S.5 & 6 Economics Uace Mock Ans 2014 Caltec S.5

MARKING GUIDE UACE MOCK 2014 ECONOMICS P220/1 SECTION A 1. a) i) Derived demand is one which is not meant to give direct satisfaction to consumers but simply aimed at acquiring a commodity to be used in production of another; e.g. demand for factors for pro duction; (1 mark) While Aggregate demand is the total planned expenditure of an economy over time or the total demand for goods by all sectors of the economy during a given time period . (1 mark) ii) Examples of commodity whose d emand is derived: - Land - Labour - Capital - Intermediate product . (2x1 = 2 marks) b) i) Cash ratio is the proportion of commercial bank deposit that is kept in vault cash form and not lent out or used by the commercial bank; (1 ma rk) While Liquidity ratio is the proportion of commercial bank liability (deposits) that is kept in cash and near cash form. (1 mark) ii) Initial deposit = Total new deposi ÷ Bank multiplier (1/cash ratio) . (1 mk) = 100,000,000 ÷ 10 (½ mark) = Sh.10,000,000 (½ mark) c) i) Leakages from the circular flow of income and expenditure are the elements that tend to reduce income level in the circular flow/ economy . (1 mark) ii) Withdrawals from the circular flow include the following: - savings - Taxation - Imports - Retained earnings and undistributed profits (3x1 = 3 marks) d) i) Technology transfer is the movement of production technique and associated expertise from one c ountry to another, (1 mark) While Technology development is the initiation and hence the improvement of existing production method - normally through research. (1 mark) ii) Hindrances to technology transfer include the following: - Lack of appropriate skills - Limited capital necessary to import it - Patent right …