Kenyatta University School of Business Bachelor of Commerce (Commerce) Eet 201  Question Paper

Exam Name: Eet 201 

Course: Bachelor of Commerce (Commerce)

Institution/Board: Kenyatta University School of Business

Exam Year:2010

EET 201
MICROECONOMICS THEORY 2
11TH JUNE 2010
INSTRUCTIONS: Answer question one and two others


QUESTION ONE

a) Compare and contrast the relative and absolute income hypothesis. (10marks)

b) Explain briefly the difference between fiscal and monetary policies highlight. Which one of the two is relevant for Kenya? (4marks)

c) Discuss the contributions of Keynes to the theory of money. (6marks)

d) Using a well labeled diagram analyze the impact of an increase in money supply in the classical model. (10marks)


QUESTION TWO

a) Outline the micro economic recommendations of the classics. (4marks)

b) Assuming an open economy with fixed government expenditure and investments, derive the expression for equilibrium income. (9marks)

c) With the aid of a well labeled diagram, analyze the impact of an increase in income on interest rates when the economy is at the liquidity trap. (7marks)


QUESTION THREE

a) Using proper diagrams analyze the impact of investments in information communication technology in the classical model. (10marks)

b) Explain in detail the determination of interest rates under Classical and Keynesian theory. (10marks)


QUESTION FOUR

a) Compare and contrast the capital account and the current account of the balance of payments. (4marks)

b) Using diagrams, explain the effects of increase in exchange rate on the IS-LM-BP framework. (7marks)

c) With the aid of a well labeled diagrams, explain the policies aimed at mitigating unemployment under the classical framework. (4marks)

d) Explain the J curve phenomena. (5marks)


QUESTION FIVE

A) Write short notes on the following:

a) Fixed exchange rate regime. (4marks)

b) Cambridge Equation. (4marks)

c) Labor market. (4marks)

d) Budget deficit. (4marks)

e) Philips' curve. (4marks)



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