ITE411S-INTRODUCATION TO ECONOMICS-1ST OPP- JUNE 2024 :: NUST past examination papers between 2020 and 2024

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ITE411S-INTRODUCATION TO ECONOMICS-1ST OPP- JUNE 2024

1 Pages 1-10

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2 Pages 11-20

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2.2 Page 12

2.3 Page 13

ITE411S-INTRODUCATION TO ECONOMICS-1ST OPP- JUNE 2024

1 Pages 1-10

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1.1 Page 1

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nAmlBIA unlVERSITY

OF SCIEn CE AnD TECHn OLOGY

FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCAITON

DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE

QUALIFICATION : BRIDGING PROGRAMMES -SOCIAL SCIENCES (04NBPR)

QUALIFICATION CODE: O7BEC0

LEVEL: 4

COURSE CODE: ITE411S

COURSE NAME: INTRODUCTIONTO ECONOMICS

SESSION: JUNE 2024

DURATION: 3 HOURS

PAPER: THEORY

MARKS: 100

FIRST OPPORTUNITY EXAMINATION QUESTION PAPER

EXAMINER(S) Mr Eslon Ngeendepi

MODERATOR: Ms Lavinia Hofni

INSTRUCTIONS

1. Answer ALL the questions.

2. Write clearly and neatly.

3. Number the answers clearly.

4. The use of a scientific pocket calculator is allowed.

5. This examination paper is divided into FOURsections.

6. Section A and Section B should be answered on the enclosed answer

sheets.

7. Section C & D should be answered in your examination book.

THIS QUESTION PAPER CONSISTS OF 13 PAGES (Including this front page)

1.2 Page 2

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SECTION A

20 Marks

Instructions:

•

Answer all the questions

•

All answers should be on the answer sheet on page 12. Tear the page off and place it inside

your examination script.

QUESTION 1

1.1 Macroeconomics can best be described as the

(a) study of the large aggregates of the economy, or the economy as a whole.

(b) study of how supply and demand determine prices in individual markets.

(d) study of how a consumer tries to spend his income.

1.2 In a command economy

(a) the government uses prices as a principal means of directing resources

(b) government does not usually allow private property

(d) money does not exist.

1.3 Which of the following is not a resource as the term is used by economist?

(a) land

(b) money

(d) building

1.4 The production possibilitiescurve (PPC}shows combinations of goods that

(a) can be produced at full employment

(b) can be consumed for a given income

(d) can be produced by a firm using different processes.

1.5 If Michelle consumes more and more chocolatesand each additional chocolate provides less

satisfaction than the previous one, we are seeing the working of the law of

(a) demand

(b) decreasing economies of scale

(d) increasing opportunity coast.

1.6 Andre consumes only jeans and shirts. Suppose that he maximises total utility within his

budget constraint and the price of jeans is N$250, where the last pair yielded 300 units of

extra satisfaction. If the price of a shirt is N$90, then the extra satisfaction received from

the last shirt must be

(a) 450 units

(b) 108 units

(d) impossible to calculate with the information provided.

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1.7 Which one of the following statements is correct?

(a) A consumer is in equilibrium when his or her marginal utility is at the maximum level.

(b) A consumer aims to maximise profits.

(d) A consumer is in equilibrium if the marginal utility per N$ is equal for the products that he or

she buys, and his or her available income has been spent.

1.8 If quantity demanded for good "B" increasesas the price of good "A" increases,one can

deduce that A and Bare:

(a) complementary goods.

(b) Normal good.

(d) Substitute good.

1.9 Supposethe supply of cotton increasesin Namibia due an improved variety. As a result:

(a) Pricesof cotton will decline, ceterisparibus.

(b) Quantity demanded for cotton will increase, ceterisparibus.

(d) All of the above.

1.10 A commodity will tend to have a price elastic demand if:

(a) It has many close substitutes.

(b) The market is defined more narrowly.

(d) The time horizon is long.

1.11 If the price elasticity of supply is zero, then

(a) the supply curve is horizontal

(b) a small decrease in the price will result in suppliers producing nothing

(d) there is a shortage of the good on the market.

1.12 In the long run

(a) All inputs are fixed

(b) All inputs are variable

(d) Output is fixed at the maximum.

1.13 Which of the following topics are within the scopeof macroeconomics?

(a) The effect of taxes on prices of airline tickets and employment trends in the food industry.

(b) The price of beef and wage differences between genders.

goods.

(d) The percentage of the labour force that is out of work and the differences in average income

from country to country.

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Questions1.14 and 1.15 are based on the informationgiven in Table1 whichdescribesthe processby

whicha loaf of bread is made availableto a consumeras afinal good.

Table 1

Price (N$) of a loaf of bread

Farmer sells wheat to a miller

0.70

Miller sells flour to baker

1.05

Baker sells bread to grocer

1.90

Grocer sells bread to consumer

2.25

1.14 Given the information in Table 1, the total value of a loaf of bread is:

(a) N$2.25

(b) N$5.90

(d) N$1.SS

1.15 Given the information in Table 1, the value added by the grocer equals:

(a) N$0.35

(b) N$0.70

(d)

N$2.25

1.16 The cost of a bank borrowing from the Bank of Namibia is the:

reserve requirement

price of securities in the open market

repo rate

Yield on government bond

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Table 2 shows a section of the national accounts for a small country in 2023. Select the relevant

statistics and answer Questions 1.17 and 1.18 using the expenditure method.

Table 2

Final Consumption expenditure by Government

N$ millions at

market prices

3 000

Gross capital formation

2 200

Financial investment (stocks and bonds)

8 000

Exports of goods and services

1200

Final consumption expenditure by households

10500

Imports of goods and services

1500

Taxes

9 500

Government transfers

1500

1.17 Refer to Table 2 above: The value of grossdomestic expenditure is:

(a) N$13 200

(b) N$15 900

(d) N$23 700

1.18 Refer to Table 2 above: The value of grossdomestic product is:

(a) N$23 400

(b) N$16 000

(d) N$15 400

1.19 In a country with a population of 50 million people, there are 20 million children under the

age of 15 years, 16 million employed, 9 million pensioners, 4 million unemployed and 1

million people who are physicallyunable to work. The unemployment rate in this country

equals:

(a) 25%

(b) 20%

(d) 10%

1.20 A businesscycle is a period of time in which:

(a) a business is established and ceases operations

(b) there are four phases: peak, downswing, trough, upswing

(d) expansion and contraction of economic activity are equal

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SECTION B

20 Marks

Instructions:

•

Answer all the questions

•

All answers should be on the answer sheet on page 13. Tear the page out and place it inside

your answer book.

QUESTION 1

[20 marks]

2.1 Goods are scarce because society's desire for them exceeds society's ability to produce them.

[T/F]

2.2 A market system is likely to generate an uneven distribution of income among the people of

a country.

[T/F]

2.3 A change in the demand for a good is caused by a change in the price of the good.

[T/F]

2.4 Sophie has N$10 available to spend on chocolate that costs N$5 a slab. Sophie wants ten

slabs. She can therefore be said to have a demand for ten slabs of chocolate.

[T/F]

2.5 Max has only enough money to purchase a television set or a digital camera. If he decides on

the TVset, the opportunity cost of the TVset is the digital camera that he has to sacrifice. [T/F]

2.6 Wages are incom.e paid for labour while salaries are income paid for capital.

[T/F]

2.7 If two products, coffee and sugar, are complements, then an increase in the price of coffee

will cause a decrease in the demand for sugar.

[T/F]

2.8 Supply refers to the quantity of a good that is available in a shop on a particular day. [T/F]

2.9 Excessdemand for a good will put downward pressure on the price of the good.

[T/F]

2.10 A change in the price of apples will cause a movement along the supply curve for apples. [T/F]

2.11 The flour used in a bakery to bake bread and the flour used by Helena to bake bread for her

family are both classified as final goods.

[T/F]

2.12 The circular flow of economic activity is a model of the influence of the government on

business behaviour.

[T/F]

2.13 If GDP at factor cost= N$400 billion, indirect taxes= N$35 billion and subsidies= N$5 billion,

then GDPat market prices= N$430 billion.

[T/F]

2.14 Buying a cup of coffee with a ten dollar note represents the use of money as a unit of account.

[T/F]

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2.15 The M1 money supply includes checkable deposits, savings accounts, paper money and coins.

[T/F]

2.16 A decrease of the Repo rate by the Bank of Namibia is a policy action designed to increase the

money supply.

[T/F]

2.17 The quantity of money held in response to interest rates is the speculative motive for holding

money.

[T/F]

2.18 Expansionary fiscal policy means to reduce aggregate demand during a recession.

[T/F]

2.19 In economics, economic growth can best be described as a period of growth in the nominal

GDP of a country.

[T/F]

2.20 In times of economic upswing, unemployment should decrease and output should increase.

[T/F]

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SECTIONC

30 Marks

QUESTION 1

[8 marks]

Use a production possibilities curves to illustrate each of the following (putting goods on the vertical

axis and services on the horizontal axis):

(a) A shift in production from services towards goods.

(2)

(b) An increase in the potential output of the economy due to a greater availability of factors of

production.

(2)

(d) A decrease in productivity in the goods sector.

(2)

QUESTION 2

[12 marks]

2.1 Consider the market for chocolate chip cookies. Suppose there is an increase in the price of

cake flour used in the production of chocolate chip cookies. Demonstrate graphically the

effect this will have on the equilibrium price and quantity of chocolate chip cookies.

(4)

2.2 Suppose you are the manager of a soccer stadium where all the tickets always have to be sold

at the same price. A match between Brave Warriors and Bafana-Bafana is scheduled to be

played next month. Market research indicates that you can sell 10 000 tickets @ N$50 each

and 8 000 tickets @ N$100 each.

(a) Which price would you choose? Motivate your answer by calculating the total revenue. (3)

(b) Calculate the price elasticity of demand for this game using the figures given in 2.2 above. (5)

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QUESTION 3 [10 marks]

Trevor is a Lego maniac, but also likes Super Soaker squirt guns. The following table shows Trevor's

total utility, marginal utility and the weighted marginal utility from Legos and squirt guns measured

in utils.

Table 3: Utility schedule

Quantity of TU

MU/P

Quantity of TU

Legos

Squirts Guns

MU/P

6.25

3.4

3.125

2.6

1.875

100

1.25

0.25

Copy Table 3 into your answer book and complete the missing columns.

(10)

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SECTION D

30 Marks

QUESTION 1

[10 marks]

In the early 1980s, under the President Ronald Reagan,the Federal government in the USAreduced

personal income tax rates. The goal was to expand aggregate demand and boost real GDPoutput and

employment in order to end the recession of 1980-1981. In the 1990s, an important part of President

Bill Clinton's programs was to stimulate economic growth by boosting government spending on long-

term investment, including highways, bridges and education. In 2001, the United States experienced

a recession and during the next two years, President George W. Bush proposed and implemented tax

cuts to stimulate the economy. And in 2008, Americans received a N$170 billion tax reduction

stimulus package. This was followed by another N$787 billion federal stimulus package under the

Obama administration in 2009. The intention was to jump-start the economy into recovery from the

recession.

(a) Define the term fiscal policy.

(2)

(b) What type of fiscal policy was adopted by President Ronald Reagan?

(2)

another N$787 billion federal stimulus package under the Obama administration in 2009

intended to jump-start the economy into recovery from the recession. State what type of

fiscal policy this was AND explain the effect of such policy on the households, firms and on

aggregate demand.

(5)

(d) What is the main argument that is used to justify government intervention in the economy?

(1)

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2.1 Page 11

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QUESTION 2

[10 marks]

Central banks worldwide have been criticized for reacting too slow to change interest rates in the

wake of changing economic conditions. The reason for their slow reaction is uncertainty about the

future state of inflation, economic growth and asset prices. Yet, their failure to react quickly often

cost the economy dearly. In a hypothetical situation:

(a) If the inflation rate rises, what effect will the Bank of Namibia's decision to increase the Repo

rate have on the money supply?

(1)

(b) Suppose that the Namibian economy has been experiencing slow economic growth and you

have been invited to attend the Monetary Police Committee meeting as an expert to advise

on the policy measure they need to adopt in promoting economic growth. The Bank of

Namibia is reluctant to use the Repo rate as means to promote economic growth and thus

you are tasked with assisting on how they could use the Open Market Operations tool in

achieving the set goal.

(i)

State whether you're going to adopt an expansionary or restrictive monetary

policy.

{1)

(ii) Explain the effect of such policy on the:

1. Banks' reserves.

(2)

2. Money supply.

(2)

3. Prices of government securities.

(2)

4. Interest rate.

(2)

QUESTION 3

[10 marks]

What type of unemployment is linked to each of the following?

(a) New entrants into the labour market looking for their first job.

(2)

(b) Unemployed workers who have insufficient skills to find a job.

(2)

(c)

Unemployment that results from a temporary decrease in aggregate demand.

(2)

(d) The use of automated robots in a factory.

(2)

(e) An individual who cannot find work because his/her skills have become obsolete. (2)

TOTAL FOR PAPER: 100 MARKS

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Student number: .....................................................

ANSWERSHEETFOR SECTIONA

Mark the correct answer with an X.

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

1.11

1.12

1.13

1.14

1.15

1.16

1.17

1.18

1.19

1.20

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Student number: .............................................

ANSWERSHEETFOR SECTIONB

Mark the correct answer with an X.

True

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2.9

2.10

2.11

2.12

2.13

2.14

2.15

2.16

2.17

2.18

2.19

2.20

False