Page 15 - DECO201_MACRO_ECONOMICS_ENGLISH

Macro Economics

Notes Growth of government consumption expenditures in real terms has accelerated to 14.5 per
cent in 1998-99 from 10.6 per cent in 1997-98. This provided an even greater stimulus to
demand than in the previous year and contributed 1.6 per cent points to overall demand
growth in 1998-99. A sharp slump in investment, however, had a deflationary impact and
countered part of this stimulus. Total investment (at 1993-94 prices) declined by about half
a per cent in 1998-99 after increasing by over 13 per cent the year before. This deceleration
in investment was linked to the deceleration in manufacturing and the slump in agriculture
in 1997-98. Average real interest rates, as measured by the cut-off yield on 364-day treasury
bills (adjusted by WPI inflation) declined by 1 per cent points over the previous year, it
was not sufficient to counter the negative factors.
Inflation rate dropped to international levels of 2 to 3 per cent for the first time in decades.
The balance of payments survived the twin shocks of East Asian crisis and the post-
Pokhran sanctions with a low current account deficit and sufficient capital inflows. This
was demonstrated by the continuing rise in foreign exchange reserves coupled with a
relatively stable exchange rate.

Question:
Comment on the Macro Economic scene in India.

Self Assessment

Multiple Choice Questions:
11. Economic growth takes place when:
(a) Total output is increasing

(b) Total income is increasing
(c) Total income is increasing but total output is decreasing
(d) Both total income and total output are increasing
12. ......................... is the percentage rate of increase of the level of prices during a given
period.
(a) Gross national product
(b) Inflation
(c) Depression

(d) Unemployment rate
13. A big jump in the out of an economy (a very high peak of business cycle) results in
.........................

(a) Boom
(b) Recession
(c) Unemployment

(d) Expansion
14. ......................... represents the relationship between spending on goods and services and
the level of prices.

(a) Demand

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