Principles of Macroeconomics (ECNC2202)
Higher Institute of Commerce and Management (HICM)
Semester: Second Semester
Level: 200
Year: 2013
UNIVERSITY OF BAMENDA
Higher Institute of Commerce and Management (H1CM)
Course Title: Principles of Macroeconomics - Examinations
Course Code:
Level: level One
Course Instructor(s): Prof. TAFAH EDOKAT / NDAMSA Dickson
Date: 23/07/2013
Time: 8h – 11h
Instructions: Answer the questions in the sequence they appear
Questions (15 marks) NB: Only (3) arid (11) score 2 marks each, the rest score 1 mark each.
1)
What is the primary objective of macroeconomics? (a sentence)
2)
Name the three factors that explain the inverse relationship between aggregate demand and
general price level. (3 phrases)
3)
Define the Marginal Efficiency of Capital (MEC) and indicate how it guides investment
decision.
4)
Which mechanism explains changes in investment as a result of changes in national income? (1
or 2 words)
5)
How is the unemployment rate calculated? (an expression)
6)
What do you understand by demand deficient or cyclical unemployment? (a sentence)
7)
Inflation is measured using two price indices. Name them (2 phrases)
8)
How can increase in the cash or liquidity ratio requirements on commercial banks help in
checking inflation? (2 or 3 lines)
9)
State the three reasons or motives why people hold money, as prescribed by the liquidity
preference theory. (3 phrases)
10)
Why is the money supply curve inelastic with respect to increase rate
11)
How does the Heckscher-Ohlin (H-O) theory best describe international trade between
Cameroon and the rest of the world? (3 or 4 lines)
12)
Differentiate between ad valorem and specific tariff systems. (2 sentences)
13)
How can devaluation help redress a balance of payment deficit? (2 or 3 lines)
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EXERCISE 1 (5 marks)
Given the following components of the national income of a country:
1) Determine the value of indirect taxes
2) Determine the value of imports
3) Determine the value of consumption capital
4) What is the value of net property income from abroad (NPIA) Justify the sign of the answer
in (4) above
EXERCISE 2 (10 marks)
Given a three sector hypothetical economy in which:
C = 40 + 0.75Yd
I = 40; G = 10 ; T - 12 + 0.2Y ; and Yd = Y -T
5) Where C is consumption; 1 is investment; G is government spending; T is taxes and Yd is
disposable income.
1) Determine the national level of income and represent it graphically
2) Determine the equilibrium levels of consumption and taxation for this economy
3) Determine the savings function for this economy
4) Determine the value of the multiplier and interpret it
5) Use the injections I withdrawal method to obtain the national level of income
Components Expenses in millions of CFA francs
Total final expenditure at market prices
500
Gross domestic product at market prices
420
Subsidies 30
Gross domestic product at factor cost
365
Gross national product at factor cost 360
Net national product at factor cost 340
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EXERCISE 3 (1; 3; 1 marks)
You are an expert on international trade issues. Countries 1 & 2 desire to understand how
specialisation and trade can still benefit them given the following information:
Cost of producing one unit (in man-hours) of
commodity
Commodity A Commodity B
Country 1 7 9
Country 2 13 11
1) State the principle of comparative costs
2) Guide these economies on the benefits from trade and specialisation (use comparative
cost analysis)
3) State any two limitations of the principle of comparative costs
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