Question 1
1. Explain how fiscal policy and monetary policy can be used to control inflation in the country.
(10 Marks)
2. Explain the difference between income approach and expenditure approach in calculating the GDP (Gross Domestic Product) using a numerical example and equations. (10 Marks)
Question 2
1. Explain the Business Cycle as a macroeconomic model? Explain three benefits of Business Cycle when making economic decisions at different levels. (10 Marks)
2. It is said that “Consumption and Savings are two sides of the Same Coin”. What are the concepts associated with Savings and Consumption, and explain the similarities and differences in those concepts? (10 Marks)
Question 3
1. Explain the difference between demand pulled inflation and cost pushed inflation. Which one is more serious and why? (10 Marks)
2. Explain what happens to National Income and interest rates at these occasions. (Assume Ceteris Paribus)
- When Nominal money supply increases.
- When Price level of the country decreases
- When expenditure multiplier decreases
- When autonomous consumption increases
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