INTRODUCTION TO MACROECONOMICS
LEVEL:HIGHSCHOOL/COLLEGE
TIME: 2HRS
DATE: 24/08/2024
INSTRUCTIONS TO CANDIDATES
1. Answer Question One and any other two questions in the answer booklet provided.
2. Question one carries 30 marks while the other questions carry 20 marks each
3. Do not write on your question papers. All rough work should be done in your
answer booklet.
4. Clearly indicate which question you are answering.
5. Write neatly and legibly.
6. Edit your work for language and grammar errors.
7. Follow all the instructions in the answer booklet
QUESTION ONE (30 MARKS)
(a)Clearly differentiate between the following concepts as used in economics
(I)Macroeconomics and Microeconomics (2 marks)
(ii) Net investment and Gross Investment (2 marks)
(iii) Marginal propensity to consume and Average propensity to consume (2 marks)
(iv) Fiscal policy and monetary policy (2 marks)
(b) Describe the importance of Macroeconomics (3 marks)
(c) Discuss the main targets of macroeconomics (4 marks
(d) Discuss the problems encountered when measuring National income (5 marks)
(e) What are main effects of inflation (5 marks)
(f) Point out the role of Central Banking (5 marks)
QUESTION TWO (20 MARKS)
(a) Suppose an economy is represented by the following economic model
C= 500+ 0.5Y
Page 1 of 9
, I = 200
G = 100
I) Derive the savings function (3marks)
iii) Calculate the MPC and MPS (2 marks)
ii) Graphically show the relationship between consumption and savings function (2 marks)
iii) Compute the equilibrium level of income and savings (3 marks)
b) Explain in detail the methods of measuring National income accounting (6 marks)
c) Discuss the factors that determines marginal propensity to consume (4 marks)
QUESTION THREE (20 MARKS)
(a) Define the term unemployment (2 mark)
(b) State and explain the main types of unemployment. (8 marks)
(c) Discuss the causes of unemployment in developing countries (10marks)
QUESTION FOUR (20 MARKS)
(a) Explain the main factors influencing investment (8 marks)
(b) ) Define inflation and explain the differences between cost push inflation and demand-pull
inflation using illustrations (6 marks)
(c) Explain three effects that explain the shape of the Aggregate Demand (AD) curve (6 marks)
QUESTION FIVE (20 MARKS)
(a) Money is often defined in terms of functions or services that it provides. State and explain
them in detail giving appropriate examples. (6 marks)
(b) According to Keynes, demand liquidity is determined by three motives, explain (6 marks)
(c) Explain the functions of monetary policy in less developed countries (8 marks)
Page 2 of 9
LEVEL:HIGHSCHOOL/COLLEGE
TIME: 2HRS
DATE: 24/08/2024
INSTRUCTIONS TO CANDIDATES
1. Answer Question One and any other two questions in the answer booklet provided.
2. Question one carries 30 marks while the other questions carry 20 marks each
3. Do not write on your question papers. All rough work should be done in your
answer booklet.
4. Clearly indicate which question you are answering.
5. Write neatly and legibly.
6. Edit your work for language and grammar errors.
7. Follow all the instructions in the answer booklet
QUESTION ONE (30 MARKS)
(a)Clearly differentiate between the following concepts as used in economics
(I)Macroeconomics and Microeconomics (2 marks)
(ii) Net investment and Gross Investment (2 marks)
(iii) Marginal propensity to consume and Average propensity to consume (2 marks)
(iv) Fiscal policy and monetary policy (2 marks)
(b) Describe the importance of Macroeconomics (3 marks)
(c) Discuss the main targets of macroeconomics (4 marks
(d) Discuss the problems encountered when measuring National income (5 marks)
(e) What are main effects of inflation (5 marks)
(f) Point out the role of Central Banking (5 marks)
QUESTION TWO (20 MARKS)
(a) Suppose an economy is represented by the following economic model
C= 500+ 0.5Y
Page 1 of 9
, I = 200
G = 100
I) Derive the savings function (3marks)
iii) Calculate the MPC and MPS (2 marks)
ii) Graphically show the relationship between consumption and savings function (2 marks)
iii) Compute the equilibrium level of income and savings (3 marks)
b) Explain in detail the methods of measuring National income accounting (6 marks)
c) Discuss the factors that determines marginal propensity to consume (4 marks)
QUESTION THREE (20 MARKS)
(a) Define the term unemployment (2 mark)
(b) State and explain the main types of unemployment. (8 marks)
(c) Discuss the causes of unemployment in developing countries (10marks)
QUESTION FOUR (20 MARKS)
(a) Explain the main factors influencing investment (8 marks)
(b) ) Define inflation and explain the differences between cost push inflation and demand-pull
inflation using illustrations (6 marks)
(c) Explain three effects that explain the shape of the Aggregate Demand (AD) curve (6 marks)
QUESTION FIVE (20 MARKS)
(a) Money is often defined in terms of functions or services that it provides. State and explain
them in detail giving appropriate examples. (6 marks)
(b) According to Keynes, demand liquidity is determined by three motives, explain (6 marks)
(c) Explain the functions of monetary policy in less developed countries (8 marks)
Page 2 of 9
