Examinations

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN Foundation Examinations Autumn 2009 September 9, 2009 INTRODUCTION TO ECONOMICS AND FINANCE Module B Q.1 (MARKS 100) (3 hours) Explain what is Movement along the Demand Curve and Shift in the Demand Curve highlighting the difference between these two concepts. Also illustrate the difference by means of diagrams. (09) Q.2 (a) What is meant by Elasticity of Demand' List and explain briefly the factors which determine the Elasticity of Demand of a product. Briefly describe when Demand for a product is considered to be:  Highly Elastic  Unit Elastic  Relatively Inelastic (07) (b) (03) Q.3 (a) Identify and explain the necessary conditions in which it would be possible for a monopolist to resort to price discrimination and charge different prices for the same product in different markets. Explain how a monopolist engaged in price discrimination in different markets would be able to earn maximum revenues. (Diagram is not required) (06) (b) (05) Q.4 Identify and explain briefly the measures which a developing country should take to achieve high levels of growth in productivity' (06) Q.5 (a) (b) Explain what do you understand by the term Multiplier. What are the limitations of the Multiplier' (03) (06) Q.6 (a) What are the objectives of pursuing and implementing a well-managed currency system' What is meant by Price Ceiling and Price Floor' Give one example in each case. (04) (05) (b) Q.7 (a) What do you understand by the term Gross Domestic Product' State the reason for excluding intermediate goods from the calculations of GDP. What is meant by ‘Terms of Trade’' Describe the situations in which the Terms of Trade would rise and fall. List the main functions of World Trade Organization. (04) (b) (03) (04) (c) (2) Q.8 (a) (b) What is meant by Indirect Taxes' Give three examples of Indirect Taxes. Briefly explain the disadvantages of Indirect Taxes. (02) (09) Q.9 (a) What is meant by Recession' What economic characteristics are most commonly observed during Recessionary periods' State any four unfavourable consequences of unemployment. (06) (05) (b) Q.10 (a) (b) What is meant by Marginal Physical Product' Explain the Law of Diminishing Returns and describe briefly the assumptions under which the Law of Diminishing Returns would be applicable. (Examples and diagrams are not required) (02) (05) Q.11 Briefly explain the following concepts: (a) Consumer Surplus (b) Price War (c) Macroeconomics (d) Open Market Operations (THE END) (06)