MERU UNIVERSITY OF SCIENCE AND TECHNOLOGY

P.O. Box 972-60200 – Meru-Kenya.

Tel: +254 (0)799529958, +254 (0)799529959, +254 (0)712524293
Website: www.must.ac.ke Email: info@must.ac.ke
University Examinations 2017/2018

FIRST YEAR, SECOND SEMESTER EXAMINATION FOR THE DEGREE

OF
BACHELOR OF SCIENCE IN ECONOMICS

BEC 3151: CONTEMPORARY ECONOMIC ISSUES IN AFRICA

DATE: SEPTEMBER 2018 TIME: 2 HOURS

INSTRUCTIONS: Answer question one and any other two questions.

QUESTION ONE (30 MARKS)

The data provided below represents an hypothetical income of country z.

• The lowest 10% of earners make 1% of all wages.

• The next 10% of earners make 4% of all wages
• The next 30% of earners make 10% of all wages
• The next 10% of earners make 20% of all wages
• The highest 10% of earners make 35% of all wages

Required:

a) Construct the Lorenz curve and show the area under Gini coefficient. (3 Marks)
b) Compute the Gini coefficient and interprete your answer. (Using tables) (13 Marks)
c) Discuss the disadvantages of Gini coefficient as a measure of the inequality in an
economy (10 Marks)
d) Briefly explain the following terms;
(i) Actual Economic growth
(ii) Potential Economic Growth (4 Marks)

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QUESTION TWO (20 MARKS)

a) Discuss the importance of Economic Development in a country. (10 Marks)

b) Briefly explain the limitations of development planning in developing countries.
(10 Marks)
QUESTION THREE (20 MARKS)
a) Assume the following information relates to an income model of an economy.

= + +
= + (Y − ) Where, T = taxes
= + I = Investment

I= G = Government Expenditure
=

Required;
Compute the equilibrium values of income ,consumption and taxes. (7 Marks)
b) Discuss factors that affect the Economic Growth of an economy. (10 Marks)
c) Briefly explain the phases of Economic Growth. (3 Marks)

QUESTION FOUR (20 MARKS)

a) Discuss the causes of unemployment in developing countries. (10 Marks)

b) Most of the developing countries are faced with balance of payments deficit. Discuss the
policy measures that can be put in place to alleviate this scenario. (10 Marks)

QUESTION FIVE (20 MARKS)

a) Briefly explain the effects of inflation in a country. (10 Marks)

b) One of the biggest obstacles to development in developing countries is inadequate
industrial base. In light of the above situation discuss the policy measures that a country
can put to develop her industrial sector. (10 Marks)

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