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Macro Economics Question Paper

Macro Economics

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2010

UNIVERSITY EXAMINATIONS: 2009/2010
FIRST YEAR STAGE 3 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CFU 103: MACRO ECONOMICS
DATE: APRIL 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer Question ONE and Any other TWO Questions
QUESTION ONE
Modern Keynesian theory outlines demand for money in three important ways transactionary,
precautionary and speculative demand for money. By use of a circular flow of income and spending
diagram, discuss;
(a) How the government obtains taxes from the households, the firms and the foreign trade.
(5 Marks)
(b) The role and impact of transfer payments from the government to the households. (5 Marks)
(c) What constitutes government spending to the firms (4 Marks)
(d) Benefits that accrue households from firms. (5 Marks)
(e) How do the firms benefit from the households through transactionary and speculative demand
for money? (5 Marks)
(f) How do the government control the flow of money in order to effect transaction, precautionary
and speculative demand for money? (6 Marks)
(Total: 30 Marks)
QUESTION TWO
(a) What is money? Name different kinds of money used in a modern economy. (5 Marks)
(b) How does the government control the flow of money in the economy? (5 Marks)
(c) Name the functions of the Central Bank of Kenya. (5 Marks)
(d) What is the role of interest rates in controlling money supply? (5 Marks)
(Total: 20 Marks)
QUESTION THREE
(a) What is inflation? Discuss the different types of inflation and the method the government uses
to control it. (5 Marks)
(b) By use of a diagram, explain the difference between the types of inflation mentioned.
(5 Marks)
(c) How do governments use interest rates as a monetary policy instrument? Give examples.
(5 Marks)
(d) By use of a diagram show why the negative relationship between investment and rate of
interest is called Investment Demand Function. (5 Marks)
(Total: 20 Marks)
QUESTION FOUR
(a) Explain the importance of trade between countries. (5 Marks)
(b) What is balance of payment (BOP) and what types of accounts are used? (5 Marks)
(c) What is the difference between natural rate of unemployment and cyclical unemployment?
(5 Marks)
(d) Unemployment rate is defined as the percentage of labour force that is unemployed. How do we calculate unemployment? (5 Marks)
(Total: 20 Marks)
QUESTION FIVE
(a) Kenya is a member of the World Bank and IMF. Outline and discuss benefits the country gets from IMF and the World Bank. (8 Marks)
(b) Research suggests that there are four determinants of growth of total output. Explain each of
them. (6 Marks)
(c) How do shifts in aggregate demand and aggregate supply affect economic growth? When is a market equilibrium achieved? (6 Marks)
(Total: 20 Marks)

Macro Economics Question Paper

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