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Elements Of Macroeconomics Question Paper

Elements Of Macroeconomics

Course:Bachelor Of Education Arts

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2007/2008
SUPPLEMENTARY/SPECIAL EXAMINATION FOR THE DEGREE OF
BACHELOR OF ARTS, BACHELOR OF COMMERCE AND
BACHELOR OF EDUCATION

AEC 102: ELEMENTS OF MACROECONOMICS

DATE: Thursday 9th October 2008________________TIME: 10.00am – 12.00pm
INSTRUCTIONS: Answer question ONE and any other TWO questions

Question One
(a)
Compare and contrast the Absolute Income Hypothesis and the relative income
hypothesis. [10 marks]
(b)
Consider an open economy with savings being 500, investments 700, trade balance 200. determine the budget balance. Is it a deficit or a surplus? [10 marks]
(c)
Using well labeled diagrams, explain the impact of an increase in income on interest rates with two scenarios
(i)
Money supply is held constant. [5 marks]
(ii)
Money supply is increased to match the increase in GDP. [5 marks]

Question Two
(a)
Discuss the Keynesian motives of holding money. [9 marks]
(b)
Assuming an open economy with fixed government expenditure and investments, derive the expressions for equilibrium income. [11 marks]

Question Three
(a)
Differentiate between Marginal Efficiency of Capital (MEC) and Marginal Efficiency of Investments. [6 marks]
(b)
Explain your understanding of fiduciary issue, giving an example of Kenya. [3 marks]
(c)
Why is it necessary at any time to discount cash flows in any investment project? [3 marks]
(d)
The basis of international trade is the basic theories. Using relevant numerical examples, explain the basic theories of international trade. [8 marks]

Question Four
(a)
Compare and contrast the capital account and the current account of the balance of payments. [8 marks]
(b)
Differentiate between economic growth and development in the most basic sense and provide an example. [7 marks]
(c)
What is your understanding of a multiplier? Provide a clear example with your answer. [5 marks]

Question Five
Write short notes on the following
(a)
Budget deficit [2 marks]
(b)
Inflation [2 marks]
(c)
Unemployment [2 marks]
(d)
Philips’ curve [2 marks]
(e)
Open market operations [2 marks]
(f)
Gross Domestic Product [2 marks]
(g)
Gross National Product [2 marks]
(h)
Money illusion [2 marks]
(i)
Real balance effect [2 marks]
(j)
Intrinsic value [2 marks]

Elements Of Macroeconomics Question Paper

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