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Macroeconomic Theory Question Paper

Macroeconomic Theory

Course:Bachelor Of Commerce

Institution: University Of Nairobi question papers

Exam Year:2011

QUESTION ONE(10mks)
(a). Explain the concept of National Income,Economic Activities and Final Products.
Clearly state which economic activities are included in the calculation of the National Income and which ones are not included. For each case substantiate your answer.............................................................................6mks
(b). Suppose C=100+0.75Y and I=50. Where C is the consumption and I is the investment function.Find:
(i). Equilibrium level of national income given that the economy is closed and there
is no government expenditure................................................2mks
(ii). Sketch the Savings and Consumption functions on an Expenditure-Income
Graph....................................................................2mks
QUESTION TWO(10mks)
State whether the following are True, False or Uncertain. Be sure to explain your
answer clearly.
(i).LM model gives equilibrium in the good market..................................2mks
(ii).Savings represents a leakage from Consumption Function........................2mks
(iii).GDP is the value of final goods produced by the nationals of a country over a
period of 1 year...................................................................2mks
(iv).Stagflation occurs when inflation rises and unemployment falls................2mks
(v)Money represents bank notes and coins only......................................2mks
QUESTION THREE(10mks)
(a).Inflation refers to persistent rise in the general price level over a fairly long
period of time. Examine the causes of inflation with the aid of clearly labeled
diagrams...........................................................................6mks
(B).Discuss the backward bending labor supply curve................................4mks
QUESTION FOUR(10mks)
(a).During recession the governments resorts to macroeconomic stabilization policies
to bring the economy back to normal.Explain using Fiscal policies how this problem can
be solved..........................................................................5mks
(b).The general equilibrium approach advocates for IS-LM curves in explaining the
equilibrium in both goods and money market.Derive both IS and LM curves clearly stating
how they determine the equilibrium in both markets.................................5mks

Macroeconomic Theory Question Paper

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