CaseStudy PGDM Term2 Macro
Rajagiri Business School
PGDM - Term 2
Macroeconomics
Case Study
GROUP 1 1. In a country, the velocity of money is constant. Real GDP grows by 5% per year, the money stock by 14% per year, and the nominal interest rate is 11 per cent. What is the real interest rate? 2. Suppose a country has a money demand function (M/P)d = kY, where k is a constant parameter. The money supply grows by 12% per year, and real income grows by 4% per year. (a) What is the average inflation rate? (b) How would inflation be different if real income growth were higher, say 6%? Explain. (c) Suppose, instead of a constant money demand function, the velocity of money in this economy was growing steadily, say by 2% per annum because of financial innovation. How would that affect the inflation rate? Explain. 3. Examine the relationship between money growth rates (M3) and inflation (GDP deflator, WPI and CPI (IW)) in the context of India for the period, 1980-81 to 2013-14. (Data source: RBI Database, Handbook of Statistics on Indian Economy 2013-14, Tables 1, 2, 45, 232 and 233 at www.rbi.org.in )
GROUP 2
Examine and analyse India’s saving and investment ratios since Independence. Relate it with the growth theories you have learnt and India’s GDP growth rates.
(Data source: RBI Database, Handbook of Statistics on Indian Economy 2013-14, Tables 223 and 224 at www.rbi.org.in )
GROUP 3 What is the current account balance? What is fiscal deficit? How is current account balance influenced by fiscal deficit? Examine this for India using data from the 1980s till 2013-14.
(Data source: Tables 236 and 238 in Handbook of Statistics on Indian Economy 2013-14 at www.rbi.org.in)
GROUP 4
How a country’s current account balance is equal to the difference between it’s saving and investment? Examine this relationship with regard to India for the last four decades.
(Data source: Economic Survey 2013-14: Statistical Appendix Table 1.6, at
PGDM - Term 2
Macroeconomics
Case Study
GROUP 1 1. In a country, the velocity of money is constant. Real GDP grows by 5% per year, the money stock by 14% per year, and the nominal interest rate is 11 per cent. What is the real interest rate? 2. Suppose a country has a money demand function (M/P)d = kY, where k is a constant parameter. The money supply grows by 12% per year, and real income grows by 4% per year. (a) What is the average inflation rate? (b) How would inflation be different if real income growth were higher, say 6%? Explain. (c) Suppose, instead of a constant money demand function, the velocity of money in this economy was growing steadily, say by 2% per annum because of financial innovation. How would that affect the inflation rate? Explain. 3. Examine the relationship between money growth rates (M3) and inflation (GDP deflator, WPI and CPI (IW)) in the context of India for the period, 1980-81 to 2013-14. (Data source: RBI Database, Handbook of Statistics on Indian Economy 2013-14, Tables 1, 2, 45, 232 and 233 at www.rbi.org.in )
GROUP 2
Examine and analyse India’s saving and investment ratios since Independence. Relate it with the growth theories you have learnt and India’s GDP growth rates.
(Data source: RBI Database, Handbook of Statistics on Indian Economy 2013-14, Tables 223 and 224 at www.rbi.org.in )
GROUP 3 What is the current account balance? What is fiscal deficit? How is current account balance influenced by fiscal deficit? Examine this for India using data from the 1980s till 2013-14.
(Data source: Tables 236 and 238 in Handbook of Statistics on Indian Economy 2013-14 at www.rbi.org.in)
GROUP 4
How a country’s current account balance is equal to the difference between it’s saving and investment? Examine this relationship with regard to India for the last four decades.
(Data source: Economic Survey 2013-14: Statistical Appendix Table 1.6, at