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Intermediate Macroeconomics Question Paper
Intermediate Macroeconomics
Course:Bachelor Of Commerce (Commerce)
Institution: Kabarak University question papers
Exam Year:2012
KABARAK
UNIVERSITY
UNIVERSITY EXAMINATIONS
2011/2012 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF COMMERCE AND
BACHELOR OF BUSINESS MANAGEMENT AND
INFORMATION TECHNOLOGY
ECON 220: INTERMEDIATE MACROECONOMICS
DAY: THURSDAY
DATE: 9/08/2012
TIME: 9.00 – 11.00 A.M. STREAM: Y2S2
INSTRUCTIONS
Answer question ONE and any other TWO questions
QUESTION ONE (30 MARKS)
a) What is a multiplier? (2 marks)
b) What are the conditions that prevent the application of the multiplier theory to the less
developed countries like Kenya? (8 marks)
c) Suppose a model is given as follows.
C=100+0.80Yd (where Yd=Y-T)
I=150
G=50
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T=20+0.25Y
All variables are as defined in class
i). Calculate equilibrium level of income, consumption and savings (6 marks)
ii) Find change in equilibrium income if G increases to 100 and I decreases to 100. (4marks)
d) What is an IS curve and how is it related to the investment demand function? (2 marks)
c) Explain the three conceptual approaches to measuring National Income figures. (6 marks)
e) Outline and explain the functions of money in an economy. (2 marks)
QUESTION TWO (20 MARKS)
a) The search for an appropriate explanation to inflation in the less Developed countries has
led to the emergence of a new school of economists called “Structuralists” and a new
class of inflation theories known as structuralist theories of inflation (Myrdal, 1968 and
Streenten, 1972). Using your country experience, briefly explain the structuralists view
on the sources of inflation. ( 10 marks)
b) How does Keynes’ theory of consumption differ from other theories of consumption
(10 marks)
QUESTION THREE (20 MARKS)
a) Examine the following hypothetical data (all are in billions of shillings) for a particular
year:
1) Net private domestic investment 120
2) Contributions for social insurance 25
3) Interest paid by consumers 9
4) Personal consumption expenditures 600
5) Government transfer payments 60
6) Indirect business taxes 75
7) Undistributed corporate profits 45
8) Net exports 5
9) Capita consumption allowance 60
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10) Total government expenditure 235
11) Corporate income taxes 70
12) Personal taxes 90
13) Net income from abroad 2
On the basis of these data, calculate the following
i.
Gross national product ( 3 marks)
ii.
National income (3 marks)
iii.
Personal income ( 3 marks)
iv.
Disposable income ( 3 marks)
b) Briefly explain four factors that determine the effectiveness of monetary policy in
developing countries. (8 marks)
QUESTION FOUR
a) What are the reasons for holding money in the Keynesian system? (12 marks)
b) Give a brief critique of the Keynesian Theory of demand for money. (8 marks)
QUESTION FIVE
a) Explain the accelerator theory of investment. How is this theory different from the
Keynesian theory of investment of investment? ( 10 marks)
b) Explain five assumptions of the accelerator theory of investment. (10 marks)
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