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Dibm 0123: Principles Of Macro-Economics Question Paper

Dibm 0123: Principles Of Macro-Economics

Course:Diploma In Business Management

Institution: Chuka University question papers

Exam Year:2013

CHUKA

UNIVERSITY

UNIVERSITY EXAMINATIONS

FIRST YEAR EXAMINATION FOR THE AWARD OF
DIPLOMA IN BUSINESS MANAGEMENT

DIBM 0123: PRINCIPLES OF MACRO-ECONOMICS

STREAMS: DIBM Y1S12 TIME: 2 HOURS

DAY/DATE: MONDAY 12/8/2013 2.30 P.M. – 4.30 P.M.
INSTRUCTIONS:

Question 1 is compulsory.
Choose Any Two.
Do not write on the question paper.

Q1. (a) (i) Define the term macro-economics. [2 marks]
(ii) Differentiate between micro-economics and macro-economics.
[6 marks]
(b) Discuss the importance of national income to a country. [6 marks]
(c) Given the following functions:

C = 100 + 0.75Y
Io = 50
Go = 20
Find the equilibrium level of income and consumption. [6 marks]

(d) What are the motives of holding money? [4 marks]
(e) Explain the term Balance of Payments. [4 marks]

Q2. A national income model is given as follows:

C = 40 + 0.75Yd ; C = a + bYd
T = 12 + 0.25Y ; T = T + tY
M = 4 + 0.02Y ; M = M + mY
Io = 16
Go = 12
Xo = 20
Required:

(i) Interpret parameters a, b, T, t, M, m and Yd. [5 marks]

(ii) Calculate Equilibrium levels of Income (Y), Consumption (C)
Tax (T) and Imports (M) [12 marks]

(iii) What are the values of; Average Propensity to consume, Average Propensity
to save and Average Propensity to import [3 marks]

Q3. (a) Define inflation. [2 marks]

(b) Explain how the following tools of monetary policy aid in controlling
inflation in Kenya.

(i) Open Market Operations (OMO)
(ii) Bank Rate
(iii) Cash reserve ratio
(iv) Liquidity ratio
(v) Moral sausation
(vi) Selective credit control [12 marks]

(c) Explain the approaches of measuring national income. [6 marks]

Q4. (a) Given the following information:

C = 100 + 0.8Yd
I = 200 – 100r
Go = 550
To = 500
Ms = 900
Md = y – 10,000r

(i) Derive the IS and LM curve.
(ii) Compute equilibrium level of income and interest rate. [10 marks]

(b) Explain the causes of unemployment in Kenya. [5 marks]

(c) What are some of the problems encountered in National Income Accounting?
[5 marks]

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Dibm 0123: Principles Of Macro-Economics Question Paper

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