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Intermediate Macroeconomics Y2s2 Question Paper

Intermediate Macroeconomics Y2s2

Course:Bachelor Of Commerce

Institution: Kabarak University question papers

Exam Year:2008

INSTRUCTIONS:
Answer QUESTION ONE and any other TWO questions.
QUESTION 1
(a) Distinguish between:
(i) Gross national product (GNP) and Gross domestic product (GDP)
(2mks)
(ii) Actual output and potential output (2mks)
(iii) GNP at factor cost and GNP at market price (2mks)
(b) Given the following data of a hypothetical economy (in billions of shillings)
Exports 700
Imports 1000
Consumers’ expenditure 45,000
Government expenditure 3,800
Gross domestic fixed capital formation 4,200
Net property income from abroad 400
Capital consumption allowance 890
Solve for,
(i) GDP (6mks)
(ii) GNP (2mks)
(iii) NNP (2mks)
(c) Identify the problems encountered in measuring national income accounts
(7mks)
(d) Given the following national income model
C = 1250 + 0.8Yd
T = 0.2Y
G0 = 450
I0 = 100
NX0 = 200
Solve for the equilibrium national output (7mks)
QUESTION 2
(a) Assuming the following model:
Y = C + I + G + (x – m)
C = a + b (Y – T)
M = M + mY
(i) Derive the multiplier assuming tax to be lump-sum (6mks)
(ii) Assuming tax to be a function of income determine the equilibrium level
of income (6mks)
(b) Show that the balanced budget multiplier is always equal to unity. (8mks)
QUESTION 3
(a) With aid of a diagram show that according to the relative income hypothesis, the
short-run average propensity to consume is greater than the long-run average
propensity to consume. (14mks)
(b) Identify the shortcomings of the relative income hypothesis. (6mks)
QUESTION 4
(a) Suppose money supply and demand for money function are given as:
Ms = 250 billion
Md = 100 + 0.5Y – 2500i
Find:
(i) The Lm-function (5mks)
(ii) The shift in the Lm-curve if change in Ms = 50 billion (5mks)
(b) Explain the functions of the central bank of Kenya (10mks)
QUESTION 5
Explain the following terms:
(i) Unemployment (3mks)
(ii) Labour force (4mks)
(iii) Phillips’ curve (4mks)
(iv) Moderate inflation (3mks)
(v) Galloping inflation (3mks)
(vi) Hyper inflation (3mks)

Intermediate Macroeconomics Y2s2 Question Paper

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