Principles of Macroeconomics (ECNC2202)
Higher Institute of Commerce and Management (HICM)
Semester: Second Semester
Level: 200
Year: 2013
Instructions : Answer the questions in the squence they appear.
Questions (2; 4; 3; 4; 2 marks)
(a) It is commonly said that microeconomic analysis operates a « worm's eye view » and
macroeconomic analysis operates a « bird's eye view » of the economy. Explain this
statement (at most 6 lines).
(b) State and briefly explain the primary objective and intermediary objectives of
macroeconomic policy (5 phrases)
(c) Differentiate between Gross Dosmetic Product and Gross National Product. Explain
GDP may be higher that GNP in most developing countries (at most 5 phrases)
(d) Give four reasons why we measure the national income of a country (4 phrases)
(e) State the fundamental psychological law of consumption as suggest by J.M Keyines.
Question 2 (5 marks)
Define the Marginal Efficiency of Capital (MEC) and indicate how it guides investment.
Exercise (1;1.5;3;3.5;4;2 marks)
Assume the consumption function for Utopia economy, closed and without a government, is
given as follows :
C = a + bY
d ,
where Y
d
is disposable income.
a > 0 and 0 < b < 1
i. Define a consumption function ?
ii. Explain the economic interpretations of the parameters a, b and bY
d.
iii. In Utopia, when income increases by 100 millions, consumption increases by 80
millions and when income is zero, consumption stands at 50 millions. Determine the
consumption function using this information.
iv. Deduce the savings function for this economy. Show your calculations.
v. Sketch the consumption and saving functions on separate graphs, identifying the
segments of the graph representing dissavings and savings.
vi. What does the slope of each graph represent ?
Bonus : What is the rationale for using ceteris paribus when dealing with economic
analysis ? (1 mark)
Good Luck.
REPUBLIC OF CAMEROON
Peace -Work – Fatherland
UNIVERSITY OF BAMENDA
P.O BOX 39 BAMENDA
TEL: 33 36 36 94
REPUBLIQUE DU CAMEROUN
Paix -Travail – Patrie
UNIVERSITE DE BAMENDA
P.O BOX 39 BAMENDA
TEL: 33 36 36 94
SCHOOL/FACULTY: H.I.C.M DEPARTMENT:
COURSE CODE: COURSE TITLE: Principles of Macroeconomics
SEMESTER: NATURE: C.A LEVEL: 1
LECTURER: Prof. Tafah Edokat/Ndamsa Dickson DATE:14/06/2013 HALL: DURATION: 1hr
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