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					CONFIDENTIAL                                                                     AP/OCT2007/QSD136




                                   UNIVERSITI TEKNOLOGI MARA
                                       FINAL EXAMINATION




     COURSE                        :   PRINCIPLES OF ECONOMICS
     COURSE CODE                   :   QSD136
     EXAMINATION                   :   OCTOBER 2007
     TIME                          :   2 HOURS




INSTRUCTIONS TO CANDIDATES

1.          This question paper consists of three (3) parts : PART A (15 Questions)
                                                              PART B (4 Questions)
                                                              PART C (5 Questions)

2.          Answer ALL questions from PART A and PART B and any three (3) questions from PART
            C.

                i)        Answer PART A in the Objective Answer Sheet.
                ii)       Answer PART B and C in the Answer Booklet. Start each answer on a new
                          page.

3.          Do not bring any material into the examination room unless permission is given by the
            invigilator.

4.          Please check to make sure that this examination pack consists of:

               i)     the Question Paper
              ii)     an Objective Answer Sheet - provided by the Faculty
             iii)     an Answer Booklet - provided by the Faculty
             iv)      a graph paper - provided by the Faculty




                       DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO
                           This examination paper consists of 10 printed pages
© Hak Cipta Universiti Teknologi MARA                                                 CONFIDENTIAL
CONFIDENTIAL                                   2                        AP/OCT 2007/QSD136

                                                        >

PART A

1. Economic studies individuals and organizations in society engaged in the

   A    production of goods and services
   B    distribution of goods and services
   C    consumption of goods and services
   D    all of the above

2. Scarcity exists in every society because there are

   A    limited wants and abundant resources
   B    limited resources and unlimited production capabilities
   C    limited resources and unlimited wants
   D     limited production capabilities and an unlimited quantity of economic resources

3. Which of the following does not refer to macroeconomics?

   A The study of the aggregate level of economic activity
   B The study of the economic behavior of individual decision-making units such as
     consumers, resource owners, and business firms
   C The study of the cause of unemployment
   D The study of the cause of inflation

4. A demand schedule shows the relationship oetween the quantity demanded of a
   commodity over a given period of time and

   A    the price of the commodity
   B    the tastes of the consumers
   C    the income of the consumers
   D    the price of related commodities

5. Which of the following does not cause an increase in supply?

    A   An increase in the commodity's price
    B   An improvement in technology
    C   A reduction in factor prices
    D   A decrease in the cost of materials

6. If I can buy any quantity of a commodity at a fixed price, this means that the supply curve
   which confronts me is:

    A    perfectly inelastic
    B    perfectly elastic
    C    unit elastic
    D    fairly inelastic




© Hak Cipta Universiti Teknologi MARA                                          CONFIDENTIAL
CONFIDENTIAL                                    3                       AP/OCT 2007/QSD136




7. The intersection of a market demand curve and a market supply curve for a commodity
   determines

   A    the equilibrium price for the commodity
   B    the equilibrium quantity for the commodity
   C    the point of neither surplus nor shortage for the commodity
   D     all of the above

8. An increase in market supply and a decrease in market demand will result in

   A a decrease in equilibrium price and an increase in equilibrium quantity
   B a decrease in equilibrium price and the change in equilibrium quantity is
     indeterminate
   C an increase in equilibrium quantity and the change in equilibrium price is
     indeterminate
   D a decrease in equilibrium price and quantity

9. The demand curve for a commodity is more elastic when,

   A    greater the number of substitute goods available
   B    greater the proportion of income spent on the commodity
   C    longer the period of time considered
   D    all of the above

10. Gross Domestic Product is the market value of

   A    all transactions in an economy during a one-year period
   B    all goods and services exchanged in an economy during a one-year period
   C    all final goods and services exchanged in an economy during a one-year period
   D    all final goods and services produced in a domestic economy during a one-year
        period

11. Which of the following is the most suitable to use as a measure of living standard?

    A   Gross National Product at current price
    B   Gross National Product at constant price
    C   Gross National Product per capita at current price
    D   Gross National Product per capita at constant price

12. If the value of Gross National Product (GNP) at factor cost is greater than the value of
    GNP at market price, it means

    A   indirect taxes is positive
    B   indirect taxes is greater than subsidies
    C   net payment to abroad is positive
    D    indirect taxes is smaller than subsidies




© Hak Cipta Universiti Teknologi MARA                                         CONFIDENTIAL
CONFIDENTIAL                                   4                           AP/OCT 2007/QSD136




13. Inflation is a situation in which

   A   there is a decrease in the purchasing power of the monetary unit
   B   there is a decrease in the price level
   C    a given quantity of money purchases a larger quantity of goods and services
   D   increases in the price level exceed increases in the nominal

14. The 'recession' phase of the trade cycle is usually characterized by

   A    rising unemployment
   B    rising employment and increasing business confidence
   C    rising money wages and full employment
   D    high levels of investment and high interest rates

15. Which of the following is not a common method of restricting trade?

    A Tariffs
    B Quotas
    C Voluntary export restraints
    D Dumping

                                                                                   (30 marks)




© Hak Cipta Universiti Teknologi MARA                                           CONFIDENTIAL
CONFIDENTIAL                                                         AP/OCT2007/QSD136




PARTB


QUESTION 1

The information in Table 1 explains the relationship between income level, price of good X
and quantities of goods P, Q, and R demanded by a household.

                                         Table 1

    Income         Price of good X            Quantity Demanded (units)
      (RM)               (RM)
                                        Good P          GoodQ             Good R
     100.00                 1             8                10                10
     120.00                 2             6                12                9
     144.00                 3             4               13.8               8
     172.80                 4             2               15.18              7
     207.36                 5             0               16.39              6


a) Briefly explain the importance of

    i) cross elasticity of demand
    ii) income elasticity of demand
                                                                                  (2 marks)

b) Calculate the cross elasticity of demand for good Q and good R when the price of good
   X increases from RM2 to RM4.
                                                                               (3 marks)

c) Calculate the income elasticity of demand for good P and good R when the household
   income increases from RM120.00 to 172.80.
                                                                             (3 marks)

d) Identify which good is

    i)   an inferior good
    ii) a substitute to good X
                                                                                  (2 marks)




© Hak Cipta Universiti Teknologi MARA                                      CONFIDENTIAL
CONFIDENTIAL                                                            AP/OCT2007/QSD136




QUESTION 2

Figure 1 below shows the market demand and supply of cement in town XX.


                                              Figure 1

               Price (RM per bag)

                            D




                                                                        p. Quantity
                                45      60   '80   100 105                 (bags)

a) What is the equilibrium price and equilibrium quantity of cement?
                                                                                      (2 marks)

b) If the market price for a bag of cement is fixed at RM20 per bag, this fixed price is called
                   , and at the price level of RM14 per bag, the fixed price is called

                                                                                      (2 marks)

c) There will be a               (shortage/surplus) by                 bags of cement at the
   market price of RM20 per bag.
                                                                                      (2 marks)

d) Explain briefly two factors that may cause the demand curve for cement to shift to the
   right.
                                                                              (4 marks)




© Hak Cipta Universiti Teknologi MARA                                         CONFIDENTIAL
CONFIDENTIAL                                                         AP/OCT2007/QSD136




QUESTION 3

The data in Table 2 below is for country Z for the year 2002.

                                                 Table 2

              Items                                               $ million

              Income from employment and self-employment          120,000

              Income from rent, dividends, and etc                 31,000

              Companies' profit: distributed                       12,350
                                 undistributed                     7,600
              Transfer payment                                     5,200

              Tax on income                                        37,000

              Depreciation                                         11,000

              Factor income received from abroad                   42,310

              Factor income paid abroad                            34,650



a) Calculate:

        i)   Gross Domestic Income                                                 (2 marks)

        ii) Gross National Income                                                (1 1/2 marks)

        iii) National Income                                                     (1 1/2 marks)

        iv) Personal Income                                                        (2 marks)

        v) Disposable Personal Income                                                (1 mark)

b) List two (2) problems in the calculation of national income.                    (2 marks)


© Hak Cipta Universiti Teknologi MARA                                         CONFIDENTIAL
CONFIDENTIAL                                                                AP/OCT2007/QSD136




QUESTION 4

a) The data in the Table 3 below relates to the price level in an economy over a period of
   time.

                                              Table 3

                                 Year     Consumer Price Index (CPI)
                                                (1985= 100)
                                 1990                150
                                 1991                160
                                 1992                175
                                 1993                165
                                 1994                170
                                 1995                180
                                 1996                185

        Based on the table above,

        i)        Calculate the annual rate of inflation for each year                 (3 marks)

        ii)       In which year was the inflation rate highest?                         (1 mark)

        iii)      In which year was the price level highest?                            (1 mark)

b)
        Table 4 indicates real GNP figures of country YY for the last twelve years.
                                           Table 4

               Year   Real G N P (RM million)        Year         Real G N P (RM million)
               1991             300                  1997                   400
               1992             700                  1998                   500
               1993             500                  1999                   650
               1994             400                  2000                   750
               1995             300                  2001                   500
               1996             350                  2002                   400

        Based on the table above, plot and label the four (4) phases of the business cycle.

                                                                                        (5 marks)

© Hak Cipta Universiti Teknologi MARA                                            CONFIDENTIAL
CONFIDENTIAL                                  9                AP/OCT 2007/QSD136




PARTC


QUESTION 1

a) Why does the problem of scarcity exist?
                                                                         (2 marks)

b) Explain the basic economic problems with examples.
                                                                         (8 marks)


QUESTION 2

a) What is price elasticity of demand?
                                                                         (2 marks)

c) Discuss four determinants of demand.
                                                                         (8 marks)


QUESTION 3

a) What is the difference between gross national product (GNP) and gross domestic
   product (GDP)?
                                                                         (4 marks)

b) Explain three (3) reasons of calculating national income.
                                                                         (6 marks)


QUESTION 4

a) What is demand-pull inflation and cost-push inflation?
                                                                         (5 marks)

b) What effect does inflation have upon

    (i) individuals who are retired
    (ii) debtors?
                                                                         (5 marks)




© Hak Cipta Universiti Teknologi MARA                               CONFIDENTIAL
CONFIDENTIAL                                      10                       AP/OCT 2007/QSD136




QUESTION 5

If international trade can be beneficial to all trading countries explain why almost all countries
are still practicing protectionist policy?
                                                                                      (10 marks)




                                        END OF QUESTION PAPER




© Hak Cipta Universiti Teknologi MARA                                             CONFIDENTIAL

				
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