# ECO 1203 INTRODUCTION TO MACROECONOMICS Click to view MAASAI MARA UNIVERSITY
REGULAR UNIVERSITY EXAMINATIONS
FIRST YEAR, SECOND SEMESTER

BSc. AGRICULTURAL ECONOMICS AND RESOURCE MANAGEMENT, BSc. AGRIBUSINESS MANAGEMENT, BSc. ECONOMICS, BSc. FINANCIAL ECONOMICS, BSc. ECONOMICS AND STATISTICS

COURSE CODE: ECO 1203
COURSE TITLE: INTRODUCTION TO MACROECONOMICS

DATE: 18TH MAY 2017 TIME: 0830-1030 HRS
INSTRUCTIONS TO CANDIDATES
Answer Question ONE and any other THREE questions

This paper consists of 3 printed pages. Please turn over.

QUESTION 1
a) What is macroeconomics? Explain why we study macroeconomics. (3 marks)
b) Given a consumption function as C= 300 + O.75Y, I = 600, G=1080, X= 260 and M= 470. Determine the equilibrium level of ;
i) National income (Y) (2 mark)
ii) Consumption ( C ) ( 2 mark)
iii) Savings (S) (2 mark)
c) What is a macroeconomic model? How is it constructed (4 marks)
d) Given a hypothetical economy with the following functions;
C= 100 + 0.8Y
S= -400 + 0.2 Y
I = 340- 10r
Ms = 140
Md = 0.4Y – 10r
Determine
i) The IS – curve equation (2 Marks)
ii) The LM- curve equation (2 marks)
iii) Income at general equilibrium ( 4 Marks)
iv) Interest rate at equilibrium (4 marks)

QUESTION 2
a) Distinguish between the following national income concepts
i) GNP and GDP (1 mark)
ii) Nominal GNP and Real GNP (1 mark)

b) Given an hypothetical data set of an economy Compute
i) Real GNP (2014-15 and 2015-16) (2marks)
ii) GNP deflator (2014-15 and 2015-16) ( 2 marks)
iii) Implicit GNP deflator(2014-15 and 2015-16) (2mark)
iv) Rate of inflation (2015-16) (2 marks)
c) Outline five determinants of the size of national income (5 marks)

QUESTION 3
a) Explain an economy as circular flows of income and expenditure. Illustrate your answer using two sector model (5 marks)
b) Discuss the problems encountered in GNP measurement. (5mks)
c) Microeconomics and Macroeconomics? [5 Marks]

QUESTION 4
a) What is macroeconomic policy? Explain the relevant four monetary and four fiscal tools of controlling and regulating monetary and fiscal variables ( 9 marks)
b) What are the different types of unemployment? How are they different from one another? (6 marks)

QUESTION 5
a) Describe the classical theory of inflation? Does this theory fully explain the phenomenon of inflation? (7 marks)
b) What is cost- push inflation? What factors contribute to the cost –push theory of inflation? (8 marks)

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