MAASAI MARA UNIVERSITY
REGULAR UNIVERSITY EXAMINATIONS 2013/2014 ACADEMIC YEAR
FOURTH YEAR SECOND SEMESTER
SCHOOL OF BUSINESS AND ECONOMICS
BACHELOR OF ARTS IN ECONOMICS
COURSE CODE: ECO 415
COURSE TITLE: INTERNATIONAL ECONOMICS II
DATE:17TH APRIL 2014 TIME: 9.00AM – 12.00PM
INSTRUCTIONS TO CANDIDATES
Question ONE is compulsory
Answer any other TWO questions
This paper consists of 2 printed pages. Please turn over.
Q1. (a) i. Explain the determinants of exchange rate in free market. 4 marks
(ii) What are the factors responsible for exchange rate fluctuations?
4 marks
(b) i) differentiate between balance of trade and balance of payment.
4 marks
(ii) How does balance of trade affect the balance of payments? 4 marks
(c) i discuss the objectives of IMF under Article Four of Agreement.
5 marks
(ii) How do these objectives differ with IMF’S SAPs? 5 marks
(d) Describe the causes of failure of gold standards after its restoration in the mid-twenties. 4 marks
Q 2 (a) Explain the role of SDRs in the international payment system. 5 marks
(b) Examine the purchasing power Theory and (ii) compare it with the balance of payment theory of foreign exchange. 10 Marks.
(c) Discuss the objectives of exchange control. 5 marks.
Q 3 (a) Discuss the following concepts as used in international Economics
(i) Undervaluation. 3 marks
(ii) Over-valuation. 3 marks
(iii) Devaluation. 3 marks
(iv) Exchange equalization. 3 marks
(b) i) .Analyse the dictum that exports pay for imports. 2 marks.
(ii) How should this notion affect tariff policy? 3 marks
Q 4 (a) Show that demand for foreign exchange is a derived demand. 5 marks
(b) Discuss the functions of the foreign exchange markets. 5 marks
(c) “A customs union may or may not increase the welfare of its member counties” Discuss with reference to the theory of second best.
10 marks
Q 5 (a) Discuss the gainers and losers following the removal of all barriers to trade in the East Africa Community in the areas of;
(i) Manufacturing. 3 marks
(ii) Financial services. 3 marks
(iii) Agricultural sector. 3 marks
(b) Discuss the role of (i) WTO and (ii) GATT to the Kenyan Economy.
9 marks
