THE PUBLIC ACCOUNTANTS EXAMINATIONS BOARD

A Committee of the Council of ICPAU

CPA(U) EXAMINATIONS

LEVEL ONE
ECONOMIC ENVIRONMENT - PAPER 3

TUESDAY 16 MARCH, 2021

INSTRUCTIONS TO CANDIDATES
1. Time allowed: 3 hours 15 minutes.
The first 15 minutes of this examination have been designated for reading
time. You may not start to write your answer during this time.
2. This examination contains Sections A and B.
3. Section A is bound separately from Section B.
4. Attempt all the 20 multi-choice questions in Section A. Each question
carries 1 mark.
5. Attempt four of the five questions in Section B. Each question carries 20
marks.
6. Write your answer to each question on a fresh page in your answer
booklet.
7. Please, read further instructions on the question paper and answer
booklet, before attempting any question.

© 2021 Public Accountants Examinations Board

 Economic Environment – Paper 3

SECTION B
Attempt four of the five questions in this section
Question 2
It is observed that in Uganda`s economy, there is a predominance of small scale
firms and these have continued to operate alongside the large scale firms.
These small scale firms are located in rural, semi- urban and urban areas yet the
large scale firms are mainly found in semi-urban and urban areas. Many of the
small scale firms use locally available raw materials hence making it cheaper for
them to operate. The labor force employed is mainly unskilled and learns on the
job. These firms tend to be highly flexible and take services nearer to the
consumers.
Programs like Pakasa and Youth Livelihood Fund are in operation purposely to
develop entrepreneurial skills for the proper working of the small scale firms
Other programs are also aired over radio and television trying to sensitize the
public so that they embrace modern technology to increase output, sales and
profits for the small scale firms.
Required:
(a) (i) Account for the survival of small scale firms in Uganda.
(8 marks)
(ii) Discuss the measures that have been put in place to promote small
scale firms in Uganda?
(7 marks)
(b) Explain the negative effects of economic dependence to the economy of
Uganda.
(5 marks)
(Total 20 marks)
Question 3
(a) Explain the:
(i) Causes of structural inflation in Uganda. (5 marks)
(ii) Possible solutions to structural inflation in Uganda. (5 marks)
(b) (i) Discuss the reasons for liberalisation of trade in Uganda.
(5marks)
(ii) Describe the measures that can be taken to improve the terms of
trade in Uganda. (5 marks)
(Total 20 marks)

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 Economic Environment – Paper 3

Question 4

(a) (i) Explain the demerits of a free enterprise economy.

(6 marks)
(ii) Explain the various ways in which the supply of entrepreneurs can
be increased in Uganda.
(6 marks)
(b) Describe the circumstances under which labor in Uganda maybe paid low
wages?
(8 marks)
(Total 20 marks)
Question 5
(a) An economy has a marginal propensity to save of 30% and an initial
income of Shs 200 million,
Required:
Calculate:
(i) The income multiplier (2 marks)
(ii) New level of income (2 marks)
(b) Explain the dangers of income inequality in developing countries
(8 marks)
(c) Discuss measures that can be taken to widen the taxable capacity in
Uganda.
(8 marks)
(Total 20 marks)
Question 6
(a) Discuss the ways in which unemployment has affected the economy of
Uganda?
(8 marks)
(b) Explain the limitations of the Quantity theory of money in developing
economies.
(6 marks)
(c) Describe the features of the informal sector in Uganda.
(6 marks)
(Total 20 marks)

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