Mac 106: Macro-Economics Question Paper
Mac 106: Macro-Economics
Course:Economics
Institution: Maseno University question papers
Exam Year:2013
Answer Question ONE and any other TWO questions.
QUESTION ONE (30 MARKS)
(a) Define the following concepts:- (5 marks)
(1) Devaluation of a currency
(2) Inflationary Spiral
(3) Consol
(4) Budget Deficit
(5) Frictional unemployment
(b) (1) Explain the concepts: cost of living and standard of living (2 marks)
(2) How would you ascertain the cost of living in a country
(3) Would it be fair to generally compare standards of living in different countries?
(3 marks)
(c) Give and explain factors a country should take into account in designing its tax policy.
(5 marks)
(d) (1)Give and explain the functions of Central Bank. (4 marks)
(2) What role does Central Bank play in the development of a country (2 marks)
(3) Explain the concept of current account of balance of payments (3 marks)
(e) (1) Give and explain limitations of gross national product as a measure of the economic well-being
(5 marks)
(2) Give and explain different ways of measuring gross domestic product of a country
(3 marks)
(3) Suppose interest rate in a certain bank is one percent in one month. Obtain the present value of having dollar 10 in each of the next two years (2 marks)
QUESTION TWO (20 MARKS)
(a) (1) Explain the conditions that lead to an extension of money supply (1 mark)
(2) What measures can the government take to control the rising general rice levels (5 marks)
(3) Explain the concepts multiplier and accelerator effects (4 marks)
(b) (1) Give and explain three indicators of economic well being of a country (3 marks)
(2) Describe the concept inflanatory gap (2 marks)
(c) (1) What factors would cause real wage to get stuck at a point above the full employment level. (3 marks)
(2) Explain the concept public debt providing factors of influence in its growth in an economy (2 marks)
QUESTION THREE (20 MARKS)
(a) (1) Explain the meaning of ''terms of trade'' (2 marks
(2) What factors lead to the improvement or deterioration of terms of trade (5 marks
(3) What effect do these factors have on the country''s Balance of payments? (1 mark)
(b) (1) Define the following concepts with examples:- (2 marks)
(1) Flow
(2) Stock
(2) Give and explain three sets of flow-stock relations (6 marks)
(3) State at least four objectives of International Monetary Fund. (4 marks)
QUESTION FOUR (20 MARKS)
(a) (1) Distinguish between nominal national income and real national income (2 marks)
(2) What factors would you take into account while considering the significance of the size of a country''s national income (5 marks)
(3) State Okun''s law of output gap and give its relevance to economic growth of your country. (3 marks)
(b)(1) Describe the expression ''economic development'' (1 mark)
(2) Give and explain three important factors that may influence the process of development (6 marks)
(3) Give and explain at least three methods of conserving foreign reserves (3 marks)
QUESTION FIVE (20 MARKS)
(a) (1) How are national accounts constructed? (6 marks)
(2) What is the significance of national income accounting? (2 marks)
(b) (1) Consider a simple economy which own three goods. The market price of each good is P1 = kshs 50, P2= kshs 100 and P3= kshs 150. The production and consumption of each good during 2000 was Q1=2000kg, Q2=2500kg and Q3=1000kg
Assume that in 2001 prices rose to P1= kshs 60, P2= kshs 120 and P3= kshs 170 and quantities produced and consumed increased to Q1=2100kg, Q2=2700kg and Q3=1000kg.
Obtain the value of nominal GDP and real GDP, using 2000 as the base year
(2) What is inflation as measured by the GDP deflator
(3) What is real rate of growth of the economy (6 marks)
(c) Explain the following concepts
(1) Treasury Bills
(2) Monetary Policy
(3) Liquidity Ratio (3 marks)
(d) Give measures of alleviating the unemployment problem in Kenya (2 marks)
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