Economics 2014 Jamb Examination

Industries are often located close to their target markets to reduce transportation costs, ensure timely delivery of goods, and respond quickly to consumer demand.
Being near the market helps firms maintain competitiveness and meet customer needs efficiently.
Other factors like tax exemptions or capital base may influence location, but market proximity is usually the primary determinant.

The Organization of Petroleum Exporting Countries (OPEC) primarily aims to regulate oil production and stabilize oil prices globally.
For Nigeria, OPEC membership ensures that oil revenues are more predictable, reducing the volatility of income from petroleum exports.
While infrastructure development or subsidies are important, OPEC's main economic contribution is price stabilization.

The money market is a segment of the financial market where short-term funds are borrowed and lent, usually for periods of less than one year.
Businesses access short-term loans for working capital or temporary investment needs through instruments like treasury bills and commercial papers.
The stock or capital market, on the other hand, caters to long-term financing.

A price index of 175% indicates that prices have risen 75% above the base year.
An increase in the price level reduces the purchasing power of money, meaning the value of money falls by approximately 43% (since 100/175 ≈ 0.57).
Therefore, the cost of living increases, and the value of money decreases significantly.

A wage freeze prevents increases in wages, which helps control aggregate demand and the cost of production.
By limiting wage growth, governments or employers aim to reduce inflationary pressures in the economy.
It does not directly affect deflation or investor encouragement, but is primarily a tool for curbing inflation.

While Nigeria faces multiple economic challenges, poor developmental policies have consistently hindered economic growth.
Ineffective governance, corruption, and lack of long-term planning restrict infrastructure development, investment, and industrial growth.
Although issues like low capital formation or oil dependence exist, policy inefficiencies are a fundamental obstacle to sustainable development.

Underdeveloped economies are characterised by low income levels, poor living conditions, and limited access to basic services.
The standard of living is low due to inadequate healthcare, education, and housing.
Features like excess capacity or low unemployment are not typical, making low standard of living the defining feature.

In an open economy, GNP or GDP is measured as the sum of consumption (C), investment (I), government spending (G), and net exports (X-M), where X represents exports and M imports.
Including net exports ensures that foreign trade is accounted for, reflecting the total output produced by the economy including foreign sector effects.
Hence, the correct formula is C+I+G+(X-M).

The multiplier (k) is given by \(k = 1/(1-MPC)\).
Given \(MPC = 2/3\), \(k = 1/(1-2/3) = 3\).
The change in national income \(\Delta Y = k \times I = 3 \times 100 = N300 \text{ million}\).
Therefore, the level of national income generated from an investment of N100 million is N300 million.

The precautionary demand for money is held to meet unexpected expenses.
It is influenced by the rate of interest because higher interest rates make holding cash less attractive, prompting individuals to keep less money for precautionary purposes.
While income and price level affect overall money demand, the precautionary component is most sensitive to interest rates.