2020 - JAMB Economics Past Questions and Answers - page 2

Average Propensity to Consume (APC) is a measure of the percentage of income that is spent rather than saved. 

APC = C / DI

Income = 500

consumption = 400 

\(\frac{400}{500}\) = 0.8 

Cyclical unemployment is the component of overall unemployment that results directly from cycles of economic upturn and downturn.

Unemployment typically rises during recessions and declines during economic expansions.

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Collectivism is most closely associated with a socialist economy. In a socialist economy, the means of production (including state enterprises) are owned and controlled by the state or the community, reflecting the collective ownership and control central to collectivism.

The law of diminishing marginal utility states that as a consumer increases the consumption of a good or service, the marginal utility (the additional satisfaction) derived from each additional unit of the good or service decreases.

• A. is incorrect because total utility may still be rising even as marginal utility is falling.
• B. is correct because the law of diminishing marginal utility directly states that marginal utility falls as consumption increases.
• C. is incorrect because the law states that marginal utility must fall, not possibly rise.
• D. is partially correct, in that it describes the consumer may still be gaining additional utility, however, the key of diminishing utility is the decrease in marginal utility.

The question is asking about the relationship between tax rate and income in a proportional tax system. A proportional tax means the tax rate remains constant as income changes.

• Curve X: Represents a constant tax rate, regardless of income level. This accurately depicts a proportional tax.
• Curves Y and Z: Likely represent progressive or regressive tax systems, where the tax rate changes with income.