List of top Macroeconomics Questions asked in GATE XH-C1

Suppose \( \alpha \) is a real number between 0 and 1. Rohit is choosing \( x \) and \( y \) to maximize the following utility function: \[ U(x, y) = x^2 + 2xy + y^2 + 4\alpha^2 + 8\alpha + 10 \] subject to the following constraints: \[ 2x + y = 10, \quad x, y \geq 0. \] Then the optimal value of \( y \) chosen by Rohit is _________ (in integer).

Suppose an investigator has specified the following simultaneous equation model:
\[ y_{1,t} = \alpha_{1,0} + \alpha_{1,2} y_{2,t} + \alpha_{2} M_{t} + \alpha_{3} K_{t} + u_{t} \tag{1} \] \[ y_{2,t} = \alpha_{2,0} + \alpha_{2,1} y_{1,t} + \alpha_{3} I_{t} + v_{t} \tag{2} \] where \( y_{1,t} \) and \( y_{2,t} \) are endogenous variables. \( M_t, K_t, I_t \) are predetermined variables. \( u_t \) and \( v_t \) are residual terms. Based on the order condition of identification, which one of the following statements is correct?

A monopolist faces the following inverse demand function: \[ P = 40 - Q \] where \(P\) denotes price and \(Q\) denotes quantity. The monopolist has zero fixed cost and a marginal cost of 5 per unit of output produced. The monopolist aims to maximize profit. Suppose the government imposes a tax of 5 per unit of output on the monopolist. As a result, the price charged by the profit-maximizing monopolist to the consumer increases by:

Consider a two-period consumption model in which a representative household lives for two periods only. In period 1, he earns income \(y_1\) and consumes \(c_1\). In period 2, he earns \(y_2\) and consumes \(c_2\). He can borrow and lend at the same rate of interest (\(r\)). His lifetime utility function is as follows: \[ U(c_1, c_2) = \ln(c_1) + \beta \ln(c_2) \] where \(\beta>0\) measures the sensitivity of future period’s consumption. What will be the marginal propensity to consume of current consumption, i.e. \(\frac{\partial c_1}{\partial y_1}\)?

Okun’s law says that a 1% increase in unemployment for one year is associated with a 2% decrease in GDP growth. Suppose an economy has the following expectations augmented Phillips curve: \[ \pi = \pi^e - \beta (U - U^N), \quad \beta>0 \] where \( \pi \) and \( \pi^e \) are the inflation and expected inflation rates, respectively. \( U \) and \( U^N \) are the unemployment and natural rate of unemployment, respectively. \( \beta \) measures sensitivity of inflation to unemployment gap. When \( \beta = 2 \), by what percentage does output fall short of full-employment given that the inflation rate, expected inflation rate, and natural rate of unemployment are 8%, 10%, and 6%, respectively?

Which among the following Gini coefficients exhibits the highest equality?

Consider the following system of equations in three variables \(x, y, z\): \[ -x - y - z = 3 \] \[ x + y + z = 10 \] \[ 2x - 3y = 6 \] This system of equations has

Which of the following models appropriately explains the fluctuations in potential output and long-run aggregate supply by understanding the shocks to productivity or the willingness of the worker?

Let the rate of inflation in an economy be 4.2%, the growth rate of velocity of money be 2%, and the growth rate of real GDP be 6%. According to Milton Friedman’s ‘k’ percent rule, the rate of growth of money supply for maintaining stable prices will be _________ (round off to one decimal place).

If a country has flexible exchange rate regime with perfect capital mobility, then according to the Mundell-Fleming Model, an expansionary fiscal policy will lead to

If expectations about inflation are formed as per the rational expectations hypothesis, then the short-run Phillips curve will be

If the sum of price elasticities of imports and exports of a country exceeds unity, then a depreciation of domestic currency will ultimately result in:

"Inflation increases the average level of prices". Which of the following is(are) necessarily implied by this statement:
(i) The prices of commodities exceed income
(ii) Money supply grows at a higher rate than the real GDP