Syllabus

REPUBLIC OF RWANDA
GASABO DISTRICT ECONOMICS Model question basic

RUTUNGA SECTOR principles of economics 2023-2024
For preparation of national exam

SUBJECT: ECONOMICS
starting from page 19
DATE: …./…./2024
TOTAL MARKS: 100 MARKS
DURATION: 3HOURS
FINAL EXAMINATION MARKING GUIDE 2022/2023
SECTION A: ATTEMPT ALL QUESTIONS. (55 marks)
 1. Choose the correct answer. (4 marks)
a) In a subsistence economic system, resources are allocated by:
 ii) Traditional and customary institutions.
b) Consumer sovereignty in a free enterprise economy implies that:
 iii) The consumer has the capacity to influence the productive decisions of the producers.
c) In a centrally planned economy, there is, except:
 iii) Decision of what to produce and how to produce it is made by the people.
d) Which of the following doesn’t characterize mixed economies?
 ii) Public goods are ignored in the economy.
 2. Match the following types of markets with their respective definitions. (4 marks)
I) Money markets
 c) These are financial markets which deal in short term loans.
ii) Capital markets
 d) These are financial markets in which medium loans, long-term loans, and securities are traded.
iii) Foreign exchange
Organised by Ihabwicyubahiro Asaph Page 1

 b) It is the market where currencies are traded due to international trade.
iv) Future market
 a) It is where contracts for delivery at some future date are traded.
 3. Use appropriate economic terms to fill in the gaps. (5 marks)
a) If two firms in the same line of business merge, it is called a horizontal merger.
b) If two firms at different stages of production merge, it is called a vertical merger.
c) If two firms in unrelated lines of business merge, it is called a conglomerate merger.
d) The advantages that a firm enjoys due to long-run expansion resulting in a fall in average costs of
production are known as economies of scale.
e) Marginal revenue of the firm is obtained by dividing the change in total revenue by the change in total
product.
a) Calculate the comparative advantage of the two countries. (3 marks)
To calculate comparative advantage, we need to determine the opportunity cost for each country for each
product.
 Rwanda:
 Opportunity cost of 1 ton of maize = 15,000 sugar / 20,000 maize = 0.75 tons of sugar
 Opportunity cost of 1 ton of sugar = 20,000 maize / 15,000 sugar = 1.33 tons of maize
 Tanzania:
 Opportunity cost of 1 ton of maize = 5,000 sugar / 15,000 maize = 0.33 tons of sugar
 Opportunity cost of 1 ton of sugar = 15,000 maize / 5,000 sugar = 3 tons of maize
b) State the commodity that each of the two countries should concentrate on by producing it for
consumption and exchange. (2 marks)
 Rwanda should concentrate on producing sugar since it has a lower opportunity cost for sugar.

 Tanzania should concentrate on producing maize since it has a lower opportunity cost for maize.
a) Calculate the market demand for mangoes at all price levels in the market. (3 marks)
Market demand is the sum of the quantities demanded by individuals A and B at each price level:
 At 1500 FRW: 10+18=2810 + 18 = 2810+18=28
 At 1550 FRW: 7+17=247 + 17 = 247+17=24
 At 1600 FRW: 6+16=226 + 16 = 226+16=22
 At 1650 FRW: 5+15=205 + 15 = 205+15=20
 At 1800 FRW: 4+12=164 + 12 = 164+12=16
 At 1900 FRW: 2+6=82 + 6 = 82+6=8
b) Illustrate the information in the market demand with its respective prices on a curve. (3 marks)
[Market demand curve plotted]
 6. Define the following terms:
a) Gross Domestic Product (GDP). (2 marks)
GDP is the total monetary value of all goods and services produced within a country's borders in a specific
time period, usually annually or quarterly.
b) Per capita income. (2 marks)
Per capita income is the average income earned per person in a given area in a specified year, calculated
by dividing the area's total income by its population.

c) Personal income. (2 marks)
Personal income is the total income received by individuals or households from all sources, including
wages, salaries, investments, and transfer payments, before taxes.
 7. Explain any five determinants of demand for labor. (5 marks)
 Wage Rate: Higher wages increase the cost of labor, reducing demand; lower wages decrease the
cost of labor, increasing demand.
 Productivity of Labor: More productive workers are in higher demand because they contribute more
to output.
 Demand for the Product: If the demand for a product increases, the demand for labor to produce
that product also increases.
 Technology: Technological advancements can either increase or decrease labor demand,

depending on whether they complement or substitute human labor.
 Number of Employers: More businesses and employers in the market increase the demand for
labor.
 8. A) what is meant by taxation? (1 mark)
Taxation is the process by which a government imposes financial charges or levies on individuals or
entities to fund public services and infrastructure.
b) Explain the effect of taxation on:
I) Saving. (2 marks)
Higher taxes on income can reduce disposable income, leading to lower savings as individuals have less
money available to set aside after meeting their consumption needs.
ii) Physical investment. (2 marks)
Increased taxation on profits or capital gains can reduce the funds available for businesses to reinvest in
physical assets, potentially slowing down capital accumulation and economic growth.
 9. A) what is unemployment? (1 mark)
Unemployment is the situation where individuals who are capable and willing to work cannot find
employment.
b) Describe the problem of voluntary unemployment. (4 marks)

Voluntary unemployment occurs when individuals choose not to work at the prevailing wage rate despite
having job opportunities. This can be due to various reasons such as:
 Expectation of higher wages.
 Preference for leisure or other non-work activities.
 Availability of financial support from savings or family.
 Disincentives from social welfare programs that make working less attractive.
10. Suppose you are an entrepreneur and your business is making profits. Explain two ways in which your
profit will contribute to the economic development of your country. (5 marks)
1. Reinvestment: Profits can be reinvested in the business to expand operations, hire more
employees, and increase production, contributing to overall economic growth.
2. Tax Contributions: Profitable businesses pay taxes, which provide the government with revenue to
invest in public infrastructure, education, and health services, supporting broader economic
development.
 11. Analyze the following as causes of maintaining small-scale firms alongside the large-scale
ones: (5 marks)
 a) Fear of rising costs.
Small-scale firms may be maintained because they can be more flexible and manage costs better in
uncertain economic environments compared to large-scale firms, which may face higher overhead and
operational costs.
 b) Market limitation.
In markets with limited demand or niche markets, small-scale firms can be more efficient and responsive to
customer needs, whereas large-scale firms may not find it profitable to operate in such limited markets.
 Question 12
 a) Distinguish between import quota and import duty. (2 marks)
 Import Quota: An import quota is a restriction that sets a physical limit on the quantity of a
particular product that can be imported into a country during a given period. Quotas are typically
used to protect domestic industries from foreign competition.
 Import Duty: An import duty, also known as a tariff, is a tax imposed by a government on goods
and services imported into the country. The purpose of import duties is to raise revenue for the
government and to protect domestic industries by making imported goods more expensive.

 b) Analyze the impact of commercial policy on an economy. (13 marks)
Commercial policies, which include tariffs, import quotas, export subsidies, and other trade regulations,
significantly impact an economy. Here are some key points of analysis:
1. Protection of Domestic Industries: Commercial policies such as tariffs and quotas protect domestic
industries from foreign competition. This can help nascent industries grow without being
overwhelmed by established international players.
2. Revenue Generation: Import duties provide a source of revenue for governments. This can be
crucial for funding public services and infrastructure.
3. Employment: By protecting domestic industries, commercial policies can help maintain and create
jobs within the country. However, they can also lead to job losses in industries that rely on imported
raw materials or export markets.
4. Consumer Prices: Tariffs and quotas can lead to higher prices for consumers, as imported goods
become more expensive and domestic producers face less competition. This can reduce consumer
welfare.
5. Economic Efficiency: While protecting certain industries, commercial policies can also lead to
inefficiencies by supporting industries that may not be globally competitive. This can result in a
misallocation of resources.
6. Trade Relations: Restrictive commercial policies can lead to trade disputes and retaliatory
measures from other countries, which can escalate into trade wars, affecting global trade and
economic growth.
7. Innovation: Protection from competition can reduce the incentive for domestic firms to innovate and
improve productivity, potentially leading to stagnation.
8. Balance of Payments: Commercial policies can influence the balance of payments. For example,
tariffs can reduce imports, improving the trade balance, but they can also provoke retaliatory tariffs
that hurt exports.
 Question 13
 Assess the effects of increased money supply in an economy. (15 marks)
 Increased money supply can have various effects on an economy:
1. Inflation: An increased money supply can lead to higher inflation if the growth in money supply
surpasses the growth in economic output. More money chasing the same amount of goods and
services drives prices up.

2. Interest Rates: Typically, an increase in the money supply lowers interest rates, making borrowing
cheaper. This can stimulate investment and consumer spending, fostering economic growth.
3. Economic Growth: In the short term, a higher money supply can boost economic growth by
increasing consumption and investment. However, if this leads to high inflation, it can harm long-
term growth.
4. Currency Depreciation: An increased money supply can lead to depreciation of the national
currency, making exports cheaper and imports more expensive. This can improve the trade
balance but may also lead to higher import costs and inflation.
5. Asset Bubbles: Lower interest rates and increased liquidity can lead to asset bubbles in real estate,
stock markets, and other investments, as cheap money fuels speculative investments.
6. Wealth Distribution: Inflation can erode purchasing power, disproportionately affecting savers and
those on fixed incomes, while borrowers benefit from repaying debts with cheaper money.
7. Expectations: If people expect inflation to rise, they may change their behavior, such as demanding
higher wages or spending quickly before prices increase further, which can perpetuate inflation.
 Question 14
 A) Dangers of Overdependence on Aid for Developing Countries (8 marks)
1. Economic Dependence: Overreliance on aid can create a cycle of dependency, where the country
becomes reliant on external funds rather than developing its own sustainable economic practices.
2. Debt Accumulation: Some aid comes in the form of loans, which can lead to a significant debt
burden. Repaying these loans with interest can strain a country's finances.
3. Distorted Priorities: Aid can influence a country's policy and budget priorities, sometimes diverting
focus from critical sectors like education and healthcare to areas preferred by donors.
4. Corruption: The influx of large sums of money can lead to increased corruption, as funds might be
misappropriated or misused by officials.
5. Market Distortions: Aid can disrupt local markets by undercutting local producers. For instance,
food aid might reduce the demand for locally produced food, harming local farmers.
6. Sustainability Issues: Projects funded by aid might not be sustainable once the aid ends, leading to
failed initiatives and wasted resources.
7. Loss of Sovereignty: Heavy reliance on aid can lead to political pressure from donor countries,
compromising the recipient country's sovereignty and decision-making.

8. Social Tensions: Disparities in aid distribution can lead to social tensions and inequalities,
especially if certain regions or groups benefit more than others.
 b) Benefits for Developed Countries in Giving Assistance to Developing Countries (7 marks)
1. Political Influence: By providing aid, developed countries can gain political influence and leverage
in recipient countries, potentially aligning them with their own geopolitical interests.
2. Economic Opportunities: Aid can open up new markets for developed countries. As developing
countries grow economically, they may become future trading partners, increasing trade and
investment opportunities.
3. Global Stability: Aid can contribute to global stability by addressing poverty and its associated
issues, such as conflict and migration. This helps in creating a more stable international
environment.
4. Humanitarian Reasons: Providing aid can fulfill humanitarian obligations, helping to alleviate
suffering and improve living conditions in poorer regions, which is morally and ethically compelling.
5. Counterterrorism: By improving economic conditions and reducing poverty, aid can help mitigate
the factors that contribute to radicalization and terrorism.
6. Environmental Benefits: Assisting developing countries in sustainable development can have

global environmental benefits, such as combating climate change through joint efforts.
7. International Reputation: Providing aid enhances the donor country's international reputation and
standing, demonstrating a commitment to global development and cooperation.
 Question 15
 A) Macroeconomic Condition in Rwanda (1 mark)
 Inflation: Rwanda is experiencing inflation, characterized by a persistent increase in the prices of

most commodities.
 b) Policy Recommendations for Rwanda's Ministry of Finance and Economic planning (6 marks)
1. Monetary Policy: Implement tighter monetary policies to control inflation. This could involve
increasing interest rates to reduce money supply and borrowing.
2. Fiscal Policy: Reduce government spending and deficits to curb inflationary pressures. Focus on
essential services and cutting non-essential expenditures.
3. Supply-Side Policies: Increase production and supply of goods to meet demand. This might include
incentives for local production, reducing import tariffs on essential goods, and improving supply
chain logistics.

4. Price Controls and Subsidies: Implement temporary price controls on essential commodities to
protect consumers. Subsidize basic goods to make them more affordable during the crisis period.
5. Strengthening Currency: Stabilize the national currency through measures such as foreign
exchange interventions and building foreign reserves to prevent devaluation.
6. Social Safety Nets: Enhance social safety nets to support the most vulnerable populations affected
by price increases. This includes direct cash transfers and food aid programs.
Policies or measures to control inflation in developing countries
 Selling the government securities to the public aimed to reduce money supply and aggregate
demand
 Reducing government expenditure
 Maintaining political stability
 Use import and export policies
 Use population control measures
 Use price control measures
 Use privatization policy
 Construction of social and economic infrastructure
 reducing borrowing from central bank for deficit financing
 16. Economic underdevelopment is a multifaceted issue that requires a comprehensive approach

to address. Here are several measures that could be undertaken to overcome this problem:
1. Education and Skill Development:
 Invest in Education: Improve access to quality education at all levels, with a focus on
primary and secondary education.
 Vocational Training: Develop vocational and technical training programs to equip the
workforce with skills needed in the job market.
 Scholarships and Financial Aid: Provide scholarships and financial aid to students from
disadvantaged backgrounds.
2. Healthcare Improvement:
 Access to Healthcare: Improve healthcare infrastructure to ensure access to basic

healthcare services.
 Preventive Measures: Implement preventive healthcare measures, such as vaccination
programs and health education.
 Nutrition Programs: Address malnutrition through targeted nutrition programs for

vulnerable populations.
3. Infrastructure Development:
 Transportation: Invest in transportation infrastructure, including roads, railways, and ports,

to facilitate trade and mobility.
 Energy: Expand access to reliable and affordable energy sources.
 Water and Sanitation: Improve access to clean water and sanitation facilities.
4. Economic Policies:
 Support Small and Medium Enterprises (SMEs): Provide financial and technical support to
SMEs to stimulate local entrepreneurship.
 Tax Reforms: Implement tax reforms to create a more efficient and equitable tax system.
 Trade Policies: Develop trade policies that promote exports and protect local industries.
5. Agricultural Development:
 Modernization of Agriculture: Promote the use of modern agricultural techniques and

technologies.
 Access to Credit: Provide farmers with access to affordable credit and insurance.
 Market Access: Improve access to markets for agricultural products.
6. Investment in Technology and Innovation:
 Digital Infrastructure: Develop digital infrastructure to support the adoption of technology in

various sectors.
 Research and Development (R&D): Invest in R&D to drive innovation and technological
advancement.
 Entrepreneurial Ecosystem: Support startups and tech-based businesses through

incubators and accelerators.
7. Governance and Institutional Reforms:
 Reduce Corruption: Implement measures to reduce corruption and improve transparency

and accountability in governance.
 Legal and Regulatory Reforms: Simplify and strengthen the legal and regulatory
framework to create a conducive business environment.
 Public Service Delivery: Improve the efficiency and effectiveness of public service delivery
8. Social Inclusion and Equity:
 Gender Equality: Promote gender equality through policies and programs that empower
women.
 Social Protection: Develop social protection programs to support the most vulnerable
populations.
 Community Development: Encourage community-driven development initiatives.
9. Environmental Sustainability:
 Sustainable Practices: Promote sustainable agricultural, industrial, and urban development

practices.
 Climate Change Mitigation: Implement measures to mitigate the impacts of climate change.
 Conservation: Protect natural resources and biodiversity.
10. International Cooperation and Aid:
 Foreign Investment: Attract foreign direct investment by creating a stable and attractive
investment climate.
 Development Aid: Utilize international development aid effectively to support key

development projects.
 Global Partnerships: Engage in global partnerships and collaborations to share knowledge

and resources.
REPUBLIC OF RWANDA
GASABO DISTRICT
RUTUNGA SECTOR
SUBJECT: ECONOMICS
DATE: …./06/2024
TOTAL MARKS: 100 MARKS
DURATION: 3 HOURS

GENERAL QUIZ OF ECONOMICS
SECTION A: Attempt All Questions (55 Marks)
1. Using a well-labeled diagram, explain the circular flow of income in an economy. (4 Marks)
Answer: The circular flow of income illustrates the movement of money, goods, and services in an economy.
The primary participants are households and firms, with the government, financial institutions, and the
foreign sector also playing crucial roles.
 Households: Provide factors of production (labor, capital, land, and entrepreneurship) to firms and
receive income (wages, rent, interest, and profits) in return.
 Firms: Produce goods and services using the factors of production and sell these goods and
services to households, generating revenue.
 Government: Collects taxes from households and firms and provides public goods and services.
 Financial Institutions: Facilitate savings and investments by households and firms.
 Foreign Sector: Engages in trade with the domestic economy through imports and exports.
2. Explain the importance of having economics knowledge for:
a) Households (2 Marks)
Answer:
 Budgeting and Spending: Helps households make informed decisions about managing their
income and expenses.
 Saving and Investing: Provides understanding of different saving and investment options to
maximize returns and secure financial future.
b) Firms (2 Marks)
Answer:
 Resource Allocation: Assists firms in optimizing the use of limited resources to maximize profits.
 Market Analysis: Enables firms to analyze market conditions, understand consumer behavior, and
develop effective strategies.

3. Analyze the importance of localization of firms for the populations where a firm is located. (5 Marks)
Answer:
 Job Creation: Provides employment opportunities, reducing local unemployment rates.
 Economic Growth: Stimulates local economic activities, increasing the region's GDP.
 Infrastructure Development: Often leads to improvements in local infrastructure, benefiting the

community.
 Skill Development: Enhances the skills of the local workforce through training and development
programs.
 Community Development: Contributes to the overall well-being of the community through corporate
social responsibility initiatives.
4. Enumerate any 4 causes of excess capacity in Rwanda. (4 Marks)
Answer:
 Insufficient Demand: Low demand for goods and services can lead to underutilization of production
capacities.
 Outdated Technology: Inefficient and old technology can reduce production efficiency, leading to
excess capacity.
 Poor Management: Ineffective management practices can result in suboptimal production

processes.
 Economic Downturns: Periods of economic recession can decrease consumer spending, leading to
excess capacity.
5. using a table, differentiate between the inflationary gap and deflationary gap using 6 points to support
your answer. (6 Marks)

6. Why do companies amalgamate? (5 Marks)
Answer:
 Economies of Scale: Reduction in per-unit cost due to increased production.
 Market Share Expansion: Increased market presence and competitive advantage.
 Diversification: Spread risk by diversifying products or markets.
 Reduction in Competition: Eliminate competition by combining resources.
 Tax Benefits: Potential tax advantages through various amalgamation structures.
8. With the help of examples, differentiate internal and external economies of scale. (5 Marks)
Answer:
 Internal Economies of Scale:
o Definition: Cost advantages that a firm can achieve by increasing its production scale.
o Example: A factory investing in advanced machinery to increase production efficiency,

reducing average costs per unit.
 External Economies of Scale:
o Definition: Cost benefits that accrue to all firms in an industry due to external factors.
o Example: Development of a specialized supplier network in a region, reducing input costs

for all local firms.
9. Enumerate any 5 determinants of demand for labor in an economy. (5 Marks)
Answer:
 Wage Rates: Higher wages may reduce demand for labor, while lower wages may increase it.
 Productivity: Higher productivity can increase demand for labor as firms seek to capitalize on
efficient workers.
 Demand for Products: Increased demand for a firm's products can lead to higher demand for labor.
 Technology: Advanced technology can either complement labor (increasing demand) or substitute
labor (decreasing demand).
 Government Policies: Labor regulations, minimum wage laws, and employment incentives can
affect labor demand.

10. What is the difference between import and export substitution strategy? (4 Marks)
Answer:
 Import Substitution Strategy:
o Definition: Focus on producing goods domestically to replace imports.
o Goal: Reduce dependency on foreign products, support local industries.
o Example: Developing a domestic automobile industry to replace imported cars.
 Export Substitution Strategy:
o Definition: Focus on producing goods for export rather than for domestic consumption.
o Goal: Increase foreign exchange earnings and economic growth.
o Example: Developing an agricultural sector to produce crops for export rather than for local
markets.
11. Using information from the above table, calculate the average revenue and marginal revenue for
each output. (4 Marks)
12. Under what conditions do workers demand higher wages? (5 Marks)
Answer:
 Inflation: Rising cost of living necessitates higher wages to maintain purchasing power.
 Increased Productivity: Workers expect higher wages if their productivity has significantly increased.
 Skill Shortages: Workers with specialized skills in high demand may demand higher wages.
 Collective Bargaining: Unionized workers can negotiate for higher wages through collective
bargaining.
 Company Profits: If a company is highly profitable, workers may demand a share of the increased
profits through higher wages.
SECTION B: Choose Any Three Questions (45 Marks)
13. Wage differential refers to the phenomenon where different workers earn different wages in the
labor market. As an economist, assess the causes of this phenomenon in Rwanda. (15 Marks)
Answer:

14. Account for the persistent balance of payment problems (BOP) in developing countries. (15 Marks)
Answer:
 Trade Deficits: High import levels compared to export levels.
 External Debt: Large amounts of foreign debt and associated interest payments.
 Reliance on Primary Commodities: Dependence on a narrow range of export commodities, often

subject to price volatility.
 Low Foreign Direct Investment: Insufficient foreign investment to balance trade deficits.
 Currency Instability: Frequent currency devaluations and fluctuations.
 Political Instability: Political unrest can deter foreign investment and disrupt trade.
15. Agriculture is one of the priority sectors that both stimulate economic expansion and make the
greatest contribution to poverty reduction and food security in Rwanda. Assuming that you are
appointed as the Minister of Agriculture, write down the strategies you would employ to improve
agricultural productivity. (15 Marks)
Answer:

 Investment in Modern Technology: Introduce and promote the use of advanced farming equipment
and techniques.
 Improved Irrigation Systems: Develop efficient irrigation to ensure water availability throughout the
year.
 Financial Support: Provide subsidies, low-interest loans, and grants to farmers for inputs like seeds,
fertilizers, and machinery.
 Research and Development: Invest in agricultural research to develop high-yield and disease-
resistant crop varieties.
 Market Access: Improve infrastructure and logistics to enhance farmers' access to markets, both
domestic and international.
 Education and Training: Provide training programs to farmers on modern farming practices and
business management.
 Sustainable Practices: Promote sustainable farming practices to preserve the environment and
ensure long-term productivity.
16. Assess the effects of increased money supply in an economy. (15 Marks)
Answer:
 Inflation: Increased money supply can lead to higher demand for goods and services, causing
inflation.
 Decreased Interest Rates: More money in the economy can lead to lower interest rates,
encouraging borrowing and investment.
 Increased Investment: Lower interest rates can stimulate business investment in capital and
infrastructure.
 Higher Consumer Spending: More money can lead to increased consumer spending, boosting
economic growth.
 Potential Economic Growth: In the short term, increased money supply can spur economic growth.
 Currency Devaluation: An excessive increase in money supply can devalue the currency, affecting
international trade.
 Asset Bubbles: Rapid increase in money supply can lead to speculative bubbles in real estate,
stocks, and other assets.

Hard work is the key to success.
REPUBLIC OF RWANDA Date: June 23th, 2023
GASABO DISTRICT End of the Year Exam 2022-2023
GS RUTUNGA
SUBJECT: ECONOMICS S 6 HEG, MCE & MEG
PAPER 1. BASIC PRINCIPLES OF ECONOMICS
INSTRUCTIONS:
- This paper is made of TWO sections A and B.
- Attempt ALL questions in section A and choose THREE questions in section B.
SECTION A. Answer ALL questions (55 marks)
1. Write TRUE if the statement is true and FALSE if it is false (5 marks)
i. Resources are scarce because society’s wants are unlimited.
ii. A fall in the price of a good will cause the demand for goods which are substitutes for it to Increase.
iii. In computing Gross National Product, Net National Product, and National Income by the expenditures
approach, transfer payments are excluded because they do not represent payments for currently produced
goods and services.
iv. The chief disadvantage of the public debt of the country is that as the debt becomes payable, the
government may be unable to tax or to borrow sufficient money to redeem its securities.
v. If a country has a BOP deficit and exchange rates are flexible, the price of that country’s money in the
foreign exchange markets will depreciate and this will reduce its imports and increaseits exports.
2. a) What is imperfect oligopoly? (1mark)
b) Give two examples of imperfect oligopoly in your country (2 marks)

b) Explain any four merits of oligopolistic markets (2 marks)
3. a) Distinguish between tax evasion and tax avoidance (2 marks)
b) Examine any six reasons as to why some people in Rwanda refuse to pay tax (3 marks)
4. a) Explain the following forms of privatization:
i) Divestiture ( 1 mark)
ii) Cost sharing (1 mark)
iii) Leasing (1 mark)
b) Identify any four roles of government in the economic of the country (2 marks)
5.a) Distinguish between specific labour and non specific labour (2 marks)
b) Give any six factors that can limit geographical mobility of labour (3 marks)
6.a) Under which group are charcoal sellers and salons classified in Rwanda? (1 mark)
b) What is their contribution contribution to the development of the economy of Rwanda? (4 marks)
7.a) Distinguish between surplus budget and deficit budget (2 marks)
b) How can the government finance a deficit budget? (3 marks)
8. a) Briefly explain how a decrease in interest rates should stimulate economic growth? (2 marks)
b) How has the National Bank of Rwanda (BNR) influenced the level of economic activities? (3 marks)
9.a) Distinguish between national income and national wealth (2 marks)
b) How are the following issues treated in measuring national income? (3 marks)
i. Inflation
ii. Subsistence output
iii.Government output sold at subsidized prices.
10.Developing countries always experience a BOP problem. These are in broad terms caused by factors
which intervene in the three categories.
- Reduce exports and increase imports
- Reduce transfer receipts and increase transfer payments

- Reduce capital inflow and increase capital outflow
Briefly, explain any five of those factors (5 marks)
11. The government of your country has a need to widen the sources of its income mainly in order to
ensure the welfare of people, economic stability and national security. Advise your country on different
methods it can use to satisfy its need. (At least five methods) (5marks)
SECTION B: Attempt any THREE questions only (45 marks)
12.Acquiring knowledge and skills is fundamental in development of any human kind.
a) How is it important to the development of Rwandan economy? (5 marks)
b) Are there problems that have affected the above process in Rwanda? (5 marks)
c) Advice Rwanda government on how to solve these problems (5 marks)
13.Planning can be done on a small and large scale.
a) Examine the advantages of planning for the economy comprehensively (5 marks)
b) Explain any five different conditions for planning to be successful. (5 marks)
c) Discuss reasons for the failure of development plans in developing countries (5 marks)
14) The Minister of Finance and Economic Planning on international day of saving 2013 had said ‘’ If you
want a better life for you and your family, you must save.’’ The Minister believed that the savings culture
should begin at an earlier age, with the children nurturing that value as they transit into adult.
a) Briefly show how is important to start saving at early age ? (5marks)
b) Give five things government of Rwanda has done to promote the culture of saving. (5marks)
c) How do you think the people’s savings are important for the government ? (5marks)
15. a) Account for the increasing need for foreign aid by developing countries (5marks)
b) What are the problems associated with foreign aid (5marks)
c) Foreign aids are given to developing countries for development purpose. Discuss ? (5marks)
16. Study the information in the table below and answer questions which follow:
Units Consumed Total Utility (TU) Marginal Utility (MU)

1 20 -
2 25 -
3 28 -

4 28 -
5 26 -
6 22 -
a) Complete the marginal utility column. (3 marks)
b) Why is total utility declining after the 4th unit ? (4 marks)
c) Account for the causes of low capital accumulation in your country ? (8 marks)
REPUBLIC OF RWANDA Date: June 23th, 2023
GASABO DISTRICT End of the Year Exam 2022-2023
GS RUTUNGA
SUBJECT: ECONOMICS S 6 HEG, MCE & MEG
PAPER 2. APPLICATION OF BASIC PRINCIPLES OF ECONOMICS
INSTRUCTIONS:
- This paper is made of TWO sections A and B.
- Attempt ALL questions in section A and choose THREE questions in sectionB.
SECTION A: Answer ALL questions (55 marks)
1.Choose the most correct answer out of the four alternatives a, b, c, and d given:
i. Which of the following is not related to the cost- push theory of inflation?
a.An increase in employment and output
b. The market power of aggressive labour trade unions
c. The ability of large corporations to administer price.
d. Decrease in supply
ii. Which of the following best defines economic cost?
a. Total payments made to workers, land owners, suppliers of capital and entrepreneurs
b. Only total payments made to workers, land owners, suppliers of capital and entrepreneurs which must be
paid to obtain the services of their resources.
c.Total payments made to workers, land owners, suppliers of capital and entrepreneurs less normal profits.
d.Total payments made to workers, land owners, suppliers of capital and entrepreneurs plus normal profits.
iii. Insufficient total demand results in:
a. Frictional unemployment c. Cyclic/ Mass unemployment
b. Structural unemployment d. Disguised unemployment.
iv. When cash is deposited in a demand deposit account in a commercial bank, there is:
a. A decrease in the money supply
b. An increase in the money supply
c. No change in the composition of the money supply
d. A change in the composition of the money supply.
v.Which of the following is not one of the effects when countries begin to specialize and trade:
a. A shift of resources away from the production of commodities in which countries have comparative
advantages.
b. A fall in the prices of resources which were relatively expensive
c. A rise in the price of products which were relatively inexpensive
d. An increased demand for relatively inexpensive products and resources.
2.a) Distinguish between economic planning and development planning (2 marks)
b) Explain at least any three qualities of a good development plan (3 marks)
3.Sometime selling government property to the private sector seems unavoidable.
a) Give any four reasons that push the government to transfer its property to the private sector (2 marks)
b) What major problems are faced by the government when transferring its property to the private
individuals/3
4.a) Distinguish between tax base and taxable capacity (2 marks)
b) Advice the government of Rwanda on how to increase the tax base and capacity in the economy (3
marks)
5.a) Differentiate between autonomous items and accommodating items in the balance of payment
accounts. /2
b) Give three reasons why government ownership of public enterprise is desirable. (3 marks)

6. Suppose you are called up on to advise, as a person who has studied economics on the issue that,
‘Rwanda wants to liberalize her foreign exchange market’. What are the benefits of foreign exchange
liberalization on the economy ? (5marks)
7.a) Explain how the following could lead to inflation:
i) Poor transport network ( 1mark)
ii) Insecurity or political instability ( 1mark)
iii) Poor technology ( 1mark)
b) Give four reasons to explain why it is difficult to control inflation in an economy (2 marks)
8.a) Explain at least four functions of financial markets in Rwanda (2 marks)
b) What hinders smooth operations of financial markets in Rwanda ? (3 marks)
9.a) The value of money should change with time. Explain any two reasons for the causes of this change of
money value (2 marks).
b) How is Rwandan currency important in the economy ? (3 marks)
10. Give reasons to explain why education is:
a) An investment (2 marks)
b) A consumption (3 marks)
11.There is a growing desire by world economies to depend on one another socially, economically and
politically, this is witnessed by different countries opening up different businesses and travelling to different
parts of the world.
a) How do you call such desire by world economies to become interdependent. (1mark)
b) Explain any four ways in which world economies can become interdependent. (4marks)
SECTION B: Attempt any THREE questions only (45 marks)
12.Made in Rwanda is an economic policy being promoted last years in Rwanda.
a) Briefly, explain what do you understand by this policy (2 marks)
b) To which approach of industrial development is this policy related? (1 mark)
c) Discuss the effects of this policy to the Rwandan economy once successfully applied in Rwanda. (12
marks)

13. A is a country whose economy suffers from high rate of unemployment and inflation. It is striving to
create employment opportunities for youth and encourage private investment in other to overcome those
macroeconomic problems.
a) What macroeconomic problems is country A facing ? (2marks)
b) Give any other two macroeconomic problems not given in the passage. (2marks)
c) How has the unemployment problem affected the development process in Rwanda? (5 marks)
d) What do you think the government of Rwanda should do to reduce the unemployment problem? (6
marks)
14.a) Why it is necessary for your country to control a rapid population growth rate? (5 marks)
b) Discuss the importance of a population census in Rwanda (5 marks)
c) What are the difficulties met in carrying out population census in Rwanda? (5 marks)
15. A country X is a developing country in Africa. It has choosen the development of agriculture as a
strategy of economic development.
a) Explain what could be the hindering problems against the process of economic development using thi
strategy? (5 marks)
b) Give five reasons to explain how the development of agriculture should facilitate industrial
development/5
c) What do you think are the problems that hinder mechanization of agriculture in Rwanda? (5 marks)
16. Labour is a human factor of production and therefore can be motivated to increase its efficiency.
Increase in its wage rate is one of different ways that can be used to promote its efficiency.
a) Explain any others different factors that can promote the efficiency of labour. (5 marks)
b) Analyze the manpower problems that developing countries are facing. (5 marks)
c) What do you think are measures to be taken to minimize the manpower problems in developing
countries ?
GOOD LUCK!!!

MARKING GUIDE: Third Term Exam 2022 - 2023
PAPER I: BASIC PRINCIPLES OF ECONOMICS S 6 HEG, MEG& MCE
1.i. (T), ii. (F), iii. (T), iv. (F), v.(T)
2. a) Imperfect oligopoly is a market structure with a few firms selling differentiated products.
b) Any three examples of imperfect oligopoly in our country:
i. The petrol industry;
ii. The cement industry;
iii. The tea industry;
iv. The mattress industry;
v. Soap industry;
vi. Newspaper industry; etc.
c)Merits of oligopoly
i.
There is high quality product because of competition among producers
ii.
There is existence of price stability under oligopoly due to price rigidity
iii.
Ability to carry out research and improve on the techniques of production
iv.
They offer after sales services to their customers
v.
Consumers have wide choice due to production of differentiated products
vi.
Firms enjoy economies of scale due to their large scale nature of operation e.g. in transport,
storage, management, etc.

vii.
It leads to social and economic infrastructure
viii.
They provide employment opportunities to the people
ix.
There is efficiency in production due to competition hence no wastage of resources
x.
Etc.
3. a) Tax evasion refers to the taxpayer refusal to the tax assessed on him/her and it is illegal while Tax
avoidance is when a taxpayer exploits loopholes in the tax low to dodge a tax and it is legal.
b) Reasons to explain why people in Rwanda refuse to pay tax :
i. Discontent with the services provided : Sometimes the people are not contented with the services
that are offered to them after paying taxes so they decide not to pay anymore.
ii. Lack of adequate information about taxes : Some people lack information about the taxes they are
supposed to pay so they end up not paying the tax.
iii. Low income levels : Some people have got very low incomes such that if they pay a tax, they may
not be able to sustain their well- being so they decide to evade taxes.
iv. Desire to retain all earnings : After making the profits, some people may desire to retain or take all
the profits for their own benefit so they decide to evade the profits.
v. Loopholes in the tax system not to follow up the people who evade taxes : Sometimes there may
be loopholes in the tax system such they are not able to follow up those who evade the taxes so
they also keep on doing the same.
vi. Opposition by the political leaders : Some oppositional leaders encourage local people not to pay
tax in order to win their support.
4.a) Explanation of different forms of privatisation :
i) Divestiture : Selling government enterprises to private ownership, or sales of public assets and
businesses
as going- concerns to the private sector.
ii)Cost sharing : This is where the government retains ownership of enterprises but the beneficiaries
contribute to the running costs e.g. schools, hospitals etc.
iii)Leasing: This where the government rents or leases out public enterprises to the private sector.
E.g. collection of market dues.
b) Four roles of government in the economic activities of a country :

i. Establishing laws enforcing them to ensure an orderly business environment.
ii. Producing goods and services especially those the private sector may not properly or adequately
produce and supply. E.g. Defense.
iii. Regulating activities of the private sector to ensure proper use of national resources and protect
consumers from exploitation.
iv. Providing and administering infrastructure in form of hospitals, schools, roads, dams, water system,
power, telecommunications, etc.
v. Imposing taxes and providing subsidies for purchase of goods and services from the private sector
to encourage or discourage certain activities or products.
vi. Stabilizing the economy through the use of monetary and fiscal policies so as to regulate prices,
unemployment and foreign trade.
vii. Reducing income inequalities among individuals, sectors, and regions of the economy.
viii. Controlling strategic industries in the economy.
ix. Planning and implementing policies that direct and control a large part of the economy.
x. Attracting private foreign capital investment through joint ventures to increase resource exploitation,
increase employment levels and increase the national income levels of the economy.
5.a) Specific labour is the labour that cannot be changed from one production activity to another while non -
specific labour is the labouur that can be transferred from one use to another.
b) Geographical mobility of labour is when people move one place to another searching for work.
Factors that limit geographical mobility of labour include :
i. High level of ignorance about the existing jobs
ii. High wages got at the current job
iii. Good climate at the current job
iv. Poor transport and communication
v. Low cost of living at the current job
vi. Low level of advertising
vii. High level of attachment to family members
viii. Inadequate institutions

ix. Political instability and insecurity
x. Language barriers
xi. Old age limits movement
xii. Etc.
6.a) They are classified under informalsector.
b) Contribution of informal sector to the development of rwandan economy :
i. It creates and increases employment opportunities
ii. It leads to development of local skills in various fields of production
iii. It increases the volume of commodities which solves the problem of inflation
iv. It creates a spirit of self- reliance
v. It reduces income inequalities because many people participate in it.
vi. It produces essential goods that are beneficial to low income earners.
vii. It provides revenue to the government through taxation of the business activities.
viii. It provides training grounds for growth of entrepreneurs.
ix. It promotes development of appropriate technology which suits the resources of the country.
x. It promotes linkages in production E.g. forward and backward linkages
xi. It promotes development of small scale industries through innovations and inventions carried out.
xii. Entrepreneurship is developed, that is, people are able to begin and manage their own businesses.
xiii. Fair distribution on income
xiv. It increases production and economic growth
xv. Etc.
7.a) Asurplus budget is when expected revenue from taxes is greater than expected expenditure while a
deficit budget is when the expected government revenue from taxation is less than expected government
expenditure.
b) A deficit budget can be financed as follow :

i. Borrowing from external and internal lenders. These may be banks, Individuals, governments,
private firms and international financial institutions.
ii. Use of accumulated reserves. A country that has had a surplus budget in previous years may use
the funds accumulated to finance a deficit in the current year.
iii. Accumulating domestic and foreign arrears may finance a deficit budget. The government obtains
goods and services on credit and promises to pay in other years and not the current budget year.
iv. Sell gold reserves of the country to finance the deficit.
v. Improving the value of domestic market by processing their products so as to increase foreign
exchange value.
vi. Restoration of peace security, law and order in all parts of the country so as to reduce military
expenditure.
vii. Reducing the level of corruption and fraud in tax assessment and administration through proper
accountability and transparency.
viii. Civil service reforms so as to reduce expenditure on large public sector through retrenchment.
ix. Population controls through family planning campaigns and education for females.
x. Modernization of agriculture so as to increase the value of agricultural products that respond to

market demand.
xi. Increasing capital development expenditure rather than expenditure on unproductive projects.
xii. Reducing the subsistence sector by monetizing the economy.
xiii. Diversification of economic activities so as to increase the tax base and eventually increasing the
export base.
xiv. Privatization of public companies so as to reduce government expenditure through financial

accommodation and generating more revenues from taxing private companies.
xv. Adopt export promotion industrialization so as to increase foreign exchange earnings.
xvi. Etc.
8.a) Reduction in interest rate can stimulate economic growth, because reduce the interest rate will attract
people to seek for loans from financial institutions which will further increase money in circulation,
aggregate demand, investment, production and employers will react by increasing the demand for workers.
b) The National Bank of Rwanda has influenced the level of economic activities in the following ways :

i. It directs its policies towards economic growth and development
ii. It controls the quantity and composition of credit through selective credit control
iii. It may run schools and colleges for training bankers since commercial banks may not be willing or
manage to finance training of their workers
iv. It controls the activities of foreign banks whose activities may not be in line with national
development
v. It tends to finance only activities which bring in profits quickly; hence their investment policy has to
be directed by central bank
vi. It supervises and examines the activity of commercial banks to promote sound commercial banking.
vii. Etc.
9.a) National income refers to the monetary value of goods and services produced in a country at a given
period of time while national wealth refers to the stock of commodities that possess a country at a given
period of time.
b) The following issues are treated in measuring national income in the following ways :
i. Inflation : because effect of inflation is difficult to adjust and may be misinterpreted to measure an
increase in output or to remove the effect of inflation from national income figures, nominal income (Income
at current prices) is deflated using consumer price index (CPI) or any other appropriate deflator to get real
national income.
ii. Subsistence output or commodities consumed at home do not pass through the market. A value is
usually inputed on it and it may be calculated as a percentage of monetary income which is determined
after carrying out a survey, therefore it is difficult to determine their value.
iii. Government out put which is sold at subsidized prices is valued at cost (original) price to reflect its actual
value.
10.Factors that cause this phenomenon (BOP Problem) include :
i. Natural calamities: these lead to agricultural failure and decline in exports e.g. drought, frost etc.
ii. Inflation: This discourages exports by making them expensive and encourages imports. Imports
are encouraged because outsiders are willing to sell in a country where prices are high.
iii. High exchange rates: When the value of currency in term of other currencies is very high, outsiders
would find it expensive to buy the over-valued currency so as to buy the commodities from that
country. This reduces exports.

iv. Poor terms of trade: Due to increase in price of import than price of export. This reduces volume
exports.
v. Protectionism: restrictions on exports of a country by other countries reduce the amount of exports
to those countries and reduce foreign exchange earnings.
vi. Political instability which reduces production for export
vii. Increase in cost of production: This leads to high price for exports and reduces foreign demand.
viii. Increase in prices of imports: This results into increased foreign exchange expenditure e.g.
increase in prices of oil products.
ix. Decline in world demand: Demand for exports may reduce due to depression, instability in markets,
reduction in population, discovery of synthetic fibres, fall in incomes, change in tastes etc.
x. Increase in capital outflow: e.g. People wishing to invest in other countries. E.g. buying securities
abroad. This may be due to political instability or low interest rate in the home country
xi. High costs of debt servicing
xii. Subsistence production
xiii. High population growth rates
xiv. High rate of profit repatriation
xv. Supply rigidities
- Etc.
11.The government of your country has a need to widen the sources of its income mainly in order to ensure
the welfare of people, economic stability and national security.
Five methods that the government of Rwanda can use to satisfy the need of its population
i. Taxes : A tax is legal compulsory levy that individuals and private companies are required to pay to
the government based on their incomes the nature of their activities (A tax is also defined as a
compulsory contribution collected by the government for the public use). Tax is not a value for
value payment. Tax is a non-quid pro quo payment this means that no goods or services are
exchanged for the amount of tax,
ii. Fees : A fee is a money paid in direct exchange for professional services rendered. Government
provides certain services and charges fees. A fee is paid for a specific service directly provided to
the person paying it.

iii. Fines and Penalties : Government raises revenue from fines and penalties imposed on the people
who commit crime or break the law.
iv. Grants : These are financial donations given to the government to cater for the costs of specific
projects or to help a country out of a specific financial dilemma.
v. Deficit Financing : This is the government orders the printing and minting of more currency notes
and coins to finance its expenditure. It is also involving the central bank as a means of getting
revenue for its expenditure.
vi. Loans : The government raises revenue by borrowing internally and externally. External loans are
got from other countries, Multinational financial institutions like International Monetary Funds (IMF),
World Bank, International development Agency (IDA) and also foreign private banks. Internal loans
are obtained from local commercial banks, development banks, mutual funds, insurance
companies and individual.
vii. Profits from Business activities : The government at times owns companies or shares in the public
companies and the aim of this is profit maximization.
viii. Securities : Government may raise money by issuing securities such as a treasury of bills and
bonds. By issuing securities the government is able to get money which it pays back to the security
holders when the securities mature.
ix. Licenses : This is a document that authorizes a person or a company to conduct the business, own
something or deal in a profitable or non-profitable activity. This earns revenue to the government.
x. Gambling : Government raises revenue through gambling activities usually in form of lotteries. E g:
National Lottery.
xi. Other sources of government revenue : Different governments devise different methods to raise
revenue in addition to the common ones mentioned above
SECTION B : Attempt any THREE questions (45 marks)
12.a) Importance or positive role of education to the development of rwandan economy :
i. It increases technical knowledge of labour one of the factors of production e.g.; training of
technicians, doctors, engineers, etc. It also improves on the entrepreneurial skills of people.
ii. It is an investment hence we get both private benefits include the salaries which people get after
attaining education and public benefits include work done by educated people in public works. The

profitability of education is got by sub tracing the total cost of training from the above mentioned
benefits.
iii. It reduces income inequalities in the long run, when almost every citizen becomes educated and
employed and gets a salary.
iv. It has an impact on checking on population growth e.g.; it delays marriage and educated people
tend to produce few children
v. It changes attitudes of the people e.g.; extension education where people are taught new methods
of farming is easy when people are educated.
vi. It increases demand for goods: e.g.; books, pens
vii. Many people are employed in education institution e.g.: ministers, teachers, clerks, sweepers,
cooks etc.
viii. It helps the nation to save foreign exchange that would have otherwise been used to import
expatriate man power.
ix. It reduces unemployment (which is caused by lock of skills and know ledge) this is especially so
with informal education e.g.; apprenticeship and technical education.
x. Educated people are easy to deal with when spreading new ideas and development e.g.; family
planning political mobilisation.
b) Problems faced by education sector in developing countries like Rwanda
i. There is limited motivation of teachers : teachers are under paid and this keeps their morale down
hence bringing up half- backed products.
ii. There are limited skills and specialized personnel at all levels : Most qualified instructors move to
other sectors and even abroad where they can have better remunerations.
iii. There are limited teaching/ learning materials : Most of the subjects are theoretically taught, and
this keeps the education sector backward.
iv. The education curriculum in developing countries is still colonial based : Most of the subjects
taught and their content is no longer relevant, they train learners for white collar jobs, they make
more job seekers than job creators.
v. There is high school drop- outs especially among the females because of different reasons leads to
lack of clients in the institutions.
vi. Poverty among the people makes them not able to send their children to school or even buy for
them scholastic materials.

vii. There is lack of enough funds for the education sector : this leaves some areas and schools in the
rural areas lack equipment to use hence hindering the development.
viii. Desire for quick money makes children abandon school and this hinders the countries’ major
objective of education for all.
ix. Some parents prefer to educate boys compared to girls and this has accelerated gender inequality
and income inequality among the males and females.
x. Etc.
c) Measures of promoting education in developing countries
The need for development of the education sector necessitates the following measures :
i. Changing the curriculum from knowledge based to competence based so as to develop a child with
all other values other than knowledge only.
ii. Promoting vocational education so as to produce students that have practical skills and can start
their own businesses instead of waiting for employment, i.e. job creators rather than seekers.
iii. Increasing the motivation of the teachers so that they can carry out their activities genuinely and
professionally.
iv. Cost sharing should be encouraged so as to avoid school drop-outs. Here the government can
undertake paying part of the students’ tuition and the students pay a small part.
v. Policies for girl child have been embarked on through reducing their entry points at the higher
institutions of learning and also when recruiting for secondary schools.
vi. Active participation of the private sector in the education system through taking up government
educational programmes as well as setting up new schools at affordable fees structures.
vii. Universal primary education and secondary education has been actively emphasized and this has
helped to educate the low income earners and the poor.
viii. Educational loans to help the students at higher levels. This is common in Rwanda under the
government fees/ tuition structure where the students in the higher institutions are given
educational loans and they pay back in instalments upon completion of the studies when they get
jobs.
ix. Etc.
13. a) Advantages of planning for the economy comprehensively(advantages of comprehensive planning)
i. It provides time long enough for survey into the resources to be made.

ii. It encourages interdependence since linkages between different sectors are possible.
iii. It allows looking far into the future which gives good ideas on priority sectors and planners will
concentrate more on such sectors.
iv. It encourages full utilization of the resources in an economy.
v. It reduces regional inequality since all sectors are planned at the same time
vi. It allows economic development to move hand in hand with economic development since plans are
for the development of the economy as a whole.
vii. It caters for the problems that may be going on the economy at a particular period of time such as
unemployment, poverty, and inflation among others.
viii. It helps to determine the sources of finance that may be needed for the development of the country
for a period of time.
ix. Etc.
b) Conditions for planning in developing countries
i. Accurate statistical data : correct and accurate data about current economic growth, population
growth and population distribution, price change, income per capita…
ii. Planning machinery : these should be machinery or authority charged with the duty of planning with
experts in different field such as economists, engineers, statisticians, demographers…
iii. Targets/Goals of plan : these are objectives of the plan that should reflect the desires and
aspirations of various social, economic, political groups in the economy. These targets should be
specific and realistic.
iv. Existence of political will/ incorrupt and efficient administration : there must be existence of a strong,
efficient, competent and non-corrupt administration at all levels. There must be a strong
enthusiasm among politicians.
v. Non- political interference : in most developing countries, politicians interfere with the planning
process because they want to attract more resources to their regions or ministries.
vi. Public cooperation : the public should understand and support the planning process and the
intended outcomes.
vii. Technical personnel : there should be enough trained professional human resource to be
responsible for the planning process in the country.

viii. Mobilization of resources : both internal and external resources should be mobilized for financing
the plan.
ix. Reasonable equality of income : there should be a reasonable equalization of income for economic
planning ; this may lead to the enthusiasm among the people for the successful working of
economic plans.
x. Scope of the plan i.e. whether partial, comprehensive, regional, etc. political will cooperation and
support of the masses
xi. Favorable institutions to facilitate plan implementation
xii. Peace and political stability to provide a conductive atmosphere for successful implementation
xiii. Plan balancing i.e. balance between priorities of the economy
xiv. The level of infrastructural development
xv. Availability of funds
xvi. Favorable foreign influence
xvii. Etc.
c)Reasons for the failure of development planning in developing countries :
i. Lack of information : this is the absence of sufficiently accurate and detailed information on the
economy as a whole.
ii. Lack of planning machinery and implantation personnel due to shortage of funds
iii. Poor implementing machinery due to shortage of entrepreneurs and corruption in government
enterprises
iv. Poor co-ordination between the local authorities and the central government.
v. Inadequate funds to implement the plans
vi. Limited political will by the people and government
vii. Resources constraints
viii. Lack of control/ unforeseen and unexpected calamities
ix. Corruption and embezzlement by public servants
x. Shortage of skilled manpower to formulate and implement plans and reliance on expatriates who
are expensive.

xi. Some plans are ambiguous : Most of governments in LDCs attempt to do too much at ago because
of the desire to have a great leap forward in living standards. This at times leads to failure to
achieve the desired goals which results into disappointment.
xii. Foreign influence through bad economic policies and direct involvement in business through
multinational corporation
xiii. Lack of monitoring
xiv. Existence of large private sector
xv. There is large informal sector which is difficult to incorporate in national plans.
xvi. Lack of political support
xvii. High inflation rates in developing countries
xviii. Political instability, long term plans fail as consequence of constant regime changes in some
countries
xix. Political interference due to differences in political ideologies
xx. Dependence on foreign aid which is inadequate, inconsistent, uncertain, string tied etc.
xxi. Natural calamities which reduce production
xxii. Lack of politically stable administration : this is due to changes in regimes which are at times
accompanied by changes in goals and objectives.
xxiii. Etc.
14. a) Importance of saving at the early age :
i. Saving for emergency funds: it is important to have an emergency fund set aside to cover
unexpected expenses. In addition to your emergency fund you need to make sure that you have a
plan and good insurance in place to help you survive the unexpected financial event in your life;
ii. To buy luxury and expensive items: when you plan to buy very expensive luxury goods, your
negotiating power is stronger if you have cash in hand, so we have previously to save for it;
iii. Save for children education: is an expense that you will need to consider, is the cost of education
for your children. You can begin saving, or you can set aside money in a savings account each
month. The sooner you start setting aside money, the easier it will be to send your children to
school.

iv. For retirement: we have to save for retirement life for not being a burden on our children when we
retire. Planning for our retirement will prevent this from happening in the future. The saved money
will also make interest.
v. To make profit: when you save money in Bank, the later will give you back your money plus
interest according to the contract made with the bank;
vi. Unforeseen expenses: it is much better to anticipate a worst case scenario and have some money
saved for overcome it;
vii. For emergencies: you can have expensive emergencies, and we all know that we will likely
encounter some sort of emergency from time to time. So why not be prepared rather than
potentially become another victim of an emergency? Saving is the best answer;
viii. Prevent loss of job: when you lose your jobs, when you have bad time, when you get sick, saved
money will help you to overcome those problems;
ix. To plan for your short term goals
x. To get you into the savings habit earlier
xi. To gain financial independence
xii. To cover increased expenses
xiii. To build trust and confidence in your abilities
xiv. To provide for your children’s education
xv. To organize your future and avoid wastage of money: people who don’t plan for their future seem
to run from crisis to crisis. There is a little known truth that happiness can come from being
organized. Putting aside savings and taking for your future is organizing and take control of your
life; OR
xvi. Financial motive / emergency funds;
xvii. Precautionary motive / unforeseen expenses;
xviii. Speculative motive / to make profit;
xix. Access to loans;
xx. Money security / avoid theft
b) Five things that the government of Rwanda has done to promote the culture of saving.

i. Political will: Rwanda Authorities want Rwanda population have a habit of saving. Umurenge Sacco
are microfinance institutions near population initiated by government of Rwanda to encourage
savings;
ii. Sensitization of people: Rwandan people should be sensitized about the importance of saving on
the radio and are called to have account number to save their money;
iii. Payment on account number: every institution is obliged to pay employees on their account
numbers;
iv. Cultural attitudes: saving in banks is a new event in Rwanda, some of people fear to save their
money in bank pretending to lose their money;
v. Encouraging people to reduce liquidity preference
vi. Encouraging banks and other financial institutions to increase interest rate paid on deposits so as
to encourage savings.
vii. Establishment or creation of many financial institutions to increase competition
viii. Establishment of EJO HEZA a long term saving scheme that adopts targets salaried and non-
salaried
ix. Establishment of Umurenge SACCOs
x. ITERAMBERE funds
xi. Integration of financial location inter schools
xii. Etc.
c)People’s savings are important for the government because of:
i. Saving reduces government expenditure
ii. It limits public debts
iii. It helps to prepare for retirement
iv. It can support increased investment levels and stimulate the growth of the economy
v. It helps to finance those big ticket items and major life events
vi. It helps in emergencies
vii. Cushions against sudden job loss
viii. It is all to easy and not to think about savings as being a priority

ix. It helps to gain financial independence or to be self- reliant.
x. Etc.
15. a) Need for the increasing foreign aids in developing countries :
i. It increases the flow of capital stock which is helpful in breaking the vicious circle of poverty.
ii. To supplement the domestic savings which are always very low because the narrow tax base.
iii. In flow of capital equipment
iv. Source of capital for financing overhead capital or infrastructure and directly productive activities
like agriculture and industry.
v. When it is in form of foreign investment it is accompanied by an inflow of skilled manpower and

advanced technology.
vi. It reduces unemployment since foreign investors employ people in countries where they invest.
vii. It leads to an increase in the tax base and tax revenue.
viii. Foreigner can invest in export sectors and hence lead to increased export production and foreign
exchange earnings.
ix. Foreign investors encourage local entrepreneurs to start investment in similar undertakings
x. Foreign firms can also start and finance basic industries and project.
xi. It strengthens relationship among countries.
b) Problems associated with foreign aids in developing countries :
i. It may be tied to specific projects which are not much beneficial to the country e.g. building
satellites
ii. It may be tied to import. E.g. where aid is for construction of a building the donor country may sell
raw materials to the recipient country and at higher price.
iii. There is high BOP deficit. The high outflow of resources to pay back loans and service them
worsens the BOP position of the country.
iv. Debt services : debt services ratio shows the money used to re-pay the debt (interest and part of
the principal) in a period of time as a percentage of GNP or foreign exchange earned in the same
period of time. When the aid is in form of the loan, it has to be repaid in future and in foreign
exchange with interest. This is a burden to the future generation.
v. Aid may lead to overdependence of the recipient country on the donor country by discouraging the
former from relying on its own resources or to set its own industries
vi. The donor country may use aid to further her political interests. E.g. ideology, which may not be
appropriate for the recipient country.
vii. There are other “strings” which may be tied to aid. E.g. military programs, diplomacy, etc. which
may not be in line with the national objectives of the recipient country.
viii. Aid may lead to instability of supply and prices of commodities since its inflow is not constant.
ix. Aid may be a burden on the tax payers in the donor country some of who are even poorer than
people in the recipient country.
x.
Foreign aid in form of huge loan should be inflationary ; this discourages savings and investment
which negatively affects the economic development of a given country.
xi.
Foreign aid promotes dumping : Developed nations, in the pretext of giving aid, have turned
developing nations into their dumping ground, especially for updated technologies. In some cases,
expired and radioactive contaminated drugs, foods, land, equipment etc. this does not kill local
production but are also harmful to human life.
xii.
Military aid to developing nations in most cases has increased conflicts
xiii.
Foreign aid reduces local production as people expect to live on foreign sent goods.
xiv. Foreign aid erodes the social and cultural values of the nationals.
xv. Foreign aids slow down initiative and hard work i.e. citizens of developing countries become lazy
expecting to live on aids.
xvi. Foreign aid distorts planning of developing countries because it normally comes in bits and
normally it is not completed or even sent as promised.
xvii. Sometimes the technological aid given is inappropriate i.e. it may be to underdeveloped or beyond
the standards of developing countries, so it may just be wasted.
xviii. Sometimes the pre-conditions set for foreign aids are disastrous for a country i.e. recipient
countries may be forced to devalue their currency, retrench workers or even accept behavior that is
considered anti-social sometimes. E.g. accepting gay practices in order to receive their aid.
xix. Etc.
c)Foreign aid is given to developing countries for development of the following purposes
i.
Foreign aid should be used to develop or to establish import substitution projects

ii.
It should be used to create projects that pay back the loan, the returns can be used. This will help
to reduce the burden of paying back passed to the people through taxation.
iii.
It should be used to develop skills, technology and enterprises that can help to create employment
and this will increase productivity and national income in the country.
iv.
It should be used in projects that fetch positive impact on the economy.
v. LDCs should always seek for aid that they can use at their will. The aid should be used to carry out
projects that the countries think can be of help of them and not what the donors think would be the
ideal projects.
vi.
Part of the aid should be used to pay back the already mature debts that may have been got in
the previous times. This will help to reduce the debt burden in the long run.
vii.
Foreign aid should be used to build the internal capacity and lead toself-reliance and economic
development of a country so as to reduce the issues of dependence.
viii.
LDCs should seek for soft loans and reject short term loans with high interest rates
ix.
Etc.
16.a) Study the information in the table below and fill or complete the column of marginal utility :
Units Consumed Total Utility (TU) Marginal Utility (MU)

1 20 -
2 25 5
3 28 3
4 28 0
5 26 -2
6 22 -4
b) When the total utility is maximised, at the 4 unit, marginal utility is zero. Beyond this point, total utility
th
begins to fall. When marginal utility is falling, marginal utility is negative which means the consumer is
enjoying dissatisfaction or desutility.

c)Capital accumulation refers to the process of increasing a country’s stock of capital assets over a given
period of time. It includes gross capital accumulation which is the total profits on capital assets and net
capital accumulation or net investment which refers to the addition to the existing volume of capital or
expenditure on new assets only. Capital accumulation is low in developing countries because:
i. Low level of savings: If the savings are low, capital accumulation is also low.
ii. Low level of incomes: Low incomes lead to low savings and capital accumulation.
iii. High population growth rate: High population growth reduces income, savings and capital
accumulation.
iv. Low level of infrastructure: e.g. roads, banks, insurance services etc. Underdeveloped
infrastructure leads to low capital accumulation.
v. Low wage rate: If the wage rate is low, labour intensive method of production is used leading to low
capital accumulation.
vi. Attitude of people towards work, how society desires to develop leads to capital accumulation.
vii. Inexistence of stock of capital: If there is an inexistence stock of capital of capital, it is difficult to
accumulate more capital.
viii. Limited market: narrow market discourages investment as a result of low capital accumulation.
ix. Unfavorable investment climate discourages production, investment as a result of low capital
accumulation.
x. Political instability: Discourages production and investors leading to low capital accumulation.
- Etc.
MARKING GUIDE: End of the Year Exam 2022 - 2023
PAPER II: APPLICATION OF BASIC PRINCIPLES OF ECONOMICS S 6 HEG, MEG& MCE
1.i. (a), ii. (b), iii. (c), iv. (d), v.(a)
2.a) Economic planning refers to deliberate government attempt or effort to influence and direct economic
choices and activities towards specific objectives within a specified period of time, while development
planning means planning for the whole society to achieve economic, political and social objectives.
b) Qualities or characteristics of a good plan.

i. A good plan should be as comprehensive as possible i.e. it should cover almost all sectors of the
economy
ii. It should be consistent with the resources available i.e. if planned programmes exceed the
available resources, the objectives of plan cannot be fully achieved and this would discourage
people.
iii. It should encourage the people to participate in the government effort i.e.in other words, a plan
should be in line with the people’s aspirations if it is to be socially relevant.
iv. It should be in line with the socio- economic system of the country which should be one of the
strategies if the intended goals are to be achieved.
v. It should fit in the physical and technical conditions of the country e.g. when planning to increase
agricultural output by introducing tractors, the land tenure system, relief, nature soil, and incomes
of people are to be considered.
vi. A good plan should be politically and administratively feasible if it is to be implemented easily.
vii. A good plan should be based on a good situational analysis, with clearly spelt-out objectives and
strategies.
viii. It should be drawn basing on the standard principles of planning e.g. it should be consistent,
compatible, feasible, etc.
ix. A good plan should be internationally relevant i.e. it should take into account issues like prices on
the world markets, policies of financing bodies etc.
x. It should name the planning body or authority
xi. It should specifically identify the sources of funding and the sources of all the other resources
required for the successful implementation of the plan.
xii. It should be well detailed with sufficient information covering a long period of time.
xiii. Etc.
3. a) Reasons that push the government to transfer its property to private sector (Privatization) :
i. To enable firms, operate more efficiently
ii. To reduce corruption tendencies in the public sector.
iii. To attract foreign investment in the economy without fear of nationalization.
iv. To reduce government expenditure on public sector enterprises.

v. Fulfilment of the International Monetary Fund conditionality of a private sector led economy.
vi. To create more job opportunities in the long run when the private sector expands it enterprises.
vii. To improve resource utilization through efficiency of the private sector and the profit motive.
viii. To allow government concentrate on provision of essential services like health and education.
ix. To expand the tax base for revenue to the government.
x. To encourage competition and improve quality of services offered by reducing monopoly basis.
xi. Etc.
b) Prblems faced by the government when transferring its property to private sector (Privatization):
i. Corruption in the privatization unit i.e. some officials are not transparent and connive with
prospective buyers.
ii. Opposition from the general public often delays the process of privatization.
iii. Poor valuation of the enterprises leads to assets being sold at give-away prices.
iv. Poor states of the enterprises due to poor maintenance making it hard to sale them.
v. Political sabotage by opposition leaders sometimes block the sale of enterprises just to
frustrate the government and advance their causes.
vi. Poverty among the nationals makes the enterprises to be sold to foreignersleading to foreign
domination in the country.
vii. Small market discourages potential buyers due to limited potential for expansion.
i. Political instability in some parts of the economy discourages potential investors from buying the
enterprises.
ii. Unscrupulous buyers win the bids to buy the enterprises and they end up not paying after taking
over the property.
iii. Underdeveloped capital markets. Government enterprises are sold under a capital market so its
underdevelopment limits the potential buyers to access the enterprises.
iv. Etc.
4.a) Tax base refers to commodities, persons or firms on which a tax is levied while taxable capacity is the
ability of the taxpayer to pay a tax assessed on him/ her and retain a sufficient disposable income to enable
him/her to live the life he/she is accustomated to.

b) Tax base can be expanded (increased) in the following ways:
i. Taxing properties especially houses and land
ii. Industrial expansion
iii. Reducing exemptions and tax holidays
iv. Tax education
v. Registration of all businesses to reduce the informal sector
vi. Improvement of tax administration
vii. Improving infrastructure especially roads to ease tax collection
viii. Etc.
Taxable capacity can be increased in the economy in the following ways:
i. To increase the level of income
ii. To expand tax base by encouraging foreign and domestic investors
iii. To reduce the size of subsistence sector
iv. To reduce income inequality
v. To increase the level of employment
vi. To ensure political stability so as to increase production and attract investors
vii. To improve tax administration
i. Intensive tax payer education
ii. Improvement in infrastructure
iii. To attract investors
5. a) Autonomous items or current accounts refers to the different items on the current and capital accounts
to offset balance of payment surplus. e.g. investment abroad and advancing short term loans. While
accommodation items or capital accounts, are those items in form of reserves required to offset a balance
of payment problem. e.g. borrowing from IMF to fulfill the principle that the BOP should always balance.
b) Government ownership of public enterprise is desirable in order:

i. To protect the public from monopoly situation;
ii. To create employment and reduce income inequalities;
iii. To control the production of essential products;
iv. To supply essential services;
v. Some enterprises require high capital investment which the private sector may not afford; etc.
- Etc.
6. Benefits of foreign exchange liberalization:
i. It reduces bureaucracy and corruption hence making it easier for investors to obtain foreign
exchange.
ii. It encourages forex inflow because of free movement of currencies.
iii. Exporters can easily sell foreign currencies
iv. Importers can easily buy foreign currencies
v. It encourages tourism since tourists can easily get local currency
vi. It increases employment opportunities from several forex bureaus.
vii. Forex bureaus facilitate customers in forex transfer to and from abroad.
viii. It reduces over valuation and under valuation of currencies.
ix. It reduces government expenditure in managing the exchange rates.
x. It increases government revenue since profits earned by forex bureaus are taxed
xi. It eliminates black marketing in the forex market.
xii. It encourages competition in the forex market which improves service delivery.
xiii. Forex bureaus give technical advice to customers with regard to investment and bureau dealings
xiv. Etc.
7.a) How the following can lead to inflation:
i. Poor transport network may cause inflation : It leads to failure to move commodities from places of
production to places of consumption, where there are no products, prices increase and cause inflation.

ii.Insecurity/ political instability/ war can cause inflation : Insecurity leads to low production, scarce away
labour, leading to destruction of infrastructure, limits training of workers, and generally discourages
Production to meet the prevailing demand hence lack of products leads to high prices which imply
inflation.
iii.Poor technology can cause inflation : This reduces production and increases cost of production which
increases prices. Due to shortage of machine, some firms produce at diminishing returns by over
utilizing
machines beyond their capacities. This also increases cost of production and prices.
b) It is difficult to control inflation because of:
i. The needs to import essential commodity and raw material which are lacking in the country
ii. High rates of rural urban migration this increases the cost of living in towns hence inflation
iii. Frequent wages increased by the government
iv. Low productivity in agricultural sector
v. High level of corruption and embezzlement of publics funds meant by productive activities
vi. The needs for high revenues from indirect taxes by the government causes producers to increases
prices of their commodities
vii. Lack of appropriate measure to control population growth
viii. Occurrence of unforeseen circumstances for example bad weather, pests, and diseases which
leads to shortages off goods and services especially in agricultural sector.
ix. Political stabilities and insecurities these demand for government to increase government
expenditure hence increased money supply in the economy
x. Limited capital required to set up industries to increases domestic production of goods and
services
xi. Existence of poor infrastructure in the economy
xii. Under developed financial sector.
xiii. Etc.
8.a) Functions of financial markets in Rwanda:

i. Financing trade i.e. money market plays a crucial role in financing both internal as well as
international trade.
ii. Financing industry i.e. money market contributes to the growth of industries by providing short and
long- term loans to the capital markets.
iii. Profitable investment i.e. money market enables the commercial banks to use their excess
reserves in profitable investment.
iv. Self- sufficiency of commercial banks i.e. developed money market helps the commercial banks to
become self- sufficient.
v. Help to central bank i.e. money market helps the central bank to secure quick and widespread
influence on the sub- markets, and thus achieve effective implementation of its policy.
vi. Mobilizing savings i.e. capital markets help in mobilizing savings and channeling them into
productive investment.
vii. Promote economic growth i.e. this is through the rational allocation of resources.
viii. The capital markets bring together the savers as lenders and investors as borrowers who are
respectively known as surplus spending units and deficit spending units.
ix. Etc.
b) Factors that hinder smooth operations of financial markets in Rwanda (Problems or limitations):
i. There is lack of coordination between the various financial institutions which leads to lending and
borrowing to become difficult.
ii. Many financial institutions are controlled by the bureaucrats and they have no technical skills, so
they lack decision making.
iii. The professional and skilled persons in financial institutions are engaging in more profitable
businesses and this has created a gap talented persons in the financial institutions.
iv. The branches of financial institutions are not opened in the rural areas to collect the savings of the
villages.
v. In advancing loans, financial institutions compete with each other to show better performance.
Sometimes, they lend money to those people who cannot repay.
vi. The complaints about default in loan repayments both the private and public sector is increasing
day by day.
vii. Poor quality of manpower is employed in the financial institutions which causes low production.

9.a) In the real life, the value of money should change with time due to the following reasons:
i. Consumption preference of people: Most of the people are ready to sacrifice current consumption if
they find that the future they will be able to consume more than the present. Some others make
current consumption because the future is uncertain for them.
ii. Uncertain of future: The future is always uncertain. Nobody knows what will happen in the future.
So, it is better to consume now rather than consume in future if current consumption rate is more.
People would like to compensate for uncertain future cash flow against certain cash flow.
iii. Inflation of the economy: Every economy has inflation but the rate is different from country to
another. If there is higher inflation, consumer prefers current consumption rather than future
consumption and vice versa.
iv. Investment opportunity: If investment is prosperous, return is reinvested in order to get more
money and we foregone consumption, in this case the future cash flow is more than its present
cash flow.
b) Importance of Rwandan currency in the economy:
i. It widens the scope for individuals to maximize their satisfaction from a given amount of
expenditure
ii. It facilitates distribution
iii. It facilitates the physical transfer of property E.g. Building from one place to another
iv. It facilitates division of labour
v. It facilitates lending i.e. the use of money facilitates the development of deferred payments
10. a) Education is an investment because:
i. It has costs: Private costs in terms of school fees and work foregone by the student while
studying. Social costs in terms of government expenditure in education.
ii. It has benefits. Private benefits in form of skills gained by an educated people and the
income he/ she earn after acquiring education. Social benefits in terms of services
rendered to society by educated people e.g. doctors, nurses, teachers, and policemen.
iii. It has profits and losses: Net returns of education are calculated by subtracting the total
costs of education from total benefits of education. Such returns are both private and
social. If the net returns are positive, education is profitable and if they are negative, then it
a loss.

iv. It is a way of accumulating human capital within labour in the same way as other
investments lead to capital accumulation.
Or
Expenditure on education and health can be regarded as an investment because of the following reasons:
i. There are returns in future after studying and also health improves.
ii. It involves opportunity cost i.e. foregoing something to attain education and treatment.
iii. It involves risks i.e. you may not gain from it when you fail to get employment.
iv. It is costly to acquire because it involves expenditures on fees, scholastic materials and treatment.
v. It is scarce i.e. not everyone has access to it like all investments are.
vi. It provides satisfaction to an individual through utility maximization.
b) Education is a consumption because:
i. It enables people to enjoy direct utility, elites acquire such titles as Professor, Doctor, Engineer
among others which they enjoy when addressed.
ii. Education enables people to enjoy a wide range of commodities like mews papers, magazines
which uneducated people cannot consume.
iii. With education, people share cultures and enjoy experiencing them.
11.a) The desire by world economies to become interdependent is called globalization
b) Four ways in which world economies can become interdependent:
i. Industrial globalization: rise and expansion of multinational companies;
ii. Financial globalization: emergence of worldwide financial markets and better access to external
financing for corporate, national and sub-national borrowers;
iii. Political globalization: the spread of political interests to the regions and countries outside the
neighborhood;
iv. Information globalization: the increase in information flow between geographically remote
locations;
v. Cultural globalization: the growth of cross-cultural contacts.
vi. Etc.

SECTION B: Attempt any THREE questions (45marks)
12. a) The Made in Rwanda policy is designed to help boost local industrial contribution to the economic
growth while promoting the brand of the Rwandan locally made products at the global stage, which will
reduce the country’s burden of relying on imports while promote locally made products from Rwanda.
b) This policy is related to import substitution strategy which refers to production for the domestic market
goods formerly imported so as to minimize the outflow of foreign exchange.
c) Once successfully applied in Rwanda, made in Rwanda will enable our country to:
i. Save foreign exchange due to reduction of expenditure on imports.
ii. Create employment opportunities and so reduction of income inequality.
iii. Reduce dependence on imported goods.
iv. Achieve economic growth due to high production.
v. Control imported inflation because the country will be able to produce its own goods and no need
to import from other countries.
vi. Control balance of payment deficits due to reduction of imports.
vii. Increase tax revenue.
viii. Develop domestic skills.
ix. It has backward and forward linkages in production.
x. Encourage foreign investors to come and invest in Rwanda because of economy of scale created.
xi. Achieve export promotion industries.
xii. Exploit idle resources in Rwanda.
xiii. Increase standard of living of Rwandese due to availability of domestically produced goods and
services.
xiv. Control dumping.
xv. Speed the process of industrialization.
xvi. Set up and develop infrastructure like roads and communication lines.
xvii. Etc.

Dispute those important positive effects that should be yielded by the success application of made in
Rwanda policy, some negative effects should result from it, and these should be:
i. If industries are mostly owned by foreign investors, the profits are repatriated and go back in their
mother countries.
ii. If the set industries use capital intensive technique of production, technological unemployment
should occur in Rwandan economy.
iii. To run and grow new industries need to be protected against foreign competition and this
protection leads to their inefficiency and production of poor quality goods.
iv. New set industries produce at high cost because of shortage of manpower, importation of raw
materials and this leads to increase in the prices.
v. The strategy should worsen the balance of payment position of Rwanda because it requires
importation of equipment and skilled manpower.
vi. If Rwanda executes the protectionism policy to protect its infant industries, foreign countries may
also retaliate by imposing similar tariffs and this will lead to lack of market.
vii. The development of industries may lead to over exploitation of resources and then to resources
exhaustion.
viii. Etc.
13.a) Macroeconomic problems faced by the country A are inflation and unemployment.
b) Any two other macroeconomic problems not given in this passage are BOP deficit, defict budget,
population problem, manpower problem, etc.
c)Unemployment problem has affected the development process in Rwanda in the following ways :
i. Increased government Expenditure: People without employment and income need support from
government in form of free services like education for children, health care and extreme cases,
shelter, this requires the government to spend more on these services when the level of
unemployment increases.
ii. Reduction in tax revenue: Government gets tax revenue by taxing the income people earn during
employment. When a person becomes unemployed, he/she can no longer be taxed because he
/she has no income and this reduces total government revenue from taxation.
iii. Loss of Output: Unemployment renders part of the labour force idle. The economy loses the output
that these people would have produced.

iv. Loss of Skills: unemployment causes loss of skills gained through education and training. Workers
who are unemployed for long period become de-skilled (loss of skills) as their skills become
increasingly outdated in a rapidly changing job market.
v. Discourage Education: Unemployment fluctuates and discourages education system. Unemployed

people cannot educate their children and unemployed people who are adequately educated
demoralise others from seeking education.
vi. Crime: unemployment breeds a pool of potential criminals and people of socially unbecoming
behaviour engaged in prostitution, gambling, corruption, drug trafficking. ... this is because people
attempt to get an income for survival since they cannot get it legally through employment.
vii. Income Inequality: unemployment increases income inequality. The unemployed labour does not
earn income while those employed continue to earn wages and salaries and this end result in the
increased income gap between the employed and unemployed.
viii. Etc.
d)The following strategies shoud be adopted by the government of Rwanda to reduce unemployment
problem :
i. Controlling population to reduce the growth of labour force: The population control campaigns
should be carried out by the East African governments in order to reduce the rate of labour markets.
ii. Economic Stability: This should be encouraged by adopting desirable macroeconomic policies
which facilitate diversification of production base into export oriented, based on labour intensive
technique of production.
iii. Wage policies: There is to overcome the constraints on the free functioning of the labour market
and efficiency of resources allocation which impact relatively on the level of productive employment.
iv. Industrialisation: There is a need to expand and diversify industrial sector of the East Africa
countries. Industrialisation through forward and backward linkages creates employment
opportunities that would help to solve the problem of unemployment in east Africa.
v. Encouraging Foreign Investors: Direct foreign investment should be encouraged and promoted by
putting in place favourable policies such as granting tax holidays to investors, subsidising the costs
of production for the foreign investors creating conductive investment climate so as to encourage
and promote production which creates employment opportunities for the people at the end hence
solving the problem of unemployment.
vi. Educational Reforms: In order to address the root causes of unemployment, education curriculum
should meet the changes to match the labour market demands.

vii. Ensuring political stability: Efforts should be put by the East African countries to improve on the
security within the region so that both local and foreign investors are attracted to start business
ventures in different productive activities for the local people.
viii. Use of Appropriate Technology: East African Countries should emphasize the use of labour
intensive technology as opposed to capital intensive technology so that the abundant labour supply
is absorbed by the different production units.
ix. Reducing the retirement ages: Voluntary retirement should also have encouraged so that young
unemployed labour force can get the opportunity to replace the old ones
x. Reduction in the employment of foreign Expatriates: This can be done by the indigenisation of all
the sectors of the economy so as to avoid employment of foreigners.
xi. Encouraging Urban Rural -Migration and rural –rural migration policies: In order to pull the labour
force that is concentrated in town centres to move back to rural areas so as to solve the problems of
rural areas, there is a need to relocate of industries in rural areas so as to solve the problems of
rural –urban migration and open urban employment.
xii. Etc.
14.a) It is important to control population because of the problems associated with a big size of population
like:
i. Dependants: Heavy dependence burden and therefore poor standard of living.
ii. Population pressure
iii. Low capital accumulation due to low saving, low investment, low income per capita.
iv. Diseases, poor health and housing conditions due to generally low standard of living
v. Problems of feeding population
vi. Poor quality of the population due to low education
vii. Unfavourable BOP
i. Rural urban migration with all its consequences like urban unemployment, creation of slums, crime,
etc.
ii. Heavy government expenditure on social services increases
iii. High rate of income inequalities
iv. High rate of social evils like prostitution, witchcraft among others.

v. Increased pressure in land.
vi. Increased pressure on infrastructure like social services.
vii. High rate of brain drain in search for employment.
viii. Unemployment problem.
ix. Etc.
b) Population census is the process of counting to establish the number of people in a particular area at
a particular time.
Importance or reasons for carrying out population census in Rwanda :
i. It gives the total population figure which is important in planning for food production, imports, etc.
ii. It helps in establishing population growth rate which should always be less than the growth of
national income
iii. It shows the distribution of population in age group which is helpful to the government to plan
schools, medical facilities, employment etc. and the business people to make investment
decisions according to the demand of each age group.
iv. It shows geographical distribution of population which is helpful to the government in regional
allocation of resources and infrastructure.
v. It shows the quality of population according to skills. This is useful in manpower planning.
vi. It shows the rate of immigration which is helpful to the government to plan increased population
and regulate immigrants.
vii. It shows the composition of population according tosex which helps the government to plan the
needs for each sex.
viii. It shows the distribution of population as citizens and non- citizens which is helpful in limiting
activities of non- citizens e.g. ownership of property, work permits, immigration laws, etc.
ix. It shows the marital status of the people as married, single, divorced, separated and widows. The
government can thereafter plan for each group accordingly e.g. to establish a fund to help widows,
to strengthen marriage laws etc.
x. Population figures are helpful in the calculation of per capita income which indicates the level of
standard of living of people in the country.
xi. Population figures can be used by the government to solicit funds for supporting family planning
and other population programmes.

xii. During the census information like occupation, type of housing, sources of income etc. is
collected and this is helpful for planning.
c)Difficulties (Problems) met in carrying out population census in Rwanda :
i. Lack of qualified personnel. In most cases, the census is conducted by village chiefs and school
teachers who may lack complete competence to conduct the exercise.
ii. Poor infrastructure makes some places unreachable
iii. A census costs require a lot of money which poor countries cannot afford
iv. Some people live in remote areas which are difficult to reach, because of mountains, deserts and
forests.
v. Wars and instabilities make counting difficult since people are scattered everywhere.
vi. Nomads (People who move from place to place) also make counting difficult, as it is difficult to
locate them on the census day.
vii. Illiterate persons are unable to provide required information.
viii. Some people do not tell the truth for economic, political or religious reasons. E.g. some people
think the government will use the data to charge them more taxes.
ix. Traditions and cultures are a problem. For example, some cultures do not allow people to count
their children. Some believe that after counted they die. Such people even hide from census
personnel.
x. Etc.
15. A country X is a developing country in Africa. It has choosen the development of agriculture as a
strategy of economic development.
a) The problems that hinder development of agriculture in the process of economic development are:
i. Shortage, poor quality of land.
ii. Land fragmentation that hinder the mechanization
iii. Land deterioration through soil erosion, deforestation and non- use of fertilizers
iv. Shortage of capital (money) to improve agriculture for farmers.
v. Shortage of skilled labour. Most of farmers in Rwanda are low skilled or illiterate and this
hinders the use of new agricultural technics and technologies.
vi. Inadequate extension education. The ratio of extension workers to farmers is still very low.
vii. Inadequate funds to carry out research on new methods of farming and new crops.
viii. Limited markets due to poor transport, low incomes and high tariffs imposed on agricultural
exports by other countries.
ix. Low prices for agricultural products because of low income elasticity of demand and
competition from artificial fibres.
x. Risks and uncertainties like drought during dry seasons, floods in low areas, change in
demand, and most insurance companies do not insure agricultural risks.
xi. Shortage of credit facilities. In Rwanda interest rate is still very high and many farmers have no
collateral securities.
xii. Over population which leads to high consumption and low surplus for investing in agriculture.
xiii. Etc.
b) Five reasons to explain how the development of agriculture should facilitate industrial development
i. Agriculture provides food for workers in the industrial sector
ii. It provides raw materials for use in industries
iii. It provides market for industrial products like fertilizers, pesticides, etc.
iv. It provides foreign exchange for importing capital and maintenance facilities of the industrial sector
v. It releases labour to the industrial sector
vi. It provides tax revenue for improving infrastructure required for the industrial sector
vii. It provides income to rural people which is used to buy products from industrial sector
viii. Etc.
c)The problems that hinder mechanization of agriculture in Rwanda include:
i. It requires high skills to operate machines which are lack in LDCs
ii. It requires a large amount of capital to implement which is lack in LDCs
iii. It requires larges pieces of land which is scarce in LDCs due to increase in population
iv. It requires a good and efficient agricultural planning which is not possible in terms of costs and
management in LDCs.

v. Relief of the area may not be suitable for the machines. E.g. Northern Province in Rwanda has
steep slopes which make mechanization difficult.
vi. Attitude towards mechanization is very poor because of high levels of illiteracy, cultural beliefs and
poverty.
vii. The approach may be inapplicable where human judgement is necessary during the production
process.
viii. Underdeveloped infrastructure and technology limits the use of machines since they require a
well- developed infrastructure like roads, network etc.
ix. Small market for the output discourages the farmers from using machines so as to increase output
since it may lead to surplus and a fall in prices.
x. Poor land tenure system where land is fragmented (divided into fragment) and owned by absentee
landlords.
xi. Machines sometimes destroy the ecology of the soil since they may not be appropriate to the
structure.
xii. Etc.
16. Labour is a human factor of production and therefore can be motivated to increase its efficiency.
Increase in its wage rate is one of different ways that can be used to promote its efficiency.
a) Efficiency of labour is measured in output per man hour (i.e. output per unit labour input). the quality of
the employed labour force determines its effectiveness or productivity or efficiency of labour refers to the
ease with which labour is able to produce good quality and high quantity output in the shortest time
possible.
Any others different factors that can promote the efficiency of labour.
i. Physical condition of labour (Health and well-being of the worker) : If the health conditions of
labour , levels of nutrition of the labour force is poor , its efficiency will be low and vice versa.
ii. Level of technology : Where modern equipment is provided and used such as computers,
efficiency of labour tends to be high compared to situations where primitive or traditional
technology is used.
iii. Working conditions of labour : When these are good especially job security, transport
allowances, etc. efficiency of labour will be high and it will be low when the conditions are poor.
iv. Degree of specialization : if labour is highly specialized and skilled, it will become more
experienced and efficient.

v. Quality and quantity of other factors of production : If other factors of production are available
and of high quality, labour efficiency will be high and it will be low if the others of factors are of
poor quality.
vi. Political atmosphere : Political security encourages concentration and efficiency among
workers but where instabilities prevail labour and tends to be inefficient because it cannot
settle at work.
vii. Climate conditions : Harsh or unfavorable conditions such as very hot and very cold tend to
make labour inefficient but if conditions are ideal or favourable, labour will be efficient.
viii. Skill, education and experience
ix. Environmental conditions
x. Managerial and supervision
xi. Wage and other incentives
xii. Qualities of the worker
xiii. Supervision
xiv. Organisation
xv. Cooperant factors, etc.
b) Manpower is the labour force within a country. In any given economy, the quantity and quality of labour
as a factor of production is important to the labourers themselves, the employers, the government, and the
economy as a whole.
Most developing countries are faced with numerous manpower related problems, which include among
others the following:
i. Excess labor supply in some sectors of the economy, agriculture for instance
ii. Scarcity of labor in some sectors of the economy, medical services for instance
iii. Unemployment and underemployment : In LDCs there is widespread unemployment and

underemployment. This is due to low production, seasonal variations in economic activity,
structural imbalances and discrimination in the labor market. There is need for proper employment
policies.
iv. Low skills and competence due to low and poor education system
v. Low level of mobility of labor (occupational mobility of labor)

vi. Brain drain of highly skilled manpower to developed countries
vii. Education system which prepares students for white collar jobs
viii. High rural urban migration due to an urban based education system
ix. Poor health due to poor feeding and diseases like VIH/AIDS.
x. Over dependency on certain categories of labour e.g. in consultancy work.
xi. Educated people are trained for white collar jobs which are not readily available
xii. Rate of utilization of labor i.e. InLDCs, some of the labor is underutilized and at time people are
employed in position which are not in line with their field of training. There is a decency of
preferring to employ expatriates instead of employing the indigenous people.
xiii. Etc.
c) Measures to be taken to minimize the manpower problems in developing countries :
i. Appropriate manpower planning necessary to minimise such irregularities
ii. Redeployment of the workforce should be undertaken to reduce shortage of manpower in some
sectors of the national economy.
iii. The education system should be revised to avoid the production of more job seekers instead of
more job makers should be produced.
iv. Retrenchment i.e. old people, the sick, and the very disabled workers should be terminated to
create an effective labour force.
v. Official exchange of manpower should be enhanced between governments, to not only reduce
shortage of indigenous manpower but also increase the supply of labour in all productive sectors of
the economy.
vi. Promotion of science and technology in all the needy fields e.g. medical, engineering, etc.
vii. Encourage the indigenous manpower to return home to serve in fields where there are apparent
shortages.
viii. There is need to improve working conditions and increase workers’ morale so as to reduce brain
drain.
ix. Encouragement of local entrepreneurs by enabling them to acquire loans so as to increase the
supply of local entrepreneurs.
x. Etc.


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REPUBLIC OF RWANDA

GASABO DISTRICT ECONOMICS Model question basic

For preparation of national exam

TOTAL MARKS: 100 MARKS

FINAL EXAMINATION MARKING GUIDE 2022/2023

SECTION A: ATTEMPT ALL QUESTIONS. (55 marks)

 1. Choose the correct answer. (4 marks)

a) In a subsistence economic system, resources are allocated by:

 ii) Traditional and customary institutions.

b) Consumer sovereignty in a free enterprise economy implies that:

c) In a centrally planned economy, there is, except:

d) Which of the following doesn’t characterize mixed economies?

 ii) Public goods are ignored in the economy.

 c) These are financial markets which deal in short term loans.

ii) Capital markets

iii) Foreign exchange

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iv) Future market

 a) It is where contracts for delivery at some future date are traded.

 3. Use appropriate economic terms to fill in the gaps. (5 marks)

b) If two firms at different stages of production merge, it is called a vertical merger.

c) If two firms in unrelated lines of business merge, it is called a conglomerate merger.

a) Calculate the comparative advantage of the two countries. (3 marks)

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 At 1500 FRW: 10+18=2810 + 18 = 2810+18=28

 At 1550 FRW: 7+17=247 + 17 = 247+17=24

 At 1600 FRW: 6+16=226 + 16 = 226+16=22

 At 1650 FRW: 5+15=205 + 15 = 205+15=20

 At 1800 FRW: 4+12=164 + 12 = 164+12=16

 At 1900 FRW: 2+6=82 + 6 = 82+6=8

[Market demand curve plotted]

 6. Define the following terms:

a) Gross Domestic Product (GDP). (2 marks)

b) Per capita income. (2 marks)

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 7. Explain any five determinants of demand for labor. (5 marks)

 Technology: Technological advancements can either increase or decrease labor demand,

 8. A) what is meant by taxation? (1 mark)

b) Explain the effect of taxation on:

ii) Physical investment. (2 marks)

 9. A) what is unemployment? (1 mark)

b) Describe the problem of voluntary unemployment. (4 marks)

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 Expectation of higher wages.

 Preference for leisure or other non-work activities.

 Availability of financial support from savings or family.

 a) Fear of rising costs.

 a) Distinguish between import quota and import duty. (2 marks)

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 Assess the effects of increased money supply in an economy. (15 marks)

 Increased money supply can have various effects on an economy:

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 A) Dangers of Overdependence on Aid for Developing Countries (8 marks)

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 b) Benefits for Developed Countries in Giving Assistance to Developing Countries (7 marks)

6. Environmental Benefits: Assisting developing countries in sustainable development can have

 A) Macroeconomic Condition in Rwanda (1 mark)

 Inflation: Rwanda is experiencing inflation, characterized by a persistent increase in the prices of

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Policies or measures to control inflation in developing countries