Scribd
Upload
199 views3 pages

ECON 302 Intermediate Macroeconomics

(1) This document provides an exam for an Intermediate Macroeconomics course, with 5 questions testing various macroeconomic concepts. Question 1 covers frictional unemployment, real business cycles, Okun's law, Phillips curve, and a model for equilibrium income and interest rates. (2) Question 2 examines demonstration and ratchet effects in consumer behavior relating to the Keynesian absolute income hypothesis. (3) Question 3 determines equilibrium income and the multiplier in an open economy model. (4) Question 4 discusses fiscal and monetary policy using the IS-LM framework. (5) Question 5 covers the aggregate demand-aggregate supply model and appropriate policy measures to address rising inflation.

Uploaded by

Mangani Isaac
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
199 views3 pages

ECON 302 Intermediate Macroeconomics

(1) This document provides an exam for an Intermediate Macroeconomics course, with 5 questions testing various macroeconomic concepts. Question 1 covers frictional unemployment, real business cycles, Okun's law, Phillips curve, and a model for equilibrium income and interest rates. (2) Question 2 examines demonstration and ratchet effects in consumer behavior relating to the Keynesian absolute income hypothesis. (3) Question 3 determines equilibrium income and the multiplier in an open economy model. (4) Question 4 discusses fiscal and monetary policy using the IS-LM framework. (5) Question 5 covers the aggregate demand-aggregate supply model and appropriate policy measures to address rising inflation.

Uploaded by

Mangani Isaac
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

KENYA METHODIST UNIVERSITY

END OF 2ND TRIMESTER 2015 (PT) EXAMINATION

SCHOOL : BUSINESS AND ECONOMICS


DEPARTMENT : BUSINESS ADMINISTRATION
UNIT CODE : ECON 302
UNIT TITLE : INTERMEDIATE MACROECONOMICS
TIME : 2 HOURS

Instructions: Answer question one and any other two questions.

Question One
a) Briefly explain the following concepts as used in economic theory.
(i) Frictional unemployment
(ii) Real business cycles
(iii) Okun’s law
(iv) Phillips curve (10mks)
b) Consider an economy described by the following equations
C = 500-5R + 0.6 (Y-T)
I = 1000 – 20r
T = 1000 + 0.1Y
G = 1200
NX = 900- 0.04Y
d

( P)
M
= 0.2y – 10r

( )
MS
P
=800

(i) Find the equilibrium values of income and interest rate. (8mks)

Page 1 of 3
(ii) Calculate equilibrium tax revenue, consumption and savings. Are
leakages equal to injections. (7mks)
c) Discuss the application of monetary policy in Kenya. Does fiscal dominate
monetary policy in Kenya? (5mks)

Question Two
a) Explain the demonstration and ratchet effects in consumer behavior and
show how they relate to the Keynesian absolute income hypothesis. (10mks)
b) Money supply doesn’t solely depend on government control, but its also a
multiple of the stock of high powered money. Using the relationship
Ms=mH, where Ms is the money supply, m is money multiplier, and H is the
stock of high powered money, derive the money multiplier and interpret.

(10mks)

Question Three
a) Given the following behavioural equations for an open economy
C = 100 + 0.75Yd
I = 60
a= 90
X = 50
T = 0.2Y
Yd = Y-T
M = 0.125Yd
Determine the equilibrium income and the multiplier. Interpret your results.

(10mks)
b) Briefly discuss the classical, Keynesian and neo-classical views relation to
the labour market. (10mks)

Page 2 of 3
Question Four
a) Discuss the effectiveness of fiscal and monetary policy using IS-LM
framework. Use illustrations where possible. (10mks)
b) (i) Distinguish between economic growth and business cycle. (5mks)
ii) Briefly explain the endogenous growth theory. (5mks)

Question Five
a) Show your understanding of the aggregate demand-aggregate supply
(AD/AS) model. What factors lead is shifts in the aggregate demand for a
given economy. (10mks)
b) If you are the policy maker in a given developing economy and inflation is
fast increasing, what factors will you address to establish the cause of this
instability? What policy measures will you suggest for maintain stability in
that country. (10mks)

Page 3 of 3

You might also like