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AME820S-ADVANCED MACROECONOMICS-2ND OPP-DEC 2025 |
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nAm I BI A u nlVE RSITY
OF SCIEnC E Ano TE CH nDLOG Y
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ECONOMICS HONOURS
QUALIFICATION CODE: 08HECO
LEVEL: 8
COURSE CODE: AME8020S
COURSE NAME: ADVANCED MACROECONOMICS
SESSION: NOVEMBER 2025
DURATION: 3 HOURS
PAPER:THEORY
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER{S) DR P. OKWOCHE
MODERATOR: DR ANTHONY ADEYANJU
INSTRUCTIONS
1. Answer ALL the questions.
2. Write clearly and neatly.
3. Number the answers clearly.
PERMISSIBLE MATERIALS
1. PEN,
2. PENCIL
3. CALCULATOR
THIS QUESTION PAPER CONSISTS OF 3 PAGES (Including this front page)
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Question 1
[25 marks]
Suppose Nangula consumes only maize meal. The following table presents the prices and
quantities of two variants of maize meal -white maize and yellow maize -from 2022 to 2024.
Using 2022 as the base year, compute the following and compare the results between 2022 and
2024:
Year
2022
2024
White maize (per kg)
N$10
N$20
Yellow maize (per kg)
N$20
N$10
Nangula's purchase
100 kg white
100 kg yellow
(a) The CPI for maize
[S]
(b) Nangula's nominal spending each year
[SJ
(c) Nangula's real spending
[SJ
(d) The implicit price deflater
[SJ
(e) Suppose that Nangula is equally happy eating white maize or yellow maize. How much has
her true cost of living increased? Compare the answer with (a) and (b) and explain briefly what
it shows about the Paasche and Laspeyres price indexes
[SJ
Question 2
[25 marks]
(a) The Keynesian cross model shows how income Yis determined for any given level of planned
investment/ and fiscal policy G and T. Equilibrium in this model is achieved at the equality of
actual expenditure (Y) and planned expenditure (PE). Show how disequilibrium appears in this
model and explain the adjustment process.
[SJ
(b) Use the model to predict the impact of the following on equilibrium GDP. In each case, show
the direction of the change and provide a formula for the size of the impact
(i) An increase in G
[SJ
(ii) A decrease in T
[SJ
(iii) Equal-sized increase in G and T
[lOJ
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Question 3
[25 marks]
Use the standard small open economy model to predict the effect of each of the following
events on the trade balance, the real exchange rate, and the nominal exchange rate.
(a) Consumers become less confident about the future, spending less and saving more [5]
(b) A tax reform increases incentives for firms to invest in new factories
[5]
(c) A new line of foreign cars becomes fashionable, raising demand for foreign goods [5]
(d) The central bank doubles the money supply
[5]
(e) Regulations restricting credit card use increase the demand for money
[5]
Question 4
[25 marks]
Consider hypothetical small open economy described by the following equations:
C = 50 + 0. 75(Y - T)
I= 200-20r
NX = 200- SOE
M
-p= Y - 4 0 r
G = 200
T = 200
M = 3000
P=4
r*= 5
(a) Derive and graph the 1s· and LM . curves
[5]
(b) Calculate the equilibrium exchange rate, income and net exports
[6]
(c) Assume a floating exchange rate: Calculate what happens to the exchange rate, income, net
exports and money supply if the government purchases increase by 50
[7]
(d) Now assume a fixed exchange rate. Calculate what happens to the exchange rate, income,
net exports, and the money supply if the government purchases increase by 50
[7]
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