WAEC SSCE - Economics - 1992

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The most basic concern of economists is to allocate scarce resources in order to satisfy human wants. This means that economists study how to best use limited resources, such as time, money, and natural resources, to meet people's needs and desires. They look at how to distribute goods and services, as well as how to produce and consume them in the most efficient and effective way possible. Ultimately, the goal of economics is to improve the standard of living for all members of society by optimizing the use of available resources.

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The most comprehensive definition of Economics is "the study of human behavior in the allocation of scarce resources." This definition encompasses a broad range of economic activities, including buying and selling, the organization of industries and markets, national development planning and budgeting, and the study of market forces as they affect human behavior. Economics is concerned with how individuals, businesses, and governments allocate limited resources to meet their needs and wants. Resources are scarce, which means that not everyone can have everything they want. Economics seeks to understand how people make choices in the face of scarcity, how markets function to allocate resources, and how public policies can be used to improve economic outcomes. In summary, while all of the options presented touch on aspects of economics, the most comprehensive definition is one that emphasizes the study of human behavior in the allocation of scarce resources. This definition encompasses a broad range of economic activities and provides a framework for understanding the choices that people make in the face of scarcity.

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Money as a unit of account refers to its ability to be used to measure the value of goods and services. It can be counted in units, but this is not the only requirement for it to be a unit of account. Money serves as a common denominator for expressing the value of goods and services. It facilitates exchange by providing a standard measure for determining the value of goods and services in terms of money. Money can also be used to store value for future payments, but this is not necessarily tied to its function as a unit of account.

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The greater burden of taxes on essential goods is typically borne by the low-income group. Essential goods refer to basic goods and services that are necessary for people's daily lives, such as food, clothing, housing, and healthcare. These goods are generally consumed by all income groups, but the low-income group spends a higher proportion of their income on essential goods than the middle or high-income groups. When taxes are imposed on essential goods, it can significantly impact the purchasing power of the low-income group. They may have to spend a higher proportion of their income on taxes, leaving less money for other essential items. In contrast, the high-income group may not feel the impact of such taxes as much because they can afford to pay for these goods and services at higher prices. Therefore, the greater burden of taxes on essential goods is borne by the low-income group, who have limited financial resources and are already struggling to make ends meet. Governments should be cautious when imposing taxes on essential goods and consider the impact on the low-income group.

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A proportional tax is a tax whose percentage rate remains constant as the tax base increases. This means that everyone pays the same percentage of their income or property value in taxes, regardless of how much money or property they have. For example, if the tax rate for a proportional tax is 10%, then someone who earns $10,000 per year would pay $1,000 in taxes, while someone who earns $100,000 per year would pay $10,000 in taxes. The percentage rate of the tax remains the same (10%), but the amount of taxes paid increases as the tax base (income) increases. Therefore, the correct answer is - "percentage rate remains constant as the tax base increases".

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The market price of a commodity is determined by the interaction of demand and supply. In simple terms, when a commodity is in high demand but there is limited supply, its price tends to increase. On the other hand, when there is a surplus of supply but low demand, the price tends to decrease. Therefore, the equilibrium price is reached at the point where the quantity demanded by consumers is equal to the quantity supplied by producers. This interaction between demand and supply is the primary determinant of the market price of a commodity. The law of demand states that as the price of a commodity increases, the quantity demanded decreases, and vice versa, which is a crucial factor in determining the equilibrium price in the market.

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Near money refers to financial assets that are not actual money, but can be easily converted into cash or used as a substitute for money. Examples of near money include savings accounts, certificates of deposit (CDs), money market accounts, and government bonds. These assets are not considered actual money because they are not generally accepted as a medium of exchange, but they are highly liquid and can be quickly converted into cash when needed. Near money can be an important part of an individual's or company's financial portfolio because it provides a safe and relatively stable way to earn interest on funds that may be needed in the short-term.

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A society that is on its production possibility curve has attained both full employment and full production. The production possibility curve is a graphical representation of the maximum amount of goods and services that a society can produce given its available resources and technology. Any point on the curve represents a combination of two goods that a society can produce using all of its available resources. If a society is on the curve, it means that it is using all of its resources efficiently to produce the maximum amount of goods and services possible. This also means that the society has achieved full employment, where all available workers are employed and contributing to the production process. Similarly, the society has achieved full production, where it is producing the maximum amount of goods and services that its resources and technology allow. Therefore, - "has attained both full employment and full production" is the correct answer.

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Economics is a social science because it deals with how humans behave when making choices about how to allocate limited resources that have alternative uses. It is related to the production and consumption of goods and services, and how these goods are distributed among individuals and groups. In other words, economics is concerned with the study of how people make decisions in order to satisfy their wants and needs, given that resources are scarce.

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In economics, production is complete when goods and services reach the consumer. The production process starts with the conversion of raw materials into finished products, which are then distributed through the supply chain to retailers, wholesalers, and finally to consumers. Production is not complete when goods are produced in factories, sold to wholesalers or retailers, or when prices are fixed for goods and services. These are important steps in the production and distribution process, but they do not represent the end goal of production, which is to satisfy the needs and wants of consumers. Therefore, the correct answer is - "goods and services reach the consumer".

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Land is often different from other factors of production because it is a free gift of nature, which means it is not created by human effort or investment. Unlike capital, labor, and entrepreneurship, land is a fixed and limited resource that cannot be easily increased or decreased. It also has different grades, which means that some lands are more productive than others, depending on their natural characteristics such as fertility, topography, and location. Land can be owned by individuals or the government, but regardless of the owner, the supply of land is finite and cannot be replicated.

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Economic growth is the rate of increase in a country's full employment and real output. In simple terms, economic growth refers to an increase in the production of goods and services in an economy over time. It is usually measured by the change in real Gross Domestic Product (GDP) or Gross National Product (GNP) over a given period. Full employment refers to a situation where there is no cyclical unemployment in an economy, meaning that everyone who is willing and able to work can find a job. Real output, on the other hand, refers to the total amount of goods and services produced in an economy adjusted for inflation. Therefore, when a country experiences economic growth, it means that there is an increase in the number of goods and services produced in the country and more people are employed, which leads to higher incomes and a better standard of living. Economic growth is generally considered a positive development as it leads to an increase in a country's overall economic welfare.

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A change in supply implies a shift in the supply curve, either to the left or to the right. When supply increases, the curve shifts to the right, indicating that more of the product is being produced and supplied at every price level. On the other hand, when supply decreases, the curve shifts to the left, indicating that less of the product is being produced and supplied at every price level. A change in supply does not result in a movement along the supply curve, nor does it affect the price and quantity supplied directly. However, it can indirectly affect the price and quantity supplied by influencing the equilibrium point where supply and demand intersect.

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Money supply is the total amount of currency in circulation and demand deposits in a country's economy. It includes physical currency, such as coins and banknotes, that is in circulation and readily available for transactions. It also includes demand deposits, which are funds held in checking accounts that can be withdrawn at any time by depositors. Money supply does not include time deposits or saving deposits, as these are not considered to be immediately available for transactions. Time deposits are funds held in bank accounts that require a certain period of time to pass before they can be withdrawn without penalty, while savings deposits are typically held for longer periods of time and may have restrictions on how often withdrawals can be made. Therefore, the correct answer is - "currency in circulation and demand deposits".

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The option that is not a good reason for the importation of agriculture in West African countries is: "provide raw materials only for foreign industries." This is not a good reason because it suggests that agriculture is only useful for exporting raw materials to other countries, and not for supporting the domestic economy. Agriculture is an important sector in West African countries, providing employment for a large percentage of the population, generating tax revenue, and serving as a major source of foreign exchange earnings. Additionally, agriculture provides raw materials not only for foreign industries but also for domestic industries involved in import substitution, which aims to reduce dependence on imports and strengthen the domestic economy. Therefore, the option that suggests that agriculture only provides raw materials for foreign industries is not a good reason for importation of agriculture in West African countries.

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The situation where government expenditure in a fiscal year exceeds its revenue is referred to as a budget deficit. This means that the government has spent more money than it has earned in that year, which can result in a negative impact on the economy. A budget deficit can occur for a variety of reasons, such as a decrease in tax revenue or an increase in government spending. In order to fund the deficit, the government may need to borrow money, which can lead to an increase in national debt. Alternatively, the government may implement policies to reduce spending or increase revenue in order to balance the budget.

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As a stockholder, you own a portion of the business you have invested in, which is represented by shares. When the business makes a profit, the profits are divided among the shareholders. This is done by paying out dividends, which are a portion of the profits distributed to each shareholder based on the number of shares they own. So, in summary, as a stockholder, you receive a share of the profits of the business in the form of dividends. You do not receive wages or salaries, nor are you entitled to gifts as a result of your ownership in the business.

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Money becomes a very poor store of value in a period of inflation. Inflation refers to a general increase in the prices of goods and services in an economy over time. When inflation occurs, the purchasing power of money decreases, meaning that the same amount of money can buy fewer goods and services than before. This is because the value of money is eroded by the rising prices. As a result, during inflation, money becomes a poor store of value because its real value decreases over time. If you save money during a period of inflation, you will be able to buy fewer goods and services in the future with the same amount of money. This is why people tend to invest their money in assets that can keep up with or outpace inflation, such as real estate, stocks, or gold.

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The largest part of the revenue of a country is typically derived from indirect taxation. Indirect taxes are taxes on goods and services that are paid by consumers when they purchase them, such as value-added tax (VAT) or sales tax. These taxes are collected by the government from businesses, but are ultimately paid by the consumers as they are included in the prices of goods and services. Indirect taxation is an important source of revenue for governments because it is easy to collect and does not require a large administrative infrastructure. In contrast, direct taxation, such as income tax, requires more administrative resources and may not generate as much revenue. Other sources of revenue, such as non-tax revenue, may also contribute to a country's overall revenue, but they are typically smaller than indirect taxation. Overall, indirect taxation is an important and reliable source of revenue for governments, and is often used to fund public services and infrastructure.

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Emigration does not increase the population of a country. Emigration means leaving a country to live permanently in another country. When people emigrate, they are leaving the population of one country and becoming part of the population of another country. This means that the population of the country they are leaving decreases, while the population of the country they are moving to increases. On the other hand, an increase in birth rate means more babies are born in a country, which increases the population. A decrease in death rate means fewer people are dying, which also increases the population. Immigration means people are moving into a country from another country, which increases the population. Early marriage, while not directly related to population growth, can lead to an increase in birth rate if the couples have children earlier in life. So, in summary, emigration does not increase the population of a country because it involves leaving one country to become part of the population of another country.

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The statement "Borrowers tend to gain" is not a negative effect of inflation. When the inflation rate is high, the purchasing power of money decreases over time. As a result, the value of loans and debts also decreases in real terms. Borrowers who borrowed money at a fixed interest rate before inflation occurred benefit from paying back the loan with less valuable money than when they borrowed it. Hence, inflation benefits borrowers because they pay back less in real terms than they borrowed. However, inflation has negative effects such as lenders earning less because the money they receive back has less purchasing power than the money they loaned out. Pensioners and salary earners on fixed income suffer because their income remains fixed, but the cost of living increases due to inflation. Exports tend to decline because higher inflation rates increase the costs of production, which results in higher prices for exports. Savings are discouraged because the value of savings decreases over time due to inflation, which discourages people from saving money.

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Indirect taxes are taxes that are imposed on goods and services when they are bought and sold, rather than on the income or profits of individuals or firms. These taxes are usually paid by the consumers who purchase the goods and services, but they may be passed on to the producers as well. Indirect taxes are not based on the principles of progressivity or regressivity, but rather on the value or quantity of the goods or services being taxed. Therefore, they can affect individuals and firms differently depending on their consumption patterns and the nature of the goods and services being taxed.

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The characteristic of a perfect competition that is NOT correct is "supply and demand are equal". In a perfect competition, many sellers and buyers are present in the market. The buyers and sellers have perfect knowledge of the market situation, meaning they are aware of the prices, products, and services available in the market. Products sold in a perfectly competitive market are identical, meaning that buyers do not differentiate between the products of one seller from another. Discrimination is not present in a perfectly competitive market, meaning that all buyers and sellers are treated equally. However, the concept of "supply and demand are equal" is not a characteristic of perfect competition. In fact, perfect competition assumes that supply and demand interact freely in the market to determine the equilibrium price and quantity. In other words, the equilibrium price is where the supply of goods and services meets the demand of buyers, but it is not a necessary condition for perfect competition. Instead, in perfect competition, no single buyer or seller has enough market power to influence the market price.

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If the price of oranges rises from the equilibrium price of 50k to 60k, there will be an excess supply of oranges in the market. This is because the higher price incentivizes more orange producers to supply oranges to the market, while at the same time, fewer buyers are willing to purchase oranges at the higher price. The result is that there are more oranges available than buyers willing to purchase them, leading to an excess supply of oranges. A shortage in the market would occur if the price of oranges remained at 50k but there were many buyers in the market, causing demand to exceed supply.

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The comparative cost doctrine of international trade suggests that countries should specialize in the production of goods and services in which they have a comparative cost advantage, and then trade with other countries for goods and services in which they have a comparative cost disadvantage. Comparative cost advantage means that a country can produce a good or service at a lower opportunity cost than another country. Opportunity cost is the cost of forgoing the production of one good or service in order to produce another. In other words, if a country can produce a good or service at a lower opportunity cost than another country, it has a comparative cost advantage in that good or service. For example, if Country A can produce one unit of wheat using fewer resources than Country B, but Country B can produce one unit of cloth using fewer resources than Country A, then Country A has a comparative cost advantage in producing wheat, while Country B has a comparative cost advantage in producing cloth. By specializing in the production of these goods and then trading with each other, both countries can increase their overall output and benefit from the trade. Therefore, the comparative cost doctrine of international trade suggests that countries should specialize in the production of goods and services in which they have a comparative cost advantage to achieve maximum efficiency and benefit from international trade.

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The market condition where profit is maximized when MR = AR = MC = P is known as "perfect competition." In a perfectly competitive market, there are many buyers and sellers, and no individual buyer or seller can influence the price of the product. This means that the market price is determined by the forces of supply and demand, and each firm is a price taker, rather than a price maker. In a perfectly competitive market, firms aim to maximize profits by producing at the point where marginal revenue (MR) equals marginal cost (MC). Since the market price is equal to the firm's average revenue (AR), profit is also maximized at this point. Thus, in a perfectly competitive market, firms cannot charge a price higher than the market price, and they cannot charge a price lower than the marginal cost of production without making a loss.

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The central bank is the main regulatory authority of the financial system of a country, which performs various functions to ensure the stability of the economy. Among the functions of the central bank, accepting deposits from the public is not one of them. The central bank does not accept deposits from the general public because its primary focus is on regulating the monetary policy of the country and maintaining financial stability. The functions of the central bank include: 1. Banker to the Government: The central bank acts as a banker to the government, where it manages the government's accounts, handles government transactions, and manages the public debt. 2. Banker's Bank: The central bank is the banker's bank, which means that it provides services to other commercial banks such as lending money, maintaining accounts, and clearinghouse facilities. 3. Responsibility for Monetary Policy: The central bank is responsible for implementing monetary policy, which involves managing the money supply and interest rates to control inflation and promote economic growth. 4. Lender of Last Resort: The central bank acts as a lender of last resort, which means it provides funds to banks or other financial institutions facing financial distress and helps prevent bank runs or systemic financial crises. In summary, the central bank performs crucial functions in regulating the economy and financial system of a country. However, it does not accept deposits from the public, as its main focus is on maintaining financial stability and regulating monetary policy.

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If the price of margarine rises substantially, some consumers may switch to buying butter instead, which would increase the demand for butter. This increased demand could result in an increase in the equilibrium price and quantity of butter. Therefore, the answer is that the equilibrium price and quantity of butter demand will likely increase.

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The mechanism in which the government sets a legal price for a commodity that is either lower or higher than the market equilibrium price is known as "price control." Price controls are a form of government intervention in the market to protect consumers or producers, but they can have unintended consequences, such as shortages or surpluses of the commodity, black markets, and reduced incentives for production or investment. In a perfectly competitive market, prices are determined by the forces of supply and demand, and the market reaches an equilibrium price where the quantity supplied equals the quantity demanded. However, price controls interfere with this natural mechanism and can lead to distortions in the market.

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Scarcity in economics refers to the situation where the available resources are limited or finite, while the wants and needs of people are infinite. This means that there are not enough resources to produce all the goods and services that people desire. As a result, scarcity forces individuals, businesses, and governments to make choices about what to produce, how to produce, and for whom to produce. Scarcity is not necessarily associated with a period of production, hoarding of goods, monopolization of resources, or famine, but rather with the fundamental economic problem of unlimited wants and needs conflicting with limited resources.

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The inflation caused by an increase in demand is known as demand-pull inflation. This type of inflation occurs when the demand for goods and services increases, but the supply cannot keep up with the demand. As a result, the prices of goods and services rise as people are willing to pay more to get what they want. Demand-pull inflation can be caused by several factors, such as an increase in consumer spending, an increase in government spending, or a decrease in taxes. When people have more money to spend, they tend to buy more goods and services, which leads to an increase in demand. If the supply cannot keep up with the demand, the prices of goods and services will rise. In summary, demand-pull inflation occurs when there is an increase in demand for goods and services that cannot be met by the supply. This leads to a rise in prices and can be caused by factors such as an increase in consumer or government spending or a decrease in taxes.

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When the government spends more money than it earns in revenue during a fiscal year, it results in a situation called a "budget deficit." This means that the government is operating at a loss and will need to borrow money to cover the shortfall. In other words, it has a negative balance or a deficit in its budget. It can happen due to various reasons such as increased government spending, decreased tax revenues, or unexpected expenses. A budget deficit is the opposite of a budget surplus, where the government earns more than it spends, and a balanced budget, where the government earns the same as it spends.

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