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Percentage change in price = change in price/old price ×
= $6.00 – $5.00/$5.00 × 100%
= 1/5 ×100%
= 20%

percentage change in quantity supplied = change in
supply/old supply × 100%
= 80kg – 75kg/75kg × 100%
= 5/75 × 100%
= 6⅔% or 6.67%

coefficient of price elasticity of supply = %change in
supply/%change in price
= 100/15 ÷ 20
= 100/15 × 1/20
= 5/15
= 1/3 or 0.333

(i) The supply is inelastic since elasticity is less than one.
(ii) Elasticity is less than one.
(2di and 2dii)
Draw the diagrams


(i) A direct tax is imposed directly on income of
individuals or organisations WHILE Indirect Tax is
imposed on goods and services.
(ii) Direct Tax burden is borne by the payer WHILE Indirect
Tax burden is borne by the producer.
(iii) The tax payers in a direct tax is aware of the payment
of such tax WHILE the tax payers under indirect tax are
not aware of the amount being paid for such tax.

-Capital gain tax
-Company tax
-Property tax
-Import duty
-Export duty
-Value added tax

(i) It helps to Protect infant industries.
(ii) It is a source of government revenue.
(iii) It helps to correct balance of payment deficit.


Central bank is an independent national authority that
conducts monetary policy, regulates banks, and provides
financial services including economic research. Its goals
are to stabilize the nation’s currency, keep unemployment
low, and prevent inflation.

(i) Regulator of Currency:
The central bank is the bank of issue. It has the monopoly
of note issue. Notes issued by it circulate as legal tender
money. It has its issue department which issues notes
and coins to commercial banks.
(ii) Custodian of Cash Reserves of Commercial Banks:
Commercial banks are required by law to keep reserves
equal to a certain percentage of both time and demand
deposits liabilities with the central banks. It is on the basis
of these reserves that the central bank transfers funds
from one bank to another to facilitate the clearing of
Thus the central bank acts as the custodian of the cash
reserves of commercial banks and helps in facilitating
their transactions.
(iii) Custody and Management of Foreign Exchange
The central bank keeps and manages the foreign
exchange reserves of the country. It buys and sells foreign
currencies at international prices. Further, it fixes the
exchange rates of the domestic currency in terms of
foreign currencies.

(i) Open Market Operation(OMO): This is the purchase or
sale of government securities in the open market to
expand or restrict the volume of money in circulation. The
central bank applies this policy with the aim of regulating
the volume of money in circulation. When there is too
much money in circulation, the central bank will sell
securities. But in other to expand the volume, it buys
(ii) Liquidity or cash ratio: The commercial banks are
mandated by the government to keep a special proportion
eg 25%, of their total deposit with the central bank in
other to control the volume of credit. The size can be
extracted or expanded depending on the economic
condition of the nation
(iii) Bank rate: This is the minimum rate of interest
charged by the central bank for discounting bill of
exchange by lowering or raising the rate, the central bank
can control the activities of the commercial banks. When
the rate increases, loan to the public (customers) reduces,
while a fall in the rate will encourage more loans
(iv) Special directives The central bank can issue
directives or special instructions to the commercial banks
and other financial institutions.


Inflation may be defined as a persistent rise in the general
price level of goods and services. Inflation occurs when
the volume of purchases is permanently running ahead of
production, with too much money in circulation chasing
too few goods.

[Choose Any Three]
(i)Reduction in burden of debt : During inflation debtors
gain because there is too much money in
circulation,which will enable them to pay their debts with
(ii)Higher profit margin : Because producers are selling
their goods at higher prices,this will lead to higher profits.
(iii)Higher tax yield:As a result of high volume of money in
circulation, government is able to realise high yield from
(iv)Higher output:Higher prices of goods and services
during inflation encourage producers to embark on large
scale production,resulting in greater output.
[Choose Any three]
(i)Decline in profits: Deflation causes a decline in profits
as a result of low volume of money in circulation
(ii) Fall in prices of goods:As a result of decline in the
volume of money in circulation, the prices of goods and
services tend to fall.
(iii)It discourage imports: Goods imported are generally
more expensive and there is no hope of selling such
goods in an economy that is experiencing deflation
(iv)Fixed income earners gain: During the period of
deflation,Fixed income earners gain because wages are
fixed and they are able to buy more goods and services
(v)It result in unemployment and creditors gain: Deflation
brings about unemployment in the labour market and
creditors gain because money has added value during the
period of deflation


Economic development may be defined as the process
whereby the level of national production (that is national
income ) or per capital income increases over a period of

[Choose Any Three]
(i)Provision of loans to aid social and economic of
member nations
(ii)Provision of technical assistance for development
projects and programmes embarked upon by member
(iii)Provision of fund for the supply and development of
infrastructural facilities such as electricity;water,transport
and telecommunications.
(iv)Provision of fund for the agricultural development of
member nations.

[Choose Any Three]
(i)providing long term capital to its member nations for
economic development and reconstruction.
(ii)To helps in inducing long term capital for improving the
balance of payments and thereby balancing international
(iii)To helps by providing guarantees against loads
granted to large and small units and other projects for the
member nations.
(iv)To ensures that the development projects are
(v)To promotes the capital investment for member
nations by providing a guarantee for capital investment
and loans.

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