Economics 2020 Jamb Examination

Scarcity refers to the basic economic problem arising because resources exist in limited quantities while human wants are virtually unlimited.
Since needs and wants exceed the available supply of land, labour, capital and entrepreneurship, choices must be made regarding allocation.
This imbalance between limited resources and unlimited wants forms the foundation of all economic decision-making.

Economics is a social science because it applies systematic, scientific methods to study human behaviour in relation to production, distribution and consumption.
It gathers data, forms hypotheses, tests relationships and uses models to make reliable predictions about economic outcomes.
Although it studies people rather than chemicals or organisms, it still follows the logic of scientific inquiry.

Invisible items refer to transactions involving services rather than physical goods.
Shipping, aviation, tourism, insurance and banking are typical examples because they do not involve tangible merchandise crossing borders.
They are recorded in the invisible (services) section of the balance of payments.

The value of money is determined largely by the general price level in an economy.
When prices rise, the purchasing power of money falls because each unit buys fewer goods and services.
Conversely, when price levels fall, money becomes more valuable. Therefore, the price level remains the most direct and significant determinant.

The Nigerian Bank for Commerce and Industry (NBCI) was established to provide medium- and long-term financing for industrial and commercial ventures.
Its primary focus is to support economic development by funding key productive sectors, making it a development bank rather than a commercial or merchant bank.

Inflation occurs when too much money chases too few goods. To reduce this, the central bank adopts restrictive (contractionary) monetary policies.
These measures may include raising interest rates, selling securities or increasing reserve requirements, all of which reduce money supply and limit excessive demand.

Open market operations involve the buying and selling of government securities by the central bank.
When it sells securities, money is withdrawn from circulation, raising interest rates. When it buys, money is injected, lowering interest rates.
This makes OMO the primary tool for influencing interest rates.

An oligopsony exists when there are many sellers but only a few buyers who dominate the market.
This gives buyers significant bargaining power over suppliers. It is the buyer-side equivalent of an oligopoly (few sellers).
Examples include markets for agricultural produce where a few large firms purchase from many farmers.

A surplus budget occurs when expected government revenue exceeds planned expenditure.
This often indicates prudent fiscal management and may be used to reduce public debt or save for future needs.
It is the opposite of a deficit budget, in which spending surpasses revenue.

When demand is inelastic, consumers do not significantly reduce the quantity they purchase after a price increase.
This means a higher tax will raise the selling price but quantity demanded will fall only slightly, resulting in greater government revenue.
Elastic or perfectly elastic goods would lead to sharp reductions in demand, defeating the purpose of raising revenue.