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Bec 2702 Final Examination Question

The document outlines the final examination for the BEC 2702 Intermediate Macroeconomics course at Kwame Nkrumah University, scheduled for July 20, 2023. It consists of seven questions, with Section A being compulsory and requiring answers to a total of five questions. Topics covered include desired consumption and investment equations, liquidity traps, IS-LM model applications, production functions, and various economic theories.

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12 views3 pages

Bec 2702 Final Examination Question

The document outlines the final examination for the BEC 2702 Intermediate Macroeconomics course at Kwame Nkrumah University, scheduled for July 20, 2023. It consists of seven questions, with Section A being compulsory and requiring answers to a total of five questions. Topics covered include desired consumption and investment equations, liquidity traps, IS-LM model applications, production functions, and various economic theories.

Uploaded by

Trax Temple
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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KWAME NKRUMAH UNIVERSITY

SCHOOL OF BUSINESS STUDIES

BEC 2702: INTERMEDIATE MACROECONMICS

FINAL EXAMINATION: FULL TIME

20TH JULY, 2023

DURATION: THREE (3) HOURS MARKS: 100

INSTRUCTIONS

1. Check that you have the correct examination paper in front of you.
2. This paper consists of Seven (06) questions; answer a total of Four (5) questions.
3. SECTION A: Question One (1) is COMPULSORY.
4. SECTION B: Answer any other FOUR (4) questions.
5. Marks for each question are indicated in the brackets.
6. Number the questions correctly and start each question on a fresh page.
7. Write your student number on all the answer booklets used.
8. There shall be NO communication among students during the examination
SECTION A
Question Onea
Desired consumption, desired investment, and government spending in a closed economy are
Cd = 360 + 200r + 0.1Y
Id = 120 + 400r
G = 120
a) Find an equation for desired national saving, S d in terms of output Y and the real interest rate
“r”. What value of the real interest rate clears the goods market when Y = 550? When Y = 600?
When Y = 650? Use the goods market equilibrium condition to derive the IS curve. Graph the IS
curve. N.B (Sd = Y + Cd + G and Sd = Id) (10 Marks)
b) In the same economy, the real money demand function is
d
M
= 100 + 0.2Y – 2000r
P

Assume that M = 300, P = 2

What is the real interest rate “r” that clears the asset market when Y = 550? When Y = 600?
When Y = 650? Use the asset market equilibrium condition to derive the LM curve. Graph the
LM curve. (10 Marks)

SECTION B
Question Two
a) What is meant by a liquidity trap? (4 Marks)
b) Is fiscal policy effective in a liquidity trap? (4 Marks)
c) How do you escape liquidity trap? (4 Marks)
d) Does liquidity trap cause inflation? (4 Marks)
e) What causes liquidity trap? (4 Marks)
Question Three

Monetary policy and fiscal policy often change at the same time. Suppose the government of
Zambia wants to raise investment but keep output constant. With the aid of IS-LM model, what
mix of monetary and fiscal policy will achieve this goal? (20 Marks)
Question Four

Consider a production function as follows: Q = 6 K 2 L2 − 0.10 K 3 L3, where Q is the total output
produced, and K and L the two factors of production. With factor K fixed at 10 units, determine

a) The total product function for factor L (TPL) (2.5 Marks)

b) The marginal product function for factor L (MPL) (2.5 Marks)

c) The average product function for factor L (APL) (2.5 Marks)

d) Number of units of input L that maximises TPL (2.5 Marks)

e) Number of units of input L that maximises MPL (2.5 Marks)

f) Number of units of input L that maximises APL (2.5 Marks)

g) The point at which MPL = APL (5 Marks)

Question Five

Write brief notes on the following

a) Says theorem (5 Marks)


b) Effective demand (5 Marks)
c) Derived demand (5 Marks)
d) Deflation (5 Marks)

Question Five

a) The rational expectations theory is a concept and modeling technique that is used widely in
macroeconomics. The theory posits that individuals base their decisions on three primary factors.
State and explain these three primary factors (10 marks).
b) With the aid of the graph, explain the “four sector model.” (10 marks)

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