All 50 questions from the General Certificate of Education (GCE) Economics 2022 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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Scale of preference shows
The scale of preference is a list of wants arranged in order of relative importance/priority; it helps in rational choice and minimizing waste of resources.
There is unemployment of resources when production is
A point inside the production possibility curve indicates that productive resources are not efficiently utilized (unemployment/underemployment of resources).
A major characteristic of natural resources is that they
Natural resources are resources created by nature (i.e. God) and are regarded as free gifts of nature because they have no cost of production.
A major disadvantage of a capitalist economy is that it
In a capitalist economy, dominated by private individuals with minimal government participation, income inequality among citizens tends to worsen, contrary to the equitable distribution promoted by socialist economies.
The mining sector of an economy contributes 60% to the GDP. If GDP is $540, what is the contribution of the mining sector?
Contribution = 60/100 x 540 = $324.00.
The increase in the demand for a commodity may lead to a decrease in the demand for another if both are
Complementary demand exists between goods used together (e.g. car and fuel); more of one increases demand for the other, while less of one reduces demand for the other - the question describes the reverse relation matching complementary goods.
The demand curve for goods of ostentation is usually
Goods of ostentation (luxuries, Veblen goods) are rare and command respect for users; demand rises as price rises, giving a positively sloped demand curve.
Which of the following factors is not a cause of change in demand? Changes in
A change in the price of the commodity itself causes a movement along the demand curve (change in quantity demanded), not a shift of the demand curve.
If the quantity demanded of a commodity increases from 20 units to 30 units when there is an increase in price from $4.00 to $5.00, the elasticity of demand is
%change in Qd = (30-20)/20 x100 = 50%. %change in Price = (5-4)/4 x100 = 25%. PED = 50%/25% = 2.00.
The supply curve of a locally-produced good may shift to the right if
An increase in government subsidies (financial assistance) to producers increases production and shifts the supply curve rightward.
In perfectly elastic supply, the supply curve
A perfectly/completely elastic supply curve is horizontal (parallel to the quantity axis); price remains the same at different quantities supplied.
An increase in the price of commodity X led to a fall in the supply of commodity Y. Commodities X and Y are
Goods in joint supply are produced together from the same source; an increase in production of X (due to higher price) affects the supply of the jointly-supplied by-product Y.
The production of rice and yam on the same farmland is an example of
When two or more commodities are produced and supplied from the same source/land, this is joint supply (e.g. rice and yam on the same farmland).
A consumer of a single commodity is in equilibrium when
A consumer attains equilibrium at the point where marginal utility equals price paid (MU = P); this is also known as utility maximization.
If the government imposes a minimum price on a commodity
A minimum price (price floor) is fixed above the equilibrium price to protect producers, and this causes excess supply/market surplus.
A minimum price legislation is also called
Minimum price legislation is known as a price floor, while maximum price legislation is known as a price ceiling.
Which of the following factors is not a cause of diminishing returns?
The law of diminishing returns (law of variable proportion) operates in the short run under constant technology; technological innovation is not a cause of diminishing returns.
In manufacturing, division of labour may be hindered by
A low level of technology limits how labour can be organized and handled, hindering effective division of labour.
The production cost that varies inversely with output is
Average fixed cost falls (varies inversely) as output rises, since a constant total fixed cost is spread over more units.
A firm that closes down will still incur
Fixed costs (e.g. rent) remain the same regardless of the level of output, and continue even if the firm stops producing.
The sufficient condition for a firm to be in equilibrium is that
A firm attains equilibrium at the profit-maximizing point where P = AC = AR = MC = MR and the marginal cost curve cuts the marginal revenue curve from below.
Cooperative societies are formed mainly to
The main reason for forming cooperative societies is the promotion and maintenance of the welfare of their members.
A disadvantage of a joint-stock company is
In a joint-stock (limited liability) company, the business is managed by the Board of Directors on behalf of shareholders, giving individual shareholders limited control over management.
The middlemen is responsible for
Middlemen (wholesalers and retailers) act as intermediaries between producers and consumers; their main function is distribution, including breaking bulk into smaller units.
A major function of the retailer is to
A retailer buys in small quantities from wholesalers and sells in units to final consumers, i.e. breaking bulk.
A positive effect of a rapid population increase is
A rapid population increase results in market enlargement, since higher population implies higher demand for goods and services.
Which of the following factors may not affect the efficiency of labour?
The race and colour of the workforce has nothing to do with the efficiency of labour, unlike education, training, welfare and quality of complementary inputs.
The type of unemployment found among workers who leave their jobs in search of other jobs is termed
Frictional unemployment occurs as a result of changing jobs, i.e. between leaving one job and getting another.
The main objective of marketing boards is to
Marketing boards are public enterprises set up by government mainly to stabilize the incomes of cash crop farmers through buying, selling, packaging, branding and grading of agricultural products.
The use of mass advertising media will enable a firm to enjoy
Mass advertising, where producers of similar products jointly advertise to the public, allows a firm to enjoy marketing economies of scale.
Which of the following industries will add most value to primary products?
The processing industry engages in processing raw (primary) materials into semi-finished or finished goods, adding the most value to primary products.
Gross National Product (GNP) less the provision for the wear and tear of assets is the
Net National Product (NNP) = GNP - Depreciation (the reduction in the value of assets due to wear and tear).
An example of transfer payments in national income accounting is
Transfer payments are payments made outside economic activity, i.e. without an exchange of goods and services, such as unemployment benefits/allowances, pensions and scholarships.
Increasing national income without effective control of population size in a country can lead to
If population size is not properly controlled, it will grow faster than national income, resulting in low per capita income and underutilization/waste of resources (unemployment).
An example of commodity money is
Commodity money is money that also has value/use as a commodity in itself; examples include gold, silver, cowries and diamond.
If inflation is anticipated, people would
When people expect prices to rise in future, they spend more money now (stocking up on goods) before prices go up further.
If the Central Bank increases its bank rate
A higher bank (discount) rate charged to commercial banks raises the interest rate charged to their customers, reducing borrowing and the money supply (a contractionary monetary policy).
Commercial banks are different from development banks in that the latter
Development banks provide long-term loans for capital/development projects and do not deal in foreign currencies, unlike commercial banks.
The use of the bank rate, cash ratio and open market operations constitute
Bank rate, cash reserve ratio and open market operations are all monetary policy tools.
Fiscal policy measures imply a change in
Fiscal policy is the use of government expenditure, revenue, budget, taxation and debt operations - collectively - to regulate the economy.
If demand is perfectly inelastic, a tax imposed
Where demand for a commodity is perfectly inelastic, the burden of the tax is entirely borne by the consumers alone, since they do not react to the price change and the whole burden is shifted onto them.
Development planning focuses mainly on
Development planning focuses mainly on mapping out strategies needed by government to achieve effective and efficient allocation of resources for the development of areas/sectors of the economy.
Political instability hinders economic growth because it
One major implication of political instability is that it discourages entrepreneurs/investors from setting up businesses in the country.
Foreign investment and long-term securities in the balance of payments are recorded as
Foreign investments and long-term securities are capital account transactions in the balance of payments; the capital account records the movement of money and securities from one country to another.
An argument for the use of commercial (trade) policy rests on the need to
International trade control measures (commercial policy) are focused on the need to make a country become self-reliant in the production of all goods and services, locally and internationally.
Which of the following measures can lead to an increase in exports?
Depreciation (a fall in the international value of a currency) makes exports cheaper for foreign buyers, thereby increasing exports.
Given a country's index of export price is 180 and that of import is 200, the terms of trade is
Terms of Trade (TOT) = (Index of export price / Index of import price) x 100 = 180/200 x100 = 90%. A TOT less than 100 means unfavourable terms of trade, i.e. import is greater than export.
A benefit that is present in all forms of economic integration is that
A common benefit of all forms of economic integration is that the size of the market for goods and services is widened as output is increased.
The main function of the African Development Bank (AfDB) is to
The African Development Bank (AfDB) is a financial institution set up by independent African countries to provide loans to members to finance viable projects that facilitate economic development.
If petrol is no longer needed to produce energy, then demand for crude oil
If crude oil is no longer needed as the main source of energy (petrol), its demand may become limited to industrial uses such as the production of plastics and other petrochemical products.
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