Correct Answer: D. profit

Explanation

(a) A tariff is a tax imposed on goods imported into a country

(b) i. The law of absolute cost advantage states that a country should produce and export those goods in which it has an absolute advantage over its trading partners and imports those goods in which it has an absolute disadvantage compared with its trading partners.

ii. The law of comparative cost advantage states that a country should produce and export those goods in which it has a Comparative advantage and import those goods in which it has a comparative disadvantage.

(c) i. There are only two countries in the world each producing and consuming only two goods.

ii. Labour is the only factor of production and they are of uniform quality within each country.

iii. There is perfect mobility of labour within each country whereas labour cannot move freely between the two countries.

iv. Costs of production are Constant. The costs remain the same whatever the quantities produced.

v. There are no costs of transportation.

vi. There is full employment in each country. As a result, to produce more of one product will entail forgoing Some quantity of the other product.

vii. There are no trade barriers between the two countries.

Correct Answer: A. The cost of living decreases of that year

Correct Answer: B. it adopts scientific methods in making its analysis

Explanation

Economics is regarded as a social science because it uses scientific methods to build theories that can help explain the behavior of individuals, groups, and organizations.

Correct Answer: A. the exchange of goods and services

Explanation

(a) Balance of trade = Export of goods - Imports of goods = $52,000.00 - $40,000.00 = 12,000.00.

(b) Credit items = $52,000.00 + 4,000.00 + $20,000.00 + $2,500.00 + $22,800.00 = $101,300.00.

Debit items = $40,000.00 + .8,000.00 + $5,000.00 + $7,500.00 + $7,000.00 = $67,500.00.

Balance on current account = $101,300.00 - $67,500.00 = $33,800.00.

(c) Credit items = $50,000.00 + $254,000.00 + $221,000.00 = $525,000.00.

Debit balance = $26,000.00 + $289,000.00 + $238,000.00 = $553,000.00.

Balance on capital account = $525,000.00 - 553,000.00 = - $28,000.00.

Balance of payments = Balance on current account + Balance on capital account = ($33,800.00) + ($28,000.00) = $33,800.00 - $28,000.00 = $5,800.00.

Explanation

a) Distinguish between domestic trade and external trade: Domestic trade is the exchange of goods and services within the borders of a country and involves the use of only one currency, ete. External trade is the exchange of goods and services across the borders of a country and involves the use of different currencies.

(b) Distinguish between terms of trade and balance of trade: Terms of trade is the rate at which a country's export is exchanged for its imports OR Terms of trade = \(\frac {\text {lndex of exports prices}} {\text {Index of import prices}}\) X 100

Balance of trade is the difference between the value ofa country's visible exports and its visible Imports over a time period.

(c) Outline four causes of balance of payments deficit in a country:

(i) Increased demand for foreign consumer goods due to high taste for foreign goods.

(ii) Demand for foreign capital goods due to rapid industrialization.

(iii) Unfavorable terms of trade because of falling commodity prices.

(iv) Decrease in the demand for local exports as a result of emergence of synthetic substitutes.

(v) Export of unprocessed primary products which attract lower prices in the world market.

(vi) Debt servicing due to borrowing from foreign lenders and inability to raise enough capital from domestic sources.

(vii) Transfer of capital abroad by foreign investors and citizens which lead to capital flight.

(viii) Large amount of payments for foreign invisible items e.g shipping. insurance. aviation and tourism expenditure on foreign missions

(ix) Increased expenditure on foreign mission

Correct Answer: C. one person bears all the risks

Correct Answer: A. maximum prices

Explanation

Price controls are government-mandated minimum or maximum prices that can be charged for specified goods. The government would normally fix a maximum price at which goods are to be sold. Maximum prices can reduce the price of food to make it more affordable to the citizens and reduce hardship and exploitation from sellers. But the problem is a maximum price may lead to lower supply and a shortage.

Correct Answer: D. only spending on final goods are considered

Explanation

To overcome the problem of double counting under the expenditure approach, only spending on final goods are considered.

The expenditure approach to calculating national income measures the total spending on goods and services in an economy. However, this can lead to double counting, as the same good or service can be counted multiple times if it is used in the production of other goods and services.

To avoid double counting, only spending on final goods is considered when using the expenditure approach. Final goods are goods and services that are not used to produce other goods and services. Intermediate goods, on the other hand, are goods and services that are used to produce other goods and services.

By only considering spending on final goods, the problem of double counting is avoided. This is because final goods are not used to produce other goods and services, so they are not counted multiple times.