Economics December 2022 Past question Paper and answers

CPA FOUNDATION LEVEL
CIFA FOUNDATION LEVEL
ECONOMICS

TUESDAY: 6 December 2022. Afternoon Paper. Time Allowed: 3 hours.
Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper.

QUESTION ONE
(a) Enumerate FIVE functions of the World Trade Organisation (WTO). (5 marks)
(b) Describe THREE ways that banks create credit. (6 marks)

(c) List FOUR characteristics of economic resources. (4 marks)
(d) Outline FIVE ways in which a government could interfere with the price mechanism. (5 marks)

QUESTION TWO
(a) List FOUR components of disposable national income. (4 marks)

(b) Explain SIX problems that an economist could encounter when comparing welfare between different countries. (6 marks)
(c) Outline FIVE factors that determine the level of demand in an economy. (5 marks)

(d) Identify FIVE reasons why unemployment is a major policy issue in developing countries. (5 marks)

QUESTION THREE
(a) Enumerate FIVE factors that could limit consumer sovereignty. (5 marks)

(b) With the aid of a well labelled diagram, explain the THREE stages of production according to the law of diminishing marginal returns. (9 marks)

(c) Explain THREE limitations of the consumer price index. (6 marks)
(Total: 20 marks)
QUESTION FOUR
(a) Using a well labelled diagram, distinguish between “price floor” and “price ceiling”. (8 marks)
(b) Explain THREE factors that influence the level of interest rates in an economy. (6 marks)
(c) State SIX policy measures that a country could adopt to avoid the risk of not being able to honour her foreign debts. (6 marks)

QUESTION FIVE
(a) Explain the following types of inflation:
(i) Cost push. (2 marks)
(ii) Credit. (2 marks)
(iii) Demand pull. (2 marks)
(b) State SIX policy measures that could be adopted developing countries to encourage industrial development. (6 marks)

(c) Enumerate FOUR factors that could determine the effectiveness of trade unions. (4 marks)
(d) Outline FOUR features of isoquant curves. (4 marks)

QUESTION SIX
(a) Outline FOUR disadvantages of a controlled market system. (4 marks)
(b) The demand and total cost function for a certain firm are represented as follows: P = 400 – 4q
TC = q2 + 10q + 30
Where:
P is the price
TC is the total cost q is the quantity

Required:
(i) The marginal cost function. (2 marks)
(ii) The marginal revenue function. (2 marks)
(iii) The average variable cost function. (2 marks)
(iv) The profit maximising level of output. (2 marks)
(v) The maximum profit. (2 marks)

(c) Discuss THREE motives of holding money as advanced the Keynesian liquidity preference theory. (6 marks)

QUESTION SEVEN
(a) Outline SIX characteristics of a good economic development plan. (6 marks)
(b) The following data relates to the national income of a certain country in billions of shillings:

C = 500 + 0.6Yd
I = 350
G = 250
T = 200
X – M = 280 – 0.1Y
Where:
G = Government expenditure
C = Consumption
I = Investment
T = Taxes
X = Exports
M = Imports
Y = National income

Required:
(i) The equilibrium level of national income. (3 marks)
(ii) The equilibrium level of consumption expenditure. (3 marks)
(iii) The multiplier. (2 marks)
(c) (i) Explain the law of variable proportions. (2 marks)
(ii) Enumerate FOUR assumptions underlying the law of variable proportions. (4 marks)