2023 - JAMB Economics Past Questions and Answers - page 4

Cost-push inflation will cause an increase in the cost of production. Cost-push inflation occurs when the costs of production, such as wages and raw materials, increase, leading firms to pass on these higher costs to consumers in the form of higher prices for goods and services. This upward pressure on production costs is a key characteristic of cost-push inflation.

Water in the ocean is an example of a free good. Free goods are goods that are available in abundance and do not require any effort or resources to obtain. They are not scarce, and their availability is not limited. In the case of water in the ocean, it is freely available and not subject to economic scarcity.

Scarcity is the fundamental economic problem arising from the imbalance between unlimited wants and limited resources. When resources are limited, individuals and societies must make choices about how to allocate those resources to meet their needs and wants.

Increased interest rates are typically used to combat inflation, not to close a deflationary gap. In the context of closing a deflationary gap, which is a situation where aggregate demand is less than aggregate supply, the focus is on stimulating economic activity.

Increasing interest rates tends to have a contractionary effect on the economy, potentially reducing borrowing and spending, which may exacerbate deflationary pressures. 

The other options are generally measures used to close a deflationary gap by increasing money supply, government expenditure, and reducing taxes, respectively.

Among all the determinants of economic growth, human capital is often considered the most important. Human capital refers to the skills, knowledge, education, and health of the labour force.

A well-educated and healthy workforce is more productive and innovative, contributing significantly to economic growth.

While other factors such as land and natural resources, technologies, and increased GDP are also important, human capital is often seen as a foundational and critical factor for sustained economic development.

Increased GDP (Gross Domestic Product) is a measure of economic output, not a determinant of economic growth.

Lack of homogeneity of goods is a condition that would not be necessary for the existence of a perfect market.

In a perfect or perfectly competitive market, goods are assumed to be homogeneous or identical.

This assumption helps ensure that buyers and sellers have perfect information and that there are no differences in the products offered by different sellers.

- Perfect knowledge implies that buyers and sellers have complete information about prices, products, and market conditions.
- Large numbers of buyers and sellers prevent any individual buyer or seller from influencing the market price.
- Portability of goods ensures that products can be easily transported and traded across different sellers.

To find the equilibrium level of national income (Y), you can substitute the given consumption (C), investment (I), and government spending (G) values into the equation Y = C + I + G.

Given:
\[ C = 100 + 0.75Y \]
\[ I = 50 \]
\[ G = 200 \]

Substitute these into the equilibrium equation:
\[ Y = C + I + G \]
\[ Y = (100 + 0.75Y) + 50 + 200 \]

Now, solve for Y:
\[ Y = 350 + 0.75Y \]
\[ 0.25Y = 350 \]
\[ Y = \frac{350}{0.25} \]
\[ Y = 1400 \]

Therefore, the equilibrium level of national income (Y) is 1400.

The principle that specifies that the amount, timing, and manner of tax payments should be made known to taxpayers is known as the Principle of Certainty. This principle ensures that taxpayers are aware of the amount they owe, the timing of the payment, and the method of payment. It contributes to a fair and transparent tax system.

A tariff is a tax imposed on imported goods. Tariffs are taxes or duties placed on goods that are traded internationally. They are designed to protect domestic industries by making imported goods more expensive, thereby providing a competitive advantage to domestically produced goods.

The "velocity" of money is the ratio of real GDP to the real money supply. The formula for velocity is:

\[ \text{Velocity} = \frac{\text{Nominal GDP}}{\text{Money Supply}} \]

It is often expressed as the number of times a unit of money changes hands in a given period, indicating how quickly money is circulating in the economy.