List of top Macroeconomics Questions

In the Keynesian closed economy IS-LM model, where interest rate is plotted along the vertical axis and output is plotted along the horizontal axis, the product market schedule will be

In the Keynesian system, the speculative demand for money arises because of

A dual economy consisting of a manufacturing sector (M) and an agricultural sector (A) is depicted in the figure below. O_MO_A is the total labour available in the economy of which O_MLS_M is the labour supply in the manufacturing sector before any migration was allowed among the labourers. The vertical axis in the left (right) side measures the wage in the manufacturing, W_M (agricultural, W_A) sector. LD_M (LD_A) is the demand of labour in the manufacturing (agricultural) sector with respect to O_M(O_A) as the origin. If wages are flexible, and labour is allowed to migrate between these two sectors, then it will be TRUE that

An incumbent firm (I) faces the possibility of entry by a challenger firm (C). If C enters, I may either accommodate or fight. If C does not enter, its payoff is 1, while I's payoff is 2. If C enters, and I accommodates, their payoffs are 2 and 1, respectively. However, if C's entry is met with a fight by I, their payoffs are 0 and 1, respectively. Which one of the following is a subgame perfect Nash equilibrium (SPNE) under perfect information ?

Which of the following statements is/are FALSE ?

In an economy, the effort level of a worker in firm i is denoted by e; and depends on the wage W_i received by the worker from the firm, and the minimum wage Wo is set by the government. The effort function is given by
\(e_i(W_iW_0)=\sqrt{W_i-W_0}\)
If the firm employs N_i unit of workers, then the efficiency unit of labour employed by the firm is e_iN_i. The production is based on only the efficiency unit of labour, and the production function is given by
\(F(e_iN_i) = \log e (e_iN_i)\)
If the minimum wage set by the government is 10, and the profit maximizing firms sell the good in a competitive market at price P by choosing W_i and N_¡, then the profit maximizing wage set by the firm will be _______ (rounded off to one decimal place).

Which one of the following measures in the Keynesian framework is adopted to tame inflation in an economy ?

If the difference between actual GDP and the trend output varies inversely with the difference between actual unemployment rate and the natural rate of unemployment, then such a relationship is called the

In the sticky-price model of aggregate supply, if none of the firms in the market have flexible prices, then the short-run aggregate supply curve will be

When transfer of income happens from the "not richer" individual to the "not poorer" individual, then such a transfer is known as

In the context of the Harris-Todaro model of rural-urban migration, which one of the following is TRUE ?

Which of the following factor(s) do NOT affect output and employment in the classical macroeconomic model ?

Consider the Solow growth model in which output (Y) is determined by the production function Y_t = 0.2K_t + 0.8L_t, where K and L denote capital and labour used in the production process, and t depicts time. The depreciation is given by δK_t, where δ = 0.2. Saving is given by sY_t, where s = 0.5. Assume that the population does not grow with time. The steady state capital per unit of labour is ______ (in integer).

In a perfectly competitive market, suppose the market demand curve is given by P = 10 + W - Q, where P is the market price, W is the average wealth of the consumers in the market, and Q is the industry output. The total cost function for a representative firm is given by C(q) = q³ - 2q² + 5q, where q is the output of a firm. If W = 80, then the total number of firms in this industry in the long-run will be ______ (in integer)

Consider a duopoly market where Firm 1 and Firm 2 produce differentiated products such that the demand function of each firm is given by :
q₁(p₁, p₂) = 18 - p₁ + p₂
q₂(p₁, p₂) = 18 + p₁ - p₂
Here, q₁ and q₂ are the outputs produced by Firm 1 and Firm 2, respectively, and p₁ and p₂ are the corresponding per unit prices.
Cost of production for the ith firm is given by C_i(q_i) = 2q_i ∀ i = 1,2
The firms compete in prices. The price set by Firm 2 such that the market is in Nash equilibrium will be ________ (in integer).

The supply curve is given as $𝑝 = 10 + 𝑥 + 0.1𝑥^2$, where 𝑝 is the market price and 𝑥 is the quantity of goods supplied. The change in the producer surplus due to an increase in market price from 30 to 70 is ____. (rounded off to nearest integer).

Consider a closed economy IS-LM model. The goods and the money market equations are respectively given as follows:
$ 𝑌 = 90 + 0.8𝑌_𝑑 − 100𝑖 + 𝐺$
$𝑀_𝑠 = 750 + 0.2𝑌 − 260𝑖$
where, 𝑌 = national income; $𝑌_𝑑$ = disposable income; 𝑇 = total tax given by 𝑇 = 5 + 0.2𝑌; 𝑖 = interest rate; 𝐺 = government expenditure = 300; $ 𝑀_𝑠$ = constant money supply = 950.
The value of 𝑇 at equilibrium 𝑌 is _______. (rounded off to the nearest integer).

An economy produces a consumption good and also has a research sector which produces new ideas. Time is discrete and indexed by 𝑡 = 0, 1, 2, …
The production function for the consumption good is given by
$𝑌_𝑡 = 𝐴_𝑡 𝐿_{𝑦𝑡}$
where, at time 𝑡, $𝐿_{𝑦𝑡}$ is the amount of consumption good produced, 𝐴𝑡 is the stock of existing knowledge, and $𝐿_{𝑦𝑡}$ is the amount of labour devoted to production of consumption good. It is known that $𝐴_0 = 1$.
The production function for new ideas is given by
$ 𝐴_{𝑡+1} − 𝐴_𝑡 = \frac{1}{250} 𝐴_𝑡 $𝐿_{𝑎𝑡}
where 𝐿𝑎𝑡 is the amount of labour devoted to production of new ideas at time 𝑡. Suppose that for all 𝑡, $𝐿_{a𝑡}$ = 10 and $𝐿_{𝑦𝑡}$ = 90. Then, the growth rate of the consumption good ($Y_{𝑡}$) at 𝑡 = 50 is _____ percent (in integer).

Consider the following AK model where the production function is given by
$ 𝑌 = 𝐴𝐾$
where 𝑌 is output, 𝐾 is capital, and 𝐴 is a constant that reflects the level of technology. Suppose there is zero technological progress in the economy and 𝐴 = 0.50. In the economy, the savings rate equals 0.60 and the depreciation rate for the capital stock equals 0.05. The population growth rate equals zero and the size of the labour force is normalised to 1. Based on the AK model, the steady state growth rate of output per capita in the economy equals ______ percent (in integer).

Consider the following information:
Consumption (𝐶) = 250 + 0.25$𝑌_𝑑$, where $𝑌_𝑑$ is disposable income Autonomous Investment ($𝐼_0$) = 100
Government Expenditure ($𝐺_0$) = 50
Income tax rate (𝑡) = 20 percent
The equilibrium level of consumption in the economy is ____ (in integer).

Consider the information given in the table below:

Year	Unemployment Rate (in percent)	Number of unemployed (in millions)	Labour Force Participation Rate (in percent)
2010	15	30	70
2020	20	50	80

The percentage change in working-age population from 2010 to 2020 is __________ (rounded off to two decimal places).

A manufacturer producing pens has the following information regarding the cost of production of pens:

Output (𝑄)	1	2	3
Total Costs (𝑇𝐶)	4	13	32

"If the total cost function is of the form $𝑇𝐶(𝑄) = 𝑎𝑄^2 + 𝑏𝑄 + 𝑐$ where 𝑎, 𝑏, and 𝑐 are constants, then the value of $𝑇𝐶(𝑄) at 𝑄 = 4$ is (in integer)."

A firm has a production function that is homogenous of degree one given by $𝑄 = 2\sqrt{𝐿𝐾}$, where 𝑄 is quantity, 𝐿 is labour and 𝐾 is capital. The unit price of 𝐿 is Rs. 4 and the unit price of 𝐾 is Rs. 16. Assuming that there is zero fixed cost, the total cost (long run) of producing 10 units of 𝑄 is Rs. (in integer).