economics

1 a teacher asks four students to fill in the gaps in the following sentence.
‘a positive economic statement is ......1...... statement that ......2...... be tested using factual
evidence, whereas a normative economic statement is ......3...... statement that ......4...... be
tested using factual evidence.’
the students’ answers are shown in the table.
which student is correct?
i ee ee ee
a an objective can a subjective cannot
b an objective cannot a subjective can
cc a subjective can an objective cannot
d a subjective cannot an objective can

2 from 1990 to 2000 each of the countries listed below changed towards a market economy
through privatisation programmes.
(ratio of private enterprise earnings to gdp)
[1880 [1008 [2000

czechia 10 70 80
hungary 20 60 80
romania 15 45 60
slovakia 10 60 80

what can be concluded about the rates of privatisation?

a czechia initially made the fastest change.

b hungary made the least overall change.

c romania made the greatest overall change.

d_ slovakia made the steadiest change.

3 farmers using traditional methods lack access to finance and often employ family members on a
part-time basis.
if working practices in agriculture could be improved, how would this be likely to be shown on the
production possibility curve?
r
manufactured
goods
t
a agricultural
goods
a byamovement from r to t
b by amovement from s tor
c byamovement from s to t
d byamovement from t tor

4 which types of good are distinguished from one another by the presence or absence of
opportunity cost?
a demerit and merit goods
b_ economic and free goods
c inferior goods and normal goods
d private and public goods

5 what could cause a shift in the supply curve of good x and a movement along its supply curve?
| shift in the supply curve movement along the supply curve
a a change in consumer preferences an increase in the price of a substitute good
b a decrease in factor productivity the imposition of a tax on good x
cc an increase in the price of a an increase in factor productivity
complementary good
d an increase in the wage rates a change in consumer preferences
in the industry

6 a supply curve is represented by the equation, quantity supplied = 10 + 5p, where p = the price
of the product.
which price rise would cause the quantity supplied to double?
a $1 to $2 b_ $1 to $3 c $1 to $4 d $1 to $5

8 the table shows the price of a good and total expenditure on the good during specific periods

when the market is in equilibrium.
1 12 96 000
2 5 40000
3 8 64000
4 10 80000
5 4 32000

what can be deduced from this data?

a_ the good has constant opportunity cost.

b_ the good is an inferior good.

c_ the price elasticity of demand is equal to one.

d_ the price elasticity of supply is equal to zero.

9 the chinese government relaxed controls on private house ownership. private house ownership
rose sharply, replacing demand for apartments rented from the state.
what would have been most likely to happen to private house prices and the rents of
apartments?
private house prices apartment rents

a decrease decrease

b decrease increase

cc increase decrease

d increase increase

10 what might explain a simultaneous increase in both price and quantity traded in the market for a
normal good?
a__ the removal of an effective maximum price on the good
b_ technological progress in the production of the good
c_ the imposition of a tax on the good
d the granting of a subsidy to producers of the good

11 the diagram shows the demand and supply curves for parking spaces in a hospital car park.
is)
price
) ss
in
a number of spaces
the managers decide to rely on the price mechanism to allocate parking spaces at the hospital.
what is required for this to work?
a_ alternative means of transport must be provided for those unable to afford price op.
b_ assurvey will be needed to find out the amount users are willing to pay.
c_ the capacity of the car park will need to be expanded.
d_ the price charged for parking spaces must be op.

12 the diagram shows a market for a good which is supplied partly from domestic production and
partly from imports. s, represents domestic supply and s,, represents imports.
s,
price :
wa h ’ sn
ae d
o r re vv
quantity

what will be the level of consumption and the associated quantity of imports?

a ot rt

b ot ot

cc ov rt

d ov rv

14 the diagram shows the market for labour.
at which level would an effective minimum wage rate have to be set?
labour supply
wage
rate apo ne
b ue rr ema ae
(| aa rt
> (se ee eee labour demand
1) quantity of
labour employed

15 what is an accurate statement about a production subsidy?
a it causes demand for the good to increase so the demand curve shifts to the right.
b_ it enables firms to supply more so the supply curve shifts to the left.
c_itis financial assistance to firms from the government to help increase output.
d_ it is money taken from firms by the government to reduce harmful side effects of production.

16 the diagram shows the market supply and demand curves for an agricultural product. the
government guarantees producers a price of at least ox for their output, but allows the market
price to be freely determined by demand and supply.

supply
price y eects nnn y
vv iw
demand
ie) s t
quantity
which area in the diagram represents the total subsidy payments made by the government to
producers?
a uyts b uyzw cc xuwv d xyzv

17 how will transfer payments to low-income families, funded by a mix of direct taxation and indirect
taxation, affect the total level of consumption?
a_ the change in the level will be uncertain.
b_ the level will fall.
c_ the level will remain unchanged.
d_ the level will rise.

18 the table shows the annual percentage change in the output per worker employed for four
nationalised industries before and after privatisation.
industry privatisation privatisation

railways 4% 2%
electricity supply 7% 9%
shipbuilding 4% -1%
telecommunications 6% 6%

what can be concluded from the table about the effect of privatisation?

a employment fell in the railway industry.

b employment was unchanged in the telecommunications industry.

c output was greatest in the electricity supply industry.

d workers became less efficient in the shipbuilding industry.

19 in its recent budget a government increased defence expenditure and the amount spent on
training to increase the productivity of the workforce. the initial equilibrium point is shown by x on
the aggregate demand, ad, and aggregate supply, as, diagram.

what would be the equilibrium point after these changes?

as,

as,
b
price level as,
a c
d
ad, ad, ‘ad,
o

real output

20 the table shows a country’s consumer price index for march and april 2015.
[am
price index
april 2015 148.6

which statement correctly describes what happened between these two months?
a_ there was a decrease in the annual rate of inflation.
b_ there was a decrease in real interest rates.
c_ there was an increase in the purchasing power of money.
d_ there was an increase in the standard of living.

21 what would be likely to increase inflation in an economy?
a_anincrease in consumer saving
b_anincrease in interest rates
c_anincrease in labour productivity
d_anincrease in taxes on imports
a a ca a a

22 in 2014 a rich foreign businessman bought a uk football club.
what would have been the immediate effect of such an investment?
a _afall in the demand for footballers in the uk
b a fall in the earnings of footballers in the uk
c _aninflow in the uk balance of payments
d an inflow in the uk balance of trade

23 australia’s spending on imports falls and, at the same time, investment abroad by australian firms
declines.
which diagram shows the immediate effect of these changes on the market for the australian
dollar?
a b
price of d s price of d s,
australian |d, australian ss
dollars dollars
p}----- <-->, p,}------->
p,}-------->c pi-----7 “ta
. d |
‘. 3 a) . d
ss if 1 soi
ie) q,q ie) q,q
quantity of quantity of
australian dollars australian dollars
cc d
price of d s s price of d, s;
australian |d) | australian - s
dollars dollars
phen po poems
pip ---f > bommel
d
s d 8; ‘
s| d, ss | a
o q o q
quantity of quantity of
australian dollars australian dollars

24 aneconomy’s terms of trade rose from the base year of 100 to 110.
which changes in the export price index and the import price index would have caused this?

export price import price
index change index change

a 0 —10

b 0 +10

cc +10 0

d +20 +10

25 the introduction of the euro as the common currency of much of western europe created a
powerful economic group.
what is least likely to have been the intention?
a faster economic growth in the region
bs greater labour mobility and employment in the region
c_ more international trade within the region
d_ more international trade with non-members

26 country x has a comparative advantage in producing wheat and country y in producing cars.
however, the countries choose not to specialise and trade.
what is a valid reason for this behaviour?
a the cost of transport is high relative to the opportunity cost differences between the
countries.
b_ the exchange rate lies within the countries’ opportunity cost ratios.
c_ there is immobility of factors of production between the countries.
d_ trade is based on absolute rather than comparative advantage.

2/ what is not an example of protectionism?
a abanon the imports of chicken products
b_ import tariffs on agricultural products
c maximum supermarket food prices
d - strict health and safety requirements

28 the government of a country plans to cut income tax rates. the initial equilibrium for the country
is represented by point x on the diagram.
which new equilibrium point would an economist predict as the result?
as,
price a
level as
b
d x
cc
ad,
ad,
ad,
a real national income

29 if an economy has a floating exchange rate, which policy could have an expansionary effect on
national income with the smallest reduction of a current account surplus on the balance of
payments?

a areduction in income tax rates

b_areduction in interest rates

c government subsidies to individuals wanting loans for house purchases
d_ increased government spending on transport infrastructure

30 which combination of fiscal and monetary policies is most likely to be effective in the short run for
tackling deflation in a closed economy?
| tecapotey [monet poy
a increasing the budget deficit reducing the interest rate
b increasing the budget deficit reducing the money supply
cc reducing the budget deficit reducing the interest rate
d reducing the budget deficit reducing the money supply

Solve 9708_w17_qp_11