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Aec 202: Intermediate Microeconomic Theory(Institute Of Open Learning) Question Paper

Aec 202: Intermediate Microeconomic Theory(Institute Of Open Learning)

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2009

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KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING (IOL)
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
AEC 202: INTERMEDIATE MICROECONOMIC THEORY
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DATE: FRIDAY 14TH AUGUST, 2009 TIME: 2.00 P.M – 4.00 P.M
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INSTRUCTIONS: Answer QUESTION ONE and any other TWO QUESTIONS.

QUESTION ONE
a) Briefly discuss the four pillars of classical theory. [20 marks]
b) With the aid of a well-labeled diagram, explain why it is imprudent in the short
run, for an economy with a deficit balance of payments to devalue its currency.
[ 10 marks]

QUESTION TWO
a) Unemployment and inflation are considered the two necessary evils in
macroeconomic theory. Explain in detail why this is so. [ 12 marks]
b) Briefly discuss Keynes criticism of classical theory. [ 8 marks]

QUESTION THREE
a) Distinguish in detail the Keynesian and classical views on the labor market. Use
diagrams where necessary. [ 12 marks]
b) Using relevant examples; distinguish between fiscal and monetary policies.
[ 8 marks]
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QUESTION FOUR
a) Suppose that the Kenya government has hired you as a consultant to advise on
how to attract foreign direct investment to Kenya. Prepare a brief indicating five
areas that the government must focus on to achieve its objective. [10 marks]
b) Outline and briefly explain five causes of unemployment in Kenya. [10 marks]

QUESTION FIVE
a) Using the relevant consumption theory, explain why a university student with
almost zero level of income may consume more goods and services than a hawker
who earns more than the student gets. [ 8 marks]
b) Using a well labeled diagram, explain the effectiveness of the fiscal and monetary
policies in the classical, Keynesian and intermediate ranges. [ 12 marks]

Aec 202: Intermediate Microeconomic Theory(Institute Of Open Learning) Question Paper

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