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Kenyatta University Examinations 2008/2009 Second Semester For The Degree Of Bachelor Of Economics Question Paper

Kenyatta University Examinations 2008/2009 Second Semester For The Degree Of Bachelor Of Economics

Course:Bachelor Of Economics And Statistics

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF
BACHELOR OF ECONOMICS

EET 101: MACRO-ECONOMICS THEORY I
DATE: Friday 11th September 2009 TIME: 2.00pm-4.00pm
Instructions
Answer Question One(Compulsory) and any other two Questions

Question One(Compulsory)
a) Define the following terms. (18 marks)
i) Gross Domestic product
ii) Monetary policy
iii)Disguised unemployment
iv) Flexible exchange rate
v) Ratchet effect
vi) Internal rate of return
b) The structural model of an economy is given as below
C=400+0.8Yd (Yd=Y-T)
I=350
G=450
T=200
Required
i) Derive the savings function (2 marks)
ii)Derive the government expenditure multiplier (3 marks)
iii)Compute the equilibrium income(Y) and consumption(C) (5 marks)
iv)Compute the new equilibrium income when the government spending is increased by 20%
(2 marks)

Question Two
a) Explain the four major goals of macro-economic policy (4 marks)
b) Using appropriate examples discuss
i) Demand pull inflation (4 marks)
ii)Cost push inflation (4 marks)
c) Highlight the measures the government can use to curb inflation (8 marks)

Question Three
a) Describe five desirable properties off money as a medium of exchange. (5 marks)
b) Describe the Keynesians theory of money demand highlighting the factors that determine
money demand in the economy. (15 marks)

Question Four
a) The following information is extracted from the national income accounting data for
country P in 2008.
Kshs. Millions
National income 2120
Undistributed corporate profits 45
Social insurance contributions 200
Transfer payments from government and businesses 340
Interest payments by government 30
Personal taxes 340
Subsidies 5
Capital consumption allowance 290
Indirect taxes 210
Personal saving 150
Required
Calculate
i) Gross National Product (2 marks)
ii)Personal income (2 marks)
iii)Disposable income (2 marks)
iv)Personal consumption spending (2 marks)
b) Explain the factors that influence size of a country's national income. (4 marks)
c) What are the limitations of per capital income in measuring social welfare? (8 marks)

Question Five
a) With the aid of a well labeled diagram, describe the life cycle income hypothesis of
consumption behavior. (10 marks)
b) Explain the factors that determine investments in a country. (10 marks)

Kenyatta University Examinations 2008/2009 Second Semester For The Degree Of Bachelor Of Economics Question Paper

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