1. Consider two countries: Frugalia and Prodigalia (we will call them F and P). In both countries the production function is Cobb-Douglas: Y = AK1/3N2/3. The population growth rate is 0.1, physical capital depreciates at the rate of 0.1, and A=1. In F the savings rate is sF = 0.2 and in P it is sP = 0.4.

(A) Write the production function in terms of output per capita (Y/N).

(B) Find the steady-state values of the capital-labor ratio (K/N) in both countries

(C) Find the steady-state values of the output per capita (Y/N) in both countries.

(D) In which of the countries is consumption-per-capita higher in the steady-state?

(E) In which of the countries is the marginal product of labor higher in the steady-state?

2. Let the following represent the structure of a SMALL OPEN ECONOMY with PERFECT CAPITAL MOBILITY and FLEXIBLE EXCHANGE RATES: C = Ca + 0.6(Y-T), Ca = 80, T = 60, G=84, IP = 70 - 10r, NX = 100 - 0.1Y - 24e, (M/P)D = 0.2Y-4r, MS/P = 60. A) Assume that initially foreign and domestic interest rates be equal so that r = rf and let the foreign exchange rate e equal 2. Find the IS and LM equations.

2. State and explain with suitable diagrams the law of deaman. What are the reasons for the downward slope of the demand?

3. How does the producer attain equilibrium under the iso-quant approach?

4. Discuss the role of time element in the determination of price and output under perfect competition with the help suitable diagrams.

5. Explain the liquidity preference theory of Interest. What is liquidity trap?

6. Graphically explain the economy's production possibility curve in terms of economic growth.

7. Explain various types of price elasticity of demand with the help of diagrams.

8. Describe the two conditions necessary for attaining equilibrium for a firm in the shortrun.

9. Discuss the conditions of price discrimination under monopoly.

10. Explain the innovation theory of profit.

11. What are the diseconomies of scale? Explain with illustrations

12. Discuss the different concepts of national income, How is national income estimated.

13. Compare and contrast the Classical and Keynesian Theory of income, output and employment.

14. Distinguish between quantitative and qualitative methods of credit control. Discuss quantitative methods elaborately.

15.Critically examine the principle of maximum social advantage.

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