UNIVERSITY EXAMINATIONS: 2018/2019
EXAMINATION FOR THE DEGREE OF BACHELOR OF BUSINESS
INFORMATION TECHNOLOGY
BUSS104 INTRODUCTION TO MACROECONOMICS
FULL TIME / PART TIME / DISTANCE LEARNING
DATE: APRIL, 2019 TIME: 2 HOURS
INSTRUCTIONS: Answer Question ONE and any other TWO
QUESTION ONE (COMPULSORY)
a) Distinguish between Absolute cost advantage and Comparative cost advantage theories of foreign
trade (4 Marks)
b) Specify what policies should be adopted by a country experiencing high level of inflation to bring it
down (6 Marks)
c) Explain four reasons why National Income per capita is a indicator of the standard of living or wellbeing between two countries (6 Marks)
d) Describe any four macro-economic goals you are familiar with that any country including Kenya
will strive to achieve (8 Marks)
e) ‘’Keynesian an economist argues that one way to cure unemployment is to increase public
expenditure and the other way is to cut taxation by an equivalent amount’’
Compare the two approaches and show which of the alternatives is likely to be more effective and
why? (6 Marks)
(Total: 30 Marks)
QUESTION TWO
a) With the aid of a well labled diagram explain what is meant by the term’ Philips curve’
(5 Marks)
b) Describe three determinants of the money supply in an economy (5 Marks)
c) Distinguish between monetary and fiscal policy. Explain how these methods are used to solve
macro-economic problems facing a country (10 Marks)
(Total: 20 Marks)
QUESTION THREE
a) Despite the fact that international trade brings benefits, restrictions on free trade still exists
Required:
i) Outline any four principal forms of restriction of international trade (4 Marks)
ii) What are the justifications for restrictions on international trade (8 Marks)
b) Discuss why a country may opt for devaluation as measure to correct her balance of payment
disequilibrium (8 Marks)
(Total: 20 Marks)
QUESTION FOUR
a) If the money supply in a given economy equals to 1000 while the velocity and price equals to 8 and
2 respectively ,determine the level of real and nominal output
(6 Marks)
b)’’According to Keynesian people have a liquidity preference for money for various motives’’
Discuss the three motives for holding money (6 Marks)
c)Outline any four factors that may slow economic growth of a developing country including Kenya
(8 Marks)
(Total: 20 Marks)
QUESTION FIVE
a) Discuss the importance of national income statistics (8 Marks)
b)’’Money is basically what money does’’ Briefly expound on this statement (8 Marks)
c) Discuss the role played by the central bank of Kenya (6 Marks)
(Total: 20 Marks)
END
