Practice neco model questions vol1 economics 2017 Past Questions

Question 1 View Details

An economy reports the following aggregate incomes: wages = \(500\) million, rent = \(200\) million, interest = \(150\) million, and profit = \(250\) million. Indirect taxes less subsidies amount to \(120\) million and depreciation is \(80\) million. Net factor income from abroad is \(30\) million. Calculate the Gross National Product (GNP) of the economy.

Correct A. 1330

B. 1240

C. 1275

D. 1385

Correct Answer: A

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Question 2 View Details

The market for wheat is described by the demand equation \(Q_d = 500 - 5P\) and the supply equation \(Q_s = 100 + 3P\), where \(P\) is the price per kilogram in Naira and \(Q\) is quantity in thousands of kilograms. Determine the equilibrium price.

A. 60

Correct B. 50

C. 55

D. 45

Correct Answer: B

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Question 3 View Details

A monopolist faces the inverse demand curve \(P = 200 - 2Q\) and has a constant marginal cost of \(MC = 20\). Its average total cost is constant at \(ATC = 30\). Find the profit the monopolist earns at the profit‑maximising output.

A. 3400

B. 3800

Correct C. 3600

D. 4000

Correct Answer: C

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Question 4 View Details

In a given fiscal year the government's revenue is \(800\) billion Naira, non‑interest expenditure is \(950\) billion Naira and interest payments are \(120\) billion Naira. The nation's GDP is \(4\) trillion Naira and the existing public debt at the start of the year is \(1\,500\) billion Naira. Compute the debt‑to‑GDP ratio after the government borrows to cover its total deficit.

Correct A. 44.25

B. 50.00

C. 48.75

D. 40.25

Correct Answer: A

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Question 5 View Details

Last year a country's GDP was \(2\,500\) billion Naira and its population was 50 million. This year the population grew by 2 % and GDP grew by 5 %. What is the percentage increase in per‑capita GDP this year?

Correct A. 2.94

B. 3.00

C. 4.50

D. 2.00

Correct Answer: A

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Question 6 View Details

The market for a certain good is described by the demand equation \(Q_d = 120 - 2P\) and the supply equation \(Q_s = 20 + P\), where \(P\) is the price in naira and \(Q\) is quantity in thousands of units. The government imposes a specific tax of ₦10 per unit on this good. Calculate (a) the tax revenue collected, and (b) the loss in consumer surplus resulting from the tax. Give your answers to two decimal places.

A. Tax revenue = ₦533.33 million; loss in consumer surplus = ₦180.00 million

B. Tax revenue = ₦400.00 million; loss in consumer surplus = ₦120.00 million

C. Tax revenue = ₦450.00 million; loss in consumer surplus = ₦150.00 million

Correct D. Tax revenue = ₦466.67 million; loss in consumer surplus = ₦166.67 million

Correct Answer: D

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Question 7 View Details

In an open economy, the marginal propensity to consume is 0.75, the marginal propensity to import is 0.10 and the income tax rate is 20 %. The government decides to increase its spending by ₦50 million, financed entirely by foreign aid (i.e., no additional taxes). Assume that each additional ₦1 million of income creates 30 new jobs. (a) Determine the change in equilibrium national income, (b) the corresponding change in employment, and (c) the change in the trade balance. Present your answers in millions of naira and number of jobs.

A. ΔY = 110 million naira; ΔEmployment = 3,300 jobs; ΔTrade balance = -12 million naira

B. ΔY = 95 million naira; ΔEmployment = 2,850 jobs; ΔTrade balance = -9 million naira

C. ΔY = 90 million naira; ΔEmployment = 2,700 jobs; ΔTrade balance = -8 million naira

Correct D. ΔY = 100 million naira; ΔEmployment = 3,000 jobs; ΔTrade balance = -10 million naira

Correct Answer: D

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Question 8 View Details

A country can produce either 1,200 tonnes of wheat or 800 tonnes of rice if it uses all its resources. If the country decides to produce 600 tonnes of wheat, what is the maximum amount of rice it can produce? Also state the opportunity cost of producing one additional tonne of wheat in terms of rice.

Correct A. Maximum rice = 400 tonnes; Opportunity cost of 1 tonne wheat = 2/3 tonne rice

B. Maximum rice = 300 tonnes; Opportunity cost of 1 tonne wheat = 1/2 tonne rice

C. Maximum rice = 200 tonnes; Opportunity cost of 1 tonne wheat = 1 tonne rice

D. Maximum rice = 500 tonnes; Opportunity cost of 1 tonne wheat = 3/4 tonne rice

Correct Answer: A

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Question 9 View Details

The consumer price index (CPI) was 120 in year 1 and rose to 132 in year 2. During the same period a worker's nominal monthly income increased from ₦50,000 to ₦55,000. (a) Compute the inflation rate between the two years, (b) calculate the percentage change in the worker's real income, and (c) state whether the worker is better off in real terms.

Correct A. Inflation = 10 %; Real income change = 0 %; Worker is neither better nor worse off

B. Inflation = 8 %; Real income change = 5 %; Worker is better off

C. Inflation = 10 %; Real income change = 5 %; Worker is better off

D. Inflation = 12 %; Real income change = -2 %; Worker is worse off

Correct Answer: A

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Question 10 View Details

The demand for a product is given by \(Q_d = 500 - 5P\) and the supply by \(Q_s = 100 + 3P\), where \(P\) is the price in naira and \(Q\) is quantity. Find the equilibrium price and equilibrium quantity.

A. Equilibrium price = ₦45; Equilibrium quantity = 275 units

Correct B. Equilibrium price = ₦50; Equilibrium quantity = 250 units

C. Equilibrium price = ₦40; Equilibrium quantity = 300 units

D. Equilibrium price = ₦60; Equilibrium quantity = 200 units

Correct Answer: B

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Question 11 View Details

The market for widgets is described by the linear demand equation \( Q_d = 500 - 5P \) and the linear supply equation \( Q_s = 2P - 20 \), where \(P\) is the price per widget (in naira) and \(Q\) is the quantity demanded or supplied. Determine the equilibrium price and the equilibrium quantity.

A. Price = 520/8 naira, Quantity = 900/8 units

B. Price = 520/5 naira, Quantity = 900/5 units

C. Price = 520/6 naira, Quantity = 900/6 units

Correct D. Price = 520/7 naira, Quantity = 900/7 units

Correct Answer: D

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Question 12 View Details

In a closed economy, the following aggregate expenditures (in billions of naira) are recorded for a given year: Consumption \(C = 2,500\), Investment \(I = 800\), Government spending \(G = 1,200\), Exports \(X = 300\), Imports \(M = 350\). Indirect taxes amount to 150 billion naira and subsidies total 50 billion naira. Depreciation (consumption of fixed capital) is 200 billion naira. Assuming net factor income from abroad is zero, calculate the Net National Income (NNI) for that year.

Correct A. 4,150

B. 4,050

C. 4,350

D. 4,250

Correct Answer: A

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Question 13 View Details

A country's population was 10 million in the year 2000. From 2000 to 2010 the population grew at an annual compound rate of 2 %. Beginning in 2010 the annual compound growth rate fell to 1.5 %. In which calendar year will the population first exceed 15 million?

A. 2025

B. 2022

Correct C. 2024

D. 2023

Correct Answer: C

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Question 14 View Details

A firm faces the total cost function \( TC = 200 + 5Q + 0.5Q^{2} \) (naira) and the market demand curve \( P = 120 - 2Q \) (naira per unit). Determine the output level \(Q\) that maximizes the firm's profit and state the maximum profit.

Correct A. Q = 23 units, profit = 1,122.5 naira

B. Q = 22 units, profit = 1,050 naira

C. Q = 24 units, profit = 1,080 naira

D. Q = 20 units, profit = 950 naira

Correct Answer: A

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Question 15 View Details

A manufacturing firm produces two products, A and B. The selling price and variable cost per unit are: Product A - price ₦150, variable cost ₦90; Product B - price ₦200, variable cost ₦130. Fixed costs amount to ₦50,000. Currently the firm produces 200 units of A and 150 units of B. Management is considering a plan to increase production of A by 50 units and reduce production of B by 30 units. Will the firm's total profit increase, decrease, or remain unchanged under the proposed plan? State the change in profit (in naira).

A. Profit decreases by 900 naira

Correct B. Profit increases by 900 naira

C. Profit remains unchanged (0 naira)

D. Profit increases by 1,200 naira

Correct Answer: B

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Question 16 View Details

In an economy the labour force is \(20\) million. The observed unemployment rate is \(12\%\). It is known that frictional unemployment accounts for \(4\%\) of the labour force and structural unemployment accounts for \(3\%\) of the labour force. The remaining unemployment is cyclical. The government implements a training programme that is expected to reduce structural unemployment by one‑third and frictional unemployment by \(25\%\). Assuming the labour force remains unchanged, what will be the new overall unemployment rate (to two decimal places) after the programme takes effect?

A. 11.25

B. 9.33

Correct C. 10.00

D. 13.50

Correct Answer: C

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Question 17 View Details

A firm uses labour only. The total product (TP) of labour \(L\) (in workers) is given by \(TP = 5L^{2} - 0.2L^{3}\). Determine the number of workers at which average product (AP) is maximised, and find the corresponding maximum AP value. Give the answer for \(L\) (workers) to the nearest whole number and the maximum AP (units per worker) to two decimal places.

A. 12 workers; maximum AP = 30.00 units per worker

B. 15 workers; maximum AP = 28.75 units per worker

Correct C. 13 workers; maximum AP = 31.20 units per worker

D. 14 workers; maximum AP = 32.50 units per worker

Correct Answer: C

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Question 18 View Details

In an economy the public holds currency equal to 30 % of total deposits (currency‑deposit ratio \(c = 0.30\)). The central bank sets the required reserve ratio \(r = 0.10\) and banks hold an additional 5 % of deposits as excess reserves (\(e = 0.05\)). (a) Calculate the effective money multiplier. (b) If the central bank reduces the required reserve ratio to \(r = 0.08\) while \(c\) and \(e\) remain unchanged, what is the new money multiplier? Give both multipliers rounded to two decimal places.

A. 3.10 and 3.25

Correct B. 2.89 and 3.02

C. 2.75 and 2.88

D. 2.60 and 2.73

Correct Answer: B

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Question 19 View Details

Country X exports only wheat and imports only cloth. In year 1 the world price of wheat is ₦\(120\) per ton and the price of cloth is ₦\(80\) per metre. Country X exports \(500\) tons of wheat and imports \(1{,}200\) metres of cloth. In year 2 the price of wheat rises to ₦\(150\) per ton while the price of cloth falls to ₦\(70\) per metre, and the quantities exported and imported remain the same. (a) Calculate the terms of trade (ratio of export price index to import price index) for each year, expressed as a percentage. (b) Determine the percentage change in Country X's net export earnings (export revenue minus import expenditure) from year 1 to year 2.

A. Year 1 TOT = 160 %; Year 2 TOT = 220 %; net export earnings improved by 80 %

B. Year 1 TOT = 140 %; Year 2 TOT = 200 %; net export earnings improved by 60 %

Correct C. Year 1 TOT = 150 %; Year 2 TOT = 214.29 %; net export earnings improved by 75 %

D. Year 1 TOT = 130 %; Year 2 TOT = 190 %; net export earnings improved by 50 %

Correct Answer: C

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Question 20 View Details

The population of Country Y was \(20\) million in the year 2000. The annual population growth rate was \(2.5\%\) per year from 2000 to 2010, after which a family‑planning programme reduced the growth rate to \(1.2\%\) per year. (a) Calculate the population in the year 2020. (b) In 2020, \(30\%\) of the population is aged 0-14, \(60\%\) is aged 15-64 and the remaining are 65 years and above. Compute the dependency ratio (defined as \(\frac{\text{population aged 0-14} + \text{population aged 65+}}{\text{population aged 15-64}} \times 100\)). (c) If the government wants the dependency ratio to fall to \(55\%\) by 2030 and expects that the proportion aged 0-14 will fall to \(25\%\) while the proportion aged 65+ will rise to \(12\%\), what will be the total population in 2030 (in millions) assuming the reduced growth rate of \(0.8\%\) per year from 2020 onward? Give the projected population rounded to two decimal places.

Correct A. 2020 population = 28.84 million; dependency ratio = 66.69 %; 2030 population = 31.23 million

B. 2020 population = 28.84 million; dependency ratio = 70.00 %; 2030 population = 32.00 million

C. 2020 population = 29.10 million; dependency ratio = 68.20 %; 2030 population = 31.80 million

D. 2020 population = 28.50 million; dependency ratio = 65.00 %; 2030 population = 30.90 million

Correct Answer: A

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Question 21 View Details

Region X had a population of \(2.5\) million in 2010 and a constant natural annual growth rate of \(2.5\%\). Each year \(5{,}000\) people migrate from Region Y to Region X. Region Y had a population of \(3.0\) million in 2010 and a natural annual growth rate of \(1.8\%\). Assuming the rates and migration remain unchanged, after how many whole years will the population of Region X first exceed that of Region Y?

A. 25

Correct B. 20

C. 22

D. 18

Correct Answer: B

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Question 22 View Details

The overall unemployment rate in a country is \(12\%\). It is known that structural unemployment accounts for \(4\%\) and frictional unemployment for \(3\%\). The remaining unemployment is cyclical. If a new policy reduces cyclical unemployment by \(40\%\) of its original level, what is the new overall unemployment rate?

A. 13\%

B. 9\%

C. 11\%

Correct D. 10\%

Correct Answer: D

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Question 23 View Details

In an economy, total bank deposits are \(\text{₦}200\) billion and currency held by the public is \(\text{₦}80\) billion. The required reserve ratio is \(10\%\) and banks hold excess reserves equal to \(2\%\) of deposits.\n\n(a) Compute the money multiplier and the resulting money supply (M1).\n(b) If the central bank raises the required reserve ratio to \(12\%\) while the proportion of excess reserves to deposits remains unchanged, what is the new money supply?

A. ₦260 billion

B. ₦240 billion

C. ₦300 billion

Correct D. ₦280 billion

Correct Answer: D

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Question 24 View Details

A country's manufacturing sector starts the year 2020 with a capital stock of \(\text{₦}1{,}000\) billion. Each year the sector depreciates \(5\%\) of its capital stock. The sector saves (invests) \(50\%\) of its output. Output is produced according to the linear function \(Y = 0.4K\), where \(K\) is the capital stock at the beginning of the year. How many whole years are required for annual output to reach at least \(\text{₦}2{,}000\) billion?

A. 10

Correct B. 12

C. 13

D. 15

Correct Answer: B

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Question 25 View Details

A market has the linear demand curve \(P = 120 - 2Q\). The industry faces a constant marginal cost of \(\text{₦}30\) per unit and a fixed cost of \(\text{₦}200\).\n\n(a) Under perfect competition, what is the equilibrium quantity, price and total surplus (consumer surplus plus profit after fixed cost)?\n(b) Under monopoly, the firm maximises profit. Determine the monopoly quantity, price, consumer surplus, producer surplus and total surplus.\n(c) What is the percentage increase in total surplus when the market moves from monopoly to perfect competition?

A. 34.2%

Correct B. 38.4\%

C. 28.9%

D. 45.6%

Correct Answer: B

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