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Econ 121: Principles Of Macroeconomics Question Paper

Econ 121: Principles Of Macroeconomics

Course:Bachelor Of Economics And Statistics

Institution: Chuka University question papers

Exam Year:2013

CHUKA

UNIVERSITY

UNIVERSITY EXAMINATIONS
EXAMINATIONS FOR THE AWARD OF
DEGREE IN BACHELOR OF ECONOMICS AND STATISTICS, BACHELOR OF ECONOMICS AND SOCIOLOGY AND AGRIBUSINESS MANAGEMENT
ECON 121: PRINCIPLES OF MACROECONOMICS

STREAMS: ECON & STAT/ECON&SOC/AGBM Y1S2 TIME: 2 HOURS

DAY/DATE: TUESDAY 6/8/2013 2.30 PM- 4.30 PM

INSTRUCTIONS:

Answer Question ONE and any other TWO Questions
Do not write on the Question Paper

Question One (Compulsory)

1. (a) The following information is provided for a certain economy
(i) Marginal propensity to consume = 0.5
(ii) Government expenditure is autonomous = 100
(iii) Exports are also autonomous = 60
(iv) Autonomous consumption = 20

The following function are also provided

(i) I = 70 – 10 r (investment function)
(ii) M = 15+0.1y (import function)
(iii) T = 10+0.2y (tax function)
(iv) m^d=0.3y-10r (Money demand function)
(v) m^s=100 (money supply)

Required:

(i) Explain the meaning of I s and L m

(ii) Derive the I s and L m equation [6 Marks]
(iii) Calculate the equilibrium income and interest rate. [4 Marks]

(iv) Determine the equilibrium consumption [3 Marks]

(b) Per capita income of Kenya is three times higher than that of Uganda; therefore the welfare of Kenyans is three times higher than Ugandans. Do you agree? Explain. [10 Marks]

(c) Explain the causes of unemployment in Kenya. [5 Marks]

Question Two

(a) With help of well labeled diagrams, distinguish between demand pull inflation and cost push inflation; and explain the factors that cause each one of them. [15 Marks]

(b) Explain the uses of natimal income accounting. [5 Marks]

Question Three

(a) Discuss the monetary policy tools used by central bank to control the amount of money in circulation. [10 Marks]

(b) Using illustrations explain the differences between inflationary gap and deflationary gap. How are these gaps removed? Explain. [10 Marks]

Question Four

(a) Discuss the determinants of consumption. [10 Marks]

(b) Discuss the features of recession phase of business cycle. [10 Marks]

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Econ 121: Principles Of Macroeconomics Question Paper

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