1. Economics is best described as the study of...

A. Choice made by successful and Rich individual

B. Ways and solution to eliminate scarcity.

C. How businessmen maximize their profits.

D. How people manage their scarce resources.

2.which all these is most likely a concerned of Economics?.

A. The changing weather and season patterns of Western countries.

B. The form of government in Iran.

C. Factors affecting the volatility of foreign exchange of stock market.

D. The effect of fungi on the growth of palm trees.

3. The scarcity definition of economics is credited to

A. Adam Smith

B. Alfred Marshall

C David Ricardo

D. Lionel Robinson

4. The father of Economics who formulated the principles of absolute advantage and the invisible hand is.

A.Jean-Baptiste Jay

B.David Ricardo

C.Adam Smith

D.Milton Fried Man.

 5.The scarcity definition of economics is credited to

A. Adam Smith

B. Alfred Marshall.

C. David Ricardo

D. Lionel Robinson.

6. The tools and other equipment employed 
Introducing consumer goods and services are called ...

A. Land

B. Labour

C. Capital

D enterprenure

7. Which of these is a form of service?

A logistic

B. Bottled drinking water

C. Fast food meal

D household appliances.

8. The government provides a cash subsidy for ethyl alcohol manufacturers to increase their supply of the product. what capable of economic way of thinking is associated with the case

A. Rational choice

B. Opportunity cost

C. Choosing at the margin

D. Responding to incentives

E. trade-off

9. economic studies the different activities taking place in the economy. Which of these not considered an economic activity?

A. Production

B.  Property

C. Distribution

D. Consumption

E. Exchange

10. which of the following disclosures the reason why scarcity exists?

A. The quantity of money in the economy is low

B. Full stop human wants exceed the resources available to satisfy them

C. The gap between the rich and the poor is too wide

D. Government make bad economic decisions

E. There is a shortage of some commodities


1.Distinguish between the following pairs of terms.

a) Capital expenditure and recurrent expenditure.

b) Fiscal policy and monetary policy.

2. Explain four reasons why government of a country imposes taxes


1. a) Capital expenditure expenses made by the government of physical assets that are durable in nature on the other hand,Recurrent expenditure are expenses that are made by the government on regular basis.

b) Fiscal policy is the use of taxation and government spending to achieve desired economic objective while Monetary policy involves the use of instruments such as interest rate, open market operation

 etc to regulate money supply to achieve desired economic objectives

2. I) Reasons for imposition of tax

II) To raise revenue for administration, defence and to provide social services

III) To regulate the importation of some commodities considered harmful. The tax makes the goods expensive to deter consumers.

III) To redistribute income between the rich and the poor.This he's done through the PAYE system where the rich pay higher tax than the poor

IV) To protect local infan industries from foreign competition.

V) correct balance of payment problem while parsing taxes on imports to increase their prices to discourage imports.

VI) To check deflation or inflation.

VII) To prevent dumping- Taxes are imposed on goods to raise their prices to discourage imports.

VIII) As a retaliatory measures against other countries.

IX) To create and protect employment in the domestic economy.

. 3 (a) Define Tariff. 

   (b)State the following laws:

   i) The law of absolute cost advantage.

  (ii)The law of comparative cost advantage. 
  4. Identify any four determinants of transactions demand for money.


  1. tariff is a tax imposed on goods imported into a country.
  2. (i) The law of absolute cost advantage state that a country should produce and export those goods in which it has absolute advantage over its trading partners and import those goods in which it has 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 groups in which it has a comparative disadvantage.

  3. (i) there are no cost of transportation
     (ii) labour is the only factor of production and they are of uniform quality within each country.
    (iii) Cost of production are constant. The cost remains the same whatever the quantities produced.
   (iv) There is no trade barriers between each countries.


1.Define consumer goods and capital goods.

2.Explain each of the following forms of capital with an example each

  • .Fixed capital
  • .Socal capital
  • .Circulating capital

3.Outline three reasons for the low level of savings in a country


1. Consumer goods are goods produced or the direct satisfaction of demand of an can be divided into non-perishable goods such as rising food drink and durable goods such as video player.

2. Capital goods:These are producer goods which are required for the production of other goods and not for resale. To the economist these goods are primarily used in producing other goods and the demand is derived demand.They are not required for their own sake but mainly for their function to aid production for example equipment plant and machinery.

2. I) Fixed capital :These are long-term assets of a firm that are very durable and are not used up in the course of production they do not change their form as well eg land ,buildings ,machinery, equipment, tools, motor vehicle etc

II) Social capital: This refers to Capital that is collectively owned by society but is provided by government. It is also called social infrastructure e.g Road, electricity, hospital ,schools, water ,rail system etc

III) Circulating Capital:This form of capital changes its form and are used up in the production process e.g stock of partly finished goods, fuel, raw materials, money for paying wages and salary etc


I) The income level is generally known as soul most people cannot afford to save

II) The dependency ratio is high because the working group is smaller compared to the youth and the aged.

III) Most people have tendency to consume rather than to say engaging in prestigious but non productive ventures for example for nearest parties wedding etc

IV) The cost of living is high because price of goods and services keep rising. people are therefore left with nothing to save.

V) The demand by banks are sometimes cumbersome because large initial deposit are require and other information that clients cannot provide.

VI) Government tax policy:If the tax is high it reduces disposable income and make saving low.

VII) Inadequate financial institution especially in the rural areas to mobilize savings.

VIII) High level of unemployment

               TAKE A QUIZ  !!!



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