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Aec 202: Intermediate Macro Economics Question Paper

Aec 202: Intermediate Macro Economics

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2009

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KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
AEC 202: INTERMEDIATE MACRO ECONOMICS
DATE: Tuesday 39th December, 2009 TIME: 2.00 p.m. – 4.00 p.m.
INSTRUCTIONS
Answer questions ONE and any other TWO questions.

Question One
a) Distinguish between the following set of terms:
(i) Real wage and money wage
(ii) Liquidity trap and crowding out effect
(iii) Microeconomic theory and macroeconomic theory
(iv) Discretionary stabilization and automatic stabilization
(v) Devaluation and Depreciation
(vi) Philips curve and labour demand curve. [18 marks]
b) Briefly discuss the four hypotheses concerning the way income influences
consumer spending. [12 marks]

Question Two
a) With aid of well labeled diagram demonstrate how a decrease in money supply
and rise in transaction demand for money would affect prices, money wages and
real variables using the classical approach. [10 marks]
b) Briefly explain Keynes criticisms on classical models. [10 marks]
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Question Three
a) Briefly discuss the Keynesian motives of holding money balances.
[9 marks]
b) Briefly explain Keynes argument on the analysis of labour market.
[8 marks]
c) Derive the total money demand curve. [3 marks]

Question Four
a) Compare the monetary and fiscal effect in the three ranges of LM function.
[12 marks]
b) Under the simultaneous equilibrium in the monetary and real sector, demonstrate
the effect of government increase in her spending. [4 marks]
c) Write short notes about J-curve phenomenon. [4 marks]

Question Five
a) Suppose that Kenya’s economy is an open economy and is in equilibrium, with
aid of well labeled diagrams explain the effect of the following:-
(i) Increase in exports under flexible exchange rate regime
(ii) Decrease in money supply under fixed exchange rate regime.
[10 marks]
b) With aid of well labeled diagrams explain how you can solve the following forms
of disequilibrium:
(i) Balance of payments surplus under fixed exchange rate
(ii) Balance of payment deficit under flexible exchange rate.
[10 marks]
…………………….

Aec 202: Intermediate Macro Economics Question Paper

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