MAASAI MARA UNIVERSITY
REGULAR UNIVERSITY EXAMINATIONS
2013/2014 ACADEMIC YEAR
SECOND YEAR FIRST SEMESTER
SCHOOL OF BUSINESS AND ECONOMICS
BACHELOR OF SCIENCE (AGRICULTURAL ECONOMICS)
COURSE CODE: ARE 202
COURSE TITLE: PRINCIPLES OF MACROECONOMICS
DATE: 14TH APRIL 2014 TIME: 2 – 5pm
INSTRUCTIONS TO CANDIDATES
Answer question ONE and any other THREE questions
1 (a) Explain the importance of macroeconomics (7mks)
(b) Explain the three approaches used in the measure of the National Income. (6mks)
(c) If the government expenditure increased by 45% from the initial expenditure of KSh. 400 and the consumption function is given by C = 200 + 0.6Y. What would be the new equilibrium income if the current income is KSh. 1500? (8mks)
(d) Derive tax multiplier (6mks)
2 Discuss the problems encountered in National Income accounts measurements (15mks)
3 (a) Explain Keynes’s motives for holding money (7mks)
(b) Discuss the components of the following measures of supply of money (8mks)
i. M1 or transaction money
ii. M2 or Broad Money
iii. M3
4 (a) Explain the difference between Fiscal and Monetary policy (4mks)
(b) How does the government expenditure lead to “crowding out effect”? (6mks)
(c) Given the following, calculate the equilibrium income. (5mks)
5 (a) Discuss the causes of “natural” unemployment (8mks)
(b) Discuss the policy measures to curb unemployment (7mks)
