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Macro Economics Question Paper

Macro Economics

Course:Macro Economics

Institution: Kenya Methodist University question papers

Exam Year:2008

KENYA METHODIST UNIVERSITY

END OF FIRST TRIMESTER 2008 EXAMINATION

FACULTY : BUSINESS AND MANAGEMENT STUDIES
DEPARTMENT : BUSINESS ADMINISTRATION
COURSE CODE : BUSS 115
COURSE TITLE : MACRO ECONOMICS
TIME : 3 HOURS

INSTRUCTION
• Answer Question ONE and THREE Questions

Question 1
a) Distinguish between the following terms:
i) Nominal GDP and real GDP.
ii) GDP and GNP
iii) Fixed exchange rate and flexible exchange rate
iv) Economic growth and Economic development
v) Liquid cash and near money assets (10marks)

b) The information below represents national income model for Mali Moto economy.
Y = C+ I
C = 80 + 0.75Y (consumption function)
I = 70 (investment)

i) Give the economic interpretation of variables 80 and 0.75. (4marks)

ii) Compute MPC and MPS. (4marks)

iii) Determine the investment multiplies and interprete the results. (6marks)

iv) Explain three conditions for the multiplier to work in any economy. (6marks)

c) Discuss four determinants of economic growth. (8marks)

d) Outline two sources of government revenue. (2marks)

Question 2
a) Explain five principles of a good tax system. (10marks)

b) Argue the case against using per capita income to compare the economic welfare of people among countries. (10marks)

Question 3
Discuss five causes of BOP deficit and suggest five measures that a country can take to solve the problem. (20marks)

Question 4
a) Critically examine six methods the Central Bank used to control money stock in the economy. (12marks)

b) Explain four reasons why monetary policies are not effective in many developing countries. (8marks)

Question 5
a) Discuss six fiscal measures that the government may apply to reduce unemployment in the economy. (12marks)

b) Explain any four causes of demand pull inflation. (8marks)

Question 6
Countries try to achieve economic growth and development by forming trading blocs. Analyze five benefits and five limitations of such blocs.
(20marks)

Macro Economics Question Paper

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