MAASAI MARA UNIVERSITY
REGULAR UNIVERSITY EXAMINATIONS 
2016/2017 ACADEMIC YEAR
FIRST YEAR SECOND SEMESTER 

SCHOOL OF BUSINESS AND ECONOMICS
BACHELOR OF COMMERCE

COURSE CODE: ECO 1203
COURSE TITLE: INTRODUCTION TO MACRO
                               ECONOMICS
DATE: 24TH APRIL 2017			                                                TIME: 2.30PM-4.30PM
INSTRUCTIONS TO CANDIDATES
•	Answer question ONE (compulsory) and any other THREE 
•	Question one carries 25 marks
•	All other questions carry 15 marks
                                                            This paper consists of 2 printed pages. Please turn over

QUESTION 1	                   

a) Explain three methods of measuring national income                      (6 marks)

b) Explain the relationship between average propensity to consume (APC) and marginal propensity to consume (MPC)                                                      (6marks)

c) Briefly explain two problems of growth and its variable                  (4 marks)

d) State the assumption of Domar-Harrod growth model                      (5marks)

e) State four roles of government in the economy                                   (4marks)

QUESTION 2

a)	Explain five  effects of inflation to Kenyan economy                       (10 marks)

b)	Give factors affecting Marginal efficiency of capital                         (5 marks)

QUESTION 3

a)	Illustrate with a diagram and describe different phases of business cycles
                                                                                                                        (10 marks) 

b)	Explain how money has removed the difficulties of batter system
                                                                                                                          (5 marks)

QUESTION 4
a) Explain briefly the Herrod-Domar model of growth                (8 marks)

b)What do you understand by the word monetary policy? Explain the objective of monetary policy                                                                  (7 marks)
QUESTION 5

a)	Discuss what is meant by involuntary unemployment and explain the Keynesian theory of involuntary unemployment                           (10 marks)

b)	Draw the curve of autonomous investment, why is it parallel to the OX 
axis?                                                                                                                    (5 marks)