Economics 2006 Jamb Examination

The change in equilibrium income due to a change in autonomous expenditure is given by the fiscal multiplier. The multiplier (k) is:

\\[k=\\dfrac{1}{1-\\text{MPC}}=\\dfrac{1}{1-0.6}=\\dfrac{1}{0.4}=2.5\\]

Therefore the change in equilibrium income = k \\times change in autonomous consumption = 2.5 \\times 10 = N25 million.

Personal income tax revenue depends on the tax base and the statutory rates. Raising the tax rate directly increases the amount collected per unit of taxable income, holding other factors constant.

Therefore increasing tax rates is the straightforward policy to raise personal income tax revenue. Option A is correct.

Transfer payments (social security payments, gifts, grants) are redistributions of income, not payments for newly produced goods or services. National income measures production, so transfers are excluded as they do not reflect current productive activity.

Including transfers would double-count or misrepresent production; hence transfers are omitted. Option D is correct.

The Nigeria Deposit Insurance Corporation (NDIC) was established primarily to provide insurance protection for depositors in the event of bank failure, thereby enhancing confidence in the banking system.

NDIC does not regulate insurance companies or accept deposits; its key role is deposit insurance and handling failed banks. Option A is correct.

A loan guaranteed by the federal government for a state government remains a public liability linked to government activity. The guarantee generally makes the debt effectively a public obligation backed by the central government.

Thus it is recorded and treated as public debt (government borrowing). Option A is the appropriate classification in standard public finance terms.

Deflation is a persistent fall in the general price level. To counter it, governments adopt expansionary tools such as deficit financing — increasing spending or borrowing to inject demand into the economy.

Contractionary policies would worsen deflation, while wage cuts reduce demand further. Deficit financing raises aggregate demand, helping stabilize prices. Option C is correct.

The bank rate is the rate at which the central bank lends to commercial banks. A reduction makes borrowing cheaper, enabling banks to extend more credit to customers.

This expansion of lending increases the overall money supply in the economy. Option A is correct.

Nigeria's major revenue has historically come from rents and royalties on petroleum and mineral resources, which form the bulk of federally collected revenues.

Other sources like company income tax and import duties exist, but resource rents dominate government revenue.

The RMAFC is constitutionally charged with developing and reviewing the revenue allocation formula that determines how federally collected revenue is shared among the tiers of government.

Its central mandate is revenue-sharing, not wages or fiscal supremacy. Option C is correct.

With inelastic demand, consumers are less responsive to price changes, so they continue purchasing almost the same quantity despite higher prices from taxation.

Producers can pass most of the tax burden onto consumers, making the incidence heavier on buyers. Option B is correct.