DBB1214 MACRO ECONOMICS

Description

SESSION	JULY-AUGUST 2025
PROGRAM	BACHELOR OF BUSINESS ADMINISTRATION (BBA)
SEMESTER	II
COURSE CODE & NAME	DBB1214 MACROECONOMICS

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Assignment Set – 1

 

 

Q1. Elaborate the key differences between classical macroeconomic theory and Keynesian macroeconomic theory. 10      

Ans 1.

Key Differences Between Classical and Keynesian Macroeconomic Theory

Classical and Keynesian economics represent two foundational schools of macroeconomic thought that explain how economies function, how output and employment are determined, and how governments should intervene. While classical theory dominated the 18th and 19th centuries, Keynesian theory emerged in the 1930s as a response to the Great Depression. The two approaches offer contrasting views on market behaviour, wage flexibility, government intervention and

 

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Q2a. Discuss the importance of the consumption function in Keynesian economics and its implications for economic policy.

1. Outline in brief the concept of Paradox of Thrift. 7+3

Ans 2.

(a). Consumption Function in Keynesian Economics and Policy Implications

The consumption function is one of the central ideas in Keynesian economics, explaining how household consumption depends primarily on income. Keynes emphasized that consumption does not increase proportionately with income; instead, it increases at a decreasing rate. This behavioural relationship is expressed as C = a + bY, where “a” represents autonomous consumption and “b” is the marginal propensity to consume (MPC). This function helped

 

 

Q3. Describe Schumpeter’s Innovation Theory of Business Cycles. How does innovation lead to both expansion and recession? 5+5         

Ans 3.

Schumpeter’s Innovation Theory of Business Cycles

Schumpeter’s Innovation Theory is one of the most influential explanations of business cycles, emphasizing the role of innovation and entrepreneurial activity in creating economic fluctuations. Unlike traditional theories that focus on monetary or external shocks, Schumpeter argues that cycles originate within the economic system itself due to waves of innovation. He views capitalism as a dynamic process where creative destruction drives changes in production, investment and employment.

Innovation as the Source of Expansion

According to

 

 

 

Assignment Set – 2

 

 

Q4. Critically analyze the different tools of monetary policy.  10

Ans 4.

Critically Analyze the Different Tools of Monetary Policy

Monetary policy refers to the actions taken by the central bank—such as the Reserve Bank of India (RBI)—to regulate money supply, credit availability and interest rates in the economy. Its objectives include price stability, economic growth, control of inflation and maintaining financial stability. To achieve these goals, the central bank uses a variety of instruments broadly classified as

 

 

 

Q5. Examine the given-

1. Concept of Triple Bottom Line 2. Functions of National Green Tribunal 5+5

Ans 5.

Triple Bottom Line & Functions of National Green Tribunal

1. Concept of Triple Bottom Line

The Triple Bottom Line (TBL) is a sustainability framework that evaluates business performance based on three dimensions: economic, social and environmental outcomes. Traditional business models focus primarily on profit maximization; however, in the modern world, success requires balancing financial returns with social responsibility and ecological preservation. The

 

Q6. Analyze the Marginal productivity Theory of Wage Determination and Ricardian theory of rent. 5+5 

Ans 6.

Marginal Productivity Theory of Wages & Ricardian Theory of Rent

1. Marginal Productivity Theory of Wage Determination

The Marginal Productivity Theory of Wages explains how wages are determined in a perfectly competitive labour market. According to this theory, workers are paid according to their marginal productivity—the additional output produced by employing one more unit of labour. Firms hire workers up to the point where the value of marginal product (VMP) equals the