2024 NABTEB ECONOMICS: NABTEB Economics (Econs) 2025 Legit Ans (8236)

(3)

(PICK ANY FIVE)

(i) Wages: The wage rate is a crucial factor. Generally, higher wages tend to reduce the demand for labor because they increase the cost of production for employers. Conversely, lower wages can increase the demand for labor.

(ii) Product Demand: The demand for labor is derived from the demand for the goods and services that labor helps to produce. If the demand for a company's product increases, the company will likely need to hire more workers to increase production.

(iii) Technology: Technological advancements can either increase or decrease the demand for labor. Automation and improved machinery might reduce the need for manual labor, while new technologies can also create new job opportunities and increase the demand for skilled labor.

(iv) Productivity: The productivity of labor affects its demand. If workers become more productive due to better training, tools, or technology, employers might demand more labor because the cost per unit of output decreases.

(v) Cost of Capital: The cost of capital (e.g., machinery, equipment) can influence labor demand. If the cost of capital is high, employers might prefer to hire more labor instead of investing in expensive equipment. Conversely, if capital becomes cheaper, employers might substitute labor with machines.

(vi) Government Policies: Regulations such as minimum wage laws, labor protections, and taxes can influence the demand for labor by affecting the cost 'copied from e x a m p l a z a . c o m free' of hiring and employing workers.

(vii) Economic Conditions: The overall economic climate affects business confidence and investment in hiring. During economic booms, the demand for labor tends to increase, whereas during recessions, it tends to decrease.

(viii) Availability of Substitutes: The availability of substitutes for labor, such as automation, outsourcing, or part-time workers, can reduce the demand for traditional labor if these alternatives are more cost-effective.

(4a)

Deficit financing refers to the methods a government uses to fund its expenditures that exceed its revenues. Essentially, when a government spends more money than it earns through taxes and other income, it needs to cover this shortfall by borrowing money, printing new money, or finding other sources of funds.

(4b)

(PICK ANY FOUR)

(i) Borrowing from the public: Governments issue bonds, treasury bills or notes to raise funds from citizens, businesses, and institutions. This method allows the government to tap into domestic savings and spread the debt burden among the population. 

(ii) Borrowing from banks: Central banks or commercial banks lend money to the government to finance its deficit. This method provides quick access to funds but can lead to inflation if the money supply increases too rapidly. Banks may also charge interest rates that add to the government's debt burden.

(iii) Printing money: The central bank prints more money to finance the deficit, increasing the money supply. This method risks causing inflation, as excessive money circulation can erode the currency's value. It can also lead to hyperinflation if not managed carefully.

(iv) Foreign borrowing: Governments borrow from foreign governments, institutions, or investors through foreign currency-denominated bonds or loans. This method allows access to global capital markets but exposes the government to exchange rate risks and potential currency 'copied from e x a m p l a z a . c o m free' fluctuations. Foreign borrowing can also increase the country's reliance on external debt.

(v) Asset sales: Governments sell state-owned assets, such as land, buildings, or enterprises, to raise funds and reduce debt. This method provides a one-time influx of capital but can lead to loss of control over strategic assets. Asset sales can also be politically sensitive or controversial.

(vi) Drawdown of reserves: Governments use accumulated reserves or surpluses from previous years to finance the current deficit. This method provides a readily available source of funds but reduces the government's safety net and may not be sustainable in the long term. It can also indicate a lack of fiscal discipline if relied upon too heavily.

(5)

(i) Frictional unemployment: Frictional unemployment occurs when individuals are temporarily without jobs while transitioning from one position to another or entering the workforce for the first time. It arises from voluntary job changes, new graduates entering the labor market, or individuals relocating for personal reasons. This type of unemployment is usually short-term and is a natural part of a healthy, dynamic economy. It reflects the time taken for people to find jobs that best match their skills, preferences, and location.

(ii) Structural unemployment: Structural unemployment results from a mismatch between the skills that workers possess and the skills demanded by employers, often due to technological advancements, changes in consumer preferences, or shifts in the economy. It is caused by technological changes (e.g., automation), globalization (e.g., outsourcing), changes in industry composition, or geographical mismatches between job seekers and job locations. Structural unemployment can be long-term and may require workers to undergo retraining or acquire new skills to find employment. It indicates underlying changes in the economy that affect entire industries or job markets.

(iii) Cyclical unemployment: Cyclical unemployment is linked to the economic cycle, increasing during recessions and decreasing during periods of economic growth. It is caused by a downturn in economic activity, reduced consumer demand, and lower production 'copied from e x a m p l a z a . c o m free' levels. During a recession, companies cut back on hiring or lay off workers due to decreased demand for their products or services. This type of unemployment is temporary and directly related to the business cycle, and it can be addressed through economic policies that stimulate demand, such as fiscal stimulus or monetary easing.

(iv) Seasonal unemployment: Seasonal unemployment occurs when workers are unemployed at certain times of the year because their jobs are dependent on seasonal conditions. It is caused by fluctuations in demand or production that occur at specific times of the year, such as agriculture during harvest periods, tourism during peak vacation seasons, and retail during holiday shopping periods. Seasonal unemployment is predictable and regular, based on the nature of certain industries. Workers in these industries often seek temporary or part-time work during off-peak seasons to supplement their income.

(6a)

A market is a place or platform where buyers and sellers come together to exchange goods, services, or resources. This can occur in a physical location, such as a marketplace or a store, or through virtual means, such as online marketplaces. The main function of a market is to facilitate the interaction between demand (buyers) and supply (sellers) to determine the price and quantity of goods and services exchanged.

(6b) 

(PICK ANY FIVE)

(i) Large number of buyers and sellers: In a perfectly competitive market, there are so many buyers and sellers that no single participant can influence the market price. Each seller supplies a small portion of the total market output, and each buyer purchases only a small portion of the total demand.

(ii) Homogeneous Products: The products offered by different sellers are identical or perfectly substitutable. There are no differences in quality, features, or branding, which means consumers have no preference for one seller's product over another's.

(iii) Free entry and exit: Firms can freely enter or exit the market without any barriers. There are no significant legal, financial, or technical obstacles preventing new firms from starting up or existing firms from shutting down.

(iv) Perfect Information: All participants in the market have complete and instantaneous access to all relevant information, such as prices, product quality, and production methods. This ensures that no buyer or 'copied from e x a m p l a z a . c o m free' seller can take advantage of information asymmetry.

(v) Price takers: Individual buyers and sellers accept the market price as given. Since no single participant can influence the price, they must take the prevailing market price as it is. Sellers sell all their output at the market price, and buyers purchase all they want at that price.

(vi) No transportation costs: There are no costs associated with transporting goods from one place to another within the market. This assumption simplifies the analysis by ensuring that prices are uniform across the market.

(vii) Perfect mobility of resources: Factors of production, such as labor and capital, can move freely and instantly from one industry to another in response to changes in relative prices or profitability. This ensures that resources are allocated efficiently in response to market signals.

(7a)

International trade refers to the exchange of goods, services, and capital across international borders or territories. It involves the import and export of products between countries, enabling nations to access goods and services that are not available domestically or are produced more efficiently elsewhere. International trade enhances economic interdependence among countries and plays a critical role in promoting global economic growth and development.

(7b)

(i) Currency exchange: International trade involves different currencies, requiring currency exchange and dealing with exchange rate fluctuations. This adds complexity and risk, as changes in exchange rates can affect the cost and profitability of trade. In contrast, internal trade is conducted within the same currency, eliminating the need for currency exchange and reducing associated risks and costs.

(ii) Regulations and Policies: International trade is governed by international laws, treaties, and agreements. Countries impose tariffs, quotas, and trade restrictions to protect domestic industries, affecting the flow of goods and services. On the other hand, internal trade is regulated by national laws and policies, which are usually less restrictive compared to international trade, facilitating easier and smoother trade.

(iii) Transportation and Logistics: Transportation and logistics in international trade involve longer distances and more complex processes, including customs 'copied from e x a m p l a z a . c o m free' clearance, international shipping, and compliance with multiple countries' regulations. This increases transportation costs and time. Internal trade generally involves shorter distances and simpler logistics, with goods often transported by road, rail, or domestic shipping, resulting in lower transportation costs and times.

(iv) Cultural and Language Differences: International trade requires dealing with different cultures, languages, business practices, and consumer preferences. This necessitates cultural sensitivity, language translation, and adaptation of products to meet local tastes and standards. In contrast, internal trade is conducted within the same cultural and linguistic framework, making communication and understanding easier, and allowing for more uniform products and marketing strategies without significant adaptation for different regions.

(8)

(i) Resource Depletion: A rapidly growing population increases demand for natural resources, leading to scarcity and depletion of essential resources like water, food, and energy. This can result in increased competition for resources, leading to conflicts and social unrest.

(ii) Environmental Degradation: A growing population puts pressure on the environment, leading to pollution, deforestation, and loss of biodiversity. This can have devastating consequences, including climate change, soil erosion, and decreased air and water quality.

(iii) Housing and Infrastructure Shortages: Rapid population growth can lead to housing shortages, overcrowding, and inadequate public services like transportation, sanitation, and healthcare. This can result in decreased quality of life, increased poverty, and social inequality.

(iv) Unemployment and Poverty: A rapidly growing population can lead to increased competition for jobs, resulting in higher unemployment rates, poverty, and income inequality. This can have long-term consequences, including decreased economic growth and social mobility.

(v) Strain on Public Services: A growing population puts pressure on public services like healthcare, education, and social services, leading to decreased quality and accessibility. This can result in decreased health outcomes, lower educational attainment, and increased social inequality.

(vi) Food Insecurity: Rapid population growth can lead to increased 'copied from e x a m p l a z a . c o m free' demand for food, resulting in higher prices, scarcity, and malnutrition. This can have devastating consequences, including starvation, stunted growth, and decreased economic productivity.

(vii) Water Scarcity: A growing population increases demand for water, leading to scarcity, rationing, and decreased access to clean water. This can have severe consequences, including dehydration, disease, and decreased economic productivity.

(viii) Increased Crime and Social Unrest: Overcrowding, poverty, and unemployment can lead to increased crime rates and social unrest. This can result in decreased safety, security, and overall quality of life.