Introduction To Macro Economics Question Paper
Introduction To Macro Economics
Course:Diploma In Business Management
Institution: Kca University question papers
Exam Year:2010
1
UNIVERSITY EXAMINATIONS: 2009/2010
STAGE IV EXAMINATION FOR DIPLOMA IN BUSINESS MANAGEMENT
DFU 103: INTRODUCTION TO MACRO ECONOMICS
DATE: APRIL 2010 TIME: 1½ HOURS
INSTRUCTIONS: Answer any THREE questions
QUESTION ONE.
a) Briefly explain the three methods used to compute the national income of a country. (6 Marks)
b) Explain why government often try to impose restrictions on free trade (8 Marks)
c) Unemployment has been a big problem in Kenya .Define and state the measures, that the
government can adopt to alleviate the problem. (6 Marks)
(Total: 20 Marks)
QUESTION TWO.
a) How do commercial banks ‘create credit’? What are the limitations to this credit creation?
(12 Marks)
b) Explain the concept of liquidity trap (8 Marks)
(Total: 20 Marks)
QUESTION THREE.
a) Clearly explain the meaning of deficit financing of the national budget. (4 Marks)
b) To what extent can an economy be supported by deficit – financing? (10 Marks)
c) Explain what fiscal policy entails. (6 Marks)
(Total: 20 Marks)
2
QUESTION FOUR.
a) What is meant by the term international trade? (4 Marks)
b) In the context of international trade, explain the concept of comparative advantage with
specialization. (10 Marks)
c) Define and briefly explain Balance of Payments (BOP). (6 Marks)
(Total: 20 Marks)
QUESTION FIVE
a) Define inflation. (2 Marks)
b) What are the major causes of inflation? (10 Marks)
c) Explain the economic effects of a high rate of inflation. (8 Marks)
(Total: 20 Marks)
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