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Econ 120: Introduction To Macroeconomics Question Paper

Econ 120: Introduction To Macroeconomics

Course:Bachelor Of Commerce

Institution: Kabarak University question papers

Exam Year:2009

COURSE CODE: ECON 120
STREAM: Y1S2
COURSE TITLE: INTRODUCTION TO MACROECONOMICS

INSTRUCTIONS:
1. This paper contains five (5) questions.
2. Answer question ONE and any other TWO questions.
3. Question ONE carries thirty (30) Marks and all others carry twenty (20) marks
each.
4. DO NOT write anything on this question paper until after the examination.
QUESTION ONE (30 MARKS)
a) What is the difference between the cost of living and the standard of living and
how is each measured? (4mks)
b) Define disposable income and explain the factors that influence the marginal
propensity to consume in an economy. (8mks)
c) The vicious circle of poverty tries to explain the plight of the Less Developed
countries. Explain this statement. (8mks)
d) Why do policy makers of the Less Developed countries get so much concerned
about unemployment situation? (10mks)
QUESTION TWO (20 MARKS)
a) To what extent are the national income figures useful in
i) Measuring the standard of living in an economy.
ii) Comparing the economic performance and standard of living among
countries (14mks)
b) Fully explain and illustrate concept of “business cycle” as used in
macroeconomics. (6mks)
QUESTION THREE
a) What is monetary policy and what are the objectives of this policy in an
economy?
(8mks)
b) Define a multiplier and explain its importance in an economy. What factors
determine the effectiveness of a multiplier in a country? (12mks)
QUESTION FOUR
a) The cry of most of the Third World countries in international trade is that the
distribution of gains from trade are unequal. What determines distribution of
gains from trade and how? Why are these countries disadvantaged?
(10mks)
b) Explain and illustrate the concept of “Phillips curve” and highlight the extent to
which it is applicable in Less Developed countries. (10mks)
QUESTION FIVE
a) Using appropriate illustration, explain the meaning of equilibrium output,
potential output and full employment level of output in a macroeconomy.
(10mks)
b) State the instruments of fiscal policy and explain fully how they can be used to
combat inflation in an economy. Illustrate your answer. (10mks)

Econ 120: Introduction To Macroeconomics Question Paper

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