Date: Monday December 10th, 2001
#Course Credits: 3.0
Semester/Year: Fall 2001
Classroom/Time: M/W/F:12:00 PM-12:50PM(Rm-CS
220)
Do
three (3) questions from the sections below. Each of your three (3) questions
must be chosen from any three (3) of the following sections below.
Section#1-National
Income Accounting System and Macroeconomic Aggregates
(1)The National Income Accounting System is indispensable to policymakers to ensure sound and timely macroeconomic management decisions. Discuss
(2a)What is meant by the National Income Accounting System?
(2b)State and explain four(4) objectives of the National
Income Accounting System
(2c)List any five (5) macroeconomic aggregates that are
monitored by the National Income Accounting System
(2d)Briefly discuss the differences between any two (2)
of the aggregates listed in Q#2 (2c) above
(3)Write brief and clear notes on the following concepts:
(a)Transfer Payments
(b)Negative Subsidies
(c)GNP at market price
(d)GDP at factor cost
(e)NDP Per Capita at market price
(f)Capital Consumption Allowances
(g)Personal Income
(h)Net Factor Income from Abroad
(i)Genuine Progress Indicator or GPI
(j)Measure of
Economic Welfare or MEW
(4a)What is the definition of the GDP of a country?
(4b)What is the definition of the GNP of a country?
(4c)State and explain two (2) valid differences between
the GDP and GNP of a country of your
choice
(4d)State and explain any five (5) limitations of the GDP
or GNP with which you are familiar
(5)State and explain four (4) reasons in defense of the GDP as a measure of a nation’s economic welfare and four (4) reasons against the GDP as a measure of a nation’s welfare
(6a)What is meant by the term “macroeconomic
stabilization of a country’s economy”?
(6b)State and explain any four (4) goals of a
macroeconomic stabilization program in an economy
(6c)Identify and clearly explain the variable in the
Keynesian macroeconomic model that is
responsible for macroeconomic instability
(6d)What is Keynes’ rationale for the stability in
consumption and government expenditures as AD variables?
(6e)What is Keynes’ rationale for not attributing the
cause of macroeconomic stability to the next export component of AD?
(7a)What is the Keynesian Income-Expenditure Model?
(7b)State and explain any two(2) reasons for the
importance of the Keynesian
Income-Expenditure Model in Macroeconomic theory and policy debates?
(7c)Suppose the MPC=0.65, C=$585b,Taxes or T=$56b,
National Income or Y=$485b in the economy of Somaliland:
Calculate the numerical value of the:
(a)
Multiplier
(b)
National Disposable Income
(c)
Savings as a share of National Disposable Income
(d)
Is there dissavings in this economy? Why or Why not?
(7d)Suppose the following changes occur in the economy of
Somaliland:
(7e)Suppose aggregate investment expenditure in the
economy of Somaliland rises by $28b, What would be the total rise in investment
given the multiplier already calculated in (7c) above?
(8)With the use of clearly labeled diagrams carefully
distinguish between the following pairs of concepts:
(a)Autonomous consumption and Consumption function
(b)MPC and MPS
(c)Dissavings and Savings function
(d)AD and AS in an economy
(e)AD shifters and AS shifters
(f)Savings function and Consumption function
(9)Write brief notes on the following categories:
(a)Cyclical Unemployment
(b)Rate of Unemployment
(c)Underemployment
(d)Rate of Underemployment
(e)Involuntary Unemployment
(f)Seasonal Unemployment
(g)Labor Force Participation Rate
(10)Distinguish between the following pairs of concepts:
(a)Structural and Cyclical Unemployment
(b)Rate of Underemployment and Rate of Unemployment
(c)Technological Unemployment and Rate of Self-employment
(d)Labor force and Labor Force Participation Rate
(e)Seasonal and Voluntary Unemployment
(f)Rate of Employment and Natural Rate of Unemployment
(12a)What is the rate of unemployment in an economy? Give a numerical example of the rate of unemployment
(12b)What is the rate of employment in an economy? Give a numerical example of the rate of employment
(12c)What is the rate of underemployment in an economy? Give a numerical example of the rate of underemployment
(12d)State and explain any three (3) limitations of data
for unemployment and employment rates
(12e)What is meant by an inverse relationship between the
rates of employment and unemployment?
(13a)Let us assume that the CPI basket for economy X is
composed of the following eight(8) commodities:
(13b)Construct a CPI with the above basket in (13a) using
the years 1985-1987 with 1986 as your initial base year and the other years as
your current years
(13c)Assign your own prices and quantities for the
commodities in your CPI basket and then choose 1985 as your next base year
(13d)How do the price changes vary as represented by the
CPI when you use the above two base years?
(13e)Is economy X experiencing moderate, galloping or
hyperinflation in your CPI basket of goods?
(14)Write notes on the following categories:
(a)Base year
(b)PPI
(c)Galloping inflation
(d)Speculation
(e)Cost-Push Inflation
(f)Real Investment
(g)Deflation
(h)Rate of inflation
(15a)Who are the monetarists and what is their explanation for the cause of inflation in an economy?
(15b)Do you see a relationship between the primary cause
of inflation that is advanced by the monetarists and the other causes you
learnt in class?
(15c)State and explain any three (3) consequences of
inflation in an economy.
(15d)Does the Quantity theory of money help or impede the
primary cause of inflation supported by the monetarists?
(16)Distinguish between the following categories:
(a)GDP Deflator and Galloping Inflation
(b)CPI and Rate of Inflation
(c)Exchange Rate and Price index
(d)Creeping inflation and Uncertainty
(e)Demand-Pull and Cost-Push Inflation
(f)Rate of Deflation and Wage-Price Spiral
(17a)State and explain any three (3) functions and properties
of money
(17b)How did the “Double Coincidence of Wants” retard the
growth of markets and trade in barter economies?
(17c)How has money in modern economies contributed to the
efficacy of economic transactions?
(17d)Is it fair to say that in contemporary modern
economies like that of the USA’s and Cuba’s the “Double Coincidence of Wants”
still exist despite the existence of
money as a medium of exchange?
(18a)What is meant by the Fractional Reserve System of
Money Creation?
(18b)What are the assumptions of the Fractional Reserve
System of Money Creation?
(18c)With the use of
the T-account model illustrate
how two member banks of the Federal Reserve System would create money
starting with $1200 and a Reserve Ratio of
10%
(18d)Use either approach discussed in class to show the
actual amount of money created in this model
(18e)What would be the new money created if the Federal
Reserve Bank increased the Reserve Ratio to 20%
(19a)State and explain any four (4) functions of the
Federal Reserve Bank
(19b)What is meant by monetary policy?
(19c)What are the monetary instruments available to the
Federal Reserve Bank?
(19d)What is the difference between an expansionary and
contractionary monetary policy?
(19e)How are monetary instruments used to pursue the
monetary policy of the Federal Reserve Bank? Give clear examples
(19f)State and explain any two (2) objectives of a
contractionary or expansionary monetary policy in an economy
(20)Distinguish between the following pairs of concepts:
(a)Open Market Operations and Discount Rate
(b)Quantity Theory of Money and Monetarism
(c)Contractionary Monetary Policy and Reserve Ratio
(d)M2 and M3
(e)Fractional Reserve System and Money Multiplier
(f)Monetary Base and Expansionary Monetary Policy
(21)Distinguish between any five (5) of the following
pairs of concepts:
(a)Exchange Rate and Fixed Exchange Rate
(b)Flexible and Managed Exchange Rates
(c)Devaluation and Depreciation of an Exchange Rate or
Currency
(d)Appreciation and Revaluation of an Exchange Rate or
Currency
(e)Current Account and Official Financing Account
(f)Balance of Payment and Exchange Rate
(g)Discrepancy Account and Balance of Trade
(h)J-Curve and Exchange Rate
(22)A floating exchange rate policy is a recipe for
Balance of Payments and macroeconomic instability. Discuss
(23)State and explain any three (3) advantages or
benefits and any three (3) disadvantages or costs of a floating or flexible
exchange in economic management
(24a)What is meant by the Balance of Payments of a
country?
(24b)State and explain the four (4) main sub-accounts of
the Balance of Payments?
(24c)Is it technically correct to say that the accounts
in Q#(24b) above are in “surplus or “deficit”? Why or Why not?
(24d)Is it technically correct to say that the Balance of
Payments of a country experiences a “surplus” or a “deficit”? Why or Why not?