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Fall-2013
Master of
Business Administration - MBA Semester 1
MB0042–Managerial
Economics-4 Credits
(Book ID:
B1625)
Assignment (60
Marks)
Note: Answers
for 10 marks questions should be approximately of 400 words. Each question is
followed by evaluation scheme. Each Question carries 10 marks 6 X 10=60.
Q1. Economic stability implies
avoiding fluctuations in economic activities. It is important to avoid the
economic and financial crisis. The challenge is to minimize the instability
without affecting productivity, efficiency, employment. Find out the
instruments to face the challenges and to maintain an economic stability.
Answer. Economic stability refers to an absence of excessive
fluctuations in the macro economy. An economy with fairly constant output
growth and low and stable inflation would be considered economically stable. An
economy with frequent large recessions, a pronounced business cycle, very high
or variable inflation, or frequent financial crises would be considered
economically unstable. A term used to describe the financial system of a nation
that displays only minor fluctuations in output growth and
Q2. Explain any eight macroeconomic
ratios.
Answer. Macroeconomics is a branch of economics dealing with
the performance, structure, behavior, and decision-making of an economy as a
whole, rather than individual markets. This includes national, regional, and
global economies. Macroeconomics examines economy-wide phenomena such as
changes in unemployment, national income, rate of growth, gross domestic
product, inflation
Q3. Define Inflation and explain the
types of inflation.
Answer. Inflation is defined as a sustained increase in
the general level of prices for goods and services. It is measured as an annual
percentage increase. As inflation rises, every dollar you own buys a smaller
percentage of a good or service.
The value of
a dollar does not stay constant when there is inflation. The value of a dollar
is observed in terms of purchasing power, which is the real, tangible goods
that money can buy. When inflation goes up, there is a decline in the
purchasing power of money. For example, if the inflation rate is 2% annually,
then theoretically a RS.10 pack of gum will cost RS.10.20 in a year. After
inflation, your money can't buy the same
Q4. Define Fiscal Policy and the
instruments of Fiscal policy.
Answer. Fiscal Policy:
Government's
revenue (taxation) and spending policy designed to (1) counter economic cycles
in order to achieve lower unemployment, (2) achieve low or no inflation, and
(3) achieve sustained but controllable economic growth. In a recession,
governments stimulate the economy with deficit spending (expenditure exceeds
revenue). During period of expansion, they restrain a fast growing economy with
higher
Q5. Investment is a part of income
which can be used for various purposes. It is necessary to create employment in
an economy and to increase national income. To understand the benefits of
income, study the various types of investment.
Answer. Investment refers to purchase of financial
assets. While Investment Goods are those goods, which are used for further
production. Investment implies the
production of new capital goods, plants and equipments. John Keynes refers
investment as real investment and not financial investment.
Investment
is a conscious act of an individual or any entity that involves deployment of
money (cash) in securities or assets
Q6. Discuss any two law of returns to
scale with example.
Answer. The laws of returns are often confused with the law of
returns to scale. The law of diminishing returns operates in the short period.
It explains the production behaviour of the firm with one factor variable while
other factors are kept constant. Whereas the laws of returns to scale operates
in the long period. It explains the production behaviour of the firm under the
conditions when both the inputs (labour and capital) are variable and they can
be increased
Solved
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