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CPA Economics – August 2026 Past Paper & Answers

Unit: Economics

20 Questions

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Download CPA Economics August 2026 past paper with detailed answers and marking scheme. This paper is based on KASNEB examination standards and is ideal for revision and exam preparation.

Access the full paper online, download the PDF, or study offline. Each question includes step-by-step solutions to help you understand key concepts in Economics.

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1a
Introduction to economics
​​Distinguish between “positive economics” and “normative economics”.
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1b
Introduction to economics
​​State TWO limitations of consumer sovereignty in a market economy.
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1c
Demand, supply and determination of equilibrium
​ ​​The demand and supply functions for a commodity in a regional market are given as follows: 
 
Qd = 540 - 4P 
Qs = 60 + 2P 
   
The government grants producers a subsidy of Sh.18 per unit. 
 
Required: 
(i) Determine the new equilibrium price paid by consumers.

(ii) Compute the new equilibrium quantity. 
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1d
Demand, supply and determination of equilibrium
​​(i)  Explain TWO ways in which knowledge of elasticity of demand might assist a firm in making pricing decisions.
 
 (ii)  Evaluate TWO likely welfare effects of imposing a binding maximum price on an essential commodity. 
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2a
Demand, supply and determination of equilibrium
​​Differentiate between “the short run” and “the long run” in production analysis.
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2b
Demand, supply and determination of equilibrium
​​State TWO sources of internal economies of scale.
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2c
Demand, supply and determination of equilibrium
​​Analyse FOUR likely effects of setting a statutory minimum wage above the market equilibrium wage.
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2d
Demand, supply and determination of equilibrium
​​A firm operating in an imperfect market has the following revenue and cost functions: 
 
​\(TR =\)​​\(150Q -\)​​\(3Q^2\)​
​\(TC =\)​\(​240 +\)​​\(30Q +\)​​\(3Q^2\)​
 
Required: 
(i) Determine the profit-maximising level of output.
(ii) Calculate the maximum profit.
(iii) Evaluate TWO welfare implications of monopoly power in an economy.  
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3a
National income
​​Distinguish between “economic growth” and “economic development”.
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3b
National income
​​Explain FOUR difficulties encountered when measuring national income in developing economies.
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3c
National income
​​The following national income information relates to a hypothetical economy for one year in billions of shillings: 
 
Gross domestic product at market price: 6,480 
Net factor income from abroad: 180 
Depreciation allowance: 420 
Indirect taxes: 260 
Subsidies: 80 
Population: 54 million 
 
Required: 
(i) Gross national product at market price. 
(ii) Net national product at factor cost.
(iii) Per capita income. 
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3d
National income
​​Describe FOUR ways in which reliable national income statistics could support development planning in a country.
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4a
Money and banking
​​Explain FOUR functions of money in a modern economy.
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4b
Money and banking
​​Outline FIVE instruments that a central bank might use to regulate money supply.
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4c
Money and banking
​ ​ ​​A commercial bank receives a new cash deposit of Sh.80 million. The required reserve ratio is 10%. 
 
Required: 
(i) Determine the credit multiplier.

(ii) Calculate the maximum total deposit creation in the banking system. 
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4d
Money and banking
​​(i)  Summarise TWO likely effects of increasing the reserve ratio on investment and employment.
 
(ii) Recommend FIVE measures that the government and central bank could combine to reduce an inflationary gap without undermining long-term productive capacity.  
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5a
Inflation and unemployment
​​Distinguish between “absolute advantage” and “comparative advantage” in international trade.
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5b
Inflation and unemployment
​​Highlight FIVE roles of Bretton Woods institutions in developing economies.
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5c
Inflation and unemployment
​​Explain SIX causes of persistent balance of payments deficits in developing economies.
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5d
Inflation and unemployment
​​(i)  Outline TWO potential benefits of regional economic integration to less developed countries. 
 
(ii)  Suggest THREE policy measures that could improve foreign debt sustainability in a developing economy. 
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