Category: Economics
Advantages/merits of Inward-looking industrial development strategy or import substitution industrial strategy
Reduces its foreign dependency through the local production of industrialized products and leads to self-sustenance of economy. It yield steady flow of income since prices ... Read More
Demerits of inward-looking industrial development strategy or import substitution industrial development strategy
It leads to unemployment due to use of capital intensive techniques of production Encourage profit repatriation since most factory owners are foreigners It promotes monopolistic ... Read More
What is inward looking economy?
An inward oriented or inward looking strategy is characterized by a bias of trade and industrial policies in favour of domestic production as against foreign trade. ... Read More
What are effects of agricultural price fluctuation in your country?
Leads to unstable export earnings Unstable terms of trade since the cost of imports remain constant Leads to fluctuating government revenue Make planning agriculture difficult ... Read More
Examine the causes of agricultural price fluctuations in your country.
Perishability and difficulty of storage this forces farmers to sell at any available price e.g. tomato, cabbage Bulkiness of products makes mobility of products to ... Read More
Mention four factors responsible for lax revenue in your country (LDCs)
High levels of tax evasion and avoidance Political interference Low tax base Low levels of taxable income Large Informal sector A big subsistence sector Corruption ... Read More
Calculate the credit created where initial deposit amount to 10,000 shillings, cash ratio 5%and four banks are involved
Banks New deposit Cash ratio Loans 1 10.000 (5/100) x 10,000 = 500 9500 2 9500 (5/100) x 9500 = 475 9025 3 9025 ... Read More
Distinguish between cash ratio and liquid ratio
Cash ratio is the proportion or percentage of the commercial bank deposits kept in cash form to meet the day demands of their customers and ... Read More
What are the components of your country’s export-import trade?
Uganda export agricultural primary products e.g. cotton, coffee, tea non-traditional export like vanilla, sim-sim, etc. services like tourism, electricity to Rwanda and Kenya Export e.g. ... Read More
Define the term “invisible export”
are non-tangible goods (service) that are sold by one country to another e.g. insurance, tourism, shipping, etc. Read More
How is inflationary gap in an economy be closed?
Decrease aggregate demand through Reductions in government spending Increasing taxes Reduction of exports Price control interest rate increases improvement of investment climate strict income and ... Read More
What is Deflationary Gap
Deflationary gap is the amount by which aggregate demand falls short of aggregate supply at level of full employment’. As shown in the figure below ... Read More
What is Inflationary Gap
Inflationary gap is the amount by which the actual aggregate demand exceeds ‘aggregate supply at level of full employment’. The diagram above shows that the ... Read More
Structural adjustment conditionality of International Monetary Fund (IMF) to a country
Privatization Economic liberalization Reduction of government expenditure Investment policy i.e. encouragement of foreign investors through provision of conducive investment climate-low taxes. Devaluation Cost – sharing ... Read More
Factors affecting efficiency of labour in Uganda
The degree of specialization Level of skills/technical knowledge The working conditions The health conditions of a worker Degree of expertise Workers attitude and level of ... Read More
Efficiency of labour
Efficiency of labour implies the quality and quantity of goods and services which can be produced within a given time and under certain conditions per unit. ... Read More
What is the role of informal sector in your country?
Creation of employment opportunities Reduction of foreign exchange outflow Production of affordable goods Produce for local market Provides skill development as it encourages training of ... Read More
What is the role of informal sector in your country?
The informal economy consists of independent, self-employed small-scale producers and distributors of goods and services. Workers in this sector are for the most part not covered ... Read More
What is the informal sector of the country?
The informal economy consists of independent, self-employed small-scale producers and distributors of goods and services. Workers in this sector are for the most part not covered ... Read More
Given that Gross Domestic Product at factor cost is 2500 million shillings, net income from abroad is 800 million shillings and depreciation of capital equipment is 50 million shillings. Calculate the Net National Product.
Net National Product = GDP – depreciation = (GDP+ Net Y from abroad) – depreciation = 2500 + 800 – 50 = 3250 million shillings Read More
Gross national product (GNP)
Gross national product (GNP) refers to the money value of all final goods and services produced by nationals of a country (living within and abroad) ... Read More
Factors that affect/determinants the elasticity of demand
Nature of the product Availability of substitutes The number of users of a product Availability of complements Proportion of income spent on the commodity Level ... Read More
Advantages/Merits of government borrowing
To fill the foreign exchange gap. Public borrowing especially external debts are important in supplementing foreign exchange earnings of a country To fill domestic savings ... Read More
Funded debt
Funded debt is money borrowed on long term basis (over one year) and repayment includes interest. Such a debt has security in form of promise ... Read More
What are the limitations of the quantity theory of money?
It assumes that velocity and number of transactions are kept constant, but this is not true because money supply increases also the volume of transactions ... Read More
Arguments against free trade
Suffocates development of local industries from over competition of established international firms Encourages dumping It increases external economic dependence on MDCs May worsen balance of ... Read More
Merits/Arguments for free trade
It leads to improvement of quality of goods and services due to competition Promotes efficiency because it encourages goods or services to be produced where ... Read More
Disadvantages/demerits of protectionism in an economy
It leads to domestic inflation due to lack of competition Leads to poor quality local goods due to lack of competition. It promotes inefficiency in ... Read More
Types of Protectionism
Protectionist policies come in different forms, including: 1. Tariffs The taxes or duties imposed on imports are known as tariffs. Tariffs increase the price of imported ... Read More
How can you distinguish between sodium bromide and sodium iodide, given chlorine water and tetrachloromethane
Chlorine is bubbled through a mixture of sodium bromide solution and tetrachloromethane; tetrachloromethane layer turns orange, similar treatment with sodium iodide give a black tetrachloromethane ... Read More
Advantages/merits of protectionism in an economy
It protects domestic/infant industries; trade restrictive policies like quotas, import duties, etc. reduce on demand of imported products thereby reducing competition form the local products. ... Read More
Examine the effect of high population growth
Advantages of high population growth A high population also provides a large market for goods and services within a given country. A big population size ... Read More
Disadvantages of high population growth
Increase government expenditure on infrastructure like schools and health care Increased environmental degradation/pollution, garbage accumulation It fuels income inequality since not all people will get ... Read More
Advantages of high population growth
A high population also provides a large market for goods and services within a given country. A big population size provides labour which combined with ... Read More
Differentiate between under population and over population
Under population is a situation of having a lower density of population than is normal or desirable to achieve full potential of economical output. Over ... Read More
Over population
Over population is a situation where the number of people living in an area exceeds the available resources. In this case an increase in population ... Read More
Factors necessary for economic growth are:
Availability of natural resources in term of quantity and quality e.g. land water, natural forest, national parks, etc. produce goods and services. Capital accumulation through ... Read More
Distinguish between economic growth and economic development
Economic growth is the sustained persistent quantitative increase in the country’s volume of goods and services as measured by an increase in Gross National Product ... Read More
What is Economic development
Economic development is the sustained persistent quantitative and qualitative increase in the country’s volume of goods and services as measured by an increase in Gross ... Read More
What is economic growth
Economic growth is the sustained persistent quantitative increase in the country’s volume of goods and services as measured by an increase in Gross National Product ... Read More
How are profits maximized in a perfectly competitive market in short run
Profits in a perfectly competitive market in short run are maximized at a point where MC = MR when AC < AR and MC curve ... Read More
Disadvantages/Demerits of price mechanisms
It promotes income inequalities. This is because the more resources you have, the more the income. Therefore people who do not have resources remain poor ... Read More
Advantages/Merits of price mechanism
Increases variety of goods and service Encourages hard work It increases efficiency in resource allocation. Under price mechanism, the major aim of producers is profit ... Read More
State effects of a regressive tax.
It reduces the demand for goods like tobacco and alcohol products. It lowers aggregate demand Leads to social unrest It promotes income inequality between the ... Read More
What is the main purpose of a sin tax?
Sin taxes are designed to increase the price of goods and services in an effort to lower consumption of undesirable goods such tobacco and alcohol. Read More
What is Pigouvian subsidies?
A pigouvian subsidy is a subsidy that is used to encourage behaviour that have positive effects on others who are not involved or society at large. ... Read More
What is the purpose of a Pigouvian tax?
A Pigovian tax is intended to tax the producer of goods or services that create adverse side effects for society. Economists argue that the costs of ... Read More
Pigouvian tax
A Pigouvian tax, named after 1920 British economist Arthur C. Pigou, is a tax on a market transaction that creates a negative externality, or an additional ... Read More
What is meant by a regressive tax?
A regressive tax is a tax whose rate in terms of percentage reduces as the level of income increase. Here the low income earners pay ... Read More
Disadvantage of a central planning.
It discourages hard work It involves bureaucracy It ignores the interests/freedom/choice of individuals It encourages development of monopoly It leads to misallocation of resources against ... Read More
What is centrally planned economy?
A centrally planned economy, also known as a command economy, is an economic system where a government body makes economic decisions regarding the production and distribution ... Read More
State reasons why an increase in money supply may not necessarily lead to inflation.
When there is an increase in foreign exchange earnings from export and tourism When the marginal propensity to save (MPS) is high When demand for ... Read More
How is the balance of payment deficit corrected under a fixed exchange rate
Foreign exchange control Devaluation Borrowing Sales of assets abroad Read More
How is balance of payment deficit corrected under a floating exchange rate?
Export promotion Import substitution Import restriction Adoption of barter trade Read More
State ways of solving/managing seasonal unemployment
Try to diversify the economy. This could be hard to do in touristy areas. Regulations which involve paying workers throughout the year, even if work ... Read More
Distinguish between seasonal unemployment and technological unemployment
Seasonal unemployment is a form of unemployment that occurs when people are unemployed at particular times of the year when demand for labour is lower ... Read More
What is technological unemployment?
Technological unemployment a phenomenon where new inventions change the nature of work, eliminating some specific jobs while also creating new higher paying jobs and launching ... Read More
What is seasonal unemployment
Seasonal unemployment is a form of unemployment that occurs when people are unemployed at particular times of the year when demand for labour is lower ... Read More
Why should the government influence the location of an industry?
To reduce on regional imbalance in terms of development To improve on social infrastructure like roads, hospital, schools, etc. To gain political support To provide ... Read More