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NABTEB Economics Questions And Answers
(a) What is Economics?
(b) In what ways is the study of Economics useful to mankind?
Ans: (a) Renowned authorities such as Adam Smith, J.S Mill, Alfred Marshall
among others had defined Economics in different ways.
The most widely acceptable definition of Economics is that of Professor
Robbins stated below:
Economics is the science which studies human behaviour as a relationship
between ends and scarce means which have alternative uses.
(b) The advantages derivable from the study of Economics include the following:
(i) The study of Economics enables individuals to understand the basic
economic Concepts and problems thereby helping to take rational
economic decisions such as production, consumption, distribution and
(ii) The study of economics develops the power of critical thinking in the
(iii) Economics enables an individual to understand current economic
issue and inculcated the sense of economic analysis in the learner.
(iv) The study of Economics enables people to choose a career.
(v) Economics empowers an individual to contribute his own quota
towards the economic development of the society.
(a) Describe the main types of public Expenditure
(b) Give the reasons that may account for an increased government expenditure
in your country.
Ans: (a) Public expenditure can be classified into two headings namely, Recurrent
expenditure and Capital expenditure.
Recurrent Expenditure: These are the expenses on running costs which are repeated
every year. Expenses on payment of wages and salaries, maintenance of
infrastructure, payments of rents and interest are examples of recurrent expenditure.
Capital Expenditure: are expenses on projects of permanent nature. These expenses
do not recur every year. Examples of capital expenditure include building of schools,
hospitals, roads, dams, electrification projects, procuring new machineries, aircrafts
and construction of airports.
(b) Government expenditure in Nigeria had been increasing year in year out for the
(i) Population growth: the need to provide more social amenities such as
schools, hospitals, electricity, and roads for the rapid increasing population
had led to increase in government expenditure.
(ii) Expansion of the administrative machinery of the country: The increasing
number of civil servants to be catered for and the adoption of the
presidential system of government in Nigeria have led to large increase in
the cost of administration.
(iii) Defence and national security: The urge to put in place a strong, efficient
and well equipped security machinery against external aggression had
increased expenses on the Army, Navy, and Air force.
(iv) Economic Development: The need to pursue developmental projects on
agriculture, industrialisation, provision of amenities like roads, electricity,
hospitals, educational facilities have led to huge increase in government
(v) Maintenance of internal law and order: Government expenses on police
force customs, immigration, prisons and the law courts have been
So as to enforce laws and maintain peace.
(vi) Rapid increase in prices: the rate of inflation in Nigeria have been
astronomical hence rapid increase in government expenditure on projects.
(vii) Expenses to meet international obligations such as aids, grants and loans
repayments to other countries have been increasing.
Compare and contrast the private limited company with the public limited company.
Ans: The private limited company and the public limited company are similar in
certain aspects while they are different in some others.
1. LEGAL ENTITY: The private limited company and the public limited company
both have a separate legal entity.
2. LIMITED LIABILITY: The liability of the shareholders is limited to the amount
of capital invested.
3. CONTINUITY: In both companies, continuity of the company is guaranteed
for the death of a shareholder does not put an end to the existence of the
4. MANAGEMENT: The management of the companies is vested with the board
of Directors or manager.
5. RAISING OF CAPITAL: Both private and public limited liability companies can
raise capital through loans and shares.
I. MINIMUM NUMBER OF OWNERS: The minimum number of owners in a
public limited liability company is 7 while it is 2 in a private limited company.
II. MAXIMUM NUMBER OF OWNERS: in a private company, the maximum
number of owners is 50 while there is no upper limit for the public company.
III. ABILITY TO SELL SHARES: Whereas the public company can sell shares to the
general public. The private company sells shares to the 50 owners only.
IV. TRANSFERABILITY OF SHARES: Shareholders in public company are free to
transfer their shares from hand to hand while this is not so in a private
V. PUBLICATION OF ACCOUNTS: The public company must publicize its
accounts annually but the private company is not required to do so.
VI. ISSUE OF DEBENTURES: While the public company can issue debentures the
private company cannot issue debentures.
VII. COMMNCEMENT OF BUSINESS: The private limited liability company can
start operation in full after securing the certificate of incorporation, the
public company cannot operate until the certificate of trading had been
(a) Explain the term under population
(b) Highlight the economic effects of high population density in
Ans: (a) Under population is a situation where the people within the country are
insufficient to fully utilize the available resources given the existing
Under population is that size of the population that is below the optimum.
There is under population if an increase in size leads to increase in output
(b) Economic effects of high population density in Nigeria
(i) Pressure on land: High population density will make the demand for land
for economy activities to outstrip the supply.
(ii) Lower living standard: There is rapid increased in the demand for goods
and services in areas of high population density hence rapid increase in
prices, shortage of goods and services culminating in lower living
(iii) Increased expenses on social amenities: The demand for social amenities
such as schools, roads, water supply, electricity etc increases in areas of
high population density. This increase government expenditure on these
(iv) Increase in crime wave: High population density may breed crimes like
armed robbery, advance fee fraud, prostitution etc.
(v) Unemployment problems: Areas of high population density in Nigeria are
associated with high rate of unemployment.
(vi) Increased supply of labour force: High population density provides
adequate supply of labour.
(vii) Higher rate of investment: Areas of high population density in Nigeria
attract investors since these areas are potential market centres.
(viii) Increased health hazards: Areas of high population density are associated
with overcrowding, air and water pollution, wastes disposal problems etc.
All these impair health.
(ix) Balance of payments problems: High population density may force the
country to import more goods and services which may lead to deficit on
the balance of payment.
(a) What are the factors affecting the location of industry?
(b) Explain FIVE roles of industrialization in the economic
development of Nigeria.
Ans. (a) The entrepreneur must consider certain locational factors with the overall
interest of reducing unit cost of production.
Such factors include:
(i) Source of raw materials: if the raw material is heavy and its cost of
transportation is very high, the entrepreneur may decide to locate his
business near the source of raw materials. Example are cement factories
and plywood factories.
(ii) Market Consideration: The ultimate aim of the producer is to sell the final
product. A business unit may be sited in areas with high population
densities. If the product is fragile, perishable or bulky to transport, the
business unit may be located near the market. Examples are production of
eggs, fresh milk and bricks.
(iii) Nearness to the source of power supply: Power supply is an essential
ingredient to production. The producer may locate his business near the
source of power be it coal, electricity or water.
(iv) Labour supply: for labour intensive form of businesses, adequate supply of
labour will be considered for location.
(v) Availability of good transport and communication system. An efficient
transportation system is needed to transport raw materials and finished
products. Also, a business unit needs an efficient communication system
such as telephones and post offices. These may encourage the producer to
site the business in places where these facilities are available.
(vi) Favourable natural conditions such as suitable climate and land may
determine where one form of agricultural activity or the other will be sited.
(vii) Political factors apart from economic factors may determine location of
(viii) The presence of amenities such as banks, insurance companies, educational
institutions, pipe borne water may attract producers to such areas.
(b) Industrialization In Nigeria plays major roles towards economic
Such roles include the following:
(i) Economic growth: Industrialization increase the Gross National product
hence economic growth is guaranteed.
(ii) Reduction in the rate of unemployment: Industrialization creates
employment opportunities to many unemployed Nigerians thus helping to
reduce the rate of unemployment.
(iii) Industrialization increases the standard of living of the people by making
greater quantities and varieties of goods and services available.
(iv) Diversification of the economy: industrialization in Nigeria removes overdependence on agriculture.
(v) Industrialization provides more foreign exchange earnings through exports.
(vi) Reduction in the inflation rate through the flooding of the market with more
(vii) Industrialization helps to correct deficit balance of payment in Nigeria.
(viii) Industrialization will expand the market for agricultural raw materials hence
higher earnings for farmers.
(ix) Improvement in farming techniques: the industrial sector produces modern
and more efficient machineries for agriculture such as ploughs, harvesters,
silos etc. The sector produces fertilizers, herbicides and insecticides for the
(x) Increase in government revenue: The manufacturing companies will pay
taxes in form of royalties, excise duties or profit tax to the government
thereby increasing government revenue.
(xi) Transfer of Technology: Industrialization enables Nigerians to acquire the
necessary technical and managerial skills necessary for indigenous business
(xii) Industrialisation leads to the development of infrastructural facilities.
(a) State the theory of comparative advantage in international marketing.
(b) Discuss the measures that can be taken by a country seeking to correct its
balance of payments deficit.
Ans. (a) The theory of comparative advantage states that a country should
concentrate on the production of the goods and services in which she has a
greater comparative advantage over others.
(b) A country can correct deficit on its balance of payments using any or a
combination of the following measures:
(i) Tariffs: Increase in import duties and decrease in export duties may reduce
importation and increase exportation respectively thus reducing the imbalance
on balance of payments.
(ii) Reduction in money supply through tight credit policies of the Central Bank and
the adoption of budget surplus may reduce importation and correct adverse
balance of payments.
(iii) Increase in income tax so as to reduce the disposable income of the people and
thus reduce the consumption of imported products.
(iv) The use of import quotas: the maximum quantity of goods to be imported by
importers can be fixed by the government to reduce importation.
(vi) prohibition of goods: The government may place embargo on importation of
(vii) Foreign exchange control: the quantity of foreign exchange that can be
approved for importation may be regulated to curtail importation.
(viii) Establishment of import – substituting industries: Indigenous investors may be
encouraged to establish industries that will produce goods that were hitherto
(ix) Export promotion measured such as tax holidays, provisions of subsidies and
liberal credit policy for export – based industries.
(x) Devaluation of currency: A deliberate reduction in the value of the currency of
a country in relation to that of another country may correct adverse balance of
(a) Outline the importance of agriculture in the economic development of
(b) Explain these terms:
(i) Plantation Agriculture
(ii) Subsistence Agriculture
Ans: (a) the contribution of the agricultural sector towards economic development
in Nigeria includes the follows:
(i) Source of food supply: Agriculture provides food for the ever increasing
population in Nigeria.
(ii) Employment opportunities: The agricultural sector employs a large
percentage of Nigerians.
(iii) Source of foreign exchange: Through the exports of agricultural raw
materials, agriculture provides the much needed foreign exchange for
(iv) Agriculture supplies raw materials to the Nigeria manufacturing sector.
(v) A source of government revenue: the government derives a lot of revenue
from income taxes from farmers and revenue from export duties on
exported agricultural products.
(vi) The agricultural sector provides a ready market for the industrial sector
thereby helping to facilitate industrialization in Nigeria.
(vii) Contribution to Gross Domestic Product: The agricultural sector
contributes a substantial percentage to the Gross
(viii) Supply of labour to the industrial sector: The agricultural sector releases
unskilled and semi skilled labour to the industrial sector.
(b) (i) Plantation Agriculture: Plantation agriculture has the following
(a) It involves cultivation of large acreage of land, hence the scale of
production is large
(b) In most cases, plantation agriculture involves cultivation of permanent
or cash crops.
(c) The method of production is mechanization and modern techniques of
(d) Plantations are either owned by the government, private individuals or
(e) Production is for the market or exports.
(b) (ii) Subsistence Agriculture involves the Following:
(a) Cultivation of small acreage of land hence a small scale production
(b) Production of food crops only
(c) Production is essentially to meet the need of the immediate family
and not necessarily for the market.
(d) There is the adoption of crude technology and the use of
(e) Subsistence farms are owned by individuals who are the owners of the family land on which agriculture is practiced.
(a) Define the term trade by barter.
(b) Discuss the problems associated with trade by barter.
Ans: (a) Trade by barter is the direct system of exchanging goods for goods or
services for services.
(b) The problems associated with trade by barter include the following:
i. The problem of double coincidence of wants: it is not easy to
establish double coincidence of wants upon which exchange is
ii. Time wastage: a lot of time is wasted before double coincidence of
want is established.
iii. Difficulty in fixing the exchange rate: There was no standard
exchange rage under the barter system of exchange thus there was
multiple exchange rates.
iv. Production is limited: since the market is not predictable under
barter, production is on a small scale.
v. Problem of indivisibility of goods: some goods are large and not
divisible into smaller units. The problem of exchange arises when
the large commodity is to be exchanged for smaller goods.
vi. Saving was impossible under barter since the goods were perishable
and they may have gone bad before exchange could take place.
vii. The problem of deferred payment: Credit transaction was not
possible under trade by barter.
viii. The problem of the bulkiness of some goods. If the commodity
involved is heavy to be carried about it is difficult to establish double
coincidence of wants.
(a) What is supply of a commodity?
(b) Discuss the factors that determine the supply of a commodity.
Ans. (a) The supply of a commodity is the quantity of the commodity that sellers
actually offer for sale at a given price and at a particular time.
(b) The factors determining the supply of a commodity are:
i. Cost of production: – A change in the cost of production will lead to a
change in the supply of commodity.
ii. The price of the commodity:- Increase in the price of a commodity will
increase its supply while a decrease in its price will decrease the
iii. Weather variation:- a favourable weather condition will boost supply
while an unfavourable climate will reduce the supply of agricultural
iv. The number of produce:- The greater the number of producers the
greater the quantity supplied.
v. Changes in the prices of other goods:- If the price of a substitute of
complement good changes the supply of a given commodity will also
vi. The level of technology:- Improvement in the method of production
will increase the supply of a product.
vii. Government policy:- Excise tax on producers may discourage
producers from producing more while subsidy increases supply.
viii. Availability of inputs such as raw materials labour and capital will
determine the supply of a commodity.
ix. The proportion of output-consumed by the producer will affect the
(a) What is a trade union?
(b) In what ways can a trade union resolve conflicts with its management?
Ans. (a) A trade union is an association of workers that fight for higher wages and
improved working conditions for members using collective bargaining.
(b) The ways by which a trade union can resolved conflicts with the
I. Collective bargaining: this involves joint negotiations between the
union and the management in order to resolve their differences
II. Threats of strike: A trade union may threaten that workers may
withdraw their services if negotiation fails to resolve a conflict.
III. Actual strike: A trade union may order its members to withdraw their
services so as to force management to grant the union’s request.
IV. Picketing: the union may employ picketing by disallowing workers to
go to their places of work.
V. Work to rule/sit down strike: the worker reports for duty but slows
a. What is price mechanism?
b. Discuss the functions of price system
a. Price mechanism is the process of determining the prices of goods and
services through the interaction of the forces of demand and supply.
b. The functions of price system are:
I. Allocation of resources: the price system rations out scarce
resources among competing entrepreneur/economic activities
II. Determination of production: it determines what to produce, what
quantity to produce, how to produce and for whom to produce.
III. The quantity demanded is determined by the price mechanism.
IV. Consumers have freedom of choice based on prices of goods and services
V. The price system determines the rewards going to various factors of production.
a. Differentiate between economic growth and economic development
b. Examine the factors that can lead to economic development
a. Economic growth refers to a sustained increase in the output of goods
and services while economic development involves positive
transformation of the economic sectors leading to increased output of
goods and services with an overall improvement in the living
standards of the people.
b. The factors that can lead to economic development in any economy
i. Embarking on manpower training programmes through greater
emphasis on science and technology in the educational system.
ii. Realistic economic planning coupled with effective
iii. Provision of more economic and social infrastructure such as good
roads, electricity, telecommunication, water supply e.t.c.
iv. Political stability leads to economic stability which in turn
guarantees economic development.
v. Unemployment should be reduced to the barest minimum
vi. Adoption of rapid industrialisation policy
vii. Introduction of modern technology in all the economic sectors of a
viii. Foreign investors must be encouraged and attracted to invest in the
ix. Corruption and economic sabotage should be eliminated from the
x. Population growth rate should be curtailed.
a. Examine what is meant by “Money”
b. Mention and explain the functions of money,
a. Money is a generally acceptable means of making payments for goods
and services and for settling debts. Acceptability can arise through
mutual agreement, custom or law.
b. Functions of money:
i. Medium of exchange: transactions are facilitated through the use
of money exchange
ii. Unit of accounts: Money serves as a means of keeping financial
records arising from economic transactions. Such records include
income and expenditure, profits and losses, balance of payment
iii. Measure of value: through the prices attached to goods and
services, the relative values of goods and services are estimated.
iv. Standard for deferred payment: The use of money had made
possible lending, borrowing and credit transactions.
v. Store of value: When prices are relatively stable, money serves as
a good store of value and saving is encouraged.
a. What is division of labour?
b. Explain five advantages of division of labour
c. Enumerate three disadvantages of division of labour
a. Division of labour is an arrangement by which the production process
is divided into separate tasks with each task being manned by different
persons or a group of persons.
b. Advantages of division of labour includes:
i. Saving of time
ii. Greater output
iii. Reduction of fatigue
iv. Reduction of cost per unit of production
v. Continuous repetition of a task increases the skill of the workers
vi. Division of labour is associated with innovation and creativity.
vii. Division of labour leads to specialisation.
c. Disadvantages of division of labour:
i. Monotony breeds boredom and loss of interest in the job
ii. There is greater risk of unemployment
iii. Division of labour may reduce the craftsmanship in labour for the
iv. Interdependence which is a by product of division of labour may bring
production to a standstill if there is fault or halt at any of the stages of
a. Distinguish between Division of labour and specialization
b. Explain THREE factors which limit the importance of division
of labour in production activity
a. Division of labour is the breaking down of the production
process into a number of separate operations with each
operation being undertaken by an employee or a group of
employee while specialization is the concentration of productive
efforts on a particular activity in which the comparative
advantage is highest.
b. Limitations on division of labour
i. The extent of demand for the product/market
ii. The managerial capability of the entrepreneur
iii. The nature of the product e.g unique talent or directive
iv. The efficiency/effectiveness of the distribution channel.
v. Availability of labour.
a. Explain the following concepts using appropriate examples
i. Opportunity cost
b. With the aid of a diagram, explain the production possibility curve.