UNIVERSITY EXAMINATIONS

COLLEGE OF BUSINESS
BACHELOR OF COMMERCE, BACHELOR OF PROCUREMENT &, BACHELOR OF
PUBLIC MANAGEMENT, BACHELOR OF INTERNATIONAL BUSINESS
MANAGEMENT

ECO 1302: INTRODUCTION TO MACROECONOMICS ASSIGNMENT

INSTRUCTIONS:
(i) Answer All Questions
(ii) Show your working clearly

QUESTION ONE (10 MARKS)

Suppose you are given the following information about some hypothetical economy
and its national income accounts. Use this information to answer the questions that
follow. (Amounts are in millions of Kshs.)
Indirect Business Taxes 459.50
Corporate profits 604.45
Corporate profits taxes 234.70
Retained earnings 165.40
Proprietors' income 519.20
Rental Income 31.05
Net Interest 585.55
Exports 842.85
Imports 1190.20
Income Receipts from rest of world 427.8
Income Payments to rest of world 377.45
Net National Product 6190.4
Government expenditures for Goods and Services 1358.25
Personal current Transfer receipts 871.15
Social Security Taxes (employee & employer) 490.75
Personal Consumption expenditures 4892.85
Gross Private Domestic Investment 1082.45
Disposable personal income 5128.75
 a. Find GDP (3 marks)
b. Find GNP (2 marks)
c. Find depreciation (capital consumption allowance) (2 marks)
d. Find National Income (3 marks)

QUESTION TWO (10 MARKS)

(a) Explain the criticism of life cycle theory of consumption. (5 marks)
(b) Macroeconomic models are simplified explanations or theories of how the economy works.
Discuss the importance of economic models. (5 marks)