

Answer ONE QUESTION in SECTION A, ONE QUESTION in SECTION B, and ALL QUESTIONS in SECTION C (multiple choice). Section A is worth 33 marks; section B is worth 33 marks; section C is worth 34 marks. The use of any approved university calculator is permitted. Answers to sections A and B must be written in the answer book using ink. Answers written solely in pencil may receive a mark of zero. Diagrams and tables may be drawn clearly in pencil or coloured pens. Answers to Section C must be entered in lead pencil only on the OMR answer sheet. This exam paper must be left in the exam room or a mark of zero may be awarded.

SECTION A (33% of the marks; recommended time: about 40 minutes) Answer ONE of the following THREE questions: 1.

Using the income–expenditure model, demonstrate and explain why the Chancellor of the Exchequer is finding it impossible to simultaneously cut the budget deficit and stimulate the economy.

2.

‘Since 2008 the UK’s inflation rate has persistently exceeded the target of 2% despite the biggest fall in real GDP since the 1930s.’ Explain how these facts can be reconciled, using the Phillips curve or AD-AS model of the macroeconomy.

3.

Identify the potential causes of economic growth. Explain through what mechanisms a rise in government spending might increase the growth rate. SECTION B (33% of the marks; recommended time: about 40 minutes)

Answer ONE of the following THREE questions: 1.

Discuss to what extent a country adopting a flexible exchange rate system is insulated from external demand shocks.

2.

How does a monetary authority conduct monetary policy in practice?

3.

What are ‘automatic stablisers’? How do they play a role in dampening output fluctuations?

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SECTION C (34% of the marks; recommended time: about 40 minutes) Multiple Choice Questions

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