Practice neco model questions vol1 economics 2019 Past Questions

Question 1 View Details

In a market, the demand curve is given by $ P = 100 - 2Q $ and the industry faces a constant marginal cost of $ MC = 20 $. Assuming the firm is a monopoly and there are no fixed costs, calculate the dead‑weight loss (DWL) that arises from monopoly pricing compared with perfect competition.

A. 800

B. 600

C. 200

Correct D. 400

Correct Answer: D

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Question 2 View Details

Given the following macro‑economic data (in billions of naira): Consumption $C = 500$, Investment $I = 150$, Government spending $G = 200$, Exports $X = 120$, Imports $M = 80$, Indirect taxes $T_i = 50$, Subsidies $S = 20$, Depreciation $D = 30$, and Net factor income from abroad $NFIA = -10$. Compute the National Income (NI) of the economy.

A. 840

B. 860

Correct C. 820

D. 800

Correct Answer: C

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Question 3 View Details

A country's export price index rises from 100 to 130, while its import price index falls from 100 to 90. The terms of trade (TOT) are defined as the ratio of the export price index to the import price index. Determine the percentage change in the terms of trade and state whether the country's terms of trade have improved or deteriorated.

A. 55.6

Correct B. 44.4

C. 33.3

D. 20.0

Correct Answer: B

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Question 4 View Details

In an economy, the marginal propensity to consume (MPC) is 0.75 and the tax rate is 20 % of income. Autonomous consumption is 50, autonomous investment is 30, government spending is 80, and net exports are -20. Using the expenditure approach, calculate the equilibrium level of national income.

A. 280

B. 400

C. 300

Correct D. 350

Correct Answer: D

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Question 5 View Details

A firm produces output according to the Cobb‑Douglas production function $ Q = L^{0.5} K^{0.5} $. The price of labour is $ w = 4 $ per unit and the price of capital is $ r = 1 $ per unit. To produce $ Q = 100 $ units at minimum cost, determine the total cost of production.

Correct A. 400

B. 450

C. 300

D. 500

Correct Answer: A

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Question 6 View Details

Given that the Consumer Price Index (CPI) was $120$ at the start of 2020, rose to $126$ at the end of 2020, and further to $133$ at the end of 2021, a two‑year government bond offered a nominal interest rate of $12\%$ per annum. Assuming the nominal rate remained constant each year, calculate the average real interest rate per annum over the two years. (Round your answer to one decimal place and express it as a percentage.)

Correct A. 6.4\%

B. 5.8\%

C. 7.2\%

D. 6.0\%

Correct Answer: A

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Question 7 View Details

National accounts for a country provide the following data (in billions of naira): GDP at market price = $15\,000$, indirect taxes less subsidies = $1,200$, net factor income from abroad = $-500$, and statistical discrepancy = $300$. The population is $30$ million. Compute the Gross National Product (GNP) at factor cost and then determine the GNP per capita. (Round the per‑capita figure to the nearest naira.)

Correct A. 13 300 billion; 443 333 naira

B. 14 500 billion; 483 333 naira

C. 13 600 billion; 453 333 naira

D. 12 800 billion; 426 667 naira

Correct Answer: A

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Question 8 View Details

The population of Country X was $20$ million at the beginning of 2020. For the first five years (2021-2025) the annual growth rate was constant at $3\%$. Thereafter the growth rate fell by $0.3\%$ each year until it reached a floor of $0.5\%$, after which it remained constant at $0.5\%$ per annum. In which calendar year will the population first exceed $30$ million? (Give the year as a four‑digit number.)

A. 2058

B. 2060

Correct C. 2059

D. 2072

Correct Answer: C

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Question 9 View Details

In 2022 the labour market statistics for a country were as follows: frictional unemployment = $2.5\%$, structural unemployment = $3.0\%$, cyclical unemployment = $1.5\%$, and the actual unemployment rate = $8.0\%$. The total labour force is $12$ million. Determine (a) the natural rate of unemployment, (b) the unemployment gap, and (c) the number of unemployed persons in millions (rounded to two decimal places).

Correct A. Natural rate 5.5 %; gap 2.5 %; unemployed 0.96 million

B. Natural rate 5.5 %; gap 1.5 %; unemployed 0.72 million

C. Natural rate 5.0 %; gap 2.0 %; unemployed 0.84 million

D. Natural rate 6.0 %; gap 3.0 %; unemployed 1.08 million

Correct Answer: A

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Question 10 View Details

The marginal propensity to consume (MPC) in an economy is $0.75$. The government decides to increase its spending by $\text{₦}200$ billion. (a) Calculate the resulting change in equilibrium national income using the expenditure multiplier. (b) What increase in taxes would be required to keep the equilibrium national income unchanged? (Express the tax increase in billions of naira, rounded to two decimal places.)

Correct A. ΔY = +800 billion; ΔT = 266.67 billion

B. ΔY = +800 billion; ΔT = 150.00 billion

C. ΔY = +600 billion; ΔT = 200.00 billion

D. ΔY = +1000 billion; ΔT = 333.33 billion

Correct Answer: A

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Question 11 View Details

A consumer has a monthly income of $\N{₦}1{,}200$. The price of rice is $\N{₦}200$ per kilogram and the price of beans is $\N{₦}150$ per kilogram. If the consumer decides to buy 3 kilograms of rice, how many kilograms of beans can he purchase with the remaining income?

Correct A. 4

B. 6

C. 3

D. 5

Correct Answer: A

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Question 12 View Details

Country A and Country B both had a real GDP of $\N{₦}500$ billion in 2020. Country A's GDP grew at $5\%$ per year for the first three years and at $2\%$ per year for the next two years. Country B's GDP grew at a constant annual rate $r$ for five years and reached $\N{₦}800$ billion in 2025. During the whole period, Country A's population grew at $2\%$ per year while Country B's population grew at $1\%$ per year. Determine which country had the higher average annual per‑capita GDP growth over the five‑year period.

A. Country D

B. Country C

C. Country A

Correct D. Country B

Correct Answer: D

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Question 13 View Details

The central bank requires a reserve ratio of $10\%$ and the public holds currency equal to $20\%$ of bank deposits. Initially total deposits are $\N{₦}500$ billion. The central bank purchases $\N{₦}50$ billion of government securities from the public. Assuming the entire amount becomes excess reserves, calculate the new total money supply after the operation.

Correct A. 800

B. 850

C. 900

D. 750

Correct Answer: A

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Question 14 View Details

In 2020 the nominal GDP of a country was $\N{₦}2{,}500$ billion and the GDP deflator was 125. In 2021 nominal GDP rose to $\N{₦}2{,}800$ billion and the deflator became 130. (a) Compute the real GDP for each year. (b) Determine the inflation rate between 2020 and 2021 using the GDP deflator. (c) If the nominal interest rate in 2021 was 12\%, what was the real interest rate that year (using the Fisher approximation)?

A. 6

B. 10

Correct C. 8

D. 12

Correct Answer: C

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Question 15 View Details

A country's population follows the logistic model $P(t)=\dfrac{K}{1+ae^{-bt}}$ where $K=50$ million, $a=4$ and $b=0.03$ (t in years, $t=0$ corresponds to 2020). In 2020 the age structure is 30\% (0‑14 years), 60\% (15‑64 years) and 10\% (65+ years) and is assumed to remain proportionally constant as the population grows.\n(a) Estimate the total population in 2030.\n(b) Compute the dependency ratio (young + old over working‑age) in 2030.\n(c) The government wants the dependency ratio to stay below 55\%. If it can reduce the effective carrying capacity to 45 million from the year it starts a new policy, determine the latest whole year by which the policy must be introduced so that the population never exceeds 45 million. Assume the same logistic parameters after the policy is implemented.

A. 2170

B. 2155

C. 2135

Correct D. 2140

Correct Answer: D

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Question 16 View Details

In a certain market the price of a good is $₦200$ and the quantity demanded is $300$ units. When the price is increased by $10\%$ the quantity demanded falls by $15$ units. Assuming the demand curve is linear, calculate the price elasticity of demand at the original price. Give your answer correct to two decimal places.

A. -0.45

B. -0.60

C. -0.35

Correct D. -0.50

Correct Answer: D

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Question 17 View Details

The population of Country X was $150$ million in 2010. For the first five years (2010‑2015) it grew at a constant annual rate of $2.5\%$. From 2015 to 2020 the annual growth rate decreased uniformly each year, starting at $2.5\%$ in 2015 and reaching $1.5\%$ in 2020. Calculate the population at the end of 2020. Round your answer to two decimal places (million).

A. 190.45

Correct B. 187.37

C. 185.12

D. 182.90

Correct Answer: B

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Question 18 View Details

A country's labour force was $20$ million at the start of 2022. The unemployment rate fell from $12\%$ to $9\%$ over the year, while the labour force grew by $3\%$. How many people moved from unemployment to employment during the year? Give your answer in millions to three decimal places.

A. 0.600

Correct B. 1.146

C. 1.046

D. 0.546

Correct Answer: B

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Question 19 View Details

Country A had a GNI per capita of $\$4{,}000$ in 2015. Over the next three years the GNI per capita grew at an average annual rate of $5\%$. During the same period the Gini coefficient rose linearly from $0.35$ to $0.40$. The national poverty line is set at $\$2{,}000$. Assuming the proportion of the population below the poverty line each year can be approximated by $P = \frac{1}{2}\times Gini \times \frac{\text{Poverty line}}{\text{GNI per capita}}$, calculate the change in poverty incidence (in percentage points) from 2015 to 2018. Give your answer to two decimal places (a negative value indicates a decline).

A. -0.10

Correct B. -0.11

C. 0.11

D. -0.12

Correct Answer: B

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Question 20 View Details

A firm produces output $Q$ according to the Cobb‑Douglas function $Q = 0.5\,L^{0.6}K^{0.4}$, where $L$ is labour (workers) and $K$ is capital (machines). The daily wage rate is $\text{₦}120$ per worker and the rental rate of capital is $\text{₦}200$ per machine. The firm wishes to produce $Q = 1{,}000$ units per day at minimum cost. Determine the cost‑minimising quantities of labour and capital (allow fractional units, round to two decimal places) and the corresponding minimum daily cost (rounded to the nearest naira).

Correct A. Labour = 2886.00 workers, Capital = 1154.40 machines, Minimum cost = ₦577,200

B. Labour = 3000.00 workers, Capital = 1000.00 machines, Minimum cost = ₦580,000

C. Labour = 2500.00 workers, Capital = 1300.00 machines, Minimum cost = ₦590,000

D. Labour = 2800.00 workers, Capital = 1200.00 machines, Minimum cost = ₦575,000

Correct Answer: A

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Question 21 View Details

Table shows the total cost (TC) in thousand naira for a textile firm at different output levels (Q) measured in units. \[\begin{array}{c|c} Q (\text{units}) & TC (\text{thousand naira})\\ \hline 0 & 150\\ 100 & 210\\ 200 & 280\\ 300 & 360\\ 400 & 460\\ 500 & 580 \end{array}\] The market price of the product is ₦1,200 per unit. (a) Calculate the average total cost at $Q = 300$ units. (b) Calculate the marginal cost between $Q = 300$ and $Q = 400$ units. (c) Identify the highest output level (in whole hundreds of units) at which the firm is still experiencing economies of scale (i.e., where average total cost is decreasing). (d) Assuming the firm wants to maximise profit, what is the smallest output level (in whole hundreds of units) at which it first attains its maximum profit?

Correct A. a) ₦1,200 per unit, b) ₦1,000 per unit, c) 400 units, d) 400 units

B. a) ₦1,150 per unit, b) ₦1,050 per unit, c) 300 units, d) 300 units

C. a) ₦1,100 per unit, b) ₦1,200 per unit, c) 500 units, d) 500 units

D. a) ₦1,250 per unit, b) ₦950 per unit, c) 200 units, d) 200 units

Correct Answer: A

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Question 22 View Details

During an open‑market operation the Central Bank purchases government bonds worth ₦500 million, injecting that amount into the banking system. The required reserve ratio is 10 %, the public holds a currency‑to‑deposit ratio of 0.25, and banks keep excess reserves equal to 2 % of deposits. Calculate the total increase in the money supply (in million naira) that results from this operation.

Correct A. Approximately ₦1,689 million (≈ ₦1.69 billion)

B. Approximately ₦1,250 million (≈ ₦1.25 billion)

C. Approximately ₦1,500 million (≈ ₦1.5 billion)

D. Approximately ₦2,000 million (≈ ₦2.0 billion)

Correct Answer: A

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Question 23 View Details

In year 0 the export price index of Country X was 120 and the import price index was 110. In year 1 the export price index rose to 135 while the import price index rose to 130. (a) Compute the terms of trade index for each year and the percentage change between the two years. (b) If export volume grew by 5 % and import volume grew by 8 % over the same period, by what percentage did the value of imports grow relative to the value of exports? State the implication for the trade balance.

A. a) ToT₀≈109.1, ToT₁≈106.0, change≈‑2.8 %; b) import value grew about 5.0 % more than export value, worsening the trade balance.

Correct B. a) ToT₀≈109.1, ToT₁≈103.8, change≈‑4.9 %; b) import value grew about 9.5 % more than export value, worsening the trade balance.

C. a) ToT₀≈108.0, ToT₁≈104.5, change≈‑4.2 %; b) import value grew about 7.2 % more than export value, worsening the trade balance.

D. a) ToT₀≈110.5, ToT₁≈102.0, change≈‑7.8 %; b) import value grew about 12.3 % more than export value, improving the trade balance.

Correct Answer: B

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Question 24 View Details

A commercial bank offers a 3‑year fixed deposit that pays a nominal interest rate of 12 % per annum, compounded annually. The expected inflation rate is 7 % per year and the tax on interest income is 15 %. (i) Using the Fisher equation, determine the real rate of return before tax. (ii) Determine the real rate of return after tax.

A. i) ≈ 3.9 % real before tax; ii) ≈ 2.2 % real after tax

Correct B. i) ≈ 4.7 % real before tax; ii) ≈ 3.0 % real after tax

C. i) ≈ 4.7 % real before tax; ii) ≈ 2.5 % real after tax

D. i) ≈ 5.2 % real before tax; ii) ≈ 3.5 % real after tax

Correct Answer: B

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Question 25 View Details

An economy produces textiles (T) and electronics (E). Its current production‑possibility frontier (PPF) is linear and given by \[2T + E = 200,\] where $T$ and $E$ are measured in units. A technological improvement in the textile sector reduces the labour required per unit of textile by 20 %. (a) Write the equation of the new PPF. (b) What is the maximum possible output of textiles if all resources are devoted to textiles under the new PPF? State the increase in the maximum textile output compared with the original PPF. (c) After the improvement, what is the opportunity cost of producing one additional unit of electronics in terms of textiles?

A. a) 2T + 0.8E = 200; b) T_max = 100 units (increase of 0 units); c) opportunity cost of 1 E = 0.5 T

Correct B. a) 1.6T + E = 200; b) T_max = 125 units (increase of 25 units); c) opportunity cost of 1 E = 0.625 T

C. a) 1.6T + 0.8E = 200; b) T_max = 125 units (increase of 25 units); c) opportunity cost of 1 E = 2 T

D. a) 1.8T + E = 200; b) T_max = 111.11 units (increase of 11.11 units); c) opportunity cost of 1 E = 0.556 T

Correct Answer: B

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