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Econ 120: Introduction To Macroeconomics November 2010 Question Paper

Econ 120: Introduction To Macroeconomics November 2010

Course:Bachelor Of Science In Economics And Mathematics

Institution: Kabarak University question papers

Exam Year:2010

COURSE CODE: ECON 120
COURSE TITLE: INTRODUCTION TO MACROECONOMICS
STREAM: Y1S2

INSTRUCTIONS:
Answer any THREE questions.

1. Explain,
a) Five adverse effects of hyper-inflation on an economy. (7.5 marks)
b) Five monetary policy tools the government can use to solve the problem of
inflation. (12.5 marks)
c) The relationship between inflation and unemployment (3 1/3 marks)

2. Distinguish between
a) Disposable income and NNP at factor cost. (4 marks)
b) Real flows and money flows. (4 marks)
c) Seasonal unemployment and structural unemployment. (4 marks)
d) Direct taxes and indirect taxes. (4 marks)
e) Gross Investment and Net investment. (3 1/3 marks)
f) Marginal propensity to consume and average propensity to consume.
(4 marks)

3. Discuss,
a) Six types of unemployment. (9 marks)
b) Six major effects of unemployment problem. (6 marks)
c) The fiscal policy tools the government of Kenya can use to alleviate the
unemployment problem. (8 1/3 marks)

4. Summary data of national accounts of a given country are given as: Autonomous
consumption expenditure is 400; autonomous investment expenditure is 300;
government expenditure is 500; autonomous net export is 100; marginal
propensity to consume out of disposable income is 0.75, and; the income tax rate
is 20%.
a) Compute the equilibrium levels of income, tax revenue and consumption
expenditure. (11 1/3 marks)
b) Suppose the investment expenditure was to increase by 100, what would
be its impact on equilibrium national income? (2 marks)
c) Solve for the government expenditure multiplier, and export multiplier and
interpret your results? (8 marks)
d) What is the position of the government budget? (2 marks)

5. Discuss using diagrams,
a) The impact of an expansionary fiscal policy by the Government of Kenya
on the national income. (10 1/3 marks)
b) The effect of a contractionary monetary policy on Kenya’s equilibrium
national income. (6 ½ marks)
c) The effect of uncertainties during election years on a nation’s equilibrium
income. (6 ½ marks)

Econ 120: Introduction To Macroeconomics November 2010 Question Paper

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