(IGNOU) MEC 002 Important Questions with Answers English Medium- MEC 002 refers to the course Macroeconomic Analysis offered by Indira Gandhi National Open University (IGNOU). It’s a compulsory course for students enrolled in the Master of Arts (Economics) program.
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Course Structure
- Block 1: Traditional Approaches to Macroeconomics: This block introduces the classical, Keynesian, and neoclassical models of economic growth and fluctuations.
- Block 2: Economic Growth: This block explores the determinants of economic growth, including capital accumulation, technological progress, and human capital.
- Block 3: Rational Expectations: This block introduces the concept of rational expectations and its implications for macroeconomic policy.
- Block 4: Inter-temporal Decision-Making: This block examines how individuals and firms make decisions over time, taking into account future expectations and constraints.
- Block 5: Economic Fluctuations: This block analyzes the causes and consequences of economic fluctuations, such as business cycles and recessions.
- Block 6: Unemployment: This block explores the different types of unemployment, their causes, and the policies to address them.
- Block 7: Open-Economy Macro-Modelling: This block introduces models of open economies and analyzes the impact of international trade and finance on macroeconomic performance.
1 ) Explain the interaction between household and firms through a circular flow diagram.
(IGNOU) MEC 002 Important Questions with Answers English Medium- The circular flow diagram is a visual representation of the economic relationships between households and firms in a market economy. It illustrates how goods, services, and money flow between these two main economic agents.
- Households are the primary consumers in the economy. They consist of individuals and families who own and consume goods and services.
- Households offer factors of production (land, labor, capital, and entrepreneurship) to firms in exchange for income.
- Firms are businesses that produce and sell goods and services. They use the factors of production provided by households to create products.
- Firms generate revenue by selling goods and services in the market.
- Firms produce goods and services, which are sold to households in the product market.
- Households purchase goods and services from firms, and this represents the flow of goods and services in the economy.
Factor Market
- Households provide factors of production (land, labor, capital, entrepreneurship) to firms in the factor market.
- Firms pay wages, rent, interest, and profits to households as income in return for using these factors of production.
- The circular flow diagram demonstrates the continuous flow of goods, services, and money between households and firms, creating a closed loop
- Firms produce goods and services.
- Households purchase goods and services.
Money Flow
- Firms receive money from households in exchange for goods and services.
- Households receive income (wages, rent, interest, profits) from firms in exchange for factors of production.
(IGNOU) MEC 002 Important Questions with Answers English Medium- Circular flow diagram highlights the interconnectedness of households and firms in an economy. It shows how resources and income circulate between these two sectors, creating a dynamic economic system. The continuous flow of goods, services, and money sustains economic activity and supports the functioning of the market economy.
2) Distinguish between the classical and Keynesian models of autput and price 1 detexmination in terms of demand and supply curves.
3) Explain the important features of consumption function. ,
4) In the Keynesian model, what is aggregate demand? How does a change in aggregate demand affect output?
5) With an example explain the concept of investment multiplier.
6)What are the types of demand for money? What are the factors on which the demand for money is dependent upon?
7) Explain the concept of ‘liquidity trap’? Why does monetary policy become ineffective if the economy is on passing through a phase of liquidity kip?
8) Explain the process of detamination of equilibrium in the real sector of the economy.
9) What does the LM curve signify? Why is it upward sloping? Explain through suitable dim.
10) Explain through IS-LM curve the ineffectiveness of monetary and ha1 policies.
11) What is the basic equilibrium condition depicted by the Solow model? I
12) What are the basic assumptions on which the Solow model is based?
13) What do you mean by steady State?
14) Under what condition does &I economy realise steady state?
15) What is the golden rule steady state for an economy? I
1) Define the concepts of absolute and conditional convergence.
16) Consider the Solow model. Derive the expression for the speed of convergence.
17) Critically evaluate the Solow mode1 of growth.
18) What are the key defining properties of Endogenous models?
19) Identify the main difference of endogenous growth theory with that of neoclassical Solow model?
20) Explain how expectations can be expressed in the form of a probability distribution.