BBA Macro Economics

Four sector economy is also called open economy. Why?

Examine the relationship between macroeconomics and economic environment.

Explain the circular flow of income and expenditure of two sector economy.

What is green gross domestic product (GDP)?

Calculate operating surplus if corporate profit Rs 60 million, rental income Rs 25 million, interest Rs 45 million, undistributed profit Rs10 million, and dividend Rs 30 million.

Differentiate between nominal interest and real interest.

Let the GDP deflator for 2023 = 375 and GDP deflator for 2024 = 405, what will be the rate of inflation?

Compute \( \text{NNP}_{\text{MP}} \) by using both income and expenditure method.

How is GDP computed by product method? Explain it with suitable example. Does this method avoid the problem of double counting?

Calculate the disposable income if national income is Rs 4,500 billion, transfer payment is Rs 1,400 billion, corporate income tax is 1,300 billion and personal direct tax is Rs 700 billion.

Differentiate between real interest rate and nominal interest rate.

Define gross national disposable income (GNDI).

Calculate GDP at factor cost and at market price from following data.

Following data shows the quantity produced and their respective market prices of two goods A and B that a hypothetical economy produces: 

a. Compute nominal GDP, real GDP, GDP Deflator and rate of inflation.
b. Why the real GDP is better measurement of welfare than nominal GDP?

Prove that the sum of MPC and MPS equal to unity.

Why does consumption curve pass through Y-axis?

Explain the long run determinants of investment.

Differentiate between induced investment and autonomous investment.

GDP of Nepal in 2020 is Rs 3,915 billion and 2021 is Rs 4,266 billion, final consumption expenditure in 2020 is Rs. 3,066 billion and 2021 is Rs 3,984 billion. Find marginal propensity to consume of Nepal for 2021.

Explain the saving function with numerical table and figure.

Explain the determinants of investments.

State the Say's law of market. What are its implications?

Suppose that the structural equation for the product market and money market in the Nepalese economy for 2024 were given as follows:

C = 200 + 0.75 (Y – T) , T = 80 + 0.2Y , I = 200 – 2,000i, G = Rs 300 million,Mt = 0.5Y, Msp = 100 – 1000i, Ms = Rs 400 million

a) Compute equilibrium output and rate of interest.

b) It is realized that Nepalese economy is trapped in economic recession. In order to remove economic recession, Nepal Rastra Bank has followed expansionary monetary policy and increased money supply by Rs. 200 million. Similarly, Government of Nepal has also implemented expansionary fiscal policy and increased spending by Rs. 200 million. What will be the simultaneous effect on equilibrium output and rate of interest?

c) Do these policy measures help to remove economic recession of Nepal? Give reasons.

(a) Derive investment multiplier.

(b) Let structural equation of Nepalese economy were: C = 200 + 0.7Yd ( Yd = Y-T), T= 500 + 0.20Y, I = Rs 200 million, G = Rs 400 million, X = Rs 100 million, M = 50 + 0.1Y.

(i) Compute equilibrium level of income.

(ii) What will be the effect on equilibrium income when government expenditure increase by Rs 20 million and tax rate level by 10 percent?

Write any four assumptions Say's law of market.

Derive the equation of equilibrium level of income in two sector Keynesian model.

Derive the tax multiplier, government expenditure multiplier and foreign trade multiplier.

Explain the labour market equilibrium.

Product market of an economy is represented by equations C = 550 + 0.7(Y-T), I* = 450-1200i, G is government expenditure, I is tax, Y is national income. Similarly, money market of the economy is represented by equations (L = 90 + 0.88Y, Ls = 2410 - 800i, Ms = Rs 4,500 billion, where Li is transaction money demand and Ls is speculative money demand, Y is national income, Ms is money supply and i is interest rate.
a. Derive IS and LM equations and determine equilibrium level of income and interest rate.
b. Determine the new equilibrium situation when central bank decides to decrease money supply by Rs 160 billion.
c. Analyze the effect of change in monetary policy of central bank on national income and rate of interest.

Inflation is an economic phenomenon. Justify it.

What are the components of balance of payment under capital account?

Enlist the sources of economic growth.

Describe the determinants of financial inclusion.

What is exchange rate? How is it determined under demand- supply approach?

How does monetary policy help to achieve full employment and price stability?

Explain the principle of demand-pull inflation. How can it be controlled by monetary and fiscal policy?

Study the following macroeconomic situation of Nepal and answer the questions followed:

Government holds key responsibilities of assuring the availability of infrastructures, social amenities, peace, security, and stability without compromising macroeconomic balance and debt sustainability. Upholding the role of supporter, facilitator, and caretaker, it needs to invest in social overhead capital to support development goals and simultaneously finance the recurrent expenditure. The capacity of the government to spend on recurrent and capital expenditures depend upon the amount of revenues it generates. Government revenue is a matter of concern for policymakers. Government revenue is more crucial in developing countries as they need a plethora of funds for developmental activities. Developing countries will need to rely substantially on domestic resource mobilization as excessive reliance on foreign financing creates problems of debt in the long run. Revenue mobilization in Nepal has remained satisfactory so far. Government revenue to GDP ratio also increased from 14.6 percent in 2009/10 to 20.07 percent in 2023/24. The major sources of revenues are expected to accrue from taxes (income, capital gains and profits which are direct taxes are expected to (26%) VAT (28%), taxes on foreign trade of which import taxes (duties) comprises 22% and excise duty comprises 14%. These four tax categories constitute more than 87% of the tax revenues received. Total budget size of current fiscal year is Rs.1,751.315 billion which comprise of recurrent expenditure of Rs 1,141.78 billion which is 65.19 percent, capital expenditure of Rs 302.68 billion which is 17.24 percent and financial management of Rs 307.45 billion which is 17.55 percent of total budget in current fiscal year. Out of total budget, the major budget for internal and external debt is Rs 330.36 billion, which is around 18 percent of total budget. This reflect the situation of resource gap in Nepal.The proposed budget plans to finance this deficit primarily through loans: foreign loans from multilateral and bilateral partners (50%), domestic loans (40%) & foreign grants (multilateral and bilateral partners (10%). However government revenue is not enough to cover government expenditures. The size of government revenue and expenditure expanded with the implementation of federalism. The increasing budget deficit has raised serious concerns in Nepal. Historically, development activities are financed through foreign aid as government revenue is not sufficient to cover the recurrent expenditure. The inadequacy of government revenue to fulfil recurrent expenditures pose a serious threat to macroeconomic stability. It is essential to break the widening budget deficit by adopting measures to strengthen the economy: Different factors that revenue collection in the economy: such as nominal GDP, imports, exchange rate, foreign aid etc.

Questions:

a. Identify the major issues in a given case.

b. Explain the major sources of government revenue in Nepal.

c. What are the causes of resource gap in Nepal and how does government of Nepal fulfil this resource gap?

d. What are the major difficulties for revenue mobilization in Nepal and what type of fiscal measures do you suggest to overcome for this problem? Explain.

How can a hotel manager use the business cycle information in business decision making?

Write any four causes for poor inflow of FDI in Nepal.

Prepare a list of characteristics of trade cycle.

What is unemployment? Explain its cost.

What is public private partnership (PPP)? How does PPP help for efficient resource mobilization?

Identify the factors that cause inflation, demand-pull or cost-push, in Nepalese economy and explain them.

Study the following macroeconomic situation of Nepal and answer the questions followed:
The Fifteenth Plan (2019/20-23/24) of Nepal has formulated 25-year vision to graduate Nepal to a middle-income country by 2050 and to reach the level of developed countries by 2043 with a per capita national income of 12,100 US dollar. The plan projects a high economic growth rate of 10.5 percent in average for achieving the national goals under the long-term vision.
During past four decades Nepal has achieved average real GDP growth rate of 4.2 percent but still the agriculture of Nepali economy is dominated by primary agriculture sector. Basic infrastructures are limited and underdeveloped situation and the country is very far behind in technological development.
Nepal is rich in natural resources and has sufficient human resources. However, use of natural resources and human resources efficiently, increase in capital formation rate, development of social infrastructure, technological change and innovation, strengthening institutions and values toward development are the key tasks of achieving equitable economic prosperity and qualitative improvement in citizens' lives.
In budget 2022/23, government has expected economic growth of 8 percent attributed to mobility in economy, economic revival, encouraging private sector investment and the investment made by the government in economic and social sectors. For this, government has allocated Rs.1,793.83 billion out which 42 percent is for current expenditure, 21.2 percent for capital expenditure, 12.8 percent for financing and 24 percent for fiscal transfers to provinces and local levels.
In 2022/23, Nepal Rastra Bank (NRB) has kept the monetary policy cautiously tight to promote macroeconomic stability by maintaining price and external sector stability and to support economic growth through channeling productivity by channeling financial resources to the productive sector. NRB has increased the bank rate to 6.5 percent, the policy rate to 7.0 percent and cash reserve ratio to 4 percent. As a result, credit expansion to the private sector will be limited to 12.6 percent, a sharp reduction from the target of 18 percent in the last fiscal year, and growth of money supply will be limit to 12 percent from the last fiscal year's target of 18 percent.

Questions:
a. Identify the sources of economic development of Nepal and explain them.
b. Are the monetary policy and the fiscal policy 2022/23 able to achieve the targeted growth rate of 8 percent? Give your critical argument.
c. Is current pace of economic growth sufficient to achieve the goals under the long-term vision of Nepal? Give your conclusion.