ADVANCED LEVEL NATIONAL EXAMINATIONS, 2020-2021 - ECONOMICS I - PAPER IV: BASIC PRINCIPLES OF ECONOMICS

Giving relevant examples, explain how the study of basic principles of economics is useful to you in your daily life.

A consumer has total money income of 250$ to be spent on two goods X and Y with prices of 25$ and 10$ per unit respectively. On the basis of the information given, answer the following questions: a) Give the equation of the budget line for the consumer. b) What is the value of the slope of the budget line? c) How many units can the consumer buy if she /he have to spend all her/ his money income on goods X? d) How does the budget line change if there is a fall in price of good Y?

Suppose you were a business person and a producer of different products and there is need for more revenue. What product would you choose to supply; the one with high price elasticity of demand or one with inelastic demand? Briefly explain your choice. Suppose you were a businessman or woman, what would your rational decisions be in the following situations and why? i) The price was increased and you have to decide to increase or reduce the wages of your workers while the demand for your products is inelastic. ii) you are the only supplier of product A. you have two categories of consumers: Students and workers. The demand of the product by students is elastic and the demand for product by workers is inelastic.

Capital as a factor of production plays a big role in production process and in development process. Explain its role in: a) Employment creation. b) Promotion of technological progress.

Most firms in Rwanda are concentrated in Kigali city especially in the industrial free zone of Masoro in Gasabo District. Do you think localization of firms is useful for households in Rwanda?

Explain the disadvantages of a perfect competition market linked to the following features: a) Homogeneity of products b) Perfectly elastic demand c) Free exit of firms

Small scale industries are needed in developing countries as a strategy of development. To what extent do you agree with this statement? Give at least 5 different reasons to support your answer.

In the table below are proposed economic policies or phenomenon in Column A and alternative measures to achieve them or reaction to them in column B. Match each policy or phenomenon with its appropriate alternative measure to achieve it or a reaction to it and justify your choice.

The Governor of the central bank of my country takes a decision to lower interest rate as required by the Minister of finance to stimulate economic growth. As an economist, how do you justify the usefulness of this decision to achieve this macroeconomic government policy?

Currency depreciation encourages investment in the country where currency is depreciated. Do you agree with this statement? Give at least three reasons to support it.