economics

1 which statement by a company is normative?
a_ in the past three years we have carried out the biggest merger acquisition in the group’s
history.
b_ the business has fallen behind competitors and needs to improve its ethical standards.
c_ the growth of the business has been in retail and financial services.
d_ the structure of the business has been simplified.

2 the diagram shows an economy's production possibility curve for goods x and y.
y
je) x xx
1 2 x
what is the opportunity cost of moving from point r to point s on the production possibility curve?
a ox b oy, c xix2 d y.y2

3 from 1995 to 2000 each of the countries listed below moved towards a market economy through
privatisation programmes.
which country made the slowest rate of transition?
(ratio of private enterprise earnings to gdp)
ssc sia
a czechia 70 80
b hungary 60 70
cc romania 45 60
d slovakia 60 80

4 a businesswoman sets up a charity to provide toys for young children of low income families.
which term most accurately describes these toys?
a_ free goods
b- merit goods
c private goods
d public goods

5 what will happen to an industry’s supply curve if new firms enter the industry?
a it will shift to the left at any given price.
b it will shift to the right at any given price.
c_ there will be a downward movement along the supply curve.
d_ there will be an upward movement along the supply curve.

6 dd; snows an individuals initial demand curve for public transport.
price of d,
public
transport
an d,
oo
quantity of
public transport

what would cause the demand curve to shift to d2d,?
a_ the cost of running the individual's car rises.
b_ the individual is banned from driving.
c_ the price of public transport rises.
d_ the quality of public transport declines.

7 two goods x and y have a positive cross-elasticity of demand and upward-sloping supply
curves.
what will be the effect of a reduction in the price of good y?
a the demand for good x will increase.
b the demand for good y will decrease.
c_ the price of good x will decrease.
d_ the quantity of good x supplied will increase.

8 which statement best describes the meaning of price elasticity of supply?
a how much price changes when there has been a change in supply
b how much supply changes when there is a change in demand
c how much supply changes when there is a change in price
d how much supply changes when there is a change in the price of a substitute

9 the table shows changes in a consumer's expenditure on various goods when her income
increases from $20000 to $24 000.
income income
$20 000: $24 000:
good | amount spent | amount spent
on good on good
($) ($)
www 100 96
x 100 100
y 200 224
zz 200 248
assuming all else remains unchanged, for which goods is the consumer’s income elasticity of
demand greater than 1.0?
a w,yandz
b wand z only
c wonly
d zonly

10 the diagram shows the market for cocoa, which is a normal good. initially the market is in
equilibrium with price p. and quantity q. bought and sold.
s,
price ss,
x
p. ais: a | d,
| sd,
o q,
quantity
which sequence of events (event 1 followed by event 2) must have occurred in order to move to
the new equilibrium at point x?
i
a a decline in the removal of a subsidy
popularity of cocoa previously paid to cocoa producers
b a decrease in a decrease in costs
disposable income of producing cocoa
cc an increase in an increase in the number
disposable income of cocoa producers
d a successful advertising an increase in the
campaign by cocoa producers. taxation of cocoa

11 goods x and y are complements and have upward-sloping supply curves.
what will be the effect on the equilibrium price and quantity of good x of an increase in the supply
of good y?
a decrease decrease
b decrease increase
cc increase decrease
d increase increase

12 what is generally considered to be one of the advantages of using the price mechanism as a
rationing device?
a it ensures that goods are allocated in accordance with the wants of consumers.
b_ it ensures that suppliers cannot make excessive profits.
c_ no one can be prevented from consuming a good if they are willing and able to pay the
market price.
d_ the allocation of goods is determined by consumers’ wealth.

13 the diagram shows a competitive market in equilibrium with price p and quantity q sold.
_ © i
price
p <w
|
|
|
|
|
|
u d
[e)
2 quantity
which area represents the producer surplus?
a opwq minus ouwq
b opwq minus upw
c ovwq minus opwq
d ovwq minus pvw

14 |the government fixes a maximum price tor wheat tlour below the market equilibrium price.
after the maximum price is imposed, which statement is not correct?
a_ producers’ revenue is increased.
b some consumers may encourage illegal sales.
c_ the quantity supplied of flour will decrease.
d_ there will be an excess demand for flour.

15 the income tax structure of a country has two elements.
1 the first $20000 of earned income is not taxed.
2 any income earned above $20000 is taxed at 20%.
what would be a correct description of this tax structure?
a aprogressive tax on incomes of more than $20 000
baprogressive tax throughout the whole income range
ca proportional tax on incomes of more than $20 000
d_ aregressive tax throughout the whole income range

16 in 2014 egypt reduced subsidies on fossil fuels such as gasoline and diesel.
the diagram shows the initial equilibrium at point x.
what will be the new equilibrium after the reduction of subsidies?
, sj
price
oe
n
d,
(e)

quantity

17 what is an aim of a transfer payment?
a it allows the government to alter the final distribution of income.
b it provides a ceiling for levels of income across the economy.
c_ it removes the need for state subsidies.
d it rewards the activity of a factor of production.

18 there have been recent calls for the uk government to nationalise its railways.
what would not be a reason for nationalising the railways?
a_ private rail companies often charge high ticket prices.
b_ private rail companies may exploit monopoly power.
c_ railways are an essential part of national infrastructure.
d_ railways should be treated as a public good.

19 the diagram shows a shift in the aggregate demand curve, from ad, to adz.
price level \
x .
ad,
o
real output

what might have caused this shift?
a _afall in the budget surplus
bsa fall in the trade surplus
c_ arise in imports
d arise in the interest rate

20 the table shows the consumer price index (cpi) and national output at current prices in 2014 and
2015 for an economy.
2015 120 110
what can be concluded when 2015 is compared with 2014?
a money national output decreased by 10%.
b money national output increased by 20%.
c_ real national output fell.
d_ real national output increased.

21 between june and the end of july 2016 the uk pound sterling depreciated by 11% against a

basket of currencies of the uk’s major trading partners.
the diagram shows the original aggregate demand curve ad, and the original aggregate supply
curve as, for the uk economy before june 2016. the equilibrium is at x.
what will be the new equilibrium for the uk economy as a result of the depreciation of the pound
sterling?

price

level as;

a
b d
cc
ad,
2 real output

22 vvhicn item is not inciuded in the current account of a country s balance of payments?
a exports of services
b _ interest on foreign loans
c profits from foreign investments
d_ the purchase of foreign assets

23 a government wishes to raise the value of the external exchange rate of its currency.
what should it do?
a discourage inward foreign direct investment
braise interest rates
c_ raise the level of aggregate demand in the economy
d remove quotas on imported products

24 country x conducts 60% of its trade with country y and 40% of its trade with country z. the initial
value of the trade-weighted exchange rate index of country x is 100.
what will be its new trade-weighted exchange rate index value if its currency falls in value by
20% against the currency of country y and rises by 10% against the currency of country z?
a 84 b90 cc 92 d 116

25 the index for a country’s terms of trade changed from 100 in year 2015, to 104 in year 2016.
what could have caused this change?
a _afall in export prices with import prices unchanged
ba fall in revenue from the export of services
c  anappreciation of the country’s currency
d arise in the value of imports

26 the table shows the production possibilities of cloth and food in four countries using all of their
resources.
(million units) (million units)
vv 40 or 8
x 28 or 4
y 8 or 2
z 5 or e)
if the world exchange rate is 1 unit of food for 6 units of cloth, with whom is v likely to trade?
a xandy b xonly c yandz d zonly

27 the diagram shows the domestic and world demand and supply for a good.
s (domestic)
price
pl rst ncrsaes re terre ng one easretencincn
p, ra world supply + tariff
p; po world supply
| | d (domestic)
(0) qa q@ q q qq,
quantity
the government imposes a tariff on imports of the good.
what will happen to the quantity imported?
a it will fall from q;q 3 to q2q3.
b it will fall from q,q5 to q2qy.
cit will fall from q2q5 to q3q4.
d it will fall from oq; to oqy.

238 vvhnat is an example of a supply-side policy?
a animport quota to restrict the supply of goods
b_ arise in interest rates to encourage the supply of savings
c_ aspecific tax on the supply of goods to raise revenue
d_ asubsidy to businesses to promote the supply of training courses

29 ina country the marshall-lerner condition for an improvement in the trade balance is satisfied in
the long run, but quantities of imports and exports are slow to respond to price changes.
the government devalues its currency to reduce its trade deficit.

which curve indicates the probable behaviour of the trade balance?
a

trade b
balance

-

\
ai d
time

30 which policy mix is most likely to be effective in the short run for reducing inflation in a closed
economy?
p| tecatpaiey | montarypoiey |
a decreasing the budget surplus increasing the interest rate
b decreasing the budget surplus increasing the money supply
cc increasing the budget surplus increasing the interest rate
d increasing the budget surplus increasing the money supply

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