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Macroeconomic Theory Exam Guide

The document outlines the examination details for AGEC 802: Macroeconomic Theory at Chuka University, including instructions for candidates and a series of questions related to neoclassical production functions, steady-state economics, the Solow growth model, and macroeconomic policies. It requires students to demonstrate understanding through diagrams and explanations, as well as calculations based on provided equations. The exam is scheduled for December 16, 2024, and lasts for three hours.

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44 views3 pages

Macroeconomic Theory Exam Guide

The document outlines the examination details for AGEC 802: Macroeconomic Theory at Chuka University, including instructions for candidates and a series of questions related to neoclassical production functions, steady-state economics, the Solow growth model, and macroeconomic policies. It requires students to demonstrate understanding through diagrams and explanations, as well as calculations based on provided equations. The exam is scheduled for December 16, 2024, and lasts for three hours.

Uploaded by

hozmor5k
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

AGEC 802

CHUKA UNIVERSITY

UNIVERSITY EXAMINATIONS

EXAMINATION FOR THE AWARD OF DEGREE OF BACHELOR OF SCIENCE IN


AGRICULTURAL ECONOMICS

AGEC 802: MACROECONOMIC THEORY

STREAMS: MSC AGEC​ ​ ​ ​ ​ ​ ​ TIME: 3 HOURS​

DAY/DATE: MONDAY 16/12/2024​​ ​ ​ 8.30 A.M – 11.30 A.M.

INSTRUCTIONS TO CANDIDATES

●​ Answer question ONE and any other TWO questions.

QUESTION 1

An economy has a neoclassical production function given by


​ y = f (k)

Where y is per capita output and k is per capita capital stock. The economy has a saving rate
given by s such that 0< s<1, a population growth rate given by n and a depreciation rate given by
d.

a)​ with the aid of suitable diagram or diagrams show how the steady state is
attained in such an economy ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ (5marks)

b)​ Explain why the steady-state attained is stable

(5marks)

c)​ Show the effect of the following policies on the steady-state

i)​ An increase in the saving rate, holding other factors constant

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AGEC 802

(6marks)

ii)​ An increase in the population growth rate, holding other factors


constant

(6 marks)

d)​ Suppose that everyone in the economy at every interest rate decides to save
more. Would this lead to an increase in the level employment? Discuss
(8 marks)

QUESTION 2

a)​ Suppose the proportional growth rate in money supply is 10%, the proportional
growth rate in the velocity of money supply is 5%, and the proportional growth
rate in real GDP is 5%. Using the quantity equation, determine the rate of
inflation
(3 marks)
b)​ Discuss the dynamics of the Solow growth Model​ ​ ​ ​
(9 marks)
c)​ State and explain three uses of money
(3 marks)

QUESTION 3
a)​ Discuss the assumptions of the basic neoclassical model of growth
(4 marks)

b)​ The equations provided below were obtained from the Kenyan macroeconomic
model.
C=100+0.8Yd
i =10-8r
L=y-50r
g =100
t=0.25y
M=2950
P=10
Required: Compute the fiscal and monetary policy multipliers and interpret them.​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (6 Marks)
c)​ Government adopts monetary-fiscal policy mix to avoid crowding out effect.
Explain with a help of a diagram. ​​ ​ (5 Marks)

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AGEC 802

QUESTION 4

a)​ Open macroeconomics requires a balance of Payments in a country. However,


Surplus or deficit frequently occur leading to disequilibrium in the balance of
payments. Discuss the causes of this disequilibrium and the related implications
of this disequilibrium

(10 marks)
b)​ Differentiate between the internal value and external value of money

​ ​ ​ ​ ​ ​ ​ ​ ​ (5 marks)

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