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Cfu 103: Introduction To Macroeconomics Question Paper
Cfu 103: Introduction To Macroeconomics
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
1
UNIVERSITY EXAMINATIONS: 2008/2009
FIRST YEAR STAGE III EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CFU 103: INTRODUCTION TO MACROECONOMICS (DAY CLASS)
DATE: APRIL 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
The following is some data on two different countries
Country A Country B
Population 1994 10M Population 1994 20M
1995 11 M 1995 20M
GNP 1994 $ 200bn GNP 1994 $ 400bn
1995 $220bn 1995$440bn
Inflation rate (1994 - 1995) 5% Inflation rate (1994 - 1995) 10%
a)
(i) By calculating GNP per capita, determine whether citizens in Country A or Country B
are better off in 1994. (3 Marks)
(ii) If GNP per capita is re-calculated for 1995, are citizens better off in Country A or
Country B? (3 Marks)
(iii) What other factors need to be considered to get a better picture of the welfare of
citizens in a particular country apart from measures of GNP? (4 Marks)
2
b) Give three motives for holding money according to the Keynesian Liquidity Theory
(5 Marks)
c) Explain what is meant by involuntary unemployment. (5 Marks)
d) Using an appropriate diagram explain what is meant by Phillips Curve (5 Marks)
e) Differentiate between absolute and comparative cost advantage theory of International Trade
(5 Marks)
(Total 30 Marks)
QUESTION TWO
RISING YEN SEES SUN SET ON JAPAN ECONOMIC MIRACLE headline from the Times 6th
July 2008.
a) Discuss briefly the possible reasons for the rise in the Japanese Yen (6 Marks)
b) Explain the implication for the Economy of a country such as Japan of Arise in the value of
the currency. (6 Marks)
c) What are the causes for disequilibrium in balance of payment in Kenya and how it affects our
domestic currency (8 Marks)
(Total 20 Marks)
QUESTIONS THREE
a) What is Inflation (2 Marks)
b) Explain any two types of inflation and indicate clearly what are the main causes of each
(6 Marks)
c) Outline the economic effect of high inflation level (6 Marks)
d) Specify what policies should be adopted by a country experiencing high level of inflation to
bring it down (6 Marks)
(Total 20 Marks)
QUESTION FOUR
The Kenyan Sugar industry has been a long beneficiary of protection. Uttered by Finance
Minister was regarded by many as undermining the power of COMESA.
a) Write a brief paper to the Finance Minister setting out the argument for and against protection.
(14 Marks)
b) What are the advantages of Kenya being a member of the International Monetary Fund (IMF)?
(6 Marks)
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(Total 20 Marks)
QUESTION FIVE
a) Why is it important to estimate National Income of a Country? What difficulties do
economists encounter while carrying out such a task particularly in developing countries?
(10 Marks)
b) The table below represents economic transactions for country XYZ in billion of shillings:
Total output Intermediate purchase
Agriculture 30 10
Manufacturing 70 45
Services 55 25
Required:
(i) Calculate the Gross National Product of this economy using the value added approach.
(3 Marks)
(ii) If depreciation and indirect taxes equal 8 billion and 7 billion shillings respectively, find the
Net Domestic Product at Market prices and at factor cost. (4 Marks)
c) Briefly explain the multiplier and accelerator principles (3 Marks)
(Total: 20 Marks)
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