2023 NABTEB GCE Advanced Economics Answers – Nov/Dec

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NABTEB ADVANCE ECONOMICS SECTION A ANSWER

(1)
(I) Cause: A change in demand is caused by factors such as consumer preferences, income, prices of related goods, while a change in quantity demanded occurs due to a change in the price of the specific product.
(ii) Effect on the Demand Curve: A change in demand shifts the entire demand curve, either leftward (decrease) or rightward (increase), whereas a change in quantity demanded causes a movement along the existing demand curve.

(1b)
(i) Cost of production: Including labor, raw materials, technology, etc.
(ii) Natural conditions: Such as weather, availability of resources, etc.

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(2a)
Market: It refers to the environment or arrangement where buyers and sellers come together to exchange goods and services.

(2b)
(i) Perfect market: Uniform prices, homogeneous products, perfect information; Imperfect market: Differentiated products, asymmetrical information, varying prices.
(ii) Perfect competition: Many buyers and sellers, easy entry and exit; Imperfect competition: Few dominant sellers, barriers to entry.

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(3a)
(I) Production: It is the process of converting inputs (resources such as labor, capital, raw materials) into outputs (goods or services) that are usable and desired by consumers.

(3b)
(i) Risk-taking: Bearing uncertainties and risks associated with starting and running a business.
(ii) Innovation: Introducing new ideas, methods, or products to the market.

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(4)
(i) Investment in Infrastructure: Better roads, ports, and transportation networks.
(ii) Efficient Logistics: Streamlining storage, handling, and delivery mechanisms.
(iii) Technology Integration: Implementing modern technologies for tracking and managing inventory.
(iv) Government Policies: Creating supportive policies for fair trade and efficient distribution.

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(5)
(i) Double coincidence of wants: Both parties must want what the other has.
(ii) Lack of a measure of value: Difficulty in determining the fair exchange rate.
(iii) Divisibility: Some goods cannot be easily divided for exchange.
(iv) Storage and perishability: Issues with storing certain goods or perishable items for future exchange.

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(6a)
A Central bank is an institution that oversees a country’s monetary policy and regulates its financial system. It manages a nation’s currency, sets interest rates, supervises commercial banks, and controls the money supply.

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(6b)
(I) Customer deposits: Funds held in savings, checking, or other accounts by customers.
(ii) Bank borrowings: Money borrowed from other banks, financial institutions, or the central bank to meet short-term liquidity needs.

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(7)
(i) Total cost: Total cost refers to the entire expense incurred by a firm in producing a specific level of output. It encompasses all costs, including fixed and variable costs, associated with production.
(ii)Average cost: Average cost is the total cost divided by the quantity of output produced. It represents the cost per unit of output and is calculated by dividing the total cost by the quantity produced.

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(8)
(i) Improving infrastructure: Enhancing transportation, communication networks, and utilities.
(ii) Providing incentives: Offering tax breaks, subsidies, or other financial incentives to attract foreign investors.
(iii) Political stability and policy consistency: Ensuring a stable political environment and consistent policies to reassure investors about the safety of their investments.
(iv) Reforming regulations: Streamlining bureaucratic processes, reducing red tape, and simplifying regulations to facilitate easier investment processes.

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(9)
-Personal income: It is the total income received by individuals from all sources, including wages, salaries, investments, and other sources before deduction of taxes.
– Disposable income: It is the income remaining after deducting taxes from personal income. It represents the amount of money individuals have available for spending and saving after taxation.

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(10a)
(I) Stabilizing oil markets: OPEC aims to stabilize oil prices by managing production levels among member countries to avoid extreme fluctuations.
(ii) Ensuring fair and stable returns: OPEC also seeks to ensure fair and stable returns for oil-producing countries by collectively regulating oil production and prices.

(10b)
(i) Price volatility: OPEC sometimes struggles to control price volatility due to factors like geopolitical tensions, fluctuations in demand, and non-member countries’ production.
(ii)Compliance issues: Member countries may not always adhere to agreed-upon production quotas, leading to challenges in maintaining market stability and achieving collective goals.

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PART III
( ANSWER ANY THREE QUESTIONS )

(16)
(I) Access to Raw Materials: Industries often locate close to sources of raw materials to reduce transportation costs. For instance, a steel plant might be near iron ore deposits or a paper mill close to forests for wood supply.
(ii) Transportation and Infrastructure: Proximity to transportation networks like ports, highways, and railways is crucial for industries. Access to these facilitates the movement of goods, reducing logistical expenses.
(iii) Labor Availability and Skills: Industries tend to locate where there’s an available workforce with the required skills. Areas with a skilled labor force or where labor costs are competitive can attract industries.
(iv) Market Access: Proximity to markets is vital. Industries often set up near their target consumers to reduce distribution costs and respond quickly to demand.
(v) Government Policies and Incentives: Government policies, such as tax breaks, subsidies, or incentives, can significantly impact industry location. Certain areas may offer favorable conditions or special economic zones to attract businesses.

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(17a)
Public debt refers to the total amount of money owed by a government to creditors, individuals, institutions, or foreign governments. It’s the accumulation of borrowing by the government over time through issuing bonds, treasury bills, and other securities to finance its expenditures when its revenues are insufficient to cover its expenses.

(17b)
(i) Interest Payments: As the debt increases, so do the interest payments on that debt. This means a larger portion of the government’s budget is allocated to paying off these interest obligations, reducing the available funds for other essential services or investments.
(ii) Crowding Out Private Investment: High levels of public debt can lead to higher interest rates, which can crowd out private investment. When the government borrows excessively, it competes with private borrowers for available funds, potentially raising interest rates for everyone.
(iii) Potential Inflation: If a government resorts to printing money to cover its debt obligations, it can lead to inflation. An excess supply of money without a proportional increase in goods and services can decrease the value of money, leading to rising prices.
(iv) Impact on Future Generations: The burden of repaying the debt falls on future generations. Excessive debt can limit the government’s ability to invest in education, infrastructure, and other areas that contribute to long-term economic growth.
(v) Credit Rating and Investor Confidence: High levels of debt can negatively impact a country’s credit rating, making it more expensive for the government to borrow money. It can also reduce investor confidence in the country’s economic stability, potentially leading to capital flight and decreased foreign investment.

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(19a)
Economic planning refers to the process where governments or authorities develop strategies, policies, and frameworks to manage and allocate resources within an economy to achieve specific economic goals or targets.

(19b)
(i) Inefficient Implementation: Often, the plans formulated may lack effective execution due to bureaucratic hurdles, corruption, inadequate infrastructure, or a lack of capacity within institutions responsible for implementation.
(ii) Dependency on External Factors: Economic plans in West Africa might face challenges due to heavy reliance on external factors such as global market fluctuations, international aid, or commodity prices, which can destabilize the economy and disrupt planned development initiatives.
(iii) Limited Data and Forecasting: Accurate data and reliable forecasting are crucial for effective economic planning. However, in many West African countries, insufficient data collection methods and unreliable statistical information hinder the precision and effectiveness of economic plans.

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