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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. Explain why a demand curve slopes downwards. (2mks)

b. Discuss the factors that may cause a shift in the supply curve. (6mks)

c. With the aid of a well-labelled diagram, explain the concept of kinked demand curve in oligopoly (6mks)

d. Briefly explain the usefulness of the concept of elasticicty of demand in the decision making process. (6mks)

QUESTION TWO
a.
i. What is meant by the term "credit creation" (2mks)

ii. Explain the reasons why banks are able to create credit for their customers. (4mks)

b. Briefly explain the likely effects of an expansionary monetary policy in an economy. (8mks)

c. Inflation is harmful to any economy. However, a little of it could be beneficial. Discuss. (6mks)

QUESTION THREE
a. Trust Enterprises is a medium sized firm which specialises in the production of water taps. The finance department has determined the following cost structure per unit of tap included:

Variable costs per unit is Sh. 15.
Fixed costs per period is Sh. 20,000.
Selling price per tap is Sh. 25.

Required:
i. Determine the break-even number of taps. (2mks)
ii. Determine the number of taps that would give a profit of Sh. 4,000 (2mks)
iii. If for some reason, the prices of taps increased to Sh. 35 per tap, what would be the break-even output? (2mks)

b. With the aid of a well labelled diagram, explain why the short-run average cost curve is above the long-run average cost curve. (4mks)

c. Discuss the factors which lead to increasing and decreasing returns to scale. (10mks)

QUESTION FOUR
a. Explain the factors that determine the level of national income of a country (8mks)

b. What problems are encountered by economic planners when estimating the national income of a country? (4mks)

c. Explain why gross national product is lower than gross domestic product in developing countries. (4mks)

d. Highlight the uses of national income figures. (4mks)

QUESTION FIVE
Distinguish between the following:

a. Own price elasticity of demand and cross price elasticity of demand. (5mks)

b. Hidden unemployment and structural unemployment. (5mks)

c. Composite demand and composite supply. (5mks)

d. Marginal cost and marginal revenue. (5mks)

QUESTION SIX
a. Explain with a well-labelled diagram, how an individual supply curve of labour (man-hours), initially slopes upwards and then backwards at higher level of wage. (4mks)

b. Explain the factors responsible for wage differential between different occupations. (6mks)

c. Unemployment has been a major economic concern for developing countries:

i. Explain the major causes of unemployment. (5mks)
ii. Suggest five economic policies that may be used to reduce unemployment. (5mks)

QUESTION SEVEN
a. "Taxation does not offer sufficient revenue for the government expenditure, hence the government resorts to public debts"

In light of the above statement, name the types of public debts. (3mks)

b. Explain the major causes of high external debts in developing countries. (5mks)

c. Suggest economic policies that can be used to minimise the problem of external debt. (12mks)

QUESTION EIGHT
a. Define the following terms:
i. Non-covertible currency. (2mks)
ii. Currency''s spread. (2mks)

b. What is the likely effect of a domestic currency appreciation on a country''s balance of trade? (6mks)

c. Discuss any four factors that may cause supply and demand curves of a domestic currency in the international money market to shift. (6mks)

d. In relation to regional economic integration, distinguish the terms "trade creation" and "trade diversion" (4mks)

Economics Question Paper

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