Business Management 2006 WASSCE-Past Questions and Answers-WAEC

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General Overview

WASSCE Past Questions and Answers for Business Management 2006 is a learning resource. This learning resource has been designed to help students to pass their exams in the above stated examining body. I believe you are imagining what our website can offer you? If so, then just wait and see. Also, have you had challenges trying to learn, write or pass your WAEC BM paper? If the answer is yes, then I can assure you that educareguide is here to help and guide you.

 

We are here to encourage you that you can easily pass this subject. Firstly, we have a lot of links to assist you to get enough details.  Truly, this will help you to gain enough knowledge and understanding to pass your examination. Secondly, we have materials on various topics, sub-topics relating to this subject area. Therefore, our site is very helpful to Senior High School Student across the West African sub-region. Notably, these countries are Nigeria, Ghana, Sierra Leone, The Gambia and Liberia.  Moreover, these students rely on our guide and pass the WASSCE Business Management Examination. In detail, check the questions and the answers just below.

 

The Nature of the Examination – Business Management 2006 WASSCE

There are two Papers in the examination, (and these are Paper 1 and Paper 2).Paper 1 is an Objective Test and Paper 2 is a written theory paper. There are 50 questions in the Paper 1. Finally, there are 8 questions in the Paper 2. The 8 questions is made up of 1 Case Study and 7 other questions.They are asked to tests the student’s general understanding of the various topics under business management. I must emphasize that, in order to pass your WASSCE questions with good answers, you need to practice critical thinking. This is because, some of the questions are tricky.

 

The Summary of the Paper – Business Management 2006 WASSCE

The WASSCE Business management Paper for 2006 can summarized below:

  • 2006WASSCE Business Management Paper One
  • 2006WASSCE Business Management Paper Two

 

Business Management 2006 WASSCE-Past Questions and Answers Paper 1

 

Let me show you how to find the answers to the Business Management Questions – Paper 1. To clarify that, when you read a question, just click on this symbol (˅) that follows the question. After doing so, the answer will drop down for you. In fact, it is a very simple task. However, for the purposes of evaluating yourself, you may want to answer the before reviewing the suggested answer (or solution)

 

  1. Which of the following does not belong to a class of production?   
      C   is the answer -Business Management 2006 WASSCE   
    1. Industry
    2. Commerce
    3. Warehousing
    4. Direct service

 

  1. Which of the following are all price speculators of shares on the stock exchange market?   
      A   is the answer -Business Management 2006 WASSCE   
    1. Stags, Bears and Bulls
    2. Jobbers, Stags and Bulls
    3. Brokers, Negotiators and Arbitrators
    4. Jobbers, Brokers and Bears

 

  1. The division of a market to cater for the different needs of customers is referred to as   
      B   is the answer -Business Management 2006 WASSCE   
    1. market price
    2. market segmentation
    3. market orientation
    4. market research

 

  1. An industry is   
      D   is the answer -Business Management 2006 WASSCE   
    1. an institution where buyers and sellers meet.
    2. an investment for the purchase and sale of goods.
    3. an institution for the buying and selling of shares.
    4. a collection of firms engaged in the production of similar goods.

 

  1. Which of the following is not a factor of production?   
      C   is the answer -Business Management 2006 WASSCE   
    1. Capital
    2. B . Entrepreneur
    3. Planning
    4. Land

 

  1. Which of the following groups represent extractive producers?   
      A   is the answer -Business Management 2006 WASSCE   
    1. Fisherman and miner
    2. Farmer and carpenter
    3. Insurance agent and miner
    4. Factory worker and banker

 

  1. Which of the following is not an advantage of personnel training? It   
      C   is the answer -Business Management 2006 WASSCE   
    1. enables employees to do their work faster.
    2. increases the firm’s productivity
    3. reduces employees’ responsibility.
    4. makes employees more skilful in performing jobs.

 

  1. The private limited liability company differs from a public limited liability company because   
      D   is the answer -Business Management 2006 WASSCE   
    1. it declares dividends to shareholders.
    2. it has a separate entity.
    3. the liabilities of shareholders are limited.
    4. it has limited number of shareholders.

 

  1. The channel of communication which exists between two heads of departments in an organization is referred to as   
      A   is the answer -Business Management 2006 WASSCE   
    1. horizontal
    2. vertical
    3. upward
    4. diagonal

 

  1. The final stage in the decision-making process is to   
      C   is the answer -Business Management 2006 WASSCE   
    1. develop alternative courses.
    2. evaluate all the available alternatives.
    3. measure whether the chosen alternative is the best.
    4. implement the best alternative chosen.

 

  1. The introduction of a suggestion box in communication is an example of   
      A   is the answer -Business Management 2006 WASSCE   
    1. upward communication.
    2. downward communication.
    3. horizontal communication.
    4. diagonal communication.

 

  1. Which of the following is a feature of co-operative societies?   
      D   is the answer -Business Management 2006 WASSCE   
    1. Each member has several votes during meetings.
    2. Members are not involved in running the business.
    3. Its main aim is profit maximization.
    4. All members have equal votes during meetings.

 

  1. The management function which provides guidance for subordinates and ensurethe achievement of organizational objectives is   
      B   is the answer -Business Management 2006 WASSCE   
    1. organizing
    2. directing
    3. planning
    4. controlling

 

  1. The process of transferring information from the sender to the receiver in an organization is termed   
      B   is the answer -Business Management 2006 WASSCE   
    1. transportation
    2. communication
    3. advertisement
    4. delegation

 

  1. Which of the following is a principle of insurance?   
      A   is the answer -Business Management 2006 WASSCE   
    1. Indemnity
    2. Life assurance
    3. Accident
    4. Fire insurance

 

  1. The person who buys and sells on behalf of another and receives a reward of commission is   
      C   is the answer -Business Management 2006 WASSCE   
    1. partner
    2. shareholder
    3. agent
    4. principal

 

  1. A Consideration is said to be an executed consideration when   
      D   is the answer -Business Management 2006 WASSCE   
    1. the consideration is not enforceable by law.
    2. a promise is made to carry out a transaction in the future.
    3. the value of the consideration is equivalent to all the parties of the contract.
    4. the consideration is wholly or completely performed at the time the promise is made.

 

  1. Which of the following makes an acceptance by post valid? When the   
      C   is the answer -Business Management 2006 WASSCE   
    1. offeree receives the letter of acceptance.
    2. offeror communicates with the offeree.
    3. letter of acceptance is posted.
    4. offeror receives a counter offer.

 

  1. Which of the following is not a party to a cheque?   
      C   is the answer -Business Management 2006 WASSCE   
    1. Drawee
    2. Drawer
    3. Cashier
    4. Payee

 

  1. Which of the following statements does not describe the principle of good work organization?   
      C   is the answer -Business Management 2006 WASSCE   
    1. Dividing and sub-dividing work into sections.
    2. Ensuring easy and good coordination among the various sections.
    3. Ensuring that all individuals in charge of others are given full authority.
    4. Considering various factors for an office layout.

 

  1. The periodic amount paid by an insured to an insurer is called   
      B   is the answer -Business Management 2006 WASSCE   
    1. commission
    2. premium
    3. rent
    4. interest

 

  1. Which of the following is a loan withdrawn from the bank’s current account?   
      C   is the answer -Business Management 2006 WASSCE   
    1. Mortgage
    2. Bank draft
    3. Overdraft
    4. Bank loan

 

  1. Excise duties imposed by the government of a country refers to the tax imposed on   
      A   is the answer -Business Management 2006 WASSCE   
    1. locally produced goods and services.
    2. goods and services imported into the country•.
    3. good sand services exported form the country.
    4. the gross salaries of workers.

 

  1. A firm is best described as   
      A   is the answer -Business Management 2006 WASSCE   
    1. the unit of investment for profit motive.
    2. the least productive unit of an industry.
    3. an association of two or more persons engaged in business.
    4. an institution which only provides employment for people.

 

  1. Which of the following is a document used in international trade?   
      D   is the answer -Business Management 2006 WASSCE   
    1. Waybill
    2. Price current
    3. Proforma invoice
    4. Bill of lading

 

  1. Goods purchased from other countries and brought into the home country are known as   
      B   is the answer -Business Management 2006 WASSCE   
    1. durable goods
    2. imports
    3. domestic goods.
    4. exports

 

  1. The agent who undertakes responsibility for the debts of a third party is known as   
      A   is the answer -Business Management 2006 WASSCE   
    1. del credere
    2. special agent.
    3. factor agent.
    4. estate agent.

 

  1. The returns on shareholding is known as   
      C   is the answer -Business Management 2006 WASSCE   
    1. a profit.
    2. an interest.
    3. a dividend.
    4. a rent.

 

  1. Which of the following institutions accepts deposits, safeguards valuables and gives out loans to its customers?   
      A   is the answer -Business Management 2006 WASSCE   
    1. Commercial banks
    2. Insurance companies.
    3. Capital markets
    4. Foreign exchange bureaux

 

  1. The system of trade which involves the exchange of goods for goods is known as   
      D   is the answer -Business Management 2006 WASSCE   
    1. wholesale trade.
    2. exchange system.
    3. retail trade.
    4. barter system.

 

  1. The means used by the government to generate revenue from her citizens is   
      A   is the answer -Business Management 2006 WASSCE   
    1. taxation
    2. budget
    3. investment
    4. subsidy

 

  1. Which of the following statement Is not true of capital as a factor of production?   
      C   is the answer -Business Management 2006 WASSCE   
    1. It is man-made.
    2. It is subject to diminishing returns.
    3. It is a human effort.
    4. It can yield income.

 

  1. Which of the following is not a characteristic of developing economies in West Africa?   
      A   is the answer -Business Management 2006 WASSCE   
    1. High level of per capita income
    2. High level of dependency
    3. Shortage of highly skilled manpower
    4. Raid population growth

 

  1. Which of the following statements is true of a customs union?   
      C   is the answer -Business Management 2006 WASSCE   
    1. Trade barriers exist between member countries but no trade barriers exist against non-member countries.
    2. Trade barriers exist between member countries and against non-member countries.
    3. No trade barriers exist between member countries but each member country is allowed to impose her own tariff on non-member countries.
    4. No trade barriers exist between member countries but common external tariff is charged against non-member countries.

 

  1. What does UNCTAD stand for?   
      A   is the answer -Business Management 2006 WASSCE   
    1. United Nations Conference on Trade and Development
    2. United Nations Committee on trade and Development
    3. United Nations Community for Trade and Development
    4. United Nations Conference on tariff and Development

 

  1. Which of the following is not an element of control?   
      B   is the answer -Business Management 2006 WASSCE   
    1. Measuring of performance against standards
    2. The means of delegating authority
    3. Taking corrective measures to rectify deviations
    4. Setting standards of performance

 

  1. A collection of instructions that directs the computer is called   
      D   is the answer -Business Management 2006 WASSCE   
    1. keyboard
    2. hardware
    3. memory
    4. Software

 

  1. The day-to-day running of the affairs of a limited liability company is theresponsibility of   
      B   is the answer -Business Management 2006 WASSCE   
    1. shareholders
    2. managers
    3. board of directors
    4. committee members

 

  1. Which of the following is not a marketing function?   
      C   is the answer -Business Management 2006 WASSCE   
    1. Research
    2. Storage
    3. Recruitment
    4. Sales promotion

 

  1. International trade is based on the theory of   
      B   is the answer -Business Management 2006 WASSCE   
    1. opportunity cost.
    2. comparative cost.
    3. absolute cost.
    4. implicit cost.

 

Use the following information to answer question 41.

      • All partners may take part in the management of the firm.
      • Interest must be paid on capital.
      • Profits or losses must be shared according to capital.
      • Any loan by a partner must attract 5% interest.
      • No new partner must be admitted without the consent of all other partners.

 

  1. Which of the above are true of a partnership agreement?   
      D   is the answer -Business Management 2006 WASSCE   
    1. I, II and IV only
    2. I and III only
    3. II, Ill and V only
    4. II, IV and V only

 

  1. Which of the following techniques is not a method of job analysis?   
      D   is the answer -Business Management 2006 WASSCE   
    1. Questionnaire
    2. Interview
    3. Observation
    4. Promotion

 

  1. The most essential quality of money is that it must be   
      D   is the answer -Business Management 2006 WASSCE   
    1. a medium of exchange.
    2. a store of value.
    3. a credit instrument.
    4. generally acceptable.

 

  1. Which of the following is not a feature of a cheque?   
      C   is the answer -Business Management 2006 WASSCE   
    1. Date
    2. Payee’s name
    3. Cashier’s address
    4. Account number

 

  1. A reward system based on the quantity of the products produced is referred to as   
      D   is the answer -Business Management 2006 WASSCE   
    1. time rate.
    2. commission
    3. bonus
    4. piece rate.

 

  1. Marketing is best defined as   
      C   is the answer -Business Management 2006 WASSCE   
    1. trade and aids to trade.
    2. those functions in business that directly involve contact with the consumers to assess their needs.
    3. activities of retailers, wholesalers and manufacturers.
    4. exchange of goods and services.

 

  1. Inter-bank indebtedness is settled at the   
      D   is the answer -Business Management 2006 WASSCE   
    1. discount house.
    2. merchant bank
    3. central bank.
    4. clearing house.

 

  1. The person wishing to buy shares in the stock exchange market should first contact a   
      A   is the answer -Business Management 2006 WASSCE   
    1. broker
    2. jobber
    3. factor
    4. shareholder

 

  1. Which of the following is not a condition for a valid contract?   
      B   is the answer -Business Management 2006 WASSCE   
    1. There must be offer and acceptance.
    2. It must be in a written form.
    3. There must be some form of consideration.
    4. Parties involved must have legal capacity.

 

  1. Which of the following is a function of the central bank?   
      B   is the answer -Business Management 2006 WASSCE   
    1. Buying and selling of foreign exchange
    2. Control of monetary policy
    3. Discounting bills of exchange
    4. Accepting deposits from customers

 

I’m sure you are going to evaluate your performance with regards to the objective questions above. Let me emphasize again that the answers to the objective questions can be found by clicking on the symbol (˅) just after the question.

Now let’s proceed to the Paper 2:

 

Business Management 2006 WASSCE-Past Questions and Answers- Paper 2

 

This paper a case study and nine other theory questions. Please read the case carefully before attempting the questions. As I have always,said, this Business Management questions and answers needs critical reading and understanding of the questions, most especially, the case. As I have always said, it is better to first answer the questions on your own before referring to the answer from the drop-down symbol.

Let me show you how to find the answers to the Business Management Questions – Paper 1, Section B. When you read a question, just click on this symbol (˅) beside it, and the answer will drop down for you. It is a very simple task.

CASE STUDY

Read the following case and answer the questions that follow:   

JACK-NABIE COMPANY LIMITED

The Jak-Nabie Company Limited which started operations in 1996 offered various kinds of second-hand (used items) for sale at very reasonable prices.

After five years of operations, the company expanded significantly in market-share. This was due to reasonable pricing policy, and the effective advertising strategy adopted by the company’s Sales and Marketing Manager, Hawa Cole. Such expansion, in market share was a compelling factor for the need to open branch offices and recruit additional staff to serve the rapidly increasing number of customers in various locations.

Considering the raid increase in customers’ demand, the Managing Director of the company, Mr. Ibrahim Cole, called on the Company Secretary, Mr. Harnid Jones, to discuss the issue and find a way forward. Both agreed that there was indeed the need for the establishment of branch offices and the recruitment of additional staff but the decisions can only be taken by the Board of Directors of the company.

The way forward therefore was to summon an emergency board meeting, the main agenda of which should be the establishment of branch offices and the recruitment of additional staff.

The meeting was held on the schedule date and the relevant issues were adequately discussed. It was then resolved that branch offices be established and additional staff be recruited to cope with the trend in the company’s business operations  

.

 

1.(a) State five sources of external recruitment available to Jak-Nabie Company Ltd. [10 marks]

Suggested Answer:   

There are many sources of external recruitment opened to Jak-Nabie Company Ltd. These include:

  • Educational Institutions:- Organizations and companies sometimes recruit fresh graduates from schools, colleges, polytechnics and the universities
  • Private Employment Agencies:- Employers who cannot go through the process of recruitment engage consulting firms to do the recruitment for them
  • Labour Department:- This is a public agency found in almost all regional capitals where employees in search of employment and employers searching for employees go to register. An arrangement is then made to link the employer with the prospective employee.
  • Advertisements:- This is the most common and popular source of external recruitment where companies announce their employment opportunitiesthrough the newspapers, magazines, journals, radio and television.
  • Unsolicited Applicants:- People who are seeking for jobs sometimes apply to organizations without being aware of vacancies in those organizations. If there are vacancies, the applicant may be asked to go through the screening process. Where vacancies are not immediately available, his name will be placed on the waiting list.
  • Employees Referrals:- Companies sometimes announce job vacancies to their staff and ask them to recommend friends, relatives and neighbours who might be in need of employment and possess the required qualification and skill.
  • Professional Associations
  • Ex-Employees  

 

1.(b)Which department in the company would be responsible for the recruitment approved by the Board? [1 mark]

Suggested Answer:   

The Personnel Department or the Human Resburce Department  

 

1.(c)Identify two factors responsible for the expansion in the market share of Jak-Nabie Company Ltd. [4 marks]

Suggested Answer:   

 

  • The effective advertising strategy adopted by the company’s Sales and
    Marketing Manager, Hawa Cole.
  • The reasonable pricing policy adopted by the company  

1.(d) State the procedure used for the recruitment of staff. [10 marks]

Suggested Answer:   

The following procedures may be taken in the recruitment of staff:

  • Advertisement in the Dailies/Notices on the company’s notice boards:-  Advertisement in the Daily newspapers, magazines, journals, radio and television should take the form of job description and job specification. Job description states the title and location of the job, the main function, responsibility, limits of authority, physical working conditions etc. It typically portrays job content. Job specification, on the other hand, describes the knowledge, skills and experience, educational levels required to carry out the job. It therefore describes the physical qualities and characteristics needed to perform the job.
  • Collection of application forms and letters:- All the application forms and letters from prospective job applicants must be collected and recorded.
  • Short-listing of applicants:- Since all types of applications are received when jobs are advertised, it is necessary to short-list the applicants. Short-listing also referred to as the screening stage involves the sorting out or elimination of those applicants judged unqualified for the job. It is normally done by matching the applications against the employer’s requirements. Those short-listed based on their merit are invited for interview.
  • Interview:- All short-listed applicants should be interviewed by the personnel Interview involves a quick evaluation of the applicant’s suitability for the job. It gives the organization an opportunity to assess the applicant directly; and it gives the applicant an opportunity to learn more about the organization. Note here that all documents tendered will be inspected and evaluated.
  • Practical Test:- Selection tests are used to supplement other techniques. A short written test and practical test should be conducted by the personnel manager to test their typewriting and shorthand skills.
  • Background Investigation:- This is carried out in order to confirm information supplied by applicants on their application forms. It is used to check the truthfulness of a candidate’s application form. Further information about the applicant may be sought from one or more of the candidates’ referees, previous employers and schools.
  • Medical test or examination:- Medical examination is carried out to determine the physical fitness of the applicants and whether they have any hidden or contagious diseases. Candidates with contagious diseases will be rejected.
  • Job offer:- If the candidate successfully passes through all the stages and continues to express interest for employment, a job offer may be made. Appointment letters may be given to successful candidates.  

 

2.   Explain five reasons why small firms continue to flourish in spite of the advantages of large-scale production. [15 marks]

Suggested Answer:   

  • Quick decision-making:- The owner has adequate control over the business, he does not need to consult anybody before taking decisions because he is the owner and manager.
  • Low capital is needed:- The capital required to operate small firms is low.
    Many people in West Africa cannot get large financial capital needed for setting up large firms. As such, those who have little capital and want to set up a business, have no alternative but to use their limited capital to set-up small trading firms.
  • Small size of the market or low income of consumers:- Most markets in West Africa are small in size. This is because most of the people have low income as compared to the advanced countries. As a result of low income,consumers like to buy goods in bits and pieces. It therefore becomes
    necessary for most small-scale businesses to meet their demand.
  • Commitment and self-interest of owners:- The business may belong toone person and thus there is great self-interest or commitment in the busin because the failure or success of the business falls directly on him.
  • Enjoyment of privacy:- Less Government controls. Business plans are mostly kept secret by the owner because .he is not compelled by law to publish his accounts to the public.There is a sense of independence because the manager is the owner and the boss and he reports to no one.
  • Flexibility:- There is flexibility. This means that one can react quickly to
    change and can adopt his or her operations to local conditions.  

 

3(a) What is insurance? [2 marks]

Suggested Answer:   

Insurance may be defined as a system where one person (the insured) makes payments to another person (insurance company) with the hope that should he (the insured) suffer any losses, the second party (insurance company)( would offer him some amount of money as compensation.

Insurance is also defined as the “pooling” of risks. A “pool” is a collection of money contributed by interested parties for a particular purpose. People contribute to the “pool” so that should they suffer the risk insured against, compensation will be paid to restore them to their previous good condition.  

3(b) Explain five characteristics of insurable risk in business. [10 marks]

Suggested Answer:   

  • It must be a risk that the insurance companies are willing to insure against,
    g., fire, accident, marine etc.
  • It must be possible for the insurance companies to calculate a fair premium to
    be paid by the insured. That is, the insurance companies must have adequate information about their previous (past) occurrences.
  • The insured must suffer some financial loss or incur some kind of liability
    should the thing/item concerned be destroyed or damaged in any way.
  • There must also be insurable interest, that is, one cannot insure the property
    of his friend. He can only insures his own property and thus will not wish that the risk insured against should occur.
  • It is also a risk that the insurance company can adequately compensate or
    indemnify the insured.  

3.(c) State two benefits which an investor may enjoy for insuring a business. [3 marks]

Suggested Answer:   

  • To the businessman, insurance policies may serve as collateral security for taking loans needed for investment. An example is endowment policy.
  • Insurance also provides the businessman with capital for investment. This they get out of premium payments. By encouraging savings particularly life assurance, these companies accumulate huge sums of money which can be lent out for productive purpose.
  • Insurance offers a businessman the opportunity to save.  

 

4(a) What is performance appraisal? [3 marks]

Suggested Answer:   

Performance appraisal is an assessment of an employee’s job performance over a period with a view to rewarding him or improving his efficiency by correcting his D short-comings. The period of assessment could be for six months or one year.  

4(b) Explain four ways in which appraisal is of importance in business organizations. [12 marks]

Suggested Answer:   

  • Appraisal of employees provides information which enables management to decide whether to promote, demote, lay-off or transfer an employee.
  • Appraisal results are used to establish the goals and objectives of the training programme or to assess training needs.
  • Appraisal results are also used to determine the size and frequency of pay increases to the ratings assigned to the employee.
  • They provide the means through which management can improve performance of an employee’s job.
  • Information from appraisal results is used to update the records of an employee. This facilitates the writing of confidential reports on employees during and after their stay with the organization.
  • The appraisal results also help to compare and contrast the differences of employees.  

 

5.(a) Explain three functions of wholesalers. [9 marks]

Suggested Answer:   

  • Wholesaler buys in bulk from the producer or manufacturer, breaks them into convenient sizes and shapes (in smaller quantities) and sells to retailers.
  • Some wholesalers may provide inventory. This reduces the manufacturersneed to carry large stock of finished products and thus reducing warehousing expenses.
  • They may participate in the producers’ advert and sales promotion programme by informing consumers of the types of utility got from the use of the product.
  • The wholesalers also provide market information to their producers. The wholesaler is close to the consumer and he is therefore in a better position to evaluate customers and also conditions in the market.
  • Wholesalers help to finance their producers by either owning stocks or
  • Wholesalers also reduce risk. A producer’s customers, e.g. retailers may be numerous and it is quite expensive for a producer especially one far distant to evaluate or access the credit worthiness of such a group of customers.
  • Thewholesaler who sells to these customers is in a better position to evaluate
    their credit worthiness.
  • Wholesalers absorb risk by taking title and bearing the cost of theft, damage, spoilage, etc.  

5(b ) State three factors that necessitate the elimination of middlemen in the chain of distribution.

[6 marks]

Suggested Answer:   

  • Middlemen who include wholesalers and retailers contribute to high prices
    because they add their cost of operations and profits to their supply to the consumers.
  • Middlemen sometimes create artificial shortage in order to sell at exorbitant
    prices to consumers.
  • Where goods are perishable in nature, manufacturers sell directly to
    consumers because such goods do not require long storage or storage at all.
  • Where products are of technical nature, manufacturers use their own
    salesmen who are technically competent to give technical advice to the final consumers.
  • When goods with low rate of turnover are involved, for example, furniture, the
    manufacturer sells directly to consumers.  

 

6.(a) Explain the term inflation. [3 marks]

Suggested Answer:   

Inflation is the term used to describe rapid increase in prices. It is a period where more money chases relatively fewer goods and services. Inflation is defined as a period of continuous and persistent increase in the general price level of goods and services and other factors of production. By this, it means that, inflation is not just higher prices but rather a continuous and sustained rise in the general price level.  

6.(b) Explain four causes of inflation in an economy. [12 marks]

Suggested Answer:   

  • Increase in Wages and Salaries:- Demand-pull inflation occurs when there is an increase in wages and salaries, which also increases purchasing power of consumers. Such increase in purchasing power will bring about excess demand over supply. This will lead to price increase and consequently inflation occurs.
  • Increase in Money Supply:- When there is an increase in money supply by
    printing more notes and coins without a corresponding increase in production too much money will be “chasing” few goods and hence leading to demand-pull inflation.
  • Low Productivity:- Due to bottlenecks in production especially in West
    Africa economies, there is low productivity, leading to shortages of goods, hence inflation. That is aggregate demand will exceed aggregate supply leading to increase in prices, hence demand-pull inflation.
  • Rapid Population growth:- Increase in population growth leads to excess
    demand over supply leading to increase in prices and hence inflation. The influx of people (refugees) form neighboring countries without a corresponding increase in food supply will lead to increase prices.
  • Increase in Government Expenditure:- In most cases investment in long-
    term projects such as construction of roads, leads to pumping of more money, so that in the short-run it may lead to excess liquidity and hence inflation.  

 

7.(a) What is money? [3 marks]

Suggested Answer:   

The problems and difficulties associated with the barter system of trade led to the introduction of money. Money may be defined as anything that is generally accepted as payment for goods and services and in the settlement of debts. Simply put, it is any commodity, which is generally accepted as a medium of exchange and in settlement of debts.  

7.(b) List and explain four qualities of money. [12 marks]

Suggested Answer:   

  • General Acceptability: Money must be acceptable. In order for money to be considered as a good medium of exchange, people must have confidence in it -to enable them readily accept it. In case money loses its general acceptability, it will cease as a good medium of exchange.
  • Portability: Money must be portable. Anything that is used as money must be easy to carry about without facing any problems or difficulties. Hence the use of more paper money than coins.
  • Durability: For money to perform its function effectively, it must be durable. That is it should not wear out quickly or be destroyed within a shorter period. Money must be able to last for a reasonable period of time without any deterioration in value. It should be something that can be kept for a long time.
  • Divisibility:- In order to ensure that goods can be bought in both small and large quantities, there is the need for money to be capable of being divided into reasonable small units. This facilitates its usage as a medium of exchange.
  • Recognisability: Money should easily be identified without facing problems. This recognisability of money would serve as a check against forgery and counterfeit currency or money.
  • Homogeneous: – Money must be homogenous. A unit in each denomination should be the same as any other unit in the same denomination e.g. a hundred cedis note in Accra should be the same as hundred cedis note in Bolgatanga. All units of some denomination should be perfectly identical in weight, colour, design etc.
  • Relative Scarcity:- Money must not be too much in an economy in order to maintain its value. This is because if it is abundant in the economy it may loose its value.  

 

8.(a) List three documents involved in the formation of a limited liability company. [3 marks]

Suggested Answer:   

  • Memorandum Of Association: – This is the document forming the constitution of the company. It spells out the relationship between the board of directors (company) and the outside world. Itoutlines the obligations of the company towards the public, the government and its agencies.
  • Articles Of Association: –Articles of association are the internal rules of the company that provide details of such matters as the number of directors, the voting rights of shareholders and how profits are to be shared. It is a document, which contains information about the structure, internal running and management of the company.
  • Prospectus: –This is needed by a public company. It is required when shares are offered for sale to the public. This also contains some amount of information about the company’s past history and future prospects. It is not an offer by the company to sell shares but rather an invitation to the public to make an offer to buy shares. It therefore provides detailed information about the company and its operations.  

8.(b) Differentiae between a co-operative society and a public corporation under the following headings:

 

  • Ownership and control;
  • Source of capital
  • Sharing of profits;
  • Bearing of risks.

 

Suggested Answer:   

  • Ownership and control:-The ownership and control of public corporation is in the hands of the government while that of co-operative society is in the hands of a management committee appointed by members themselves.
  • Source of capital:-The government provides capital for public corporations. This is mostly provided from taxes which have been collected from the public. Co-operative society gets is source of capital from members’ contributions.
  • Sharing of profits:-The profits of public corporations go to the government, that is, the national treasury while that of co-operative society is shared among members in the form of dividends.
  • Bearing of risks:-The risks of public corporations are borne by the government or state or citizens of the country. Those co-operative societies are borne by all members who have contributed money to the business.  

 

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