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Bismillahir Rahmanir Rahiim

MUDIO ISLAMIC EXAMINATION BOARD (MIEB)

FORM FIVE TEST ONE EXAMINATION (2018)
ECONOMICS – 2
TIME: 3:00HRS SEPTEMBER, 2018

INSTRUCTIONS:
- This paper consists of two sections
- Answer Five questions at least two question from each section
- Question 3 is compulsory
- Each question carry 20 marks
- Show your work clearly

SECTION A
1. a) Define the following terms
i) national income
ii) circular flow of income
iii) per capital income
iv) transfer payment
v) disposable income
b) “The per capital income of country X is 5 times that of country Y. So the average person in
country X enjoys a higher standard of living 5times more than his/her counterpart in country
Y. Comment on the validity of this statement.

2. a) Distinguish between the following

i. GDP and GNP
ii. GNP and NNP
iii. Private income and public income
iv. NIFA and Net indirect tax
v. Deflationary Gap and inflationary Gap.
b) How can national income can be calculated in any country like Tanzania.

3. In the table below are items of the income statement of an economy for the year 2016/2017
DETAILS BILLIONS
Rents 24
Personal consumption expenditure (c) 1080
Corporate income taxes 65
Undistubuted corporate profits 180
Net exports 7
Capital consumption allowance 80
Dividends 35
Interest 82
Indirect business taxes 163
Gross private domestic investment 240
Compensation of employees 1028
Government purchases of goods and services 365
Proprietors income 97
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Determine the Gross National product by using:-

a) Expenditure Approach
b) Income Approach

4. a) Define the following term

i. Consumption function
ii. Marginal propensity to consume (mpc)
iii. Marginal propensity to save (mps)
iv. Investment multiplier
v. Accelerator principle
b) National income (y) = C + S
C = consumption
S = saving
Show that
S = –a + y (1 – b)
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c) Given the MPc as calculate
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a) MPs
b) Multiplier

SECTION B
5. a) Define
i. Development planning
ii. Economic planning
iii. Comprehensive planning
iv. Sectoral planning
b) Planning is a wastage of Resources. Discuss

6. Why Economic planning fail in LDC’s (with recent evidence). (8 points)

7. a) Indicate briefly the ingredients of good plan. (5 points).

b) With the aids of diagram explain the concept of Lorenz curve.

8. a) What is the rationale for planning in your country? (5 points)

b) The table below represents economic transactions for a country PQR in Billions of Shillings.
Total output Intermediate purchases
Agriculture 60 20
Manufacturing 140 90
Services 110 25
Required
i) GNP by value added Approach
ii) If depreciation is 16 billions, and indirect tax is 14 billions. Find not domestic product
both at market price and factor cost.

Wabillahit Tawfiiq
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