MERU UNIVERSITY OF SCIENCE AND TECHNOLOGY

P.O. Box 972-60200 – Meru-Kenya.

Tel: +254 (0) 799 529 958, +254 (0) 799 529 959, +254 (0) 712 524 293
Website: www.must.ac.ke Email: info@must.ac.ke

University Examinations 2017/2018

SECOND YEAR SPECIAL / SUPPLEMENTARY EXAMINATION FOR DEGREE OF

BACHELOR OF COMMERCE

BEC 3225/BBE 3153: MACROECONOMICS

DATE: SEPTEMBER, 2018 TIME: 2 HOURS

INSTRUCTIONS: Answer question one and any other two questions.

QUESTION ONE (30 MARKS)

a) Given the following national income figures of country X in millions shillings

Sector Millions (shs)

Subsistence economy 230
Enterprises 960
Private households 45
Producers of government services 530
Rental surplus (with depreciation) 170
Profits and interests 1720
Indirect taxes 590
Subsidies 10
Net factor income from abroad -150
Required
a) Compute the totals for the monetary economy. (5 Marks)
b) Calculate
(i) GNP at factor cost (2 Marks)
(ii) GNP at market prices (2 Marks)
(iii) Gross National product (GNP) (2 Marks)
c) Explain the 3 main methods used in the computation of national income. (9 Marks)

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 d) Explain the assumptions of the circular flow of income of a closed economy model.
(10 Marks)

QUESTION TWO (20 MARKS)

a) Briefly explain the cause of balance of payment problems. (10 Marks)

b) Discuss the disadvantages of economic integration. (10 Marks)

QUESTION THREE (20 MARKS)

a) Discuss the factors responsible for wage differentials within the same occupation.
(10 Marks)
b) Explain briefly why government imposes taxes. (10 Marks)

QUESTION FOUR (20 MARKS)

a) Explain the determinants of money supply in an economy. (12 Marks)
b) Discuss the factors that influence rise or fall of interest. (8 Marks)

QUESTION FIVE (20 MARKS)

a) Explain the causes of cost-push inflation. (10 Marks)
b) Discuss the reasons for the development of international trade. (10 Marks)

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