a) The level of consumption is determined only by the level of income, be it absolute, relative

or permanent. Do you agree with this statement? If not what are the other factors that

influence household consumption

b) Differentiate between liquidity preference and liquidity trap

c) Describe the instruments of monetary and fiscal policies. Explain how monetary and fiscal

policies are applied to achieve macroeconomic objectives of the country

d) The level of unemployment among the youth in Kenya is very high. Suggest some policy

recommendations that can be implemented to alleviate the problem

e) Describe the reasoning behind the negative slope of the Phillips curve. What are the policy

implications of the tradeoff between the rate of inflation and the rate of unemployment?