NAMIBIA UNIVERSITY

OF SCIENCE AND TECHNOLOGY

FACULTY OF MANAGEMENT
SCIENCES

DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE

QUALIFICATION: BACHELOR OF ECONOMICS

QUALIFICATION CODE: 07BECO LEVEL: 7

COURSE CODE: IMA612S COURSE NAME: INTERMEDIATE MACROECONOMICS

SESSION: JANUARY 2020 PAPER: THEORY

DURATION: 3 HOURS MARKS: 100

SECOND OPPORTUNITY EXAMINATION QUESTION PAPER

EXAMINER(S) | MS.NNSHITENGA Mr. P. NANGULA MS. K. MACKENZIE

MS. L. HOFNI

INSTRUCTIONS
This paper consist of section A and B
Answer ALL questions.
on

Number your answers in accordance with the question paper.

Start each section Answer on a new page
vip

Write clearly and legibly

PERMISSIBLE MATERIALS

1. Pen
2. Ruler
3. Calculator

THIS QUESTION PAPER CONSISTS OF _6_ PAGES (Including this front page)

1|Page
SECTION A: MULTIPLE CHOICE QUESTIONS
[20 Marks]
SECTION A:
MULTIPLE CHOICE QUESTIONS

1. Inflation:
a) Always reduces the cost of living
b) Always reduces the standard of living
c) Reduces the price of products
d) Reduces the purchasing power of a pound

An increase in injections into the economy may lead to:

n
a) An outward shift of aggregate demand and demand-pull inflatio
n
b) An outward shift of aggregate demand and cost-push inflatio
n
c) An outward shift of aggregate supply and demand-pull inflatio
d) An outward shift of aggregate supply and cost-push inflation

An increase in the marginal propensity to consume will:

a) Lead to the consumption function becoming steeper
b) Shift the consumption function upwards
c) Shift the consumption function downwards
d) Shift the savings function upwards

ble income
If the Keynesian consumption function is C = 10 + 0.8 Yd then, if disposa
is £1000, what is amount of total consumption?
a) £0.8
b) £800
c) £810
d) £0.81

lead to:
An increase in consumption at any given level of income is likely to
a) Higher aggregate demand
b) An increase in exports
c) A fall in taxation revenue
d) Adecrease in import spending

2|Page
6. Lower interest rates are likely to:
a) Decrease consumption
b) Increase cost of borrowing
c) Encourage saving
d) Increase borrowing and spending

's products may

7. The effects of inflation on the price competitiveness of a country
be offset by:
a) An appreciation of the currency
b) A revaluation of the currency
c) Adepreciation of the currency
d) Lower inflation abroad

8 to 10 below,
Please read the following scenario and answer questions
es 100 golf balls
Scenario: Real GDP: Suppose that in year 1, an economy produc
next year the economy
that sell for $3 each and 75 pizzas that sell for $8 each. The
sell for $9 each.
produces 110 golf balls that sell for $3.25 each and 80 pizzas that
year 1 to year 2 is:
8. (Scenario: Real GDP )The growth rate of nominal GDP from
A. 19.72%.
B. 10%.
C. 7.8%.
D. 8.8%.
year 2 is:
9. (Scenario: Real GDP )Using year 1 as the base year, real GDP in
A. N$900.
B. N$970.
C. N$1,000.
D. N$1,077.50

vely is:
10. (Scenario: Real GDP )The value of nominal GDP in years 1 and 2 respecti
A. N$180,000; N$257,400.
B. N$900; N$990.
C. N$900; N$1,077.50.
D. N$1,000; N$1,005.
SECTION B [80 MARKS]

QUESTION 1 [14 MARKS]

Given the information in the following tables, fill the blanks (assuming that the
consumption function is linear with respect to disposable income). Find the tax
function, consumption function with respect to disposable income, the consumption
function with respect to output, the savings function with respect to disposable income,
and the savings function with respect to output, please note that Progressive Taxes:

Y T Y-T Cc Ss

0 -20 110

100 0 150
200
80
390
Taxes are a function of income (i.e. T = c + dY)
a) Fill the gap in the table above (0.5 *16 = 8 Marks)
b) Consumption Function with respect to Y (2 Marks)
c) Savings Function w/ respect to Y (2 Marks)
d) What is the level of Output for this economy (2 Marks)

QUESTION 2 [44 MARKS]

Consider the economy with the following information about goods and money
market:
Cd = 200 + 0.5Y — 500r
Id = 200 - 500r
(M/P)d= 0.5Y — 250r
G = 150
M = 4900
Y = 1000

a) What are the general equilibrium levels of the real interest rate r, the price level
P, desired aggregate consumption Cd, and desired investment Id? ( keep the
answers to 2 decimal places) (20 Marks)

b) Suppose that the majority of economic activity in this economy is bread making.
Because wheat plantations received good rain this year, let us imagine that the
weather this year is unusually conducive to growing wheat. In the IS-LM
framework, this situation represents a beneficial supply shock. Specifically,
suppose the full-employment level of output Y1 increases temporarily to Y2 =
1050. Show what happens to the economy in a graph. What will be the new
short-run equilibrium value of r and how will the new general equilibrium come
i]es se so
 the answers to 2 decimal
about? What is the new price level P? ( keep
places) (24Marks )

QUESTION 3
y’s productive capacity,
Economic growth can be defined as an increase in a countr
over a period of years, Most
identifiable by sustained rise in real national income
attempt explain the concept
of influential economist have developed models in an
of economic growth;
mic growth of a country
a) Discuss in details the main factors influencing the econo
(12 Marks)
that result from economic
b) Outline the major three benefits and three costs
growth?
(6 Marks)

MARKS:100

5|Page
 .....
cee ece cee eee
Student NUMbEr:... ....
eee cence eee teens eee eeeeeetees

ANSWER SHEET FOR SECTION A

Mark the correct answer with an X.

A B

10

6|Page