2023 - JAMB Economics Past Questions and Answers - page 7

The theory of Absolute Advantage was propounded by Adam Smith. However, it's important to note that the theory of Comparative Advantage was propounded by David Ricardo, not Adam Smith.

The term used to describe the rate of output per group of workers per unit time is "labour productivity."

Individual output usually refers to the output of a single worker, while labour productivity considers the overall output per worker or group of workers.

An increase in total production (real GDP) causes the demand for money to increase and the interest rate to increase. This relationship is often explained by the Quantity Theory of Money.

When real GDP rises, individuals and businesses need more money to facilitate increased transactions. As the demand for money increases, lenders raise interest rates to benefit from lending money, leading to an increase in the interest rate.

Institutions serving as links between surplus and deficit units are commonly known as financial intermediaries. These institutions play a crucial role in facilitating the flow of funds between those who have surplus funds (surplus units) and those who need funds (deficit units).

Examples of financial intermediaries include:

• banks
• credit unions
• insurance companies
• mutual funds

The decision to consume more of one product under normal circumstances will typically imply that less of another product will be consumed. This reflects the concept of opportunity cost in economics. When individuals choose to allocate more resources (money, time, etc.) to one product or activity, they are doing so at the expense of other possible choices. 

Economists refer to private goods as rivalrous and excludable. Private goods are characterized by two key features: rivalry (consumption by one person reduces the amount available for others) and excludability (it is possible to prevent individuals who have not paid for the good from consuming it). 

In Nigeria, the Consumer Price Index (CPI) is presently used to measure inflation. The Consumer Price Index tracks changes in the prices of a basket of goods and services commonly purchased by households. It is a widely used indicator for measuring inflation as it reflects the average price changes that consumers experience. 

Limited liability is not a method used by the government to redistribute income. Limited liability is a legal concept that protects the personal assets of shareholders from the debts and liabilities of a business. On the other hand, government redistributes income through measures such as market intervention (regulations), transfer payments (like social welfare programs), and taxation (progressive tax systems).

When a generalization is made based on observed facts, it is called inductive reasoning. Inductive reasoning involves deriving general principles from specific observations or cases. It is a method of reasoning that moves from specific instances to a general conclusion.

Let's calculate the normal profit using the provided information:

Total economic cost = N750,000
Revenue from selling 10,000 units = N1,000,000

Normal Profit = Revenue - Economic Cost

Normal Profit = N1,000,000 - N750,000

Normal Profit = N250,000

Therefore, the business would earn a normal profit of N250,000.