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ECONOMICS 3
0725

CAMEROON GENERAL CERTIFICATE OF EDUCATION (GCE) BOARD

General Certificate of Education Examination/Technical and Vocational Education Examination

JUNE 2022 ADVANCED LEVEL

Subject Title ECONOMICS
Paper No./Title 3
Subject Code No 0725

1 Hour 45 minutes

INSTRUCTIONS TO CANDIDATES

Answer ANY THREE questions. All questions carry equal marks.

You are advised to spend the first fifteen minutes reading the paper.
In calculations you are advised to show all the steps in your working.

You are reminded of the necessity for good English and orderly presentation in your answers

Calculators are allowed.

Turn Over
1⁃/0725/A/3
2022GCEB
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1. Assume that an economy can produce only two goods X and Y. If all the resources are
employed and allocated with maximum efficiency, the economy is capable of producing the
following combinations of the two goods;

Combination 1 2 3 4
Output of good X (in units) 50 40 20 0
Output of good Y (in units) 0 300 500 550

(a) Plot a production possibility curve reflecting the above information. (8 marks)
(b) Explain briefly whether an output combination of 40units of X and 500 units of Y can
be produced. (6 marks)
(c) What is the opportunity cost of increasing the production of good Y from 300 units to
500 units per week? (2 marks)
(d) Offer a brief explanation of the shape of the PPC which you have drawn. (4 marks)

2. The out of workers employed in a rice hulling mill is as outlined below.

Assume perfect competition in both the product and factor market and that the market price
per kg of rice determined by the market forces is 100frs.

No of workers 1 2 3 4 5 6 7 8 9 10
Total product 100 500 2700 4000 4750 5400 6000 6500 6900 7000
(kg)

(a) If the competitive wage rate is 40.000frs per month, how many workers will be
employed? (6 marks)
(b) Assume the government succeeds in implementing a minimum wage of 55.000frs per
month, what will be the effect? (6 marks)
(c) If in the new situation above, the price of sugar rises to 1500frs a kg and at the same
time productivity of workers increases by 20%, what will be the new level of
employment? (6 marks)
(d) Assume that the employer of labor is a monopsonist and the supplier of labor is a
monopolist, comment on the result of (b) above. (2 marks)

3. An economy at present has a national income 80,000MFCFA

The following relationships occur;

Consumption ═ 0.8Y disposable

Income tax ═ 0.5Y
Indirect tax ═ 0.1Y
Import ═ 0.2Y
Planned investment ═ 12000MFCFA
Government spending ═ 60,000MFCFA
Export ═ 18000MFCFA
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For consumption, taxation and imports, the average and marginal propensities are equal.
(a) Explain in terms of injections and withdrawals, why the economy is not at present
equilibrium. (6 marks)
(b) What is the equilibrium level of income? (6 marks)
(c) Calculate the trade gap at current level of income. (4 marks)
(d) What is the value of the multiplier? (4 marks)

4. Study the table below showing demand and supply for a commodity. D0 and S0 are the final
demand and supply schedules respectively.

Price (FRS) D0 D1 S0 S1
30 6 24 28
24 12 26 26
20 24 32 24
16 28 36 22
10 30 40 20
5 35 42 13

(a) Complete the supply schedule S1 above assuming that the initial supply So increase by
100%. (5 marks)
(b) Suppose that demand increases from D0 to D1 while supply remains constant at So,
what will be.
(ⅰ) The momentary equilibrium price and quantity? (5 marks)
(ⅱ) The short⁃run equilibrium price and quantity? (5 marks)
(c) What will be the long⁃run equilibrium price and quantity when supply increases from
S0 to S1. (5 marks)

5. Assume that the only Commercial Bank in a certain country has the following balance sheet.

LIABILITIES Amounts (frs) ASSETS Amounts(frs)

Customer’s Deposits 850,000 Cash 80,000
Other liabilities 150,000 Treasury bills 320,000
Advances 600,000

(a) Calculate;
(ⅰ) The bank’s cash ratio. (4 marks)
(ⅱ) The bank’s liquid asset ratio. (4 marks)
(b) If a customer deposits a further 200,000 frs cash into the bank;
(ⅰ) What is the new cash ratio? (4 marks)
(ⅱ) How much money is this bank able to create from this new deposit, using the
old cash as base? (4 marks)
(c) Enumerate FOUR (04) limitations on this bank to keep on creating credits. (4 marks)

2022/A/0725/3/