economics

1 an economist knows the current point at which an economy is operating within its production
possibility curve.
what can the economist judge from this knowledge about the economy?
a _ its degree of self-sufficiency
b _ its international competitiveness
c _ its level of output of two goods
d its rate of economic growth

2 abdul earns $50000 a year working as a teacher. he owns a house valued at $250000 and has
shares worth $20000. he has a current bank account with a balance of $1500 and $200 in his
wallet. in his house there is a jar containing $100, which he has saved to spend on his
forthcoming holiday.

what is the value of abdul’s liquid assets?
a $200 b_ $300 c $1800 d $21500

3. which type of good is healthcare?
a demerit
b_ free
c_ merit
d public

4 which is a normative statement?
a ifinterest rates fall consumption is likely to increase.
bf interest rates fall consumption will definitely increase.
c_ interest rates and consumption are usually inversely related.
d_ the rate of interest should be reduced.

2 = inatree market there is a surplus of a good.
which change would cause the market to come to an equilibrium?
a adecrease in demand
ba fall in price
c agovernment minimum price
d_anincrease in supply

6 what is most likely to increase the quantity of houses supplied?
a apolicy to help house buyers on modest incomes
b_arestriction on the level of rent that can be charged
c arise in the tax on materials used for building houses
d_ the removal of a subsidy to house builders

7 the diagram shows two demand curves and two supply curves for a product.
which equilibrium point is most likely to represent the long-run equilibrium in the market?
ss
price ss
a
d b

(el d

d
2 quantity

8 the equilibrium price of a product is $10. the government introduces an effective minimum price
of $12 for the product.
under which condition will the value of the producer surplus increase the most?
price elasticity
of demand
a 0
b between 0 and 1
cc 1
d greater than 1

9 diesel engines are a major cause of air pollution in cities. a city authority placed a charge on
diesel taxis entering the city.
what would be the most likely effects on the demand and supply of taxi journeys into the city?
demand for supply of
taxi journeys taxi journeys
a fall fall
b fall remain unchanged
cc remain unchanged fall
d rise fall

10 which combination of the classification of a good and market change will cause the demand
curve for the good to shift right?
[| eessitaton food [mate change |
a inferior good income decrease
b inferior good price decrease
cc normal good income decrease
d normal good price decrease

11 the supply (s) of a product is determined by the equation s = 10 + 10p when p is the price of the
product in $.
what is the product’s price elasticity of supply when its price rises from $1 to $2?
a 0.5 b 1.0 cc 2.0 d 5.0

12 ihe table gives estimates of the price elasticities and cross elasticities of demand for bus and rall
travel.
, elasticity with respect to the price of
service

bus travel 0.37 +0.13

rail travel +0.16 0.43
what would be the change in the volume of rail travel resulting from a 1% increase in bus fares?
a adecrease of 0.13%
b_ adecrease of 0.37%
c_ anincrease of 0.16%
d_anincrease of 0.43%

13. which combination is most likely to result in the demand for a product being highly price-elastic?
[mame [
substitutes spent on product
a large large
b large small
cc small large
d small small

14 what is most likely to occur when the government privatises public sector organisations?
a consumer choice will increase.
b employment will increase in the short run.
c innovation will be discouraged.
d_ the production of public goods will increase.

15 the diagram shows the market for bus services before and after a government subsidy.
supply before subsidy
pie g supply after subsidy
ps il.
ae
p, remeetd
p, kk
demand
o qa, a
number of bus journeys

which area on the diagram shows the incidence of the subsidy for the consumer?
a p,hip2 b  p,jkp2 c p2igp3 d p2klp3

16 the diagram shows the market for eye tests.
price of eye s
tests ($)
p,
p,
d
o
q q, quantity of
eye tests
which policy would enable the government to increase the number of eye tests from oq, to
oq:2?
a amaximum price of op3 per test
b  aminimum price of op2 per test
c  asubsidy paid to opticians of p;—p2 per test
da subsidy paid to opticians of ps—p; per test

1/7 in november 201/, the scottisn government introduced a minimum price for alcono!l because of
the detrimental health effects of alcohol consumption.
which combination of actions is most likely to lead to a failure with respect to reducing the
detrimental effects of the consumption of alcohol?
es
a minimum price is set too high effective information provision regarding
the health effects of consuming alcohol
b minimum price is set too high effective subsidisation of
non-alcoholic beverages
cc minimum price is set too low health benefits of reduced alcohol
consumption have been overestimated
d minimum price is set too low stricter enforcement of the regulations
relating to the sale of alcohol

18 what is an example of direct provision by a government?
a_ the government introduces a subsidy on renewable fuels to help the environment.
b_ the government introduces a unit tax on cigarettes to discourage consumption.
c_ the government sets a maximum rent on housing to protect tenants.
d the government takes over a private library to improve local services.

19 the graph shows the annual percentage change in the prices of services and in the prices of
goods between 2007 and 2012.
10
% annual 8
price
change 6 .
services
4
2
0
2007 \2008 2009 2010 2011 2012
=) goods
a
what can be deduced from the graph?
a on average the price of services was higher than the price of goods throughout the period.
b_ the average price of goods was higher in 2012 than in 2010.
c_ the average price of services was higher in 2012 than in 2010.
d_ there was a fall in the general price level between 2008 and 2010.

20 a government decides to devalue the country’s currency to remove the deficit on its current
account of the balance of payments.
what is the most likely reason why this would not work?
a the country gains a competitive advantage from the devaluation.
b_ the country has a surplus on its capital and financial accounts.
c_ the price elasticities of demand for the country’s exports and imports are greater than one.
d_ there are high trade barriers with the country’s main trading partners.

21 = +vwvhat will increase if aggregate demand rises when aggregate supply is perfectly elastic?
a labour shortages
b_ real output
c the price level
d_ wage rates

22 acountry operates a floating exchange rate.
what will cause the demand curve for the country’s currency to shift left in the foreign exchange
market?
a_ adecrease in the country’s interest rate
b- adecrease in the country’s money supply
c_anincrease in the country’s export sales
d_anincrease in the country’s import purchases

23 the table shows the relative price of exports compared with imports expressed as an index
number for an economy (2013 = 100).
2013 100
2014 97
2015 95
which statement about the period 2013-2015 is correct?
a export prices have increased each year.
b_ the general level of prices has fallen.
c_ the terms of trade have deteriorated.
d_ the volume of imports increasingly exceeds the volume of exports.

24 the table shows an extract from a country’s balance of payments.
exports imports
$ billion $ billion
trade in goods 150 200
trade in services 70 50
primary (investment) income 120 100
secondary (transfer) income 15 20
what is the current account balance?
a -$10bn b -$15bn c -$30bn d -$50bn

25 the real national income of a country fell by 3%.
what could have caused this?
a money national income fell by 3% when the rate of inflation was 6%.
b- money national income fell by 6% when the rate of inflation was 3%.
c money national income rose by 3% when the rate of inflation was 6%.
d money national income rose by 6% when the rate of inflation was 3%.

26 an economy with a long history of extensive barriers to trade decides to switch to totally free
trade.
what is most likely to increase in the short term?
a consumer surplus
b government revenue
c inflationary pressure
d profits of all domestic companies

27 why is a balance of payments deficit a potential problem for an economy with a fixed exchange
rate?
a_ domestic money supply will increase.
b_ rival economies may react with trade protection measures.
c_ the economy’s foreign exchange reserves may decrease.
d the economy’s short-run standard of living will be reduced.

28 what would be a positive effect on the growth of an economy in the short run, if the government
reduced a direct tax on individual earnings?
a food prices would increase due to shortages
b_ imports of luxury cars would increase to satisfy a change in demand
c savings would increase due to additional disposable income
d_ the consumption of domestically produced goods would increase

29 which combination of fiscal and monetary policies is most likely to be effective in the short run for
tackling deflation in a closed economy?
| tecapoty | meneten potoy
a decreasing the budget deficit decreasing the interest rate
b decreasing the budget deficit | decreasing the money supply
cc increasing the budget deficit decreasing the interest rate
d increasing the budget deficit decreasing the money supply

30 which policy measure is an expenditure-switching measure designed to reduce a current account
surplus?
a acutin income tax rates
b  adepreciation of the exchange rate
c_ the removal of limits on bank lending
d_ the removal of subsidies to exporters

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