In a three-sector economy, explain how the circular flows of income and output take place. Use appropriate diagram substantiate your answer.

Briefly explain the implications of the LM curve. What does a point outside the LM curve mean? What do the position and slope of the LM curve imply?

Briefly explain the implications of the IS curve. What does a point outside the IS curve mean? What do the position and slope the IS curve imply?

Explain why and how, according to the classical economists, the economy always operates at full employment level.

What is Say's Law of market? What are its implications for an economy?

Discuss the factors that lead to a shift in the medium-run aggregate supply (AS) curve.

Explain the concept of adaptive expectations. What are its limitations?

What are the implications of policy ineffectiveness proposition?

Explain the concept of current account in the context of foreign trade. How is a deficit in the current account settled?

Distinguish between the concepts of future contract and forward contract.

State the reasons behind exchange rate overshooting.

Bring out the salient features of the asset market approach to exchange rate determination.

Discuss the important conclusions of the Mundell Fleming model.

By using the IS-LM framework, explain the effect of an expansionary fiscal policy on output, prices and rate of interest.

Derive the equations for IS and LM curves. Specify the parameters of the model. Explain how the levels of equilibrium output and interest rate are influenced by changes in these parameters.

 Write a short note on the limits to monetary policy in an economy.

 Explain the major insights from the Ricardian equivalence proposition.

Describe the various channels of monetary transmission mechanism.

State the implications of the knife-edge problem on economic growth of an economy.

Bring out the salient features of the Baumol-Tobin model of transaction demand for money.