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Economics Question Paper

Economics

Course:Course In Applied Agricultural Meteorology

Institution: Orbit School Of Management Studies question papers

Exam Year:2005

CPA PART I
ECONOMICS

Answer any FIVE questions.
ALL questions carry equal marks.

QUESTION ONE
a. Identify and explain six factors that determine the supply of money in an economy. (6mks)

b. Explain the concept of liquidity trap. (6mks)

c. Discuss the impact of an expansionary monetary policy to an economy. (8mks)

QUESTION TWO
a. Define the term "inferior good". (2mks)

b. Distinguish between the income and substitution effects of a change in the price of a commodity. (4mks)

c. With the aid of well labelled diagrams, illustrate the income and substitution effects of a fall in the price of commodity X, where commodity X is:
i. A normal good (7mks)
ii. An inferior good. (7mks)

QUESTION THREE
a.
i. Explain the law of supply (2mks)

ii. Explain a situation where the law of supply is violated (2mks)

b. Explain the concept of consumer sovereignity (4mks)

c. The market for slim mobile phones is represented by the following functions:

Q + 1/3 P = 36
Q + 9 = 1/2 P

Where P=price, Q=quantity.

Required:
i. Identify the demand and the supply functions (give reasons for your answer) (4mks)

ii. The equilibrium price and quantity (4mks)

iii. With the aid of a diagram, illustrate and explain the impact of a simultaneous increase in households income and tax on the sale of slim mobile phones. (4mks)

QUESTION FOUR
a. Write short notes on the following:
i. Kinked demand curve (3mks)
ii. Hyper inflation (3mks)
iii. Open market operations (3mks)
iv. Incidence of tax (3mks)
v. Marginal rate of technical substitution (3mks)

b. Identify the characteristics of an oligopolistic market structure (5mks)

QUESTION FIVE
a.
i. Define the term "unemployment" (2mks)
ii. State and explain any five types of unemployment (10mks)

b. Regional development imbalances are widespread in less developed countries.
Discuss policy recommendations that the governments in these countries may adopt to curb the imbalances (8mks)

QUESTION SIX
a.
i. With the aid of well labelled diagrams, distinguish between price floors and price ceilings (4mks)
ii. Explain the consequences of implementing the above price control mechanisms in an economy (6mks)

b. Trade liberalisation involves the reduction of protectionist measures with the aim of improving efficiency in trade.
Explain the likely effects of trade liberalisation on:
i. Consumers (3mks)
ii. Importers (3mks)

d. Identify four forms of non-tarriff barriers (4mks)

QUESTION SEVEN
a. Give reasons why the existence of monopolies may be beneficial to an economy. (5mks)

b. With the aid of well labelled diagrams, explain the short run and the long run equilibrium position of a firm in perfect competition (8mks)

c. With the aid of a diagram, explain the break even price and the shut down price of a firm in perfect competition. (7mks)

QUESTION EIGHT
a.
i. Describe the value added approach of measuring national income (6mks)
ii. Explain six problems associated with the value added approach of measuring national income (6mks)

b. The following data relates to the national income parameters of your country in billions of shillings:

C = 56 + 0.8 Y
G = 800
I = 400
T = 20 + 0.1 Y
X = 20
M = 80 + 0.2 Y

Where
C = consumption expenditure
G = Government expenditure
I = investments
T = Taxes
X = Exports
M = Imports
Y = Disposable income

Required:
i. The equilibrium consumption in terms of national income (2mks)
ii. The marginal propensity to save (2mks)
iii. The equilibrium level of national income. (4mks)

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