Thursday, July 2, 2009

ECO401- Economics (Session - 2) page 4

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Question No: 51 ( Marks: 5 )
Briefly discuss the concept of comparative advantage with the help of example.

Question No: 52 ( Marks: 10 )
A. Differentiate between Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS).
B. Suppose a household has the consumption function (C) presented in the figure given below:
a. Find consumption when disposable income is $8,000 and $10,000.
b. Find consumption when disposable income is $ 6,000. How can a household consume more than its disposable income?
c. What is true for every point on the 450 line?

(Marks: 4+6)

Question No: 53 ( Marks: 10 )
Define M0 and M1. Briefly discuss the three broad motives of holding money.


Question No: 54 ( Marks: 10 )
Recall the Equation of Quantity theory of money and calculate the missing figure in each of the following cases:
a) Money supply (M) =100, Price (P) = 3 and real output (Q) = 200. Calculate the missing figure.
b) Velocity of money (V) = 4, Price (P) = 5 and output (Q) =100. Calculate the missing figure.
c) Money supply (M) = 200, velocity of money (V) = 7 and output (Q) = 700. Calculate the missing figure.
d) Money supply (M) =150, velocity of money (V) = 8, Price level (P) = 3. Calculate the missing value.

(Marks: 2.5 each)

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