Topic Five: Macro Instability (Inflation and Unemployment)

1. What do you understand by the term macro instability?

2. Discuss five causes of macro instability which you know.
3. Differentiate between inflation and deflation.
4. Differentiate between demand-pull and cost-push inflation.
5. Write short notice about any five types of inflation according to the percentages of price changes.
6. What causes demand pull inflation?
7. What causes cost push inflation?
8. “Inflation is always bad”. Discuss.
9. The inflation rate in X economy for 2012 is 7% while the nominal interest rate is 15%. Calculate the real
interest rate in this economy for the year 2012.
10. Inflation erodes the purchasing power and thus the two are inversely related. Discuss at least for costs of
declining purchasing power.
11. The government of Tanzania can use fiscal and monetary policy measures to maintain the purchasing
power of the national currency. Discuss.
12. Consumers need money to purchase different commodities in order to maximize utility whilst private
investors need money to invest and purchase productive inputs in order to maximize profit; similarly the
government needs money to finance different public projects for the purpose of maximizing social welfare;
henceforth the availability of money would enable these economic agents to achieve their objectives.
Nevertheless, too much money in the economy is economically harmful. Discuss this argument.
13. What is unemployment?
14. Discuss different types of unemployment which you know.
15. What are the causes of current unemployment in Tanzania?
16. Discuss various mechanisms that the government of Tanzania can use to solve the problem of
unemployment.
17. What are the effects of unemployment?
18. Although the Tanzania’s labor market may exhibit equilibrium, (demand for labor and labor supply being
equal) yet the problem of unemployment will still exist. Discuss.
19. How can the natural rate of unemployment be reduced?

1|Dr. Kimaro, E
0758 067 536
 Topic Six: International Trade
1. By using hypothetical data, discuss the following
(a) Absolute advantage theory of international trade
(b) Comparative advantage theory of international trade
2. Write short notes on;
(a) Tariffs
(b) Non tariff trade barriers
(c) Balance of payment
3. Consider the following information and answer the following two questions below;
Countries/Products Wheat Cotton
Tanzania 30 hours/unit 60 hours/unit
Zimbabwe 50 hours/unit 75 hours/unit
Which country has comparative advantage and which one has absolute advantage? Why?
4. Define the term trade protectionism.
5. Despite having incentives for free trade, most of the countries protect their international trade
relations. Discuss.
6. Discuss various methods of trade protections.
7. What is terms of trade and how can be determined?
8. Terms of trade in developing countries are unfavorable. What is/are the reason(s)?
9. What measures can be used to improve terms of trade in developing countries like Tanzania?
10. What are the assumptions underlying the theory of comparative advantage?
11. Do Russia, US, China, South Korea, Japan and European countries need to trade with
developing countries like Tanzania? Why?
12. What is dumping as it is used in international trade?
13. Tanzania has trade relationships with various countries in the world. What are the advantages
of such trade relations?

2|Dr. Kimaro, E
0758 067 536
14. By using partial equilibrium analysis (figure 1.1 below), examine the economic effects of tariffs.
Price
DD SS

Pd

Pt

Pw

a b q c d Quantity

Figure 1.1 Economic impact of tariffs

3|Dr. Kimaro, E
0758 067 536
 Topic Seven: Economic Growth and Development

1. Write short notes on the following

(a) Economic growth
(b) Economic development
(c) Endogenous theory of economic growth
(d) Exogenous theory of economic growth
(e) Poverty
2. Economic growth is caused by two main factors; mention them.
3. A nation like Tanzania can increase its real output and income in two fundamental ways; list them.
4. According to theorists, a nation can increase the ability to expand its output/income. This expansion is
accelerated by four supply factors; list them.
5. What is the role of aggregate demand on economic growth?
6. Does the government of Tanzania need to harness efficiency in order to spur economic growth? If YES,
why?
7. What is the significance of research and development (R & D) on developing countries like Tanzania?
8. A nation can exhibit economic growth and lack economic development. Discuss this argument.

4|Dr. Kimaro, E
0758 067 536