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Elements Of Macroeconomics Question Paper

Elements Of Macroeconomics

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATION 2007/2008
INSTITUTE OF OPEN LEARNING
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE

AEC 102: ELEMENTS OF MACROECONOMICS
DATE: Wednesday 9th January 2008 TIME: 1:00 - 3:00 PM

INSTRUCTIONS
Answer QUESTION ONE and ant other TWO QUESTIONS

QUESTION ONE
(a) Explain the difference between the basic theories of international trade. (8 marks)
(b) Show mathematically how we would obtain equilibrium income for a closed economy, given fixed investment and government expenditure. (8 marks)
(c) Compare and contrast the tools of monetary and fiscal policy. (10 marks)
(d) Outline two reasons for deflating data in macroeconomics. (4 marks)

QUESTION TWO
(a) Using proper diagrams, explain the motives of Keynesian money demand. (9 marks)
(b) What are the possible effects of increasing income on interest rates. (11 marks)

QUESTION THREE
(a) Differentiate between a multiplier and an accelerator, giving usefulness of each.
(8 marks)
(b) Explain in detail the following theories of investments. (12 marks)
a. Tobin- Q
b. Neoclassical
c. Internal funds theory

QUESTION FOUR
(a) What do you understand about money illusion? Explain with examples. (5 marks)
(b) Compare and contrast Fisher's and the Cambridge equation. (8 marks)
(c) Outline the sources of both the cost push and demand pull inflation. (7 marks)