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Age 215: Macroeconomics Question Paper

Age 215: Macroeconomics

Course:Bachelor Of Science In Agricultural Economics

Institution: University Of Eldoret question papers

Exam Year:2016

UNIVERSITY OF ELDORET
SCHOOL OF AGRICULTURE AND BIOTECHNOLOGY
DEPARTMENT OF AGRICULTURAL ECONOMICS AND RURAL DEVELOPMENT
SECOND YEAR SECOND SEMESTER, 2015/2016 ACADEMIC YEAR.
BACHELOR OF SCIENCE IN AGRICULTURAL ECONOMICS
AGE 215 :MACROECONOMICS
INSTRUCTIONS; Answer all questions in section A and any Two in section B.
SECTION A. (30 MARKS)
1. using illustrations, explain the life circle Hypothesis. (6 marks)
2.Discuss the concept of liquidity preference. (6 marks)
3.Given a simple national income equation; Y= C+1, and C=cY, drive the investment multiplier. (6 marks)
4.Discuss the Keynesian consumption function. (6 marks)
5.Discuss briefly the determinants of aggregate supply. (6marks)

SECTION B(40 MARKS)
QUESTION SIX
a) Discuss three motives for holding money. (9 marks)
b) Discuss the role of Central Bank in a country's economy . (7 marks)
c) What factors affect the velocity of money in an economy as outlined in the quantity theory of money. (9 marks)
QUESTION SEVEN
given the following model of a closed economy in the short run, with price level (p) fixed at 10; and
C=0.5(U- T)
T= 1500-250r
G=1500
Md/P=0.5Y - 500r
Ms=1000
Required;
a) Write the numerical formula for the IS curve, showing Y as a function of r alone.( 5marks)
b) Write the numerical formula for the LM curve, showing Y as a function of r alone (5marks)
c) What are the short run equilibrium values of Y, r and national saving (S)? (5marks)
d) Assume that G increases by 1500, by how much income will increase in the short run equilibrium. (5 marks)
QUESTION EIGHT
a) What are the functions of money? Describe clearly how money performs these functions. (5 marks)
b) The inadequacies of trade by Barter as an exchange mechanism gave birth to money. Explain these inadequacies. (5 marks)
c) Give the reason why an individual may decide to hold part of his money wealth as money balances pointing out the factors that can influence the amount he decides to hold. (5 marks)
d) Define velocity. Discuss the role of velocity in the quantity theory of money. (5marks)

Age 215: Macroeconomics Question Paper

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