economics

1. what is correct for a normative statement?
a _itis objective and based on fact.
b__itis objective and can be proved correct.
c_itis subjective and based on opinion.
d_ it is subjective and can be reliably tested.

2 what does a production possibility curve show?
a the maximum output that can be produced by a firm in a year
b the maximum output that can be produced per worker per year in the economy
c_ the maximum output that could be exported from a country
d_ the maximum output of two or more goods in an economy from a given amount of inputs

3. in zimbabwe there was hyperinflation.
which two functions of money might the zimbabwe dollar be most likely to have still performed
during this hyperinflation?
a medium of exchange and store of value
b _ standard for deferred payments and unit of account
c _ store of value and standard for deferred payments
dunit of account and medium of exchange

4 the diagram shows two production possibility curves, xx and yy.
. y
manufacturing
output x
oo x y
agriculture
output
what would cause a movement from xx to yy?
a a decrease in scarce resources
b  adecrease in the cost of resources
c_anincrease in the cost of labour
d_anincrease in the labour force

5 the table shows the market demand and supply for bananas over a year. at a market price of 8
cents per kg there is disequilibrium in the market.
fice of bananas total market total market
* cents er kg) demand (million | supply (million
per kg tonnes) tonnes)
4 1000 150
6 800 300
8 600 450
10 400 600
12 200 750
what action would the government have to take to achieve market equilibrium at a price of 8
cents per kg?
a grant a subsidy of 2 cents per kg to producers
b_ impose a tax of 4 cents per kg on consumers
c purchase the entire supply at 8 cents and sell at 4 cents
d_ ration consumers to 75kg each per year

6 incalculating the short-run supply schedule for a firm, what is assumed to remain unchanged?
a_ the number of consumers
b _ the price of the good
c_ the quantity of raw material inputs
d the state of technology

7 the graph shows the demand and supply curves for an industry.
s.
x
price
x
oo quantity
what would cause a shift in the supply curve from s, to s2?
a_anincrease in the number of firms in the industry
b_anincrease in the number of workers employed
c_anincrease in the productivity of the workforce
d_anincrease in the wage rates paid to workers

6 ihe diagram shows the outcome when a landowner, who has allowed motorists to park on his
field at no cost, introduces a parking charge of $1.
supply
charge

$1

ie) parking spaces
what is the loss of consumer surplus that results?
a xonly b x+y c yonly d yz

9 the diagram shows the market for a good.
price ss
p, maximum price
rh
p, minimum price
d
(e) quantity
if the government imposes a minimum price at op; and maximum price at op2 what would
happen?
a the price will be unchanged at op.
b_ the price will fall to op,.
c_ the price will rise to op2.
d_ there will need to be rationing by the government.

10 two goods, x and y, have a cross elasticity of demand of +1.8. good y has an income elasticity
of demand of —0.6.
an increase in both the incomes of consumers and the price of good y will have which
combination of effects?
quantity quantity
demanded of x | demanded of y

a fall fall

b fall rise

cc rise fall

d rise rise

11 what is price elasticity of supply?
a_ the change in the quantity supplied when a price changes
b_ the change in the quantity supplied when demand changes
c_ the comparison of the proportionate change in supply to the proportionate change in demand
d_ the comparison of the proportionate change in supply to the proportionate change in price

12 what does the assumption ‘ceteris paribus’ mean when economists analyse the way in which the
quantity demanded of a good changes?
a changes in quantity demanded can cause changes in any of the other variables.
b consumer preferences are always assumed to remain unchanged.
c only one variable is assumed to change while the others remain the same.
d_ several variables change simultaneously.

13 in which situation is the demand for a product said to be price elastic?
a a fallin price increases expenditure on the product.
b.a fall in price increases quantity demanded.
c_ arise in price increases expenditure on the product.
d_ arise in price reduces quantity demanded.

14 which product is most likely to be provided only by the government?
a national defence
b national health
c national museums
d national theatres

15 which term is given to an income received by an individual for which there is no corresponding
contribution to output?
a profit
b_ revenue
c salary
d transfer payment

16 a government policy favours older people at the expense of younger people.
which would be most likely to correct such an imbalance?
a_anincrease in expenditure on government-provided pensions
b_anincrease in government-subsidised training schemes for school-leavers
c_anincrease in the rate of income tax on earned incomes
d_anincrease in the rate of interest on savings

17 a government gives a subsidy to a producer of a product.
what will be the likely effect of this?
a ashift to the left in the demand curve and a rise in equilibrium quantity
b_asshift to the left in the supply curve and a rise in equilibrium quantity
ca shift to the right in the demand curve and a fall in equilibrium price
d_ashift to the right in the supply curve and a fall in equilibrium price

18 which is the most appropriate reason for the continued government ownership of a natural
monopoly?
a the government will guarantee competitive behaviour.
b_ the government will ignore any losses made by the monopoly.
c_ the government will maximise profits.
d_ the government will take account of external benefits.

19 when will the imposition of a tariff by a country on the goods and services of its major trading
partners reduce the country’s expenditure on imports?
a when the income elasticity of demand for imports is greater than 1
b_ when the price elasticity of demand for imports is greater than 1
c_ when the price elasticity of demand for imports is less than 1
d_ when the price elasticity of supply of imports is greater than 1

20 how will an increase in government spending on infrastructure affect aggregate demand and
aggregate supply?
[| aaa demand | aareate sumo |
a decreases increases
b increases decreases
cc increases increases
d stays the same increases

21 the table shows the amount of good x or the amount of good y that can be produced by country
r and country t if each uses all of their resources.
output of output of
good x good y
country r 80 100
country t 20 80
what can be concluded from the table?
a country r has an absolute advantage in producing good y and a comparative advantage in
producing good x.
b- country r has an absolute advantage in producing good x and a comparative advantage in
producing good y.
c country t has an absolute advantage in producing good x and a comparative advantage in
producing good y.
d country t has an absolute advantage in producing good y and a comparative advantage in
producing good x.

22 what is most likely to lead to a persistent surplus in a country’s current account of its balance of
payments?
a alow domestic savings rate
ban undervalued exchange rate
c highly protectionist policies by other countries
d low investment income from abroad

23 the diagram shows australia’s terms of trade per quarter from q2, 2014 to q1, 2017.
109.7
107.4
terms of
trad 103.5
rade 102 102.9
99.3
95
926 93.9
89.9
ts 87.9
q2. q3 q4 qi q2 q3 q4 qi! q2 q3 q4 qi
2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017
in which period did australia’s terms of trade decline and then improve?
a q2, 2014 to q4, 2014
b_ q1, 2015 to q3, 2015
c q4, 2015 to q2, 2016
d q3, 2016 to q1, 2017

24 the diagrams show a country’s aggregate demand (ad,) and aggregate supply (as,) curves.
since the world economic downturn (2007-2008) some governments have reduced labour costs
and ensured interest rates remained unchanged.

how would this most likely be shown on a diagram?
a b
. as; . as,
price as price
level level
pyeng py eigeooen
pg protons eae ae:
; ad, pa ad,
ad,
oo real gdp oo real gdp
cc d
. as, . as,
price as price
level : level
pgpaneecnenore 2 pgprnsslgerno ng
py paren sneggi nomen s aeecnnseen
‘ ad, mi ad,
ad,
oo real gdp oo real gdp

25 an economy changes its exchange rate at time t.
balance
of trade
surplus
+
0 i time
balance of trade
deficit
what does the j-curve diagram show happens at t and after t?
exchange rate marshall-lerner
change at time t condition
a devaluation does not apply
b devaluation applies
[e revaluation does not apply
d revaluation applies

26 vwvnat always nappens when there is an increase in the consumer price index’?
a_anincrease in consumer expenditure
b_anincrease in the cost of living
c  areduction in living standards
d_ areduction in real disposable income

2/ what would not be included in germany's balance of payments accounts?
a financial investments in germany by japanese banks
b_ foreign aid received by germany
c_ the german terms of trade
d_ the takeover of a german company by a french company

28 an economy has a balance of payments surplus, which it wishes to eliminate.
in order to achieve this objective, which combination of polices would be most appropriate?
a adepreciation of the currency and an increase in government spending
ban appreciation of the currency and a cut in interest rates
c_ anincrease in the money supply and a pay freeze
d increases in both direct and indirect taxation

29 the diagram shows the possible relationships between the degree of independence of the central
bank and the level of inflation.
which relationship suggests that central bank independence is an effective way to reduce
inflation?
a b
annual
inflation
rate c
d
least most
degree of central
bank independence

30 which change in economic circumstances is most likely to lead to a reduction in the rate of
domestic inflation in an economy?
a adepreciation in the currency
b_ areduction in the productivity of labour
c aworld-wide recession
d_anincrease in direct taxes to finance increased welfare payments

Solve 9708_w19_qp_11