ECONOMICS REVISION KIT FOR KASNEB COURSES (PAST PAPERS WITH ANSWERS)

Economics past papers with solutions

 

CPA

 

 

ECONOMICS

 

PART 1

 

CPA SECTION 2

 

 

REVISION KIT

 

 

 

ECONOMICS REVISION KIT SAMPLE WORK

  

 

INTRODUCTION

 

Following our continued effort to provide quality study and revision materials at an affordable price for the private students who study on their own, full time and part time students, we partnered with other team of professionals to make this possible.

This Revision kit (Questions and Answers) contains kasneb past examination past papers and their suggested answers as provided a team of lecturers who are experts in their area of training. The book is intended to help the learner do enough practice on how to handle exam questions and this makes it easy to pass kasneb exams.

 

 

ECONOMICS REVISION KIT SAMPLE WORK

 

 

ECONOMICS

 

GENERAL OBJECTIVE

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply the fundamental principles of economics in decision making.

 

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

  • Apply basic mathematical and graphical techniques to analyse economic relationships and interpret the results
  • Apply the knowledge of economics in decision making
  • Analyse economic problems and suggest possible policy related recommendations
  • Apply knowledge of economics in international trade and finance
  • Apply economic principles in the development and implementation of policies in agriculture and industry

 

CONTENT

 

MICROECONOMICS

 Introduction to economics

  • Definition of economics
  • Basic economic concepts: economic resources, human wants, scarcity and choice, opportunity cost, production possibility curves/frontiers
  • Scope of economics: Micro and macro economics
  • Methodology of economics: positive and normative economics, scientific methods, economics as a social science.
  • Economic systems: free market economy, mixed economy, consumers’ sovereignty.

 

Demand, supply and determination of equilibrium

    Demand analysis

  • Definition
  • Individual demand versus market demand
  • Factors influencing demand
  • Exceptional demand curves
  • Types of demand
  • Movement along and shifts of demand curves
  • Elasticity of demand
  • Types of elasticity: price, income and cross elasticity
  • Measurement of elasticity; point and arc elasticity
  • Factors influencing elasticity of demand
  • Application of elasticity of demand in management and economic policy decision making

 

   Supply analysis

  • Definition
  • Individual versus market supply
  • Factors influencing supply
  • Movements along and shifts of supply curves
  • Definition of elasticity of supply
  • Price elasticity of supply
  • Factors influencing elasticity of supply
  • Application of elasticity of supply in management and economic policy decision making

 

    Determination of equilibrium

  • Interaction of supply and demand, equilibrium price and quantity
  • Mathematical approach to equilibrium analysis
  • Stable versus unstable equilibrium
  • Effects of shifts in demand and supply on market equilibrium
  • Price controls
  • Reasons for price fluctuations in agriculture

The theory of consumer behaviour

  • Approaches to the theory of the consumer – cardinal versus ordinal approach
  • Utility analysis, marginal utility (MU), law of diminishing marginal utility (DMU)
  • Limitations of cardinal approach
  • Indifference curve analysis; Indifference curve and budget line
  • Consumer equilibrium; effects of changes in prices and incomes on consumer equilibrium
  • Derivation of a demand curve
  • Applications of indifference curve analysis: substitution effect and income effect for a normal good, inferior good and a giffen good; derivation of the Engels curve
  • Consumer surplus /Marshallian surplus

 

The theory of a firm

     The theory of production

  • Factors of production
  • Mobility of factors of production
  • Short run analysis
  • Total product, average and marginal products
  • Stages in production and the law of variable proportions/the law of diminishing returns
  • Long run analysis
  • Isoquant and isocost lines
  • The concept of producer equilibrium and firm’s expansion curve
  • Law of returns to scale
  • Demand and supply of factors of production
  • Wage determination theories
  • Trade unions: functions and challenges
  • Producer surplus/economic rent/Marshallian surplus

 

     The theory of costs

  • Short run costs analysis and size of the firm’s total cost, fixed cost, average cost, variable costs and marginal cost
  • Long run costs analysis
  • Optimal size of a firm
  • Economies and diseconomies of scale

 

Market structures

  • Definition of a market
  • Necessary and sufficient conditions for profit maximisation
  • Mathematical approach to profit maximisation
  • Output, prices and efficiency of: perfect competition, monopoly, monopolistic competition, oligopolistic competition

 

 

MACROECONOMICS

National income

  • Definition of national income
  • Circular flow of income
  • Methods/approaches to measuring national income
  • Concepts of national income: gross domestic product (GDP), gross national product (GNP) and net national product (NNP), net national income (NNI) at market price and factor cost, disposable income
  • Difficulties in measuring national income
  • Uses of income statistics
  • Analysis of consumption, saving and investment and their interaction in a simple economic model
  • Determination of equilibrium national income
  • Inflationary and deflationary gaps
  • The multiplier and accelerator concepts
  • Business cycles/cyclical fluctuations

 

 Economic growth, economic development and economic planning

  • The differences between economic growth and economic development
  • Actual and potential growth
  • The benefits and costs of economic growth
  • Determinants of economic development
  • Common characteristics of developing countries
  • Role of agriculture and industry in economic development
  • Obstacles to economic development
  • The need for development planning
  • Short term, medium term and long term planning tools
  • Challenges to economic planning in developing countries

 

Money and banking

 

     Money

  • The nature and functions of money
  • Demand and supply of money
  • Theories of demand for money: The quantity theory, the Keynesian liquidity preference theory

 

      The banking system

  • Definition of commercial banks
  • The role of commercial banks and non-banking financial institutions in the economy
  • Credit creation
  • Definition of central bank
  • The role of the central bank; traditional and changing role in a liberalised economy, such as financial sector reform, exchange rate reform
  • Monetary policy, definition, objectives, instruments and limitations
  • Determination of interest rates and their effects on the level of investment, output, inflation and employment
  • Harmonisation of fiscal and monetary policies
  • Simple IS–LM Model
  • Partial equilibrium and general equilibrium

 

Inflation and unemployment

 

     Inflation

  • Definition and types of inflation
  • Causes of inflation: cost push and demand pull
  • Effects of inflation
  • Measures to control inflation

     Unemployment

  • Definition of unemployment
  • Types and causes of unemployment
  • Control measures of unemployment
  • Relationship between unemployment and inflation: the Phillips curve

 International trade and finance

  • Definition of International trade
  • Theory of absolute advantage and comparative advantage
  • World trade organization (WTO) and concerns of developing countries
  • Protection in international trade
  • Regional integration organizations, commodity agreements and the relevance to less developed countries (LDCs)
  • Terms of trade, balance of trade, balance of payments (causes and methods of correcting deficits in balance of payments), exchange rates, types of foreign exchange regimes, factors influencing exchange rates, foreign exchange reserves
  • International financial institutions: International Monetary Fund (IMF) and World Bank
  • National debt management: causes and interventions
  • Structural Adjustment Programmes (SAPs) and their impacts on the LDCs

 Emerging issues and trends

 

CONTENT                                                                                PAGE

 

Past papers

 

  1. November 2019 ………………………………………………………………10
  2. May 2019……………………………………………………………………..14
  3. November 2018………………………………………………………………19
  4. May 2018……………………………………………………….…………….23
  5. November 2017………………………………………………………………27
  6. May 2017………………………………………………………….………….31
  7. November 2016………………………………………………………………36
  8. May 2016……………………………………………………………….…….40
  9. November 2015………………………………………………………………44
  10. September 2015………………………………………………………………48

 

 

Suggested Answers

 

  1. November 2019 ………………………………………………………………52
  2. May 2019……………………………………………………………………..71
  3. November 2018………………………………………………………………92
  4. May 2018……………………………………………………….…………….111
  5. November 2017………………………………………………………………129
  6. May 2017………………………………………………………….………….148
  7. November 2016………………………………………………………………165
  8. May 2016……………………………………………………………….…….181
  9. November 2015………………………………………………………………197
  10. September 2015………………………………………………………………213

 

 

 

ECONOMICS REVISION KIT SAMPLE WORK

 

CPA PART I SECTION 2

CS PART I SECTION 2

CIFA PART I SECTION 2

CCP PART I SECTION 2

 

ECONOMICS

 

WEDNESDAY: 27 November 2019.                                          Time Allowed: 3 hours.

Answer any FIVE questions.                                    ALL questions carry equal marks.

 

QUESTION ONE

(a) Examine four limitations of a planned economic system.                               (4 marks)

(b) With the aid of a diagram, explain the concept of production possibility curve.

(5 marks)

(c) With the help of a diagram, illustrate the concept of surplus as applied in the theory of market equilibrium.                                                                                            (5 marks)

(d) The following equations are given:

ECONOMICS REVISION KIT SAMPLE WORK

CPA PART I SECTION 2

CS PART 1 SECTION 2

CIFA PART I SECTION 2

CCP PART I SECTION 2

 

ECONOMICS

 

TUESDAY: 21 May 2019.                                                          Time Allowed: 3 hours.

Answer any FIVE questions.                                    ALL questions carry equal marks.

 

QUESTION ONE

(a) (i) Explain the Keynesian liquidity preference theory of demand for money.  (1 mark)

(ii) Outline five criticisms of the theory in (a) (i) above.                                     (5 marks)

(b) (i) Distinguish between “perfect oligopoly” and “imperfect oligopoly”.       (2 marks)

(ii) Describe three methods used in fixing prices under the oligopoly market structure.

(6 marks)

(c) Highlight six factors that might lead to a rightward shift of the optimal point of a firm.

(6 marks)

                                                                                                                (Total: 20 marks)

ECONOMICS REVISION KIT SAMPLE WORK

CPA PART I SECTION 2

CS PART I SECTION 2

CIFA PART I SECTION 2

CCP PART I SECTION 2

 

ECONOMICS

 

TUESDAY: 27 November 2018.                                               Time Allowed: 3 hours.

Answer any FIVE questions.                                   ALL questions carry equal marks.

 

QUESTION ONE

(a) Differentiate between “economic resources” and “non economic resources”.  (1 mark)

(b) (i) Explain the term “consumer sovereignty” as used in economics.               (1 mark)

(ii) Outline eight factors that hinder consumers’ sovereignty.                        (8 marks)

(c) Enumerate five factors that determine the price elasticity of demand of a commodity.

(5 marks)

(d) Highlight five barriers to occupational mobility of labour.                                        (5 marks)

                                                                                                                 (Total: 20 marks)

ECONOMICS REVISION KIT SAMPLE WORK

CPA PART I SECTION 2

CS PART 1 SECTION 2

CIFA PART I SECTION 2

CCP PART 1 SECTION 2

 

ECONOMICS

 

TUESDAY: 22 May 2018.                                                        Time Allowed: 3 hours.

Answer any FIVE questions.                                  ALL questions carry equal marks.

 

QUESTION ONE

(a) Discuss five negative effects of inflation in an economy.                           (10 marks)

(b) Explain five conditions that could favour effective use of price discrimination in an economy.        (10 marks)

                                                                                                                 (Total: 20 marks)

QUESTION TWO

(a) Examine four determinants of’ money supply in an economy.                        (8 marks)

(b) Explain six reasons why a country might impose international trade restrictions.

(6 marks)

(c) Analyse three roles of International Monetary Fund (IMF) to member countries.

(6 marks)

ECONOMICS REVISION KIT SAMPLE WORK

CPA PART I SECTION 2

CS PART I SECTION 2

CIFA PART I SECTION 2

CCP PART I SECTION 2

 

ECONOMICS

 

TUESDAY: 28 November 2017.                                        Time Allowed: 3 hours.

Answer any FIVE questions.                             ALL questions carry equal marks.

 

QUESTION ONE

(a) Explain the following types of development plans:

(i) Short term plans.                                                                                      (1 mark)

(ii) Medium term plans.                                                                                           (1 mark)

(iii) Long term plans.                                                                                    (1 mark)

(b) Highlight three exceptions to the law of diminishing marginal utility.     (3 marks)

(c) Describe four functions of money in an economy.                                   (4 marks)

(d) Enumerate five advantages and five disadvantages of a planned economic system.

(10 marks)

ECONOMICS REVISION KIT SAMPLE WORK

CPA PART I SECTION 2

CS PART I SECTION 2

CIFA PART I SECTION 2

CCP PART I SECTION 2

 

ECONOMICS

 

TUESDAY: 23 May 2017. Time                                                    Allowed: 3 hours.

Answer any FIVE questions.                               ALL questions carry equal marks.

 

QUESTION ONE

(a) Highlight four steps followed in the scientific method used in economics. (4 marks)

(b) Enumerate five factors that determine the price elasticity of supply of a commodity.

(5 marks)

(c) Using indifference curve analysis, derive the Engel’s curve of a normal good.

(6 marks)

(d) Summarise five applications of opportunity cost in decision making.        (5 marks)

                                                                                                            (Total: 20 marks)

ECONOMICS REVISION KIT SAMPLE WORK

CPA PART I SECTION 2

CS PART I SECTION 2

CIFA PART I SECTION 2

CCP PART I SECTION 2

 

ECONOMICS

 

TUESDAY: 22 November 2016.                                              Time Allowed: 3 hours.

Answer any FIVE questions.                                     ALL questions carry equal marks.

 

QUESTION ONE

(a) (i) Explain the term “price control” as used in economics.                            (l mark)

(ii) Highlight eight reasons for price controls in an economy.                          (8 marks)

(b) Outline six advantages of a controlled market system.                                (6 marks)

(c) With the aid of a diagram, explain the concept of consumer surplus.           (5 marks)

                                                                                                               (Total: 20 marks)

ECONOMICS REVISION KIT SAMPLE WORK

KASNEB

CPA PART I SECTION 2

CS PART I SECTION 2

CIFA PART I SECTION 2

CCP PART I SECTION 2

 

ECONOMICS

 

TUESDAY: 24 May 2016.                                                       Time Allowed: 3 hours.

Answer any FIVE questions.                                   ALL questions carry equal marks.

 

QUESTION ONE

(a) Outline four assumptions underlying consumer equilibrium.                        (4 marks)

(b) With the aid of a diagram, explain the production possibility frontier.         (5 marks)

(c) Summarise five ways through which the government could influence the allocation of resources in a free market economy.         (5 marks)

(d) Explain how the concept of elasticity of demand guides economic decision making in the following areas:

(i) Government tax policy on household consumption.                                (2 marks)

(ii) Devaluation policy.                                                                                   (2 marks)

(iii) Price discrimination a monopolist.                                                      (2 marks)

                                                                                                                (Total: 20 marks)

ECONOMICS REVISION KIT SAMPLE WORK

KASNEB

CPA PART I SECTION 2

CS PART I SECTION 2

CI FA PART I SECTION 2

CCP PART I SECTION 2

 

ECONOMICS

 

MONDAY: 23 November 2015.                                       Answer any FIVE questions.

QUESTION ONE

(a) With the aid of a diagram, describe the concept of unstable market equilibrium.

(5 marks)

(b) “All giffen goods are inferior goods but not all inferior goods are giffen goods”. Using a relevant diagram, explain the above statement.                                             (5 marks)

(c) Argue five cases for and five cases against specialisation as a method of production.

(10 marks)

                                                                                                                  (Total: 20 marks)

ECONOMICS REVISION KIT SAMPLE WORK

KASNEB

CPA PART I SECTION 2

CS PART I SECTION 2

CIFA PART I SECTION 2

CCP PART I SECTION 2

 

ECONOMICS

PILOT PAPER

 

September 2015.                                                                Time Allowed: 3 hours.

Answer any FIVE questions.                                   ALL questions carry equal marks.

 

QUESTION ONE

(a) (i) Distinguish between “gross domestic product” and “gross national product”.

(4 marks)

(ii) Give the reasons for the lower value of the gross national product in the less developing countries.      (1 mark)

(b) The following data represents economic transactions of a hypothetical economy:

ECONOMICS REVISION KIT SAMPLE WORK

SUGGESTED ANSWERS

 

NOVEMBER 2019

 

 

QUESTION ONE

  1. a) Limitations of a planned economic system

A planned economics system refers to a system where all major economic decisions are made a government ministry or planning organization

Limitations of planned economic system are:

  • Consumers cannot choose and only those goods and services are produced are those which are decided the government.
  • Lack of profit motive may lead to firms being inefficient.
  • Lots of time and money is wasted in communicating instructions from the government to the firms.

ECONOMICS REVISION KIT SAMPLE WORK

SUGGESTED ANSWERS

 

 MAY 2019

 

 

QUESTION ONE

  1. a) i) Explain the Keynesian liquidity preference theory of demand for money

As per lord John Maynard Keynes, the rate of interest is determined the supply of money and the desire to hold money. Money is the most liquid asset, with interest being the compensation for liquidity loss. Moreover as per Keynes, the three motives for holding money include:

  • Transactions motive: holding money to meet the day today expenses
  • Precautionary motive : holding money to take care of unexpected occurrences
  • Speculative motive: holding cash to take care of profitable opportunities that might arise.

ECONOMICS REVISION KIT SAMPLE WORK

 

SUGGESTED ANSWERS

 

NOVEMBER 2018

 

QUESTSION ONE

  1. a) Difference between “economic resources” and “non economic resources”

Economic resources are those resources that are scarce and therefore command a price. e.g.  land, labor, entrepreneurship and capital. Non- economic resources are those that are abundant in nature and thus do not command a price. e.g. air.

ECONOMICS REVISION KIT SAMPLE WORK

SUGGESTED ANSWERS

 

MAY 2018

 

 

QUESTION ONE

 

  1. Negative effects of inflation in an economy.

 

Inflation refers to decline in purchasing power of money. It has the following negative impacts:

  • Currency debasement which lowers the value of a currency and sometimes causes a new currency to be born.
  • Causes an increase in tax brackets people will be taxed a higher percentage if their income increases following an inflation increase.
  • Causes business cycles: many businesses will have to go out of business because of the losses they incurred from inflation and its effects.

ECONOMICS REVISION KIT SAMPLE WORK

SUGGESTED ANSWERS

NOVEMBER 2017

 

 

QUESTION ONE

a) Explanation of the following types of development plans:

  1. i) Short term plans: These are development plans that will cover a period of one year or less
  2. ii) Medium term plan: Development plans that will cover a period of over one year but a maximum 5 years

ECONOMICS REVISION KIT SAMPLE WORK

SUGGESTED ANSWERS

MAY 2017

 

QUESTION ONE

1a) Steps followed in the scientific method used in economics

  • Definition of concepts: ideas are stated in such a way that they can be measured in order to test theory against fact.
  • Formation of hypothesis: A hypothesis is an educated guess. It is based on actual observations and some underlying assumptions.
  • The use of hypothesis to forecast: if correct, then it should follow, that when certain things are done, certain things are set to happen.
  • Hypothesis testing: gathering real life data to test the practicality of hypothesis.

ECONOMICS REVISION KIT SAMPLE WORK

SUGGESTED ANSWERS

 

NOVEMBER 2016

 

 QUESTION ONE

a) i) Explanation of the term “price control” as used in economics

These are government mandated legal minimum or maximum prices set for specified goods. They are usually implemented as a means of direct economic intervention to manage the affordability of certain goods.

ECONOMICS REVISION KIT SAMPLE WORK

SUGGESTED ANSWERS

MAY 2016

 

QUESTION ONE

  1. a) Assumptions underlying consumer equilibrium
  • Utility can quantified in monetary terms
  • Constant prices of commodities
  • Consumers income is given
  • Utility is cardinally measurable i.e. it can be expressed in exact units

ECONOMICS REVISION KIT SAMPLE WORK

SUGGESTED ANSWERS

 

NOVEMBER 2015

 

 

QUESTION ONE

 

  1. a) Concept of unstable market equilibrium

 

Unstable market equilibrium refers to an equilibrium wheredivergence from equilibrium position generates forces that push further from equilibrium position, thus there is no restoration of original equilibrium position

ECONOMICS REVISION KIT SAMPLE WORK

SUGGESTED ANSWERS

 

PILOT PAPER

 

SEPTEMBER 2015

 

QUESTION ONE

 

  1. a) i) Distinction between” Gross Domestic Product and “Gross National Product”

 

Gross Domestic Product refers to the money value of all goods and services produced within a country in one year including net factor income from abroad. Gross National Product is a measure of all output of citizens of a country working within the country or outside the country less income earned foreigners in the country.

 

ECONOMICS REVISION KIT SAMPLE WORK

ECONOMICS PAST PAPERS WITH ANSWERS



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