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Intermediate Macroeconomics Year 2010 Question Paper

Intermediate Macroeconomics Year 2010

Course:Bachelor Of Economics And Mathematics

Institution: Kabarak University question papers

Exam Year:2010

INSTRUCTIONS:
(i) Answer ANY THREE questions

QUESTION 1
Distinguish between
a) GDP and GNP (4 marks)
b) Leakages and injections in the circular flow of income. (4 marks)
c) Frictional unemployment and structural unemployment. (4marks)
d) Marginal efficiency of capital and marginal efficiency of investment. (4 marks)
e) Balance of trade on visible and overall balance of payments. (4 marks)
f) Stock variable and flow variable. (3? marks)

QUESTION 2
A national income model is given below
C =C0 + cYd
(Consumption function)
I = I0 (Investmnet Expenditures)
G = G0 (Government expenditure)
X = X0 (Export expenditure)
T = T0 +tY (Tax function)
M = M0 + mY (Import function)
a) Compute the equilibrium levels of income, consumption, tax revenue
and imports. (11? marks)
b) Solve for the investment multiplier, government expenditure multiplier, tax multiplier
and export expenditure multiplier? ( 8 marks)

QUESTION 3
Given the following macroeconomics model:
G=G0 =200 X = X0 =150 I = I0 = 250 T = T0 = 100 M = 150,
C = C0 +cYd
,C0 =50 and c=0.8
a) Derive the saving function. (2 marks)
b) Solve for the government expenditure multiplier and interpret your results. (4 marks)
c) Solve for the import multiplier and interpret your results. (4 marks)
d) Compute the equilibrium level of income and balance of payment? (6 marks)
e) What is the position on: government budget and balance of payment? (4 marks)
f) Compute the value of the average propensity to import at equilibrium and interpret your
result. (3? marks)
QUESTION 4
Discuss briefly,
a) Three major objectives of fiscal policy. (8 marks)
b) Three fiscal instruments you might use to bring the economy under recession to full
employment level. (7½ marks)
c) Five instruments of monetary policy which have been employed by the Central bank of
Kenya. (7½ marks)

QUESTION 5
Give the following functions:
C =10 + 0.75 Yd (Consumption function)
I = 20 – 2,000 R (Investment Expenditure)
L = Y – 1,000 R ( Demand for money)
G = 50 (Government expenditure)
T = 40 (Tax revenue)
M = 90 (Money supply)
a) Derive equations for IS and LM curves. (6 marks)
b) Compute equilibrium level of interest rate ( R) and income (Y). (4 marks)
c) Explain any two factors that cause shift in IS and LM curves. (6 marks)
d) Explain any two factors that cause shift in IS and LM curves. (6 marks)

Intermediate Macroeconomics Year 2010 Question Paper

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