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MEC-102 Macroeconomic Analysis – Solved Assignment 2024-25

Introduction Below are the complete solved answers for the IGNOU MEC-102: Macroeconomic Analysis Tutor Marked Assignment (TMA) for the academic year 2024-25. Click on each question below to view its full answer in easy-to-understand language for students. Assignment Questions with Answer Links 1. Specify the Lucas Supply Function. What are its implications? In what respects […]

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Write short notes on the following: a) Capital asset pricing model b) Permanent income hypothesis

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a) Capital Asset Pricing Model (CAPM) The Capital Asset Pricing Model (CAPM) is a widely used financial model that explains how assets should be priced based on their risk. It shows the relationship between the expected return of an asset and its risk compared to the overall market. Key Equation: E(Ri) = Rf + βi(Rm

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Classify various theories of unemployment based on the possible responses of the firm.

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Introduction Unemployment is a key issue in macroeconomics. Economists have proposed various theories to explain why unemployment exists and how firms and workers interact in the labor market. One important way to classify unemployment theories is by looking at how firms respond to different economic situations. In this answer, we will explore several theories of

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Bring out the salient features of real business cycle models. What are its implications?

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Introduction Real Business Cycle (RBC) models are a major development in macroeconomic theory. Introduced in the 1980s by economists like Finn Kydland and Edward Prescott, these models attempt to explain economic fluctuations based on real (not monetary) shocks, especially productivity changes. Unlike Keynesian models that emphasize demand-side factors, RBC theory focuses on supply-side elements and

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What does the Phillips curve signify? How do you reconcile the difference in the shape of the curve in the short run and the long run?

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Introduction The Phillips Curve is an important concept in macroeconomics that shows the relationship between inflation and unemployment. Named after economist A.W. Phillips, the curve originally showed an inverse relationship between the two — as inflation increases, unemployment decreases, and vice versa. However, the shape and interpretation of the Phillips Curve differ in the short

What does the Phillips curve signify? How do you reconcile the difference in the shape of the curve in the short run and the long run? Read More »

Explain the mechanism through which internal and external balance takes place under flexible exchange rate.

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Introduction In an open economy, a country must maintain both internal balance (full employment and price stability) and external balance (a sustainable current account or balance of payments). Under a flexible exchange rate regime, the exchange rate is determined by market forces without direct government intervention. This system helps adjust the balance of payments and

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What are the implications of IS and LM curves? What are the factors on which the position and the slope of IS and LM curves depend?

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Introduction The IS-LM model is a fundamental framework in macroeconomics used to analyze the interaction between the real and monetary sectors of the economy. Developed by John Hicks and Alvin Hansen, it represents equilibrium in both the goods market (IS curve) and the money market (LM curve). This model helps understand how fiscal and monetary

What are the implications of IS and LM curves? What are the factors on which the position and the slope of IS and LM curves depend? Read More »

Specify the Lucas Supply Function. What are its implications? In what respects is it different from the classical aggregate supply function?

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Introduction The Lucas Supply Function is an important concept in macroeconomics, especially in the New Classical school of thought. Developed by Robert Lucas in the 1970s, it introduced expectations and information into the analysis of aggregate supply. Lucas challenged the traditional Keynesian and classical views by emphasizing the role of rational expectations in shaping output

Specify the Lucas Supply Function. What are its implications? In what respects is it different from the classical aggregate supply function? Read More »