WAEC SSCE - Economics - 1995

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A budget is a summary of expected income and expenditure. It is a financial plan that outlines how much money an individual or organization expects to earn and spend over a given period, typically one year. A budget can be used by individuals, businesses, and governments to manage their finances, make informed financial decisions, and ensure that they are living within their means. The budget will show the expected income, such as salaries or revenues, and the expected expenses, such as rent, utilities, and other bills. By comparing the income and expenses, individuals and organizations can identify areas where they may need to reduce spending or increase income to balance the budget.

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Détails de la réponse

In perfect competition, the marginal cost (MC) curve represents the additional cost incurred by the firm for producing one more unit of output. The average cost (AC) curve represents the cost per unit of output, obtained by dividing the total cost by the quantity produced. When the MC curve intersects the AC curve, it indicates that the firm is producing at the lowest possible cost. If the MC curve intersects the AC curve from below at its lowest point, it means that the cost of producing an additional unit is less than the average cost of all the units produced. This situation is ideal for the firm since it is producing at the lowest possible cost and maximizing its profits.

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Détails de la réponse

The multiplier is the ratio of change in income to the expenditure that brought it about. In other words, it is the amount by which an initial change in expenditure, such as an increase in government spending or investment, will increase the total income in an economy. The multiplier effect occurs when the initial change in spending leads to an increase in income, which in turn leads to additional spending and further increases in income. The size of the multiplier depends on the marginal propensity to consume, which is the fraction of additional income that is spent on consumption. The higher the marginal propensity to consume, the larger the multiplier will be.

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Economics is a social science that studies how scarce resources are allocated to satisfy human wants. It focuses on understanding how people make decisions to allocate resources, such as time, money, and labor, to achieve their desired outcomes. Economics also examines how markets operate and how the interactions between buyers and sellers affect the prices of goods and services. In addition, it analyzes the role of governments and other institutions in regulating and influencing economic activity. The ultimate goal of economics is to improve the well-being of individuals and societies by promoting efficient and effective allocation of resources.

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Détails de la réponse

At optimum population level, a country has its highest output per head. Optimum population level refers to the size of population that can be supported by the available resources in a country without putting undue strain on the resources. When a country reaches its optimum population level, the available resources are utilized efficiently, resulting in higher productivity and output per capita. This means that each individual is able to produce more goods and services, which translates to higher standards of living for the population as a whole.

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Government can influence aggregate demand through various measures such as reducing personal income tax, creating employment opportunities, and increasing workers' fringe benefits. However, retiring a director-general in the public service or making compulsory deductions from salaries of all categories of workers are not measures that can directly influence aggregate demand. Therefore, the correct answer is: "Retirement of director-general in the public service" and "Compulsory deduction from salaries of all categories of workers."

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When a commodity has elastic demand, it means that consumers are sensitive to changes in its price. Therefore, an increase in the price of the commodity will lead to a decrease in the demand for the commodity. This is because consumers will be discouraged from buying the commodity due to the high price. Conversely, if the price of the commodity decreases, the demand for it will increase as consumers will be attracted to buy it due to the lower price. Therefore, the effect of an increase in price on the demand for a commodity with elastic demand will be a decrease in the demand for the commodity.

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Détails de la réponse

A point along a consumer's indifference curve shows a combination of two commodities from which the consumer derives the same level of satisfaction or utility. The consumer is indifferent between any points on the same indifference curve, as they provide the same level of utility. The indifference curve represents the different combinations of two goods that a consumer can choose to consume, while remaining indifferent or having the same level of satisfaction. Each point on the curve represents a different combination of the two goods, but with the same level of satisfaction or utility for the consumer. Therefore, a consumer's choice among different points on an indifference curve depends on his/her budget constraint or the price of the goods.

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The correct answer is "market size". Division of labor is a system of organizing work in which tasks are divided among workers to increase efficiency. However, for division of labor to work effectively, there must be a large enough market to accommodate the increased production that results from specialization. If the market is too small, there may not be enough demand for the increased production, and specialization may not be worthwhile. Therefore, market size is an important limiting factor in the application of division of labor.

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Political instability does not encourage the location of industries. Political instability can create an uncertain and unstable environment for businesses, which can make it difficult for industries to operate smoothly. In such an environment, there may be frequent changes in government policies, disruptions in supply chains, and a general lack of security, which can make it difficult for industries to operate efficiently and profitably. As a result, political instability can discourage the location of industries in a particular area.

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Effective demand in economics refers to the desire or willingness of consumers to buy goods and services, coupled with the ability to actually purchase them, i.e. backed by sufficient purchasing power. It is the combination of two factors - the willingness to buy and the ability to pay. Therefore, effective demand can be understood as the amount of a particular product or service that consumers are both willing and able to purchase at a given price level.

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Giffen commodities are those commodities for which demand increases as price increases. This is contrary to the law of demand which states that as the price of a good increases, the quantity demanded decreases. Giffen goods are usually inferior goods that are consumed out of necessity and have no close substitutes. As the price of the Giffen good increases, consumers have less income to spend on other goods, so they end up buying more of the Giffen good despite the higher price. This is because the income effect of the higher price outweighs the substitution effect.

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Preferential treatment is not a feature of a perfect market. A perfect market is characterized by a large number of buyers and sellers, homogeneity of products, absence of transport costs, and perfect knowledge of market situation. In a perfect market, all buyers and sellers have equal access to information and no one is given preferential treatment over another. This ensures that prices are determined solely by supply and demand, without any outside influences. Therefore, preferential treatment would disrupt the balance of the perfect market and make it imperfect.

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A monopolist is a sole supplier of a particular good or service with no close substitutes, and therefore, has the power to influence market prices. To maximize profit, the monopolist should attempt to equate marginal cost to marginal revenue. Marginal cost refers to the cost of producing one additional unit of output, while marginal revenue is the revenue generated by selling one additional unit of output. At the point where marginal cost equals marginal revenue, the monopolist is producing the optimal level of output that maximizes profit. If marginal revenue is greater than marginal cost, the monopolist can increase profit by producing more output. On the other hand, if marginal cost is greater than marginal revenue, the monopolist can increase profit by reducing output. Equating average cost to average revenue or fixing price and output may not result in maximizing profit, as it does not consider the marginal costs and revenues associated with each unit of output. Equating price to total cost is not a viable strategy as it would lead to losses.

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In economics, production refers to the process of creating goods and services that have value and utility for consumers. It involves using various inputs such as labor, capital, and natural resources to produce a final product that can be sold in the market. The ultimate goal of production is to satisfy the needs and wants of consumers by creating goods and services that they are willing and able to buy. Therefore, production involves the use of resources to create value and utility, which is an essential component of economic growth and development.

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The decision on what to produce is a problem in all economic systems. It is one of the fundamental questions of economics and refers to the allocation of scarce resources to the production of different goods and services. In a market economy, this decision is made by the interaction of supply and demand, while in a planned economy, it is made by central planning authorities. In a mixed economy, the decision is a combination of market forces and government intervention. Therefore, the problem of what to produce exists in all economic systems.

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The real value of money refers to what it can buy at a particular time, in terms of goods and services. It is determined by the purchasing power of the currency, which is the amount of goods or services that can be bought with a unit of currency. The purchasing power of money can change over time due to inflation or deflation, which can affect the value of money in terms of what it can buy. Therefore, the real value of money is not fixed and can vary depending on various economic factors.

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International trade takes place because of differences in production cost between countries. Each country has its own resources, labor, and technology that influence the cost of producing goods and services. Some countries may have lower production costs for certain goods or services than others, making it more cost-effective to import those goods or services from another country rather than producing them locally. This creates a demand for international trade as countries seek to take advantage of these differences and increase their economic welfare.

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The option that does not require the use of information from a census is "Controlling geographical mobility of labour among the states or regions". This is because controlling geographical mobility of labour involves policies and regulations to restrict or encourage the movement of people between regions or states, and it does not necessarily require census data to be effective. The other options such as allocating central government revenue, planning for development, demarcating constituencies, and providing social amenities all require census data to accurately assess the population, demographics, and needs of the states or regions in question.

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The objective of the Indigenisation policy in Nigeria was to reduce foreign dominance of the Nigerian economy by increasing Nigerian participation, protecting the national interest and security, and preventing foreign monopoly of the economy. The policy did not aim to eliminate foreign participation in the Nigerian economy. Therefore, the option "eliminate foreign participation in the Nigerian economy" is the correct answer.

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The greatest foreign exchange earner for Nigeria before the advent of petroleum was agriculture. Agriculture was a major source of revenue for Nigeria, and the country was a leading exporter of crops such as cocoa, rubber, palm oil, groundnut, and cotton. These cash crops were exported to countries like Britain, the United States, and other European countries. Agriculture was the mainstay of the Nigerian economy and played a significant role in the country's economic development until the discovery of oil in the late 1950s.

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The headquarters of the African Development Bank (ADB) is located in Abidjan, which is the economic capital of Côte d'Ivoire, a country in West Africa.

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Balance of trade refers to the difference between the value of a country's imports and the value of its exports over a specific period, usually a year. In other words, it is a measure of the net inflow or outflow of goods and services in and out of a country. If the value of exports is greater than the value of imports, the balance of trade is said to be positive, indicating a trade surplus. Conversely, if the value of imports is greater than the value of exports, the balance of trade is negative, indicating a trade deficit.

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Under the socialist economy, the decision on what to produce is determined by the Government. In a socialist economy, the Government owns and controls the means of production, and therefore, the Government decides what goods and services are produced and how they are distributed among the people. The decision is not based on the expected profit or price or preference of consumers, but rather on the needs and priorities of the society as a whole. The goal of a socialist economy is to ensure that everyone's basic needs are met, and resources are allocated in a way that benefits society as a whole, rather than just a few individuals or corporations.

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Oil was first discovered in commercial quantities in Nigeria in Oloibiri, a small community located in present-day Bayelsa State. The discovery was made on Sunday, January 15, 1956, by a team of Shell British Petroleum (now Shell Petroleum Development Company) led by a geologist, Mr. L.A.K. Jones. The discovery of oil in Oloibiri marked the beginning of Nigeria's oil industry, which has become the country's main source of revenue and foreign exchange.

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Net National Product (NNP) is the total value of goods and services produced by a country's residents and businesses in a given period, minus the depreciation of capital goods. In other words, NNP represents the total income earned by a country's citizens and businesses in a given period, after accounting for the wear and tear of equipment, buildings, and other capital assets used in the production process. Therefore, the correct option is: Gross National Product (GNP) less depreciation.

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Malthus observed in his theory that population was growing in geometrical progression. This means that the population was increasing exponentially, with each generation having more children than the previous one. For example, if a population starts with 100 people and grows at a rate of 2% per year, after 10 years it will have increased to 122 people, but after 20 years it will have increased to 149 people, and after 30 years it will have increased to 181 people, and so on. Malthus believed that this exponential growth in population would eventually outstrip the resources available to support it, leading to poverty, famine, and other forms of social and economic unrest.

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Marginal cost refers to the additional cost incurred in producing one more unit of a good or service. It is the extra cost that arises from increasing the output of a production process by one unit. This includes both the variable costs, such as the cost of raw materials and labor, as well as any additional fixed costs that are incurred, such as the cost of equipment or facilities. The formula for calculating marginal cost is the change in total cost divided by the change in quantity produced.

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Terms of trade refer to the ratio between the price of a country's exports and the price of its imports. It measures how much of a country's imports can be exchanged for a unit of its exports. For example, if a country exports crude oil for $100 per barrel and imports wheat for $200 per ton, the terms of trade would be 0.5 barrels of oil per ton of wheat. Generally, a higher ratio indicates that a country can purchase more imports for a given amount of exports, which is considered favorable for its economy.

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A tax whose rate increases as income increases is called a progressive tax. This means that the more income an individual or entity earns, the higher the percentage of their income they are required to pay in taxes. The aim of a progressive tax system is to ensure that those who can afford to pay more contribute a larger share of their income to fund government services and programs, while those with lower incomes pay a smaller share. The opposite of a progressive tax is a regressive tax, where the tax rate decreases as income increases.

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The economic system currently in operation in Nigeria is a mixed economy. This means that the economy combines elements of both capitalism and socialism, with both private and public sectors playing important roles in the economy. In Nigeria, the private sector is dominant in areas such as agriculture, manufacturing, and services, while the government plays a major role in the oil and gas industry, as well as in providing social services such as healthcare and education. The mixed economy model allows for some level of government intervention in the economy, while still allowing private businesses to operate and compete in the market.

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In economics, scarcity means that the resources available to produce goods and services are limited while the demand for these goods and services is unlimited. This means that the supply of goods and services is limited, and this limited supply cannot meet the unlimited wants of individuals. As a result, scarcity forces individuals, businesses, and governments to make choices about what to produce and how to allocate resources. Therefore, scarcity implies that we must choose between alternative uses of our limited resources.

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The law of demand states that as the price of a good or service falls, the quantity demanded of that good or service will increase, and conversely, as the price of a good or service rises, the quantity demanded of that good or service will decrease. This means that there is an inverse relationship between the price of a good or service and the quantity demanded of it. In simpler terms, people tend to buy more of a product when it is cheaper, and buy less of it when it is more expensive.

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The option that is not a function of an insurance company is "Collection of deposits from the public". Insurance companies do not collect deposits like banks, they collect premiums from policyholders. Insurance companies use the premiums collected to mobilize funds, encourage savings habits through life assurances, grant loans on a long-term basis for investment, and encourage investment by security of capital. However, they do not collect deposits from the public.

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(a) Equilibrium occurs where quantity demanded equals quantity supplied. From the schedule this is at a price of 7, where \(Q_d=Q_s=300\) units. At this price the plans of buyers and sellers exactly match, so there is neither shortage nor surplus.

(b) Excess demand occurs at prices below 7, where \(Q_d>Q_s\):

• At price 5: \(500-60=440\) units of excess demand.
• At price 6: \(400-150=250\) units of excess demand.

(c) Excess supply occurs at prices above 7, where \(Q_s>Q_d\):

• At price 8: \(400-250=150\) units of excess supply.
• At price 9: \(500-150=350\) units of excess supply.
• At price 10: \(600-50=550\) units of excess supply.

(d) The supplier is willing to sell most at the highest price, 10, where he is willing to supply 600 units. This reflects the law of supply, that a higher price encourages a larger quantity supplied.

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Government takes part in business enterprise for the following reasons:

• To provide essential goods and services: utilities such as water, electricity and public transport that the citizens need but the private sector may neglect.
• To provide services too costly for private investors: projects requiring very heavy capital, such as railways, refineries and steel plants, are often beyond private means.
• To prevent exploitation by private monopolies: government provides some services itself to ensure fair prices and protect consumers.
• To create employment: public enterprises provide jobs and help reduce unemployment.
• To generate revenue: profitable state enterprises add to government income.

(Other valid reasons: to ensure even development across regions, and to control strategic industries important to national security.)

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(a) Completion of the table

Average product is calculated as:

\[AP=\frac{TP}{L}\]

Marginal product is calculated as:

\[MP=\frac{\Delta TP}{\Delta L}\]

Thus:

\[P=\frac{36}{3}=12\text{ kg}\]

\[Q=\frac{60}{6}=10\text{ kg}\]

\[R=48-36=12\text{ kg}\]

\[S=60-60=0\text{ kg}\]

\[T=56-60=-4\text{ kg}\]

Variable units of labour	Fixed asset: land (hectares)	Total product (kg)	Average product (kg)	Marginal product (kg)
1	3	8	8	–
2	3	18	9	10
3	3	36	12	18
4	3	48	12	12
5	3	55	11	7
6	3	60	10	5
7	3	60	8.6	0
8	3	56	7	-4

(b) Total Product and Marginal Product curves

(c) Relationship between TP and MP

1. TP increases while MP is positive. From the first to the sixth worker, TP rises from 8 kg to 60 kg because each additional worker adds to output.
2. MP rises initially, reaching its maximum value of 18 kg at the third worker. Thereafter, MP falls, showing diminishing marginal returns.
3. TP reaches its maximum of 60 kg when MP is zero, at the seventh worker. The TP curve is therefore horizontal at this point.
4. When MP becomes negative, as with the eighth worker where MP is \(-4\) kg, TP falls from 60 kg to 56 kg.

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a. Meaning of a tax. A tax is a compulsory payment imposed by government on individuals and firms to raise revenue and achieve economic objectives, for which the taxpayer receives no direct or equivalent benefit in return.

b. The various tax systems. These describe how the tax rate changes as income (the tax base) changes.

• Progressive tax: the rate of tax rises as income rises, so higher earners pay a larger proportion of their income (for example, personal income tax with rising bands).
• Proportional tax: the rate of tax is constant at every level of income, so everyone pays the same percentage regardless of how much they earn.
• Regressive tax: the rate of tax falls as income rises, so the tax takes a larger proportion of the income of the poor than of the rich (many indirect taxes work this way in effect).

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Meaning. Inflation is a persistent and appreciable rise in the general price level, which reduces the purchasing power of money. Its effects on the economy are mixed but mainly harmful.

Harmful effects.

• Fall in purchasing power: the same amount of money buys fewer goods, so real income falls.
• Hardship for fixed-income earners: salary earners, pensioners and landlords on fixed rents suffer because their incomes do not rise with prices.
• Discourages saving: the real value of savings falls, so people are reluctant to save, reducing funds for investment.
• Redistribution of income: debtors gain and creditors lose, because loans are repaid in money of lower value; speculators and traders holding goods gain.
• Balance-of-payments problems: home-produced goods become dearer, so exports fall and imports rise, worsening the trade balance.
• Uncertainty: unpredictable prices discourage long-term investment and planning.

Possible favourable effect. A mild, creeping inflation can encourage producers, because rising prices raise profit expectations and may stimulate output and employment in the short run.

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West African countries are described as under-developed because they show the typical features of poverty and low economic advancement:

• Low per-capita income: average income per person is low, so living standards are poor.
• Over-dependence on agriculture and primary products: economies rely heavily on the export of raw materials with little processing.
• Low level of savings and investment: because incomes are low, capital formation is small.
• Widespread illiteracy: low levels of education and skill limit productivity.
• Low level of technology: production relies on crude, out-of-date methods.
• High rate of population growth: rapid population increase outstrips output and strains resources.
• High unemployment and underemployment.
• Poor infrastructure: inadequate roads, power, water and communications.
• Dependence on foreign aid and external loans.

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The Economic Community of West African States (ECOWAS) is a regional economic grouping. If it functions efficiently, it can hasten the economic growth of member states in the following ways:

• Creation of a larger market: the removal of trade barriers among members widens the market for each country's goods, encouraging greater production.
• Free movement of factors: free movement of goods, labour and capital allows resources to flow to where they are most productive.
• Economies of scale: firms produce for the whole region, lower their average costs and become more competitive.
• Industrialisation: the larger market and joint projects encourage the establishment of more industries.
• Increased intra-regional trade: members trade more among themselves, reducing dependence on countries outside the region.
• Joint development projects: members pool resources for roads, power and other infrastructure that single countries could not afford.
• Greater bargaining power: acting together, members negotiate better terms in world trade and attract more investment.

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a. Meaning of supply. The supply of a commodity is the quantity of that commodity which producers are willing and able to offer for sale at a given price over a given period of time. It is not merely the stock in existence, but the amount actually offered for sale at each price.

b. Factors that can change the supply of beans.

• Price of beans: a higher price encourages farmers to supply more, a lower price less.
• Cost of production: higher costs of seeds, fertiliser, labour or transport reduce supply.
• Weather and climate: good rainfall and favourable weather raise output, while drought, flood, pests or disease reduce it.
• State of technology: improved farming methods and equipment increase the quantity that can be supplied.
• Government policy: subsidies and low taxes raise supply, while heavy taxes reduce it.
• Prices of other crops: if maize becomes more profitable, farmers may switch land from beans, reducing bean supply.
• Number of farmers: more producers entering bean farming increases total supply.

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a. Definition of tariffs. Tariffs are taxes or duties imposed by a government on goods that cross its national boundary, chiefly on imports (and sometimes on exports). They raise the price of the affected goods.

b. Reasons for imposing tariffs.

• To raise government revenue: import and export duties are an important source of income.
• To protect infant industries: tariffs make imports dearer, giving young home industries room to grow.
• To prevent dumping: they discourage foreign firms from selling goods below cost in the home market.
• To correct a balance-of-payments deficit: tariffs reduce imports and so save foreign exchange.
• To protect employment: by discouraging imports, they safeguard jobs in local industries.
• For retaliation: a country may impose tariffs in response to tariffs placed on its own goods.

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The compilation of National Income Accounts in Nigeria faces several problems:

• Inadequate and unreliable data: statistics are scarce, incomplete or inaccurate.
• Large subsistence sector: much output (for example food grown and consumed at home) is not sold in the market, so it is hard to value.
• Illiteracy: many producers keep no records and cannot supply accurate figures.
• Problem of double counting: difficulty in separating final goods from intermediate goods can lead to values being counted more than once.
• Large informal sector: many small traders and artisans are outside official records.
• Shortage of trained personnel: too few qualified statisticians to gather and process the data.
• Problem of transfer payments: deciding what to include or exclude (pensions, gifts) is difficult.
• Income earned abroad and by foreigners: hard to measure accurately.