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Cfu 103 Introduction To Macroeconomics (Saturday) Question Paper
Cfu 103 Introduction To Macroeconomics (Saturday)
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
1
UNIVERSITY EXAMINATIONS: 2010/2011
FIRST YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CFU 103 INTRODUCTION TO MACROECONOMICS (SATURDAY)
DATE: DECEMBER2011 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One and Any Other Two Questions
Question One
a) The table below represents the value of economics transaction
for a hypothetical economy in billions of Kenya Shillings;
Gross National Product 20,000
Net Income form abroad 600
Deprecciation 4,000
Indirect taxes 1,000
Social Security Contribution 800
Corporate Income Taxes 2,500
Undistributed profits 200
Direct personal Taxes 2,000
Population 300
Transfer payments 1,000
2
Required;
From the table above derive the following;
i) Disposable Income (2Marks)
ii) Net National product at market prices (2Marks)
iii) Per capita income (2Marks)
iv) Personal Income (2Marks)
v) National income (2Marks)
b) Explain five common problems encountered by economist in estimating the national
income of acountry. (5Marks)
c) Are changes in national income a complete and accurate measure of changes in the
welfare of a community? Discuss. (10Marks)
d) Discuss the roles played by th commercial banks in fast tracking the process of
economic development. (5Marks)
Question Two
a) Keynes developed the concept of the multiplier with the intention of arguing that extra
gorvenment spending on public works which is financed by a budget deficit would have
a positive effect on a demand defficient economy, however several factors limit the
application of the multiplier for an economic management.Discuss these factors.
(8Marks)
b) Using appropriate illustration, discuss the typical features of the trade cycle. (12Marks)
Question Three
a) Explain how the Kenyan government uses both fiscal and monetary policies to
influence the perfomance of an economy. (8Marks)
b) The table below shows trade relationship between two countries A and B
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Country Rice(Tonnes) Clothes(Yards) Rice (Tonnes) Clothes(Yards)
Country A 0 200 Country A 80 60
Country B 350 0 Country B 145 60
World Total 350 200 World total 225 120
i) Discuss the utilization of the theory of comparative advantage and increased
specialization in the above (5 Marks)
ii) Explain the gains resulting from trade between the two countries (4 Marks)
c) Explain the main causes of budget deficit in Kenya today. (4Marks)
Question Four
a) Discuss the economic consequences of the current high and rising inflation, what are the
appropriate measures to arrest the situation. (10Marks)
b) According to the Keynesians, ‘one way to cure unemployment is to increase public
expenditure; another is to cut on taxation by an equivalent amount’’.
Compare the two approaches and show which of the alternatives is likely to be more
effective and reliable to a developing economy. (10 Marks)
Question Five
a) ‘’High level of savings and investment is important to all economies.’’Discuss. (10 Marks)
b) Explain the arguements for and against fixed exchange rate (6Marks)
c) Highlight the importance of circular flow of income ane expenditure . (4Marks)
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