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Bcom 202 – Intermediate Macroeconomics Question Paper

Bcom 202 – Intermediate Macroeconomics

Course:Bachelor Of Commerce

Institution: Egerton University question papers

Exam Year:2010

INSTRUCTIONS:
1. This paper contains five (5) questions.
2. Answer question ONE and any other TWO questions.
3 Question ONE carries thirty (30) marks and all other questions carry twenty (20) marks each.

QUESTION ONE
a) Distinguish between GDP and GNP and explain which of the two is higher in Kenya and why. (8 marks)
b) An economy is described by the following behavioral and structural equations.
C = co + b Y
I = Io
G = Go
X = Xo
M = mo + m Y
Where C = Consumption, I = Investment, G = Government spending, X = Exports and M = Imports.
i) Explain the economic interpretations of Co, b, mo and m as used in these equations.
(8 marks)
ii) Present the complete Keynesian model of equilibrium income determination in the economy in a reduced form. (4 marks)
iii) Define the Keynesian multiplier and show it from (ii) above. (4 marks)
iv) Identify the endogenous variables and show their equilibrium levels. (6 marks)

QUESTION TWO
a) Explain J.M. Keynes’s basis for criticizing the classical approach to macroeconomics based on Say’s Law. (10 marks)
b) Explain the accelerator principle and the multiplier process in relation to the existence of business cycles in an economy. (10 marks)

QUESTION THREE
a) Briefly explain the shortcomings of the Keynesian macro model on employment determination in Less Developed Countries. (14 marks)
b) Under what circumstances is inflation justifiable in an economy? (6 marks)

QUESTION FOUR
a) Critically justify the basis for international trade from the comparative advantage theory point of view (8 marks)
b) What factors influence the country’s productive capacity? (4 marks)
c) Explain the shortcomings of the quantity theory of money as developed by Irving fisher.
(8 marks)
QUESTION FIVE
a) Explain and graphically present how changes in aggregate demand expenditures can bring about shifts in output, employment and inflation stating some of the causes of change in aggregate demand. (15 marks)
b) Explain the causes of the balance of payment problems in the Less Developed Countries. (5 marks)

Bcom 202 – Intermediate Macroeconomics Question Paper

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