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Elements Of Macroeconomics Question Paper

Elements Of Macroeconomics

Course:Bachelor Of Education

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATION 2007/2008
SUPPLEMENTARY/SPECIAL EXAMINATION FOR THE DEGREE OF BACHELOR OF ARTS

AEC 102: ELEMENTS OF MACROECONOMICS
DATE: Thursday 9th October 2008 TIME: 10:00 AM - 12:00 PM

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, investment 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 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 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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