Would the central bank need to intervene | Class 12 Macro Economics Chapter Open Economy Macroeconomics, Open Economy Macroeconomics NCERT Solutions

Differentiate between balance of trade and current account balance.

Explain the automatic mechanism by which BoP equilibrium was achieved under the gold standard.

Are the concepts of demand for domestic goods and domestic demand for goods the same?

In the above example, if exports change to X = 100, find the change in equilibrium income and the net export balance.

Discuss some of the exchange rate arrangements that countries have entered into to bring about stability in their external accounts.

Should a current account deficit be a cause for alarm? Explain.

If inflation is higher in country A than in Country B, and the exchange rate between the two countries is fixed, what is likely to happen to the trade balance between the two countries?

Suppose the exchange rate between the Rupee and the dollar was Rs. 30=1$ in the year 2010. Suppose the prices have doubled in India over 20 years while they have remained fixed in USA. What, according to the purchasing power parity theory will be the exchange rate between dollar and rupee in the year 2030.

Calculate the open economy multiplier with proportional taxes, T = tY, instead of lump-sum taxes as assumed in the text.

Why is the open economy autonomous expenditure multiplier smaller than the closed economy one?

What is a barter system? What are its drawbacks?

Write down some of the limitations of using GDP as an index of welfare of a country.

Explain the relation between government deficit and government debt.

From the following data, calculate Personal Income and Personal Disposable Income.
                                                                               Rs (crore)
(a) Net Domestic Product at factor cost                    8,000
(b) Net Factor Income from abroad                              200
(c) Undisbursed Profit                                                1,000
(d) Corporate Tax                                                         500
(e) Interest Received by Households                         1,500
(f) Interest Paid by Households                                  1,200
(g) Transfer Income                                                       300
(h) Personal Tax                                                            500

Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.

Give the relationship between the revenue deficit and the fiscal deficit.

Explain ‘Paradox of Thrift’.

Discuss the issue of deficit reduction.

What is the difference between ex ante investment and ex post investment?

Are fiscal deficits inflationary?

What is High Powered Money?

What is the difference between ex ante investment and ex post investment?

Suppose that for a particular economy, investment is equal to 200, government purchases are 150, net taxes (that is lump-sum taxes minus transfers) is 100 and consumption is given by C = 100 + 0.75Y (a) What is the level of equilibrium income? (b) Calculate the value of the government expenditure multiplier and the tax multiplier. (c) If government expenditure increases by 200, find the change in equilibrium income.

Describe the four major sectors in an economy according to the macroeconomic point of view.

What are the important features of a capitalist economy?

What are the instruments of monetary policy of RBI?

What is the difference between microeconomics and macroeconomics?

The value of the nominal GNP of an economy was Rs 2,500 crores in a particular year. The value of GNP of that country during the same year, evaluated at the prices of same base year, was Rs 3,000 crores. Calculate the value of the GNP deflator of the year in percentage terms. Has the price level risen between the base year and the year under consideration?

Explain why the tax multiplier is smaller in absolute value than the government expenditure multiplier.

Suppose marginal propensity to consume is 0.75 and there is a 20 per cent proportional income tax. Find the change in equilibrium income for the following (a) Government purchases increase by 20 (b) Transfers decrease by 20.