P220/1

ECONOMICS

Paper 1

July /August 2017

3 hours

RESOURCEFUL MOCK 2017

Uganda Advanced Certificate of Education
ECONOMICS

Paper 1

3 hours

INSTRUCTIONS

Answerfivequestions only.

Section A is compulsory. Answers to this section should be concise.

Answer four questions from section B.

All questions in section B carry equal marks.

Credit will be given for use of relevant diagrams.

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 SECTION A (20 MARKS)
1. (a)(i)Distinguish between a laissez faire economy and a command economy. (02 marks)
(ii) Mention any two demerits of a laissez faire economy. (02 marks)
(b) (i) Define the term average cost. (01 mark)
(ii) State three reasons for the rise in average costs of production in an economy. (03 marks)
(c ) (i) Define the term export multiplier. (01 mark)
(ii)Given that an increase in export revenue from Uganda shillings 2,500,000,000 to Uganda
shillings 4,500,000,000 resulted into an increase in income from Uganda shillings
8,500,000,000 to Uganda shillings 12,200,000,000, calculate the export multiplier. (03 marks)
(d )(i) Differentiate between frictionalunemployment and seasonal unemployment. (02 marks)
(ii) Outline two causes of frictional unemployment in an economy. (02 marks)

(e ) (i) What is meant by the term ‘economic planning’? (01 mark)

(ii) Give three conditions for the success of economic development planning in an
economy. (03 marks)

SECTION B (80 MARKS)

2. (a) Distinguish between increase in demand and increase in quantity demanded. (04 marks)
(b). Discuss the causes of instabilities in commodity demand in an economy. (16 marks)
3. (a) What are the conditions for existence of perfect competition in an economy?

(08 marks)
(b) How does a firm in a perfectly competitive market maximizeprofits
(i) in the short run? (6 marks)
(ii) in the long run? (6 marks)

4. (a) Explain the Malthusian population theory. (06 marks)

(b) Account for the limited relevance of the Malthusian population theory in developing
countries. (14 marks)

5. (a) State the functions of the central bank in an economy. (08marks)

(b) How does the central bank control inflation in an economy? (12 marks)

6. (a) Why do governments in developing economies draw deficit budgets? (10 marks)
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 (b). Explain the importance of a national budget in developing countries. (10 marks)

7. (a) Explain the factors that may limit success of regional economic co-operation between
countries. (10 marks)
(b) What are the demerits of regional economic co-operation to the member countries?
(10 marks)

END