EXAMINATION NO.
_________________________
2017 EXAMINATIONS
ACCOUNTING TECHNICIAN PROGRAMME
PAPER TC 5: ECONOMICS
WEDNESDAY 31 MAY 2017 TIME ALLOWED: 3 HOURS
2.00 PM - 5.00 PM
INSTRUCTIONS
1. You are allowed 15 minutes reading time before the examination begins during which
you should read the question paper and, if you wish, make annotations on the question
paper. However, you are not allowed, under any circumstances, to open the answer
book and start writing or use your calculator during this reading time.
2. Number of questions on paper – 7.
3. The paper is divided into sections A and B.
4. Answer FIVE questions ONLY; TWO from Section A and THREE from Section B.
5. Each question carries 20 marks.
6. Begin each answer on a fresh page.
7. DO NOT OPEN THIS PAPER UNTIL YOU ARE INSTRUCTED BY THE
INVIGILATOR.
This question paper contains 6 pages.
This question paper must not be removed from the examination hall
SECTION A
Answer any two questions from this section
1. (a) What is production? 2 Marks
(b) With the aid of a clearly labelled indifference curves and budget line diagram,
explain the incomes effect resulting from a change in income. 8 Marks
(c) What is barter? 1 Mark
(d) State any three limitations of barter trade. 3 Marks
(e) Explain three categories of specialization. 6 Marks
(TOTAL: 20 MARKS)
2. (a) State any four determinants of supply. 4 Marks
(b) What causes the following:
(i) Movement along the supply curve; 1 Mark
(ii) A shift of the supply curve? 1 Mark
(c) Explain the following terms:
(i) Consumer surplus 1 Mark
(ii) Producer surplus 1 Mark
Continued/……
Page 2 of 6
(d) Figure 1 shows supply and demand graphs. Use it to answer the questions that
follow.
Price (MK)
18 S
10
D
0 20 Quantity
Required:
Calculate:
(i) the total consumer surplus 3 Marks
(ii) the total producer surplus 3 Marks
(e) (i) What is “price elasticity of demand?” 2 Marks
(ii) State any four main determinants of price elasticity of demand. 4 Marks
(TOTAL: 20 MARKS)
3. (a) Explain the following:
(i) Short run costs 1 Mark
(ii) Long run costs 1 Mark
Continued/……
Page 3 of 6
(b) Table 1 shows some output levels. Use it to answer the questions that follow.
Units of Total Cost (TC) Average Cost (AC) Marginal Cost (MC)
Output (n) MK MK MK
1 110
2 120
3 180
4 260
Required:
Calculate:
(i) the Average Cost (AC) at each output level 2 Marks
(ii) the Marginal Cost (MC) at each output level 2 Marks
(c) (i) What is profit? 1 Mark
(ii) State four functions of profit. 4 Marks
(d) Compare and contrast the following market structures; Perfect competition,
Monopolistic competition and Monopoly using the following criteria: Number of
firms and Type of product.
Market Structure Number of Firms Type of Product
Perfect Competition
Monopolistic Competition
Monopoly
3 Marks
(e) State four conditions necessary for price cartels to exist. 4 Marks
(f) State two factors that affect the demand for labour. 2 Marks
(TOTAL: 20 MARKS)
Page 4 of 6
SECTION B
Answer any three questions from this section
4. (a) What is money? 2 Marks
(b) State four functions of money. 4 Marks
(c) Explain four effects of inflation on the functions of money. 8 Marks
(d) What is credit? 1 Mark
(e) State any five sources of credit. 5 Marks
(TOTAL: 20 MARKS)
5. (a) Explain any three factors that influence the amount of consumption, according to
the Keynesian model. 6 Marks
(b) Assume that in equilibrium, the national income in a small closed economy is
K20 million and the average and marginal propensity to consume are 60 percent:
Required:
(i) Calculate the marginal propensity to save. 2 Marks
(ii) Calculate the amount of consumption level. 2 Marks
(iii) Calculate the amount of investment level. 2 Marks
(iv) What would be the new level of national income if investment increased
by K5,000,000? 3 Marks
(c) State five problems that may arise when GNP per capita (head) is used as an
indicator of living standards. 5 Marks
(TOTAL: 20 MARKS)
Page 5 of 6
6. (a) What is national debt? 2 Marks
(b) Explain the following:
(i) Two direct taxes employed in Malawi. 2 Marks
(ii) Two indirect taxes employed in Malawi. 2 Marks
(c) (i) What are trade cycles? 2 Marks
(ii) Explain three ways in which a government may reverse the downswing of
a trade cycle. 6 Marks
(d) (i) Explain the difference between demand-pull and cost-push inflation.
4 Marks
(ii) State two undesirable consequences of inflation. 2 Marks
(TOTAL: 20 MARKS)
7. (a) Define a foreign exchange market. 2 Marks
(b) State three advantages of a fixed exchange rate system. 3 Marks
(c) Explain two benefits of international trade. 4 Marks
(d) Explain how changes in terms of trade can be measured. 2 Marks
(e) If a base period index of exports and imports is 100, thus terms of trade for the
base year is 100 and suppose export price index rises to 120 and import price
index rises to 110.
Required:
Calculate the terms of trade. 4 Marks
(f) State five adverse effects of protectionism. 5 Marks
(TOTAL 20 MARKS)
END
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