Hbc2213:Intermediate Macro Economics Question Paper
Hbc2213:Intermediate Macro Economics
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2012
QUESTION ONE (30 MARKS)
a. Explain the term potential output (5 Marks) b. Would it be possible for the actual output of an economy to be above potential output? Explain (3 Marks) c. Differentiate between nominal GNP and real GNP (8 Marks) d. Explain the following terms as used with reference to inflation. i. Base year (4 Marks) ii. Consumer price index (4 Marks) e. Suppose we have the following date on prices.
Year GNP price reflector (1982-100)
1985 110.9
1986 113.9
1987 117.7
1988 121.3
Required:
Calculate the rate of inflation for 1986, 1987 and 1988. (6 Marks)
QUESTION TWO (20 MARKS)
a. Discuss the real busies cycle models (6 Marks)
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b. Explain how the real business cycle models differ from the equilibrium business cycle models (8 Marks) c. Outline the main criticisms that have been advanced against the real business cycle models (6 Marks)
QUESTION TRHEE (20 MARKS)
a. Explain the term, planned investment. (4 Marks) b. Discuss the determinants of level of investment demand in an economy (6 Marks) c. The relations below are for a closed economy without government C = 600 + 0.7Y I = 250 + 0.1 y- 10r i. Determine the is- schedule (3 Marks) ii. Determine the level of income along the is schedule corresponding to interest rates of 5, 3 and 7 percent (3 Marks) iii. determine the change in autonomous investment that will have the same effect on equivalent income as a fall in interest from 7 to 5 percent (4 Marks)
QUESTION FOUR (20 MARKS)
a. explain monetarists view of money ( 6 marks) b. outline the monetarists criticism of the income expenditure model (6 Marks) c. discuss the problem of persistence of recession from national expectations perspective (8 Marks)
QUESTION FIVE (20 MARKS)
Consider an hypothetical economy characterized by the following. C = 25 + 0.8 Yd
I = 20
G = 26
X = 17
M = 2 + 0.1 Y
T = 25 + 0.25 Y
a. compute the equilibrium level of income, consumption and imports (6 Marks) b. Solve the government expenditure multiplier and interpret your answer (6 Marks) c. Solve for the import multiplier and interpret your results (6 Marks) d. Explain the unit multiplier theorem (2 Marks)
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