Notesale: Turn your study into money

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MACHAKOS UNIVERSITY
University Examinations for 2016/2017

SCHOOL OF BUSINESS AND ECONOMICS
DEPARTMENT OF ECONOMICS
FIRST YEAR SECOND SEMESTER EXAMINATION FOR DEGREE IN
BACHELOR OF STATISTICS AND PROGRAMMING
BACHELOR OF ECONOMICS AND STATISTICS
BACHELOR OF ECONOMICS AND FINANCE
BACHELOR OF ECONOMICS
BACHELOR OF COMMERCE
BACHELOR OF EDUCATION
BACHELOR OF ARTS

EET 101: MACROECONOMIC THEORY I
DATE: 2/6/2017
INSTRUCTIONS:

TIME: 11:00 – 1:00 PM

Answer Question ONE and Any Other Two Questions
QUESTION ONE (COMPULSORY) (30 MARKS)
a)

Assume a closed economy where the level of I is 300, G=T=150 and the savings function
is

= −30 + 0
...

i)

Calculate the equilibrium level of income
...

(5 marks)

v)

b)

Briefly explain the two types of exchange rate regimes
...


b)

Why do people hold money when they can earn interest by lending it to others or by
buying interest yielding bonds?

c)

(4 marks)

(6 marks)

Through which instruments does the Central Bank of Kenya control money supply?
(6 marks)

d)

Graphically derive the IS curve

(4 marks)

QUESTION THREE (20 MARKS)
a)

The following data relate to an emerging African country
...
(10 marks)

QUESTION FOUR (20 MARKS)
a)

b)

Discuss the following concepts:
i
...


Cyclical unemployment

(2 marks)

iii
...


Main functions of commercial banks

(2 marks)

What measures would you suggest to control inflation in Kenya?

(10 marks)

QUESTION FIVE (20 MARKS)
a)

Distinguish between short-run aggregate supply and aggregate demand
...
Explain the impact of an increase and a decrease
in aggregate demand on GDP, price level and unemployment rate in any economy
...


Examination Irregularity is punishable by expulsion

(6 marks)

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