Public Finance Question Paper

Public Finance

Course:Bachelor Of Arts In Economics

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
ARTS AND BACHELOR OF COMMERCE

AEC 307:
PUBLIC FINANCE

DATE: FRIDAY 28TH AUGUST 2009
TIME: 2.00 P.M. ? 4.00 P.M.

INSTRUCTIONS
Answer Questions 1 and any other 2 questions.

Q.1
a)
Explain the benefits and ability to pay principles of taxation stating the limitations of each. (12 marks)
b)
Explain the five (5) reasons why privatization is necessary in an economy. (10 marks)
c)
The market demand of a public good is derived by vertical summation of individual marginal benefit. Explain with the help of a diagram. (8 marks)
Q.2
a)
Using a model of closed economy show that the balance budget multiplier is unit. (10 marks)
b)
Explain the rationale of public sector in an economy. (10 marks)
Q.3
a)
Explain the economic functions of public expenditure. (6 marks)
b)
The government can use fiscal policy to remove an economy from a recession. Using various policy instruments explain how this can be done. (10 marks)
c)
Describe any three (3) methods that the government can use to redeem public debts. (6 marks)
Q.4
a)
Define the term externality in relation to public goods. (3 marks)
b)
Explain how Pigourvian and Coase method can be used to solve externalities. (12 marks)
c)
State the limitations of Coase remedies. (5 marks)
Q.5
a)
Distinguish between statutory incidence and economic incidence of a tax. (4 marks)
b)
State and explain any four (4) principles of taxation. (8 marks)
c)
State and explain the four (4) principles of public expenditure. (8 marks)

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