economics

1. which is a positive statement?
a a fall in the value of the chinese yuan against the us dollar will make chinese goods more
price competitive in the usa.
b direct taxes are the best fiscal instrument to redistribute income in a developed economy.
c_ the most important macroeconomic objective of the government is to reduce unemployment.
d the uk government should not renationalise the railway infrastructure.

2 which is closest to being a public good?
a electricity
b_ health services
c _ street lighting
d_ water supply

3. an individual has an appointment with his dentist.
he has a choice between travelling to the appointment by car, or leaving the car at home and
travelling by bus and then by train. the costs of the journey are given below.
bus fare 2
train fare 3
car parking charge 4
petrol z
car wear and tear costs 1
given this information, what is the opportunity cost to the individual of travelling by car rather than
by bus and train?
a $2 b $4 cc $7 d $12

4 inthe diagram the original production possibility curve is lm.
l
consumer n
goods
(e) pm
capital goods
what could cause the curve to shift to np?
a a fall in the working population
b_areallocation of resources from consumer goods to capital goods
c_anincrease in output per worker
d_anincrease in unemployment

5 the diagram shows the supply curve for bananas.
price s
fe 2
9 100 150
quantity (kg)
what is the price elasticity of supply when there is a rise in price from $5 to $6?
a -2.5 b +0.4 c +2 d +2.5

6 what causes an inelastic market supply curve for an agricultural crop sucn as wheat?
a agovernment decision to import crops at times of shortage
b san efficient use of fertilisers causing crop production to rise
c the storage of excess production for future sale
d_ the very long time required to produce additional output

7 travellers can cross the english channel either by the channel tunnel or by a sea journey.
the table gives details of the passengers, in thousands, using these services between 2005 and
2015.

between 2005 and 2015 the price of the channel tunnel fell and the price of sea journeys rose.
ear channel tunnel sea journey
y passengers passengers
2005 17005 23693
2010 18303 21883
2015 20 864 21000
what does the data suggest?
a_ the cross elasticity of demand between the two services is positive.
b_ the market for crossing the english channel grew continuously over the period.
c_ the rate of decline in sea journeys accelerated over the period.
d_ the two services for crossing the english channel are complementary.

8 the diagrams represent the demand curves for three goods x, y and z. they are drawn to the
same scale and can be used to represent the price elasticity of each good. the three goods are
lamb only, all meat and all food.

price \ price \ price
ie) quantity ie) quantity ie) quantity
good x good y good z

which combination of goods is likely to represent lamb only, all meat and all food?
[[eseax [woos | geo |

a food meat lamb

b lamb meat food

cc lamb food meat

d meat lamb food

9 the diagram shows the european market for diesel fuel and the original equilibrium is at m.
‘ ss,
price
m
g 1
h xi
ni }
j 7 d,
tt d,
(e) rt
quantity
europeans want low-emission cars and therefore the demand for diesel fuel has decreased from
d, to do.
which area represents the new producer surplus for companies supplying diesel fuel?
a gmnh b jgm c jhn d jnr

10 a us study, published in july 2014, warned teenagers to reduce the amount of fizzy drink they
consume. one can of fizzy drink contains an adult’s entire daily sugar allowance.
if the advice were accepted, how might the effect be illustrated on demand and supply diagrams
for fizzy drinks and for sugar?
| | diagram for fizzy drinks diagram for sugar
a demand curve moves to the left movement up the supply curve
b demand curve moves to the left movement down the supply curve
cc movement up the demand curve supply curve moves to the right
d movement up the demand curve supply curve moves to the left

11 a government decides to put a tax on a good.
which price elasticity conditions would result in most of the tax being paid by the consumer?

demand supply
elasticity elasticity

a elastic elastic

b elastic inelastic

cc inelastic elastic

d inelastic inelastic

12 the diagram shows the income tax system adopted by a country.
tax paid
($)
(e) y, y,
personal
income ($)
what are the average and marginal rates of tax as incomes rise from y, towards y2?
average rate marginal rate
of tax of tax
a constant constant
b constant decreasing
cc decreasing constant
d decreasing decreasing

13 what is most likely to decrease if the government pays a subsidy to the producers of a product?
a government spending
b_ output of the product
c price of the product
d rates of taxation

14 |the government introduces a new transfer payment, to help people on low incomes aftord
housing.
what will be the effects of this in the housing market?
| | effect on the demand curve effect on the supply curve
a a movement along demand a movement along supply
b a movement along demand a shift in supply
cc a shift in demand a shift in supply
d a shift in demand a movement along supply

15 a specific tax is placed upon each bottle of perfume sold. in the diagram, ss is the supply curve
before tax, s:s; is the supply curve after tax.
‘ d s,
price
ss
ww,
r peste rene
q ip ==5 lint x
et
, 7 bd
ss a
[e) y zz
quantity
which area represents that part of the tax revenue paid by producers?
a orwy b pqut c prwt d qrwu

16 in each diagram the initial supply is s; and the new supply after subsidy is s2. the subsidy is
identical in each case.
which diagram shows the greatest incidence of the subsidy on the consumers?
a b
s; s;
price s2 price s2
p3 ferns an |
oe ( |
\ pip—ak |
pap 8 p, to
i yi d
11d ' ;
ie) q,q, quantity ie) q, q quantity
cc d
price price
| ss; p; a s;
p; — t py = '
pa | . re cho _
m2) 1 i
o q,q, quantity ie) q, q,
quantity

17. which statement is not correct?
a_ a progressive tax usually improves the distribution of income.
ba regressive tax benefits the rich more than the poor.
c_ anad valorem tax causes a parallel shift left of the supply curve.
d some consumers can avoid paying indirect tax.

18 the diagram shows the market supply and demand curves for wheat.
d is)
price
pee geo renceg omeneernnens
p, a
(e) k l r
output
what should a government do to maintain a minimum price of op2?
a buy quantity kl
b buy quantity kr
c sell quantity lr
d sell quantity kr

19 singapore imports almost all of its raw materials and its exports are a high percentage of its
gdp. the price elasticity of demand for exports and the price elasticity of demand for imports
are each less than 1.
what would be the likely impact of a depreciation of the singapore dollar?
a_ the domestic inflation rate would fall.
b_ the government's budget deficit would move to surplus.
c_ the price of imports would fall.
d_ the value of exports would fall.

20 the diagram shows the original aggregate demand curve, ad,, and the original aggregate
supply curve, as;. the original equilibrium is at x.
what would be the new equilibrium if there is an increase in private sector investment and an
increase in government spending on training courses?
price as:
level as;
a as;
» sok \
“ . ad.
ad, ad, 2
real gdp

21 the graph shows the rate of inflation for seven countries for 2015 and 2016.
7
6
5
4
j tt 1
yt ae
i) 2) oo ae
cm: 6) goo
o ll i]
costa ecuador india japan malaysia mauritius a"
4 rica
-2
what can be concluded from this graph?
a_ prices in costa rica rose in 2015 but remained constant in 2016.
b_ prices in ecuador and mauritius were lower in 2016 than in 2015.
c_ prices in india and malaysia remained constant in 2016 and 2015.
d_ prices in thailand and japan were lower in 2016 than in 2015.

22 the diagram shows the effect of a tariff on a product.
price domestic supply
p, world supply plus tariff
p, — — world supply
domestic demand
ie) quantity
from this diagram, what determines the gain the tariff generates for domestic producers?
a the price elasticities of domestic supply and demand
b the tariff rate and the price elasticities of both domestic demand and supply
c the tariff rate and the price elasticity of domestic demand
d the tariff rate and the price elasticity of domestic supply

23 the european union consists of a group of countries with free trade between its members and a
common external tariff on trade with non-members.
what would weaken the operation of this customs union?
a_ devaluation of any member's currency
b_ differences in wage costs between members
c_ entry tests for seasonal migrant workers
d one member country agreeing a trade deal with a non-member country

24 which change is most likely to result in a worsening of a country’s balance of payments?
a areduction in remittances from citizens who work abroad
b_ arise in domestic rates of direct taxation
c  anexpansion in the economy of a major trading partner
d_anincrease in domestic interest rates

25 what must be true if an economy is experiencing inflation?
a aggregate demand is increasing.
b aggregate supply is decreasing.
c_ the interest rate is increasing.
d_ the real value of money is decreasing.

26 what is the most likely consequence of an appreciation in the value of the malaysian ringgit?
a adecline in the level of unemployment in malaysia
ba fall in the rate of growth of the general price level in malaysia
c  areduction in the volume of imports into malaysia
d  animprovement in the malaysian balance of trade in services

27 under which conditions will an appreciation of a floating exchange rate cause the current account
of the balance of payments to worsen the most?
price elasticity of price elasticity of
demand for imports | demand for exports
a 0.4 0.4
b 0.4 0.6
cc 0.6 0.4
d 0.6 0.6

28 an economy experiences cost-push inflation.
which combination of policies would be best for the economy to use to reduce cost-push
inflation?
a appreciate lower minimum wage
b appreciate raise minimum wage
cc depreciate lower minimum wage
d depreciate raise minimum wage

29 a government reduces the rate of tax firms are charged on their land and buildings.
how is this likely to affect the economy’s price level and real output?
[ [price tee [reat ouput_|
a fall fall
b fall rise
cc rise fall
d rise rise

30 a government adopts a more expansionary fiscal policy and a more deflationary monetary policy.
which combination of changes in policy instruments is consistent with this?
jovernment f ‘
9 ' taxation interest rate
expenditure
a decrease decrease decrease
b decrease increase decrease
cc increase decrease increase
d increase increase increase
eee

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