JARAMOGI OGINGA ODINGA UNIVERSITY OF SCIENCE AND TECHNOLOGY 
SCHOOL OF BUSINESS & ECONOMICS
UNIVERSITY EXAMINATION FOR THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION
1ST YEAR 2nd SEMESTER 2019/2020 ACADEMIC YEAR
MAIN CAMPUS
COURSE CODE: AEC 102/BEN 3121/ SAC 106
COURSE TITLE: INTRODUCTION TO MACROECONOMICS
EXAM VENUE:   		                                 STREAM: (BBA )	
DATE:		                    		  EXAM SESSION: 
TIME: 2   HOURS 

Instructions:
1.	Answer  Question ONE (COMPULSORY) and ANY other 2 questions
2.	Candidates are advised not to write on the question paper.
3.	Candidates must hand in their answer booklets to the invigilator while in the examination room.

QUESTION ONE

i.	Explain the reasons and mechanism of Central supervision to Commercial banks    
10 Marks
ii.	The following information relates to the National income of a Country at a given period of time
ITEM	AMOUNT	
Rent	600	
Net indirect taxes	450	
Compensation of Employees	1200	
Net factor income from abroad	-100	
Mixed income of self employed	1500	
Profit	800	
Consumption of fixed capital	300	
Interest 	500	

a.	Use the income method to calculate 
I.	GDP at market prices
II.	GNP at market prices
III.	NNP at market prices
IV.	NNP at market prices
V.	NNP at factor cost							10 Marks

iii.	Explain the reasons for internal and external debt in Kenya                           10 marks
QUESTION TWO
i.	Explain Monetary policy measures to contain unemployment situation in a developing economy                                                                                   		10 Marks
ii.	Explain the reasons why it is difficult to reduce public expenditure   	10 Marks                             

QUESTION THREE
i.	The following information relates to the trend of inflation of a country for the last five years
YEAR	PERCENTAGE %	
2009 - 2010	25	
2010 - 2011	20	
2011- 2012	15	
2012 - 2013	10	
2013 - 2014	5	

   Explain the reasons and the consequences for this trend                                          10 Marks  
ii.	Explain the Monetary aggregates used by the Central Bank of Kenya            10  Marks
QUESTION FOUR
i.	Explain the reasons why it was necessary to establish Central banks             10 Marks
ii.	Explain the importance  the national income in most developing economy    10 Marks                   
QUESTION FIVE
i.	Explain the major policy measures to control the balance of payment disequilibrium
   10 Marks                                                                                                     
ii.	The following information relates to the national income of a certain country on which the consumption expenditure 2000, Government expenditure 3000, Investment spending 1500 and Marginal propensity to consume 0.5. Calculate the National income equilibrium.								    4Marks
iii.	Highlight the importance of commercial banks on economic growth and development of a country 									    6 Marks