Instruction: answer ALL questions.

SECTION ONE: MCQs (each question is 2 marks)

1) The ratio of the change in the equilibrium level of income to a change in some autonomous increase

in spending is the:

(a) Elasticity coefficient.

(b) Accelerator.

(c) Automatic stabilizer.

(d) Seasonal unemployment.

3) If the number of people classified as unemployed is 20,000 ad the number of people classified as

employed is 230,000, what is the unemployment rate?

(a) 8%.

(b) 8.7%.

(c) 9.2%.

(d) 11.5%.

4) Expansionary monetary policy:

(a) Tends to lead to an appreciation of a nation’s currency.

(b) Usually has no effect on a currency’s exchange value.

(d) By offering financial services, such as stick market brokerage.

6) Which of the following events will lead to an increase in the equilibrium interest rate?

(a) A decrease in the level of output (real GDP).

(b) The purchase of government securities by BEAC.

(c) An increase in the level of output (real GDP) and an increase in the money supply.

(d) The sale of government securities by the BEAC.

7) If the quantity of money demanded is less than the quantity of money supplied, then the interest rate

will:

(a) Either increase or decrease, depending on the amount of excess demand.

(b) Increase.

REPUBLIC OF CAMEROON

Peace -Work – Fatherland

UNIVERSITY OF BAMENDA

P.O BOX 39 BAMENDA

TEL: 33 36 36 94

8) Which of the following actions is an example of expansionary fiscal policy?

(b) Becomes steeper.

(c) Shifts to the right.

(d) Shifts to the left.

10) To lower interest rates, BEAC could:

(a) Buy securities.

(b) Decrease the money supply.

(c) Raise the treasury bill rate.

(d) Raise the reserve requirement.

11) To resolve a short-term deficit in the balance of payment, Cameroon could:

(a) Sell government securities.

(c) Reduces taxes on income.

(d) Reduce foreign currency reserves.

SECTION TWO

Question 1 (6 marks)

State and explain three non-tariff barriers which the Cameroon government could use to protect domestic

poultry producers from imported poultry products.

Question 2 (20 marks)

The table below hosts the cost of producing one unit (in man-hours) of commodities A and B in two

countries (North and South).

a) State the principle of comparative advantage. (3 marks)

b) Which country has an absolute advantage in production of commodity A and B? Justify (4 marks)

c) Based on your answer in (b) above, is trade possible between two countries? (3 marks)

d) Use comparative cost analysis to guide these economies on the benefits from trade and

specialization. Show your calculations (7 marks)

e) State any three limitations of the principle of comparative costs (3 marks)

Question 3 (20 marks)

We have a three-sector hypothetical economy in which:

I = 40; G = 10; T = 12 + 0.2Y; Y

= Y – T;

2) Determine the national level of income and represent it graphically (4 marks)

3) Determine the equilibrium levels of consumption and taxation for this economy (4 marks)

4) Determine the savings function for this economy (2 marks)