MONDAY: 5 December 2022.      Morning Paper.       Time Allowed: 3 hours.

Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper.

QUESTION ONE

1. Define the term “giffen goods” as used in economics. (2 marks)

2.  Outline SIX assumptions of the production possibility frontier. (6 marks)

3.  Explain THREE limitations of macroeconomics theory. (6 marks)

4. State SIX effects of price fluctuations in the agricultural sector in an economy. (6 marks)

(Total: 20 marks)

QUESTION TWO

1. State FOUR characteristics of a monopoly market structure. (4 marks)

Using a well labelled diagram, illustrate the longrun equilibrium point of a firm operating in a monopoly market structure. (6 marks)

2. Explain FIVE arguments in favour of enhancing the mobility of the factors of production. (10 marks)

(Total: 20 marks)

QUESTION THREE

1. Define the term “spot exchange rate”. (2 marks)

Explain FOUR advantages of a managed floating exchange rate. (8 marks)

2. The following represents the demand and supply functions for a commodity in a certain market:
Q – 4P = –5
Q – 13 = –5P

Required:

Determine the demand function and supply function. (5 marks)

Determine the equilibrium price and equilibrium quantity. (5 marks)

(Total: 20 marks)

QUESTION FOUR

1. State FOUR characteristics of a mixed economy. (4 marks)

2. Suggest SIX determinants of labour supply in an economy. (6 marks)

3. Discuss FIVE monetary policies used by central bank to control the amount of money in circulation in an economy. (10 marks)

(Total: 20 marks)

QUESTION FIVE

1. Using a diagram, explain the law of decreasing return to scale. (6 marks)

2.  State EIGHT negative effects of inflation in an economy. (8 marks)

3. With reference to national income, summarise THREE limitations of the multiplier. (6 marks)

(Total: 20 marks)

QUESTION SIX

1. The economic transaction figures of Pwato Republic in thousands of shillings are as follows:
Sector Total output Intermediate purchases
Agricultural 56,000 33,000
Manufacturing 97,000 64,000
Service 72,000 46,000

Required:

Compute the Gross National Product of Pwato Republic, using the value added approach of National Income. (2 marks)

Calculate the Net Domestic Product at market prices and factor cost, if the indirect taxes and fixed assets depreciation is equal to 20,000 and 25,000 respectively. (4 marks)

2.  Suggest SIX policy measures that might be implemented by developing countries in order to accelerate their economic growth and development. (6 marks)

3.  State FOUR reasons why unemployment is a major policy issue in developing countries. (4 marks)

4. Explain FOUR challenges facing small scale industries in developing countries. (4 marks)

(Total: 20 marks)

QUESTION SEVEN

1. Using a diagram, show the indifference curves for complimentary and perfect substitute goods. (6 marks)

2. Distinguish between “own price elasticity of demand” and “cross elasticity of demand”. (6 marks)

3. Explain TWO exceptions of the law of diminishing marginal utility. (4 marks)

4. Outline FOUR factors that limit the effective implementation of fiscal policy in developing countries. (4 marks)

(Total: 20 marks)

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