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Macro Economic Theory Question Paper

Macro Economic Theory

Course:

Institution: University Of Nairobi question papers

Exam Year:2012

Use a well labeled diagram of the Keynesian cross to show the effect of an increased in taxation on equilibrium income.
Suppose lumpsum taxes were increased by 600. What would be the change in consumption assuming an MPC of 0.75
What would be the change in national income for the economy described in b) above and with the same increase in taxes.
Suppose the government expenditures increased by 400 units what would be the change in equilibrium national income assuming the following consumption function C=300+0.8Y

Whether mobilization of resources from domestic financial sector leads to crowding out of private sectors investment is just a matter of degree. Inline with this statement discuss
A scenario in which thee could be no crowding out effect
A scenario of 100% crowding out effect
A scenario of relatively small level of crowding out effect
Use clear diagrams to illustrate your answer above.

What is the mundel fleming model
Express the goods market equilibrium equation for the open economy. Include a clear definition of variables used.
What is meant by perfect capital mobility.
What will be the effect on the domestic economy if interest rates were to decrease below the international interest in the context of the mundel fleming model.
Discuss at least two assumptions of mundel fleming model
With the aid of a well labeled diagrams show how the open economy IS curve is derived the goods market.

Write the Philips curve equation and include a clear definition of variables used.
Discuss two relationship between cyclical unemployment and inflation.
Discuss how the aggregate demand curve could be derived from the IS-LM equilibrium illustrate your answer.
Why is it not wise economic move to increase wages when the economy is experiencing high inflation.

Discuss the worker misperception mundel of aggregate supply. Be careful to discuss the assumptions of the model and why it concludes that the aggregate supply curve is upward sloping in the short run.
Discuss how IS curve for the closed economy could be derived in the goods market. Use well labeled diagrams.

Show the effects of a contractionary monetary policy on equilibrium income holding fiscal policy constant.
Discuss the effects of an increase in transfer payments on the IS-LM equilibrium holding monetary policy constant.
Discuss at least 3 critics on classical economists by Keynes.
Differentiate between economic growth( in real terms) and development

Macro Economic Theory Question Paper

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