economics

1 the transition of centrally planned economies to market economies was accompanied by a
significant change in the composition of output.
what was an immediate consequence of this transition?
a a build-up of unsold stocks of goods
b_anincrease in exports of goods
c_ anincrease in unemployment
d_ decreasing prices of goods and services

2 which statement is correct?
a normative economics concerns the description of economic models.
b- normative economics is objective and factual.
c_ positive economics can be tested by data and evidence.
d_ positive economics is subjective and offers a value judgement.

3 consumers do not use enough of a product to maximise their private benefit because they have
imperfect information about the product.
how would an economist classify this product?
a demerit good
b_ free good
c_ merit good
d public good

4 what is meant by the division of labour?
a_ each worker specialises in a different task in production.
b some workers work part-time and others work full-time.
c the same amount of output per hour is produced by each worker.
d_ workers divide their time between different jobs.

5 what describes a market supply curve?
a it is downward sloping.
b_itis the same as the aggregate supply curve.
c_itis the sum of all firms’ supply curves for a product.
d_ itis the supply of all products within an economy.

6 in the diagram, d is the demand curve for indian tea exports and s, is the supply curve when
there is a tax on tea exports.
s,
price
ronaigg s,
x ot
i zz
iw |
yf '
<a
e quantity
the indian government removes the tax, which causes the supply curve to shift to s2.
which areas in the diagram measure the resulting loss in tax revenue to the indian government
and the resulting gain in consumer surplus?
loss in tax gain in
revenue consumer surplus

a x wry

b x x+z

cc xty zz

d xy x+zz

7 in which market would equilibrium not be achieved at point e if price were above op?
a b
ss d ss
price price
d
ee p pines e
o q ie) q
quantity quantity
cc d
ss d
price price
ss
dae see en
d
o q ie) q
quantity quantity

8 in the diagram, the supply curve shows the number of spaces in a car park and the demand
curves show the demand for spaces on four different days (d1, dz, d3 and d,).
is)
price
py pes-setees mana
papoose d,
py sega d,
pi poeceeesecseee se d;
d,
8 quantity
the owner wishes to charge a parking fee on each of these days to allocate the spaces
according to the market mechanism.
which pricing policy should the owner use?
a seta fixed price at p;
b seta fixed price at py
c_ vary prices between p2 and p3;
d_ vary prices between p, and py

10 how might a firm raise the value of the price elasticity of supply for its product?
a decrease the amount of labour that it employs
b_ employ new technology to increase its productive capacity
c_ increase advertising expenditure to generate more revenue
d_ reduce the level of stocks in order to cut costs

11 shoe manufacturers often use leather to make their most expensive shoes. due to a world
shortage of leather, the price of leather has risen.
what will be the effect of this price change?
a the demand curve for leather shoes will shift to the left.
b_ the demand curve for a substitute for leather shoes will shift to the right.
c_ the supply curve for leather shoes will shift to the right.
d_ the supply curve for a substitute for leather to make expensive shoes will shift to the right.

12 the diagram represents the market for a good.
price p ss;
xx
4
z a
a quantity
which statement is correct?
a oxrepresents the price above which no producer wishes to stay in the market.
b oz represents the minimum price consumers are prepared to pay.
c  pyz represents the total consumer surplus.
d xyz represents the total producer surplus.

13 the economics department of a university calculates that the price elasticity of demand for the
products of a local firm is between —1.1 and —1.3.
which decision could be justified by the research?
a increase prices to increase profit.
b_ invest in more capital to increase output.
c_ reduce advertising to reduce costs.
d_ reduce prices to increase revenue.

14 a specific tax is imposed on a product for which the elasticity of supply is zero.
which statement is correct?
a the burden of this tax will fall entirely on consumers.
b_ the burden of this tax will fall entirely on suppliers.
c_ the burden of this tax will fall mainly on consumers.
d_ the burden of this tax will fall mainly on suppliers.

15 the diagram shows a market where a government has set a minimum price of om.
. ss
price
a fete ete eres minimum price
p pcre eae es
d
0 quantity
what can be concluded from the diagram?
a at prices above om, there would be a surplus of the good.
b_~ at the minimum price om, there would be a shortage of the good.
c_ price will fall automatically from om to op.
d_ the minimum price will be ineffective.

16 what would supporters of a nationalised public transport service expect to be the most likely
outcome from the privatisation of train and bus services?
a fewer destinations served by trains and buses
blower fares
c_ more frequent services to all destinations
d more people employed in public transport services

17 a teenager received a cheque for $50 as a birthday gift from her parents. the teenager paid the
cheque into her savings account at the bank.
why is this gift a transfer payment?
a it did not involve a cash payment.
b it transfers money between bank accounts.
c_ the parents did not spend their money.
d_ the teenager did not produce any output.

18 what is a necessary characteristic of a public good?
a iithas a fixed maximum price.
b_ it has an opportunity cost of production of zero.
c_itis non-excludable.
d_ it is an essential good.

19 what is least likely to change an advanced industrialised economy’s terms of trade?
a __ its level of labour productivity
b _ its rate of inflation
c_ the maintenance of a stable foreign exchange rate
d_ the occurrence of random supply shocks

20 the diagram shows the aggregate demand (ad) and aggregate supply (as) curves for an
economy.
general as
price level
ad,
ad,
o
real output
which situation would not cause a shift from ad, to ad2?
a _afall in the general price level as government spending is reduced
b_aneasing of credit by commercial banks for household purchases of consumer goods
c_anincrease in earnings from exports of high-tech products
d_anincrease in investment by firms in computer systems

21 which combination of changes is most likely to lead to an increase in the aggregate price level
and the level of real output?
[ [income orate | netewors _ |
a fall decrease
b fall increase
cc rise decrease
d rise increase

22 country w conducts 50% of its trade with country x, 30% of its trade with country y and 20% of
its trade with country z. the initial value of the trade-weighted exchange rate of country w is 100.
country w’s currency appreciates 10% against the currency of country x, depreciates 10%
against the currency of country y and is unchanged against the currency of country z.

what will be the new trade-weighted exchange rate?
a 100 b 102 cc 102.5 d 200

23 the table shows the goods balance and services balance for a country in selected years.
goods balance services balance
2015 +120 -30
2016 +110 -30
2017 +50 -10
2018 +130 -60
2019 +140 —50
between which years did the overall goods and services balance change the most?
a 2015 to 2016
b_ 2016 to 2017
c 2017 to 2018
d 2018 to 2019

24 what is not an example of protectionism?
a export subsidies
b_ import subsidies
c quotas
d tariffs

25 what is an expenditure-switching policy to reduce a country’s balance of payments deficit?
a an increase in budget surplus
b_anincrease in direct taxes
c_anincrease in import tariffs
d_anincrease in interest rates

26 the diagram shows the aggregate demand (ad) and aggregate supply (as) for an economy.
as,
general
price
level as;
ad
o real output
which changes in subsidies and indirect taxes would have caused the change in as shown?
a _ higher subsidies and higher indirect taxes
b higher subsidies and lower indirect taxes
c_ lower subsidies and higher indirect taxes
d lower subsidies and lower indirect taxes

27 in its recent budget a government increased defence expenditure and also the amount spent on
training that increased 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,
general b
price level as,
a cc
d
ad, ad, ‘ad,
(@)
real output

28 an increase or decrease in exchange rates can take place in both a floating and a fixed exchange
rate system but different terminology is used for each system.
what is the correct terminology?
a depreciation appreciation
b depreciation revaluation
cc devaluation appreciation
d devaluation revaluation

29 in 2018 the united states (us) government reduced direct taxes on consumers and businesses.
what are likely to be the effects of these changes on consumption, investment and national
output?

a decrease decrease decrease
b decrease increase increase
cc increase decrease decrease
d increase increase increase

30 acountry experienced a significant fall in unemployment but its inflation rate remained low.
what could explain this?
a_ global competition prevented firms passing on higher costs.
b_ increased spending on imports had lowered the exchange rate.
c_ there was a low level of spare capacity in the economy.
d_ wage rates had increased by more than labour productivity.

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