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3 C 60213

Explain the slope of the LM curve.
What is liquidity trap ?
State the monetary theory of inflation.

How can income policy be used to control inflation ?
(10 x 2 = 20 marks)
Section C (Short Essay Questions) |

Answer any six questions.
Each question carries 5 marks.

What are the different types of inflation ?

What is monetary policy ? What are the various instruments of monetary policy ?
Examine Fischer's quantity theory of exchange.
State the factors that lead to a shift in the IS curve to the right.

Briefly explain Keynes theory of business cycle.

Explain Okun’s law.

What are the determinants of money supply in an economy ?

Distinguish between Keynesian transaction demand for money and speculative demand for money.
(6 x 5 = 30 marks)
Section D (Essay Questions)

Answer any two questions.
Each question carries 12 marks.

Explain diagrammatically how the IS curve is an important tool in determining goods market
equilibrium. .
Critically examine the concept of short run and long run Philips curve.

Explain Friedman’s reformulation of the quantity theory of money.

How did money evolve as a medium of exchange ? Examine the various functions of money.
(2 x 12 = 24 marks)