NMIMS BBA – B.Com Macro Economics Solved Answer Assignment

Macro Economics

NMIMS BBA – B.Com Macro Economics Solved Answer Assignment

1. Explain the impact of a change in autonomous expenditure on the equilibrium level of income using Investment Multiplier (10 Marks)

Introduction:

When discussing economics, the term “investment multiplier” refers to the change in equilibrium income that occurs as a direct consequence of a shift in independent spending. Spending that is not affected by shifts in revenue is an example of autonomous expenditure.

Concept and application

 

The formula for determining the investment multiplier is 1/(1-MPC), where MPC stands for the marginal propensity to consume. The MPC is the proportion of increased income that is spent on consumption, and it is expressed as a fraction. For instance, if the MPC is 0.8, then 80 cents are spent on consumption, and 20 cents are saved for every additional dollar of income. This is referred to as a consumption gap. According to the formula for the investment multiplier, the multiplier grows larger whenever the MPC gets smaller.

Conclusion:

 

In 1936, John Maynard Keynes published a piece of writing that would go on to have a significant impact on the development of economic theory. A timeless work in the field of economics, “The General Theory of Employment, Interest, and Money,” more commonly referred to as “The General Theory,” is a book that bears the author’s name.

NMIMS BBA – B.Com Macro Economics Solved Answer Assignment

2. Why did the classical economics assume that in a competitive economy, full employment will be automatic? On what grounds Keynes questioned this assumption(10 Marks)

 

Introduction:

 

Many traditional economists held the view that employment levels were at their maximum. For them, filling a workforce was the norm, and anything deviating from this was seen as abnormal. According to Pigou, the economic system has the potential to automatically generate full employment in the labor market whenever there is a balance between the demand for labor and the supply of work in the market.

Concept and application

 

Say’s Law of Markets, proposed by classical economists such as Marshall and Pigou, is the cornerstone of the classical approach. This view is often known as “the old school.” They demonstrated how individual markets decide production and employment levels for different labor, goods, and currency types. Each call has a mechanism for achieving equilibrium that contributes to maintaining full economic employment.

Conclusion:

They believed that markets were self-regulating and would naturally find an equilibrium state where supply and demand would match, including in the labor market, so they anticipated that full employment would be inevitable in a competitive economy.

NMIMS BBA – B.Com Macro Economics Solved Answer Assignment

3a. From the following data, calculate National Income (5 Marks)

Items	Rs (in crores)
Private Final Consumption   Expenditure	510
Government Final Consumption  Expenditure	75
Gross Fixed Capital Information	130
Change in Stocks	35
Exports	50
Imports	60
Consumption of fixed capital	40
Net Factor Income from Abroad	-5
Indirect taxes	90
Subsidies	10

 

Introduction:

The total value of the commodities and services generated by an economy over a specific period is what is meant to be represented by the term “national income.” It is a critical indicator of the state of the nation’s economy as a whole and is frequently utilized in making significant policy decisions.

Concept and application:

The income, output, and spending approaches are the three primary methods that can be used to compute a country’s gross domestic product (GDP). Each plan primarily emphasizes a distinctive facet of the economy; nevertheless, in the end, they both arrive at the exact total for national income.

Conclusion:

The income, output, and spending approaches are the three primary methods that can be used to calculate the nation’s gross domestic product (GDP). Although each of these methods offers a unique viewpoint on the state of the economy, in the end, they all result in the exact estimate of the country’s total income.

NMIMS BBA – B.Com Macro Economics Solved Answer Assignment

3b. Excessive involvement of government in a sector of market affects the other remaining participants of the sector. Comment (5 Marks)

Introduction:

An excessive level of involvement on the part of the government in a particular market segment might have a considerable influence on the other parties still active in that segment. Depending on the type of involvement and the industry’s specific conditions, this impact may have both a positive and a negative effect on the sector.

Concept and application

Regulation is one of the most prevalent ways in which the presence of the government in a sector can affect the other actors in that sector. Rules established by the government can set standards for various factors, including quality, safety, and environmental influence.

Conclusion:

In conclusion, an excessive level of involvement on the side of the government in a particular market segment can significantly impact the other participants in that market segment.