PRINCIPLES OF ECONOMICS AUGUST 2023 PAST PAPER

MONDAY: 21 August 2023. 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. Distinguish between “composite demand” and “competitive supply”. (4 marks)

2.  The following diagram relate to a firm in a certain industry:

With reference to the above diagram, highlight SIX factors that might have caused the supply curve to shift to the left. (6 marks)

3. Describe FIVE roles of commercial banks in an economy. (10 marks)

(Total: 20 marks)

 

QUESTION TWO

1. Using demand and supply diagrams, explain the effects on the market equilibrium price and quantity transacted for commodity “A” given:

An imposition of a per-unit tax on the suppliers of commodity “A”. (4 marks)

A reduction in the production cost of commodity “A”. (4 marks)

An increase in the price of commodity “B” which is a substitute for commodity “A”. (4 marks)

2. Explain FOUR factors that limit the multiplier effect in an economy. (8 marks)

(Total: 20 marks)

 

QUESTION THREE

1. The following information shows the total product of a commodity:

Required:

Compute the marginal product. (4 marks)

Draw a diagram to show the relationship between total product and marginal product. (4 marks)

2. Outline SIX effects of urban unemployment in the economies of developing countries. (6 marks)

3. Identify SIX factors that influence the level of investment in an economy. (6 marks)

(Total: 20 marks)

 

QUESTION FOUR

1. Highlight FIVE features of a firm operating under a monopolistic competitive market. (5 marks)

2. The commodity and money markets for a hypothetical economy are represented by the following:
Commodity market:

Required:

Derive the IS function. (5 marks)

Derive the LM function. (5 marks)

The equilibrium rate of interest and equilibrium level of national income. (5 marks)

(Total: 20 marks)

 

QUESTION FIVE

1. Outline FIVE characteristics of public goods. (5 marks)

2. With the help of a well labelled diagram, explain the concept of producer surplus. (5 marks)

3. Explain FIVE effects of depreciation of a currency in an economy. (10 marks)

(Total: 20 marks)

 

QUESTION SIX

1. The following data relates to a small hypothetical economy:

The marginal propensity to consume for this economy is 0.85.

Required:

Calculate the equilibrium level of national income. (6 marks)

Explain what would happen to the national income of the above economy if its currency appreciated.
(4 marks)

2. Enumerate SIX positive effects of inflation in an economy. (6 marks)

3. Outline FOUR assumptions of the credit creation process. (4 marks)

(Total: 20 marks)

QUESTION SEVEN

1. Summarise SIX factors that limit the effectiveness of trade unions in developing countries. (6 marks)

2. Explain FIVE roles of interest rate in an economy. (5 marks)

3. Outline FIVE causes of the vicious circle of poverty in developing countries. (5 marks)

4. State FOUR assumptions of the law of variable proportions. (4 marks)

(Total: 20 marks)

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