Open Economy Macroeconomics

16 solved questions from Class 12 Economics, each with the full working. Tap any question to see the step-by-step solution.

• 1 What is the primary topic or theoretical principle explored in 'Open Economy Macroeconomics' (Class 12 ECONOMICS)? medium MCQ Chapter Core Principle
• 2 Which key mechanism or analytical rule is highlighted in 'Open Economy Macroeconomics'? medium MCQ Key Analytical Mechanism
• 3 What is the primary topic or principle explained in 'Open Economy Macroeconomics' (Class 12 Economics)? medium MCQ Chapter Core Concept
• 4 Which key observation or fact is central to understanding 'Open Economy Macroeconomics'? medium MCQ Key Fact & Mechanism
• 5 Why is the study of 'Open Economy Macroeconomics' important for students of Class 12? medium MCQ Learning Significance
• 6 What is a common application or real-world example related to 'Open Economy Macroeconomics'? medium MCQ Real World Application
• 7 What key takeaway should students retain after completing 'Open Economy Macroeconomics'? medium MCQ Chapter Summary & Takeaway
• 8 Define the current account in the balance of payments and list all its major components. easy 2 marks Current account components
• 9 Explain the short‑run impact of a sudden large capital outflow on (i) the exchange rate, (ii) the domestic interest rate, and (iii) national output in a small open economy operating under a flexible‑exchange‑rate regime, using the Mundell‑Fleming framework. hard 5 marks Impact of capital outflow
• 10 India’s terms of trade have fallen sharply due to a global decline in commodity prices. As a policy maker, propose a comprehensive policy mix that could mitigate the negative impact on national output and employment. Justify each component of your proposed policy mix. hard 5 marks Policy mix for mitigating terms‑of‑trade shock
• 11 India’s current account consists of a trade balance in goods of +3% of GDP, a trade balance in services of -1% of GDP, a net income balance of +2% of GDP and a net transfer balance of -0.5% of GDP. What is the current account balance as a percentage of GDP? easy 2 marks Components of current account
• 12 In a small open economy operating under a flexible exchange‑rate regime, the IS curve shifts right by an increase in government spending, while a sudden capital outflow causes a 5% drop in net capital inflow, shifting the BP curve leftwards. Using the Mundell‑Fleming framework, estimate the qualitative impact on (i) national output, (ii) domestic interest rate, and (iii) exchange rate. hard 5 marks Mundell‑Fleming analysis of simultaneous fiscal shock and capital outflow
• 13 As a policy maker, propose a comprehensive policy mix to mitigate the negative impact of falling terms of trade on India’s national output and employment. Explain each component of your mix and justify how it helps. hard 4 marks Policy response to terms‑of‑trade shock
• 14 India’s trade in goods is +2.0% of GDP, trade in services is –0.8% of GDP, net income balance is +1.5% of GDP and net transfer balance is +0.3% of GDP. What is the current account balance as a percentage of GDP? easy 1 mark Current account calculation
• 15 In a small open economy with a flexible exchange rate, an increase in autonomous consumption shifts the IS curve rightward, while a sudden capital outflow reduces net capital inflow by 10% and shifts the BP curve leftward. Using the Mundell–Fleming framework, explain qualitatively the impact on (i) national output, (ii) domestic interest rate, and (iii) exchange rate. medium 2 marks Mundell–Fleming analysis
• 16 Which of the following is NOT a component of the current account? easy MCQ 1 mark Components of current account