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 TIME: 11:00 – 1:00 PM
INSTRUCTIONS:
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 + 0.15 Where S is savings, I is investment, G is government
expenditure, T is taxes and Yd is disposable income.
i) Calculate the equilibrium level of income. (3 marks)
ii) What will be the increase in national income if investment reduces by 25 holding
other variables constant? (3 marks)
iii) Suppose government reduced taxes by 100 in this economy, what would be the
change in national income? (3 marks)
Examination Irregularity is punishable by expulsion Page 1 of 3
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 TIME: 11:00 – 1:00 PM
INSTRUCTIONS:
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 + 0.15 Where S is savings, I is investment, G is government
expenditure, T is taxes and Yd is disposable income.
i) Calculate the equilibrium level of income. (3 marks)
ii) What will be the increase in national income if investment reduces by 25 holding
other variables constant? (3 marks)
iii) Suppose government reduced taxes by 100 in this economy, what would be the
change in national income? (3 marks)
Examination Irregularity is punishable by expulsion Page 1 of 3
