Kenyatta University Bachelor Of Commerce (Commerce) Eet 201: Intermediate Macro Economics  Question Paper

Exam Name: Eet 201: Intermediate Macro Economics 

Course: Bachelor Of Commerce (Commerce)

Institution/Board: Kenyatta University

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATION 2009/2010
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
EET 201: INTERMEDIATE MACRO ECONOMICS
DATE: Tuesday.39th December, 2009
TIME: 2.00-4.00 pm

INSTRUCTIONS:
Answer question one and any other two questions
Question one;
(a) Distinguish between the following set of terms:
i. Real wage and money wage.
ii. Liquidity trap and crowding our effect.
iii. Micro-economic theory and macroeconomic theory
iv. Discretionary stabilization and automatic stabilization.
v. Devaluation and depreciation
vi. Philips curve and labour demand.
[18 marks]

(b) Briefly discuss the four hypotheses concerning the way income influences consumer spending. [12 marks]


Question two
(a) With the help of a well labeled diagram, demonstrate how a decrease in money supply and rise in transaction demand for money would affect prices, money wages and real variables using the classical approach. [10 marks]
(b)Briefly explain Keynes criticism on classical models. [10 marks]


QUESTION THREE
(A) Briefly discuss the Keynesian motives of holding money balances. [9 marks]
(b)Briefly explain Keynes argument on the analysis of labour market. [8 marks]
(c) Derive the total money demand curve. [3 marks]


Question four
(a) Compare the monetary and fiscal effect in the three ranges of LM function. [12 marks]
(b)Under the simultaneous equilibrium in the monetary and real sector demonstrate the effect of government increase in her spending. [4 marks]
(c) Write short notes about j curve phenomenon [4 marks]


Question five
(a) Suppose that Kenyans economy is an open economy and is in equilibrium, with aid of a well labeled diagram explain the effect of the following
i. Increase in export under flexible exchange rate regime
ii. Decrease in money supply under fixed exchange rate regime. [10 marks]

(b) With aid of a well labeled diagram explain how you can solve the following forms of disequilibrium
i. Balance of payment surplus under fixed exchange rate.
ii. Balance of payment deficit under flexible exchange rate.[10 marks]



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