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Econ 120: Introduction To Macroeconomics August 2008 Question Paper

Econ 120: Introduction To Macroeconomics August 2008

Course:Bachelor Of Commerce

Institution: Kabarak University question papers

Exam Year:2008

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

INSTRUCTIONS:
1. Answer QUESTION ONE and any other TWO questions.
QUESTION 1
(a) Distinguish between the following paired terms
(i) Real income and nominal income (4mks)
(ii) Investment and capital (4mks)
(iii) Inflation and stagflation (4mks)
(iv) Average propensity to save and marginal propensity to save.
(4mks)
(v) Balance of trade on visible and overall balance of payments
(4mks)
(vi) Real flows and money flows. (4mks)
(b) Given the following consumption function,
C = C0 + c Y
Explain the terms, C0, c and cY. (6mks)
QUSTION 2
Discuss:
(a) Four monetary tools that the government can use to control an inflation problem.
(12mks)
(b) Four functions of money. (8mks)
QUESTION 3
Discuss giving possible remedies, five types of unemployment observed in Kenya over
the past decade. (20mks)
QUESTION 4
(a) Explain the problems encountered in the measurement of national income
accounts. (7mks)
(b) Compare the three approaches to national income measurement. (13mks)
QUESTION 5
Given the following macroeconomic model:
G = G0 = 150 X = X0 = 150 I = I0 = 200 T0 = 100 M0 = 50,
C = 50 + 0.8Yd
Where
C = consumption expenditure
G = Government spending
X = exports
I = investment
T = tax
t = tax rate,
(a) Compute the equilibrium level of income and consumption? (10mks)
(b) Solve for the government expenditure multiplier and interpret your results.
(5mks)
(c) Suppose through a government policy, investment increases by 100, by how much
will the equilibrium national income increase? (5mks)

Econ 120: Introduction To Macroeconomics August 2008 Question Paper

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