DBIT304  GENERAL ECONOMICS.

UNIVERSITY EXAMINATIONS
EXAMINATION FOR THE DIPLOMA IN BUSINESS INFORMATION
TECHNOLOGY
DBIT304 GENERAL ECONOMICS
DATE: AUGUST 2019 TIME: 2 HOURS
INSTRUCTIONS: Answer QUESTION ONE and ANY OTHER TWO.

QUESTION ONE
(a) Define the term ‘economic system’ and enumerate five advantages of a free market
system (6 Marks)
(b) (i) Explain what is meant by market equilibrium for a commodity (2 Marks)
(ii) Commodity X has the following equations

Required:
Determine the equilibrium quantity and price for this commodity X (4 Marks)
(ii) Discuss four factors affecting demand for a commodity in the market
(4 Marks)
(iii) Distinguish between short run period and long run period of production
(4 Marks)
(iv) Explain how import duties affects the demand for a commodity in the market.
(2 Marks)
(v) Explain four forms of restrictions used in international trade (4 Marks)
(vi) Highlight four problems facing agricultural sector in Kenya today (4 Marks)

QUESTION TWO
(a) Distinguish between economic growth and economic development (2 Marks)
(b) According to vision 2030 strategy, Kenya is looking forward to be a developed nation
by year 2030. Evaluate eight obstacles that may hinder Kenya from realising her
vision.
Suggest eight possible measures that can be implemented to help Kenya realise this
vision.
(8 Marks)
(c) Highlight three importance of macroeconomics (3 Marks)
(d) Explain five benefits of international trade to an economy (5 Marks)
(e) Distinguish between direct production and indirect production (2 Marks)
QUESTION THREE
(a) Discuss four factors affecting supply of a commodity in the market (4 Marks)
(b) State and explain two exceptional cases to the law of demand (2 Marks)
(c) Differentiate between positive and normative approach as methodologies used in
economic analysis (4 Marks)
(d) Discuss how unemployment affects the growth and development of a country.
(5 Marks)
(e) Explain five measures that can be adopted to fight inflation in an economy.
(5 Marks)
QUESTION FOUR
(a) Discuss four advantages of price controls in an economy (4 Marks)
(b) Explain five reasons for rural-urban migration in an economy (5 Marks)
(c) Examine five policy measures that can be adopted to minimise the problem of rising
external debts in most developing countries (5 Marks)
(d) The following table shows the units of output and costs by a firm operating in the
short run period. Fill in the missing figures. (Figures are in shillings)

QUESTION FIVE
(a) Examine four reasons why most developing countries experiences a deficit balance of
payment (4 Marks)
(b) Explain four features of good money in an economy (4 Marks)
(c) Discuss four functions of money in an economy (4 Marks)
(d) Distinguish between demand pull inflation and cost push inflation (4 Marks)
(e) Explain four measures that can be implemented to unemployment in an economy

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