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ECONOMICS OBJ
1-10CCDACADBBC
11-20EEADABAAEB
21-30ACBBDEBDCA
31-40DADDECBCCC
41-50BABBADDAEE
51-60DEACDCABAA
2a
.total amount=80+200+150+120+70=620million.
Percentage allocation to transport=80/620*100=12.9%
Percentage allocation to health=200/620*100%=32.26%
Percentage allocation to education=150/620*100%=24.19%
Percentage allocation to agriculture=120/620*100%=19.36%
Percentage allocation to tax=70/620*100%=11.29%: *Economics Theory Section B Solution by Star Light Solution Team*
Question Six
6a)
Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions. Capital markets help channelise surplus funds from savers to institutions which then invest them into productive use. Generally, this market trades mostly in long-term securities.
Capital market consists of primary markets and secondary markets. Primary markets deal with trade of new issues of stocks and other securities, whereas secondary market deals with the exchange of existing or previously-issued securities. Another important division in the capital market is made on the basis of the nature of security traded, i.e. stock market and bond market.
1) In many instances, capital markets take the form of stock exchanges on which firms market debt securities such as bonds, and equity securities like stocks. Bondholders are creditors who lend money to institutions for a set period of time in exchange for interest payments. Stockholders are the owners of publicly listed companies and the funds from stock purchases are reinvested in the firm. Most firms issue both stock and bonds; these securities are typically marketable, which means that the original purchaser of the security can sell it on to another investor at a later date.
The advantages of capital markets such as stock exchanges include the fact that these locations provide a venue where those seeking finance can be connected to prospective lenders and investors.
2) capital market transactions also include private investment agreements between individuals and businesses. Some such deals are brokered by private equity firms that introduce investors to firm's seeking capital. In other instances, a business owner may directly approach an individual and ask for a loan or a
capital infusion. Many mainstream lenders are unwilling to finance start up firms or businesses engaged in speculative ventures. The advantages of capital markets also include the fact that high-risk borrowers can gain access to much needed funds.
3) Companies directly benefit from the capital markets because many firms would become insolvent in the absence of formal or informal investment marketplaces. The advantages of capital markets are also realized by employees of firms that grow and expand as a result of capital infusions. These individuals have more opportunity for career advancement and job promotion. Additionally, expanding firms open new plants and offices and along with new work venues, these firms also create new jobs.
As firms grow, new technologies are developed and researchers and marketing agents are employed to create and develop these products.
4) When large numbers of companies begin to hire additional workers, the economy of a particular country or region starts to expand because those workers reinvest their money in the economy when they buy goods. This means that profit levels start to increase at retail and manufacturing firms and these companies often use these funds to expand operations and create more jobs. Additionally, some publicly traded firms pass on profits to shareholders in the form of dividend payments. Consequently, investors indirectly benefit from their capital investments when they receive dividend disbursements.
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Question Nine
9)
1) Automatic fiscal stabilisers . In a recession, government tax revenues fall (e.g. people earn less so pay less income tax). Also, the government have to spend more on unemployment benefits. Therefore, in an economic downturn, borrowing rises. To eliminate borrowing in a recession would make the recession worse and increase inequality. If the government couldn’t borrow in a recession, the unemployed may not get any benefits and have no income. Also, higher taxes and lower spending would reduce domestic demand and make the recession even worse. (automatic fiscal stabilisers )
2) Political . The biggest tendency to borrow comes from political pressures. Voters generally like to hear the promise of lower taxes and increasing spending. A manifesto to tackle a budget deficit (higher taxes and lower spending) is unlikely to be popular. Voters often are supportive of the general idea of reducing government debt, but when it comes to actual policies like lower benefits, higher pension age, increased VAT rate, then it is likely to hit some particular pressure group with a vested interest in maintaining low tax and spending. For a government to increase borrowing is generally less politically damaging than increasing taxes. (though ironically, I feel austerity can be politically popular at all the wrong times )
3) Tax revenues are less than predicted. borrowing means the government can meet a temporary shortfall by borrowing, rather than having to immediately cut back on spending. Like an overdraft facility, government borrowing gives the government more flexibility and means they can maintain wages and spending commitments without having to keep cutting spending.
4) War . During a war, government spending is stretched leading to higher borrowing. The highest rates of borrowing occurred during the two world wars. Also, during wars, it may be easier to sell bonds as you can play the patriotic card to encourage people to finance government borrowing.
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Question Ten
*Question 10*
*(10a)*
Industrialization is a phenomenon in the development of nations, characterized by the growth of machine and power tools production, the growth of mechanical and technical skills (technology) required for industrial production, with attendant large-scale production all of which leads to changes in the social and economic organization of society.
*(10b)*
(I) To tackle the problem of managerial and technical know-how, the Centre for Management Training was made an agent of the Nigerian Enterprises Promotion Board. It was to help in training indigenous personnel. The Manufacturers’ Association of Nigeria and the Nigeria Employers’ Consultative Association were to organize seminars for indigenous personnel.
(II) To combat the issue of possible collusion and sabotage of the decree, the decree provided for very stiff penalties for any Nigerian found sabotaging the efforts of the decree. Any Nigerian found guilty of such criminal lack of patriotism was to pay a fine of N150,000.00 or go to jail for five years, or both. It is not easy to deal with the problem of a few Nigerians being enriched at the expense of the masses.
(III) To combat the possible problem of capital outflow in the short run, a member of regulations were made. There regulations included:
- That there would be no repatriation of funds in cases where the masses were sold to non-Nigerians.
- Repatriation was not allowed for the sale of real estates which were developed from funds generated locally, except on the final emigration of the owner
(IV) To combat the problem of capital shortage:
- The federal government set up the Nigerian bank for commerce and industry. The primary objective was to provide the necessary funds for acquiring the businesses of foreigners affected by the decree.
- Commercial banks were encouraged to give loans to prospective indigenous businessmen for acquiring the business of aliens.
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Question Eleven
11a)
Unemployment is a term referring to individuals who are employable and seeking a job but are unable to find a job. Furthermore, it is those people in the workforce or pool of people who are available for work that does not have a job. Usually measured by the unemployment rate, which is dividing the number of unemployed people by the total number of people in the workforce, unemployment serves as one of the indicators of an economy’s status.
11b)
1. Fiscal Policy of Government
Economic plan of any government depends on revenue and expenditure.
Fiscal policy shows how government spends the budget and collects revenues to run the country.
It collects revenue such as corporate and income tax, sales tax, custom duties and tariffs and spends it on repairs of roads and salary.
A Fiscal policy is either expansionary or contractionary, but we are focusing on the former.
Expansionary fiscal policy occurs when government reduces tax and spends more money to make the economy grow.
Because of this growth in the economy, individuals and firms have more money to spend, which raises output. This increase in production adds to growth and lowers unemployment in the economy.
2. Central Bank and Nigeria Monetary Policy
Monetary policy refers to money supply, interest rates, credit in the economy, and rules guiding the financial sector issued by the Central Bank of Nigeria (CBN) on behalf of the government.
Every year CBN makes rules for easy operation of the financial sector. It manages money supply by:
the lending rates going up
the lending rates going down
lending more
lending less
Lending rate affects individuals who borrow from banks to pay for their personal needs and firms who borrow from banks to grow their businesses.
Capital is crucial for any business to survive so companies must borrow at sensible interest rates to make profit.
Monetary policy makes it easy for companies to plan the time to borrow from their banks and do so when interest rates are low.
Getting a loan enlarges their business, which increases output and profit, and helps these companies create more jobs.
3. Government Spending
Due to limited resources and competing needs, it is difficult to get required funds from Government to fix infrastructures that need urgent repairs.
However, if government spends money to repair roads, purchase hospital equipment, and fix public schools, its effect on the economy is visible.
For example to repair any road, government must hire contractors who will employ people to work on the project sites.
The effect, repairing a road, will have on employment is that many laborers will get a job.
The second is that the job increases hired workers purchasing power.
The third is that people will patronize any support businesses, set up near any of the projects sites.
4. Agric Sector Reform
Agriculture is the second largest employer of labor in Nigeria. The agro allied value chain can become the hub for creating more jobs for Nigerians.
Let us use a recent case to support this claim. For example, in December 2016, Lagos state government sold Lake Rice to Lagos residents.
This happened due to a deal between Kebbi and Lagos State for the production of Lake Rice brand, and this alliance created many jobs.
Imagine that all states in the country copy this example, and produce one agric commodity; this would not only reduce unemployment but feed the country as well.
✍✍ *Economics* ✍✍
*Solution*
*5*
*(Pick any five)*
(i) *_Inadequate Land Tenure System_:* The land tenure system in many areas does not encourage agricultural productivity. In some places, land is communally owned and farmers have no claim to the land after they have finished using it. The communal system of land tenure has several adverse effects. People who wish to farm on a large scale and do not belong to the community may find it difficult to acquire enough land. In some places, non-members of the community who wish to farm on the community’s land may not be allowed to do so. The land cannot be sold to outsiders.
(ii) *_Small Size of Farm_:* In many areas, the farms are very small as a result of land fragmentation. A piece of land is divided into smaller pieces and allotted to the sons of the family. The small size of farms makes the use of mechanized farming wasteful, and large-scale farming becomes impossible. There are therefore no economies of scale in production.
(iii) *_Persistent Pest Attacks_:* The constant attacks on crops and animals by diseases and pests contribute to low productivity. Many crops are destroyed by diseases and pests before the harvesting period. Caterpillars, beetles, and army-worms destroy many crops. The mealybug has consistently been attacking cassava in many areas. The presence of tsetse fly causes cattle disease. The destruction of agricultural products by pests and diseases leads to a poor yield per hectare.
(iv) *_Inadequate Farming Methods_:* Shifting cultivation is still practiced in some areas where there is abundant land and a very low population density. This method of farming wastes time and energy in clearing forests for the purpose of planting. It also aids soil erosion.
(v) *_Poor Marketing Facilities_:* In many countries, organized marketing facilities are provided mainly for export crops. Facilities for the marketing and distribution of food crops are inadequate. Many farmers are not willing to increase output since they cannot easily market their products. Also, low fluctuating prices of agricultural products, brought about by some other constraints to agricultural development, discourage productivity.
(vi) *_Poor Transportation Facilities_:* Many farming areas are not served with good roads or other means of transportation. Farmers in such remote areas therefore finds it difficult to evacuate their agricultural produce for sale. Many of the farm products perish before they reach their destination due to the bad roads and inadequate feeder roads. Farmers in such areas are therefore forced to curtail their production since large-scale production does not yield them much dividend.
(vii) *_Inadequate Storage Facilities_:* At present, there are inadequate storage facilities for many crops such as silos for grain, cold rooms for perishable commodities, etc. These are either not available or insufficient. Agricultural products are spoiled while being stored under inadequate tropical conditions due to attack by pests or adverse weather conditions. This reduces the farmer’s incentive to produce on a large scale.
*6a*
*Definition of 'Capital Market' Definition:*
Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions.
*No. 6b*
*Savings*
Investing in securities that are listed in the Capital or Stock market encourages inv fbestors to accumulate their savings in small amounts over time
*Income*
Investment in the stock market provides a source of income. Shares pay dividends when companies declared profits and decide to distribute part of the profits to shareholders. Bonds pay an interest income to the bondholders. Sometimes the income earned from listed securities is higher than interest earned from the money or banking sector.
*Wealth or Capital gain*
Whenever the prices of securities listed in the market go up, the value of the investment of the holders of those securities increases. This is called capital gain and is an important way of growing wealth through the stock market. It is important to note that a one –off investment in the Capital market does not make sense. It is therefore the accumulative investment over time that creates opportunities for growth in wealth through the Capital Market.
*Securities as Collateral*
Listed securities are easily acceptable as collateral against loans from financial institutions.
*Liquidity*
Liquidity is the ability to convert shares or bonds into cash by selling within the shortest time possible without losing much value. When one needs funds urgently, listed securities could be very useful because they are more liquid than most other forms of assets.
Bonds pay an interest income and shares pay dividends income
*Grow wealth*: Over time, the value of your investment increases, whenever the prices of your stock go up. This is called capital gains.
Listed securities are easily acceptable as collateral against loans.
10a
*Industrialization* is the process by which an economy is transformed from primarily agricultural to one based on the manufacturing of goods. Individual manual labor is often replaced by mechanized mass production, and craftsmen are replaced by assembly lines
*11a* )
Unemployment is a situation where some people who fall within the ages of the working population, capable and willing to work are unable to obtain befitting work to do.
11b)
i ) *Achieving industrialization:* Establishing many industries will create more employment opportunities.
ii) *Population Control:* Optimum population will help to to solve our unemployment problem because it will bring our population to equilibrium point with out resources.
iii) **Good development plans* schools and colleges should be established based on the available places that will absorb the products of these institutions
10a
*Industrialization* is the process by which an economy is transformed from primarily agricultural to one based on the manufacturing of goods. Individual manual labor is often replaced by mechanized mass production, and craftsmen are replaced by assembly lines
: *No. 6b*
*Savings*
Investing in securities that are listed in the Capital or Stock market encourages inv fbestors to accumulate their savings in small amounts over time
*Income*
Investment in the stock market provides a source of income. Shares pay dividends when companies declared profits and decide to distribute part of the profits to shareholders. Bonds pay an interest income to the bondholders. Sometimes the income earned from listed securities is higher than interest earned from the money or banking sector.
*Wealth or Capital gain*
Whenever the prices of securities listed in the market go up, the value of the investment of the holders of those securities increases. This is called capital gain and is an important way of growing wealth through the stock market. It is important to note that a one –off investment in the Capital market does not make sense. It is therefore the accumulative investment over time that creates opportunities for growth in wealth through the Capital Market.
*Securities as Collateral*
Listed securities are easily acceptable as collateral against loans from financial institutions.
*Liquidity*
Liquidity is the ability to convert shares or bonds into cash by selling within the shortest time possible without losing much value. When one needs funds urgently, listed securities could be very useful because they are more liquid than most other forms of assets.
Bonds pay an interest income and shares pay dividends income
*Grow wealth*: Over time, the value of your investment increases, whenever the prices of your stock go up. This is called capital gains.
Listed securities are easily acceptable as collateral against loans.
[Question 5*
*(Pick any five)*
(i) *_Inadequate Land Tenure System_:* The land tenure system in many areas does not encourage agricultural productivity. In some places, land is communally owned and farmers have no claim to the land after they have finished using it. The communal system of land tenure has several adverse effects. People who wish to farm on a large scale and do not belong to the community may find it difficult to acquire enough land. In some places, non-members of the community who wish to farm on the community’s land may not be allowed to do so. The land cannot be sold to outsiders.
(ii) *_Small Size of Farm_:* In many areas, the farms are very small as a result of land fragmentation. A piece of land is divided into smaller pieces and allotted to the sons of the family. The small size of farms makes the use of mechanized farming wasteful, and large-scale farming becomes impossible. There are therefore no economies of scale in production.
(iii) *_Persistent Pest Attacks_:* The constant attacks on crops and animals by diseases and pests contribute to low productivity. Many crops are destroyed by diseases and pests before the harvesting period. Caterpillars, beetles, and army-worms destroy many crops. The mealybug has consistently been attacking cassava in many areas. The presence of tsetse fly causes cattle disease. The destruction of agricultural products by pests and diseases leads to a poor yield per hectare.
(iv) *_Inadequate Farming Methods_:* Shifting cultivation is still practiced in some areas where there is abundant land and a very low population density. This method of farming wastes time and energy in clearing forests for the purpose of planting. It also aids soil erosion.
(v) *_Poor Marketing Facilities_:* In many countries, organized marketing facilities are provided mainly for export crops. Facilities for the marketing and distribution of food crops are inadequate. Many farmers are not willing to increase output since they cannot easily market their products. Also, low fluctuating prices of agricultural products, brought about by some other constraints to agricultural development, discourage productivity.
(vi) *_Poor Transportation Facilities_:* Many farming areas are not served with good roads or other means of transportation. Farmers in such remote areas therefore finds it difficult to evacuate their agricultural produce for sale. Many of the farm products perish before they reach their destination due to the bad roads and inadequate feeder roads. Farmers in such areas are therefore forced to curtail their production since large-scale production does not yield them much dividend.
(vii) *_Inadequate Storage Facilities_:* At present, there are inadequate storage facilities for many crops such as silos for grain, cold rooms for perishable commodities, etc. These are either not available or insufficient. Agricultural products are spoiled while being stored under inadequate tropical conditions due to attack by pests or adverse weather conditions. This reduces the farmer’s incentive to produce on a large scale.
1a) Income elasticity of demand is the degree of responsiveness of demand to changes in the income of consumers.
1d) Bournvita to Mr. Dantani is a normal goods. That is so because when Mr. Dantani's income rose from N300,000 to N600,000, his demand for bournvita also increased from 150 to 250, thus indicating positive elasticity. This is usually the case with normal goods
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