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Eco 311: Intermediate Macroeconomics Question Paper

Eco 311: Intermediate Macroeconomics

Course:Bachelor Of Arts In Economics

Institution: University Of Kabianga question papers

Exam Year:2017

SCHOOL OF BUSINESS AND ECONOMICS.

Department of Accounting, Finance and Economics.

2016/2017 Academic Year

THIRD YEAR SECOND SEMESTER EXAMINATION

FOR THE DEGREE OF BACHELOR OF ARTS (ECONOMICS)

ECO 311: INTERMEDIATE MACRO-ECONOMICS

Instructions: Answer Question ONE and any other THREE

Question One [25 Marks]

a) Distinguish between the following concepts.

i). Classical theory and Keynesian theory. (4 Marks)

ii). J curve phenomenon and BP curve. (4 Marks)

iii). Open market operations and discount rate. (4 Marks)

b) Using well labelled diagrams, analyze the impact of influx refugees in the country using the classical model. (6 Marks)

c). Explain the effects of monetary policy in the three ranges of LM curve. (7 Marks)

Question Two (15 Marks)

In an effort to explain the fact that consumption is a function of income, identify and explain the four different hypothesis. (15 Marks)

Question Three (15 Marks)

a) Suppose that wages have been fixed above the equilibrium wages:

i). Demonstrate the unemployment problem associated with fixed money wage under the classical policy proposal. (4 Marks)

ii). Using the basic classical model, explain the remedy to the government in order to restore the equilibrium. (5 Marks)

b). Explain how the government can use fiscal and monetary tools to solve macroeconomic problems of unemployment and inflation. (6 Marks)

Question Four (15 Marks)

a). Explain the shortcomings of classical theory of output and employment on the following:

i). The real theory of interest. (4 Marks)

ii). The wage and price flexibility. (4 Marks)

b). Discuss the following hypothesis concerning the way income influences consumer spending:

i). The absolute income hypothesis. (3 Marks)

ii). The life cycle hypothesis. (4 Marks)

Question Five (15 Marks)

a). With the aid of a well labelled diagram, explain how you can sustain an exchange rate in a fixed exchange rate regime. (7 Marks)

b). Suppose that everyone in the economy at every interest rate decided to save more, would this lead to unemployment? In other words, would the total output change? Explain with the help of a well labelled diagram. (8 Marks)

Eco 311: Intermediate Macroeconomics Question Paper

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