2018 - WAEC Economics Past Questions and Answers - page 4

 Precautionary Motive. A desire to hold cash in order to be able to deal effectively with unexpected events that require cash outlay.

This occurs when two people have goods they are both happy to swap in exchange. i.e. a perfect barter exchange. a requirement that must be met before a trade can be made. It specifies that a trader must find another trader who is willing to trade what the first trader wants and at the same time wants what the first trader has.

A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments.

When the central bank increases the bank rate , the banks and individuals are discouraged from borrowing money because of increase in interest rates. this is used as a monetary policy tool to reduce circulation of money in the economy.  people would rather invest their monies to be paid high interest rates than borrow from banks and pay the bank interest

 Income Redistribution is an economic practice which is aimed at leveling the distribution of wealth or income in a society through a direct or indirect transfer of income from the rich to the poor. Economists or Governments adopt economic policies and strategies like progressive taxation to implement this phenomenon. the tax is used to build public infrastructure

An economic situation in which the price of a product will have no effect on the supply. In a perfectly inelastic situation regardless of the amount of a product on the market, the price of the product remains the same. 

Activities that lead to  economic growth

• Natural Resources. The discovery of more natural resources like oil, or mineral deposits may boost economic growth as this shifts or increases the country's Production Possibility Curve. 
• Physical Capital or Infrastructure. 
• Population or Labor. 
• Human Capital. 
• Technology. 
• Law

A rise in imports has a negative effect on the balance of trade, that is, it will tend to increase the trade deficit or reduce the trade surplus.

Tariffs are duties (taxes) imposed on imports. When tariffs are imposed, the prices of imports would increase to the extent of tariff. The increased prices will reduced the demand for imported goods and at the same time induce domestic producers to produce more of import substitutes. Non-essential imports can be drastically reduced by imposing a very high rate of tariff. Therefor, reducing tariffs will further increase balance of payment deficits.