BEGINNING OF TERM II 2019 EXAM

S.5 ECONOMICS
P220/1
TIME: 2 HOURS 30 MINUTES
INSTRUCTIONS
- Answer FOUR questions in all
- Choose any three questions from B.
- All questions carry equal marks

SECTION A

1. (a) (I) what is meant by the term production possibility frontier . Is A Curve
That Shows All Combinations Of 2 Commodities That Can Be Maximally
Produced When All Resources Are Fully And Efficiently Employed (01
mark)
(ii) State any three causes of a shift in the production possibility frontier.
Increased efficiency of labor; increased skill of entrepreneurship;
discovery of new natural resources
(03 marks)
(b) (I) what is a factor price? Is a monetary reward to a factor of
production (01 mark)
(ii) Mention any three factor prices in an economy. Rent to land; profit
to entrepreneurship; wages to labor (03 marks)
(c) Distinguish between;
(I) Net National Product and Gross national products. (02 marks)
(ii) Nominal National income and Real National income. (02 marks)
(d) (I) distinguish between normative economics and positive economics.
Normative econ is the kind of econ that deals with people’s attitudes and personal
views while positive econ is the econ that deals with and highly restricted to facts.
(02 marks)
(ii) Give an example in each of the above cases. Normative; we should
cut taxes in half to increase disposable income levels\\positive; based
on past data, big tax cuts would help many people,but government
budget constraints make that option unfeasible (02
marks)
(e) State any four causes of immobility of capital. High restrictions on capital
inflow; unfavorable rules and regulations imposed by government on certain
goods; high taxes imposed on capital flows; presence of a volatile exchange rate
(04 marks)
 SECTION B
2. (a) Distinguish between capital accumulation and capital consumption allowance.
Capital accumulation is the process of improving a country’s stock of capital
goods mainly through investments. While capital consumption allowance is
the amount of money set aside by the business owners to replace faulty
capital assets by making repairs and buying spare parts
(04 marks)
(b) Examine the factors that affect the level of capital accumulation in an
economy. (16 marks)

3. (a) Distinguish between productivity and efficiency of labor. Productivity is

quantity of output that can be produced by a unit of labor in a given period
of time while efficiency is the quality and quantity of output that can be
produced by a unit of labor in a given period of time (04 marks)
(b) Account for low labor productivity in LDCs. (16 marks)

4. (a) How is national income computed in an economy? (06 marks)

(b) Suggest possible measures to increase national income in an economy.
(14 marks)

5. (a) Distinguish between supply of labor and supply of labour. (04 marks)
(b) Explain the factors which influence the level of labor supply in an economy.
(16 marks)
END