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Ollscoil na hÉireann, Gaillimh GX_____
National University of Ireland, Galway
Summer Examinations 2007 / 2008
Exam Code(s) 1BA1, 1BA6, 1BA11, BA7, 1EM1, 1OA1, Exam(s) 1 st B.A., 1 st B.A. (PSP), 1 st B.A. (History), 1 st B.A. (Psych.), Erasmus, Occasional Module Code(s) EC136 & EC Module(s) Principles of Macroeconomics Paper No. 1 Repeat Paper External Examiner(s) Professor Cillian Ryan Internal Examiner(s) Mr. Brendan Kennelly Dr. Terrence McDonough Instructions: Please answer TWO questions. Duration 2 hours No. of Pages 2 Department(s) Economics Course Co-ordinator(s) Dr. T. McDonough Requirements : MCQ Handout Statistical Tables Graph Paper Log Graph Paper Other Material
Answer 2 of the following questions.
- Discuss the relationship between the neoclassical approach, the institutional/Keynesian approach and the Marxian approach and political policy positions. Illustrate this by giving an account of the three schools’ theories of unemployment and the policy prescriptions which follow from them. Use graphs where appropriate.
- Explain the origin of the neoclassical vertical aggregate supply curve. Explain why the neoclassical aggregate demand curve slopes down. Use the aggregate supply and demand curve graph to illustrate the neoclassical theory of inflation and the real business cycle model explanation of business cycles.
- Describe the Keynesian concept of aggregate expenditure. Use aggregate expenditure in explaining the Keynesian theory of inflation. What options does the government have according to this analysis in addressing the problem. C = 90 + .8GDP I = 250 G = 150 X = 60 M = .05GDP a) Calculate the equilibrium level of income for this model. b) Suppose business decides to double its investment. What is the new equilibrium income level? c) Calculate the multiplier for this model. d) If full employment GDP is equal to 2600 (using the orignial figures), the government should consider raising government expenditure to what level?
