economics

1 line xx is the production possibility curve (ppc) of a worker picking peas and beans in a 10 hour
working day.
y
quantity of peas
picked per day
x
oo
quantity of beans
picked per day
what could cause the worker’s ppc to shift to the line yy?
a a decrease in working hours to 8 per day and a machine that increases the worker’s pea
picking productivity
b  amachine that increases the worker's pea picking productivity only
c anew work schedule where the worker spends 6 hours per day picking peas and only
4 hours picking beans
d_areduction in working hours to 8 per day only

2  whatis a function of money?
a  divisibility
b_ durability
c portability
d_ medium of exchange

3 whatis classified as a public good by economists?
a flood defences
b  government-funded hospitals
c government-run national parks
d the internet

4 which statement about the factors of production is correct?
a the factor capital includes shares and deposit accounts at banks.
b_ the factor labour includes human-made resources.
c_ the factor land includes forests and undiscovered copper.
d_ the factor enterprise takes risks and is rewarded with interest.

5 which supply curve shows that the price elasticity of supply of the good is always equal to 1?
a_astraight line that intersects the horizontal axis
b_astraight line that intersects the vertical axis
c_ astraight line that passes through the origin
d_astraight line that is vertical to the horizontal axis

6 what could cause a sniit in the supply curve of good x and a movement along its supply curve?
| shift in the supply curve movement along the supply curve
a a change in demand for good x an increase in the price of a substitute good
b a decrease in factor productivity the imposition of a tax on good x
cc an increase in the price of a an increase in factor productivity
complementary good
d an increase in the wage rates a change in demand for good x
in the industry

7 the market for mobile phones is initially in equilibrium at x. the government then imposes a
sales tax.
what is the government's total tax revenue from this tax?
supply plus tax
[j |seeeeeeeeseens j
pers supply before tax

t k !

ss xx

r

demand
- qa, q, ;
quantity

a jkx b  tkls c tkmr d ujxs

8 what is an example of the rationing function of the price mechanism?
a when the price of a product is falling, firms will allocate less resources to its production.
b when the price of a product is falling, the government can set an effective minimum price.
c when the price of a product is rising, firms will expand production of the product to make
profits.
d when the price of a product is rising, some consumers will no longer be able to buy it.

9 in 2016 car drivers bought more fuel because the price of oil from which it was made had fallen.
which diagram represents this change in the market for fuel?
a b
price ss price
of fuel of fuel
epo ag ®t p is)
ppa ee
i d, ; bs;
d, ' d,
0 q, q 0 q, q,
quantity quantity
of fuel of fuel
cc d
price s price s;
of fuel of fuel s,
py pe > py p>
i | d, ras
d, f a
fe) q, q, se) q, q
quantity quantity
of fuel of fuel

10 the diagram shows the demand and supply curves for bread in a developed economy. bread is a
substitute for pasta and rice.
ss,
price
d,
d,
ie) quantity
what would cause the demand curve for bread to shift from d, to d2 in a developed economy?
a arise in the price of pasta and rice
b adecrease in the real income of consumers
c_ arecession and rising unemployment
d_ asubsidy given to producers of pasta and rice

11 the table shows the quantity demanded of three goods when the price of good x changes.
($) demanded demanded demanded
5 100 60 20
4 110 50 22
3 140 30 28
2 200 15 40
1 300 4 60
which relationships between x, y and z can be deduced from the table?
ee
a a complement for x a complement for x
b a complement for x a substitute for x
cc a substitute for x a complement for x
d a substitute for x a substitute for x

12 the diagram shows three supply curves.
s,
price
s,
s,
oo quantity
what can be concluded about the price elasticity of supply of the curves?
a_ as price rises, the price elasticity of supply of sz will increase.
b_ atany price, the price elasticity of supply of s, will be less than that of ss.
c_ atany price, the price elasticity of supply of s2 will be higher than that of ss.
d_ the price elasticity of supply of each curve is constant.

13 the diagram shows the market for smartphones in india.
f
price
g ss
m
h
j kc
nn
« d, dz
oo rt ,
quantity
rising incomes in india have seen a demand for this normal good shift from d, to do.
which area now represents consumer surplus and which area now represents producer surplus?
consumer producer
surplus surplus
a fmh hmk
b fmh okmt
cc gnj hmnj
d gnj jnk

14 a nationalised industry is privatised.
assuming there is no change in the output of the industry in the short run, what are the direct
effects of the change?
proportion of industry
size of public sector output entering the
market

a decreases increases

b decreases no change

cc no change increases

d no change no change

15 what is a distinguishing feature of a progressive income tax?
a_ high earners pay a higher proportion of their income in tax than low earners.
b_ high earners pay a lower proportion of their income in tax than low earners.
c_ high earners pay the same proportion of their income in tax as low earners.
d low earners pay more tax than high earners.

16 why might a government nationalise a private firm?
a to gain greater efficiency due to more competition
b_ to increase merit good provision
c_ to increase choice for the consumer
d_ to raise more tax revenue

17 the diagram shows a firm’s supply of and demand for apples.
price ss
i. | np
o q, q, q, q,
quantity of apples
if a minimum price is increased from p, to pz what will happen to the amount of apples sold?
a it will decrease from q, to qo.
b it will decrease from q,q; to q2q3.
cit will increase from q3 to qy.
d_ it will increase from q3q2 to q4q).

18 in an attempt to reduce crime, a government introduces a subsidy on the production of burglar
alarms, but sales rise very little.
which possible characteristics of the good would lead to this outcome?
price elasticity price elasticity
of demand of supply

a high high

b high low

cc low high

d low low

19 compared with pakistan, germany has a higher output of pharmaceuticals per unit of resources
used.
what could explain this?
a the existence of floating exchange rates
b the law of absolute advantage
c the marshall—lerner condition
d_ the terms of trade

20 which statement about inflation is correct?
a inflation will lead to a rise in exports.
b inflation will lead to a rise in real incomes.
c inflation will lead to a rise in the cost of living.
d inflation will lead to a rise in the purchasing power of money.

21 why is it that a country’s balance of payments must always balance?
a exchange rate changes will correct any deficit or surplus.
b one country’s deficit is balanced by another country’s surplus.
c_ the current account is balanced by the capital and financial accounts.
d_ the government must act to correct any disequilibrium.

22 which argument for protection would be most relevant if the government of country x decided to

exercise voluntary export restraint in its trade with country y?

a voluntary export restraint would achieve an immediate correction for x’s balance of trade
deficit.

b_ voluntary export restraint would cause the level of gdp to increase in country x.

c_ voluntary export restraint would help to negotiate improved trading conditions between x
and y.

d_ voluntary export restraint would help to reduce the level of unemployment in country x.

23 the average price of a country’s exports increased by 5% and the average price of its imports
increased by 10%.
what can definitely be concluded from this information?
a its balance of trade will improve.
b its balance of trade will worsen.
c its terms of trade have improved.
d its terms of trade have worsened.

24 there is an increase in indirect taxes.
what will be the impact on demand-pull inflation and on cost-push inflation?
demand-pull cost-push
inflation inflation
a fall fall
b fall rise
cc rise fall
d rise rise

25 the table shows the number of biscuits and cakes that can be produced by four workers in an
hour.
[tere [te [nation | omer |

cakes 3 10 12 16
who has the greatest comparative advantage in producing biscuits?
a laura
b mo
c nathan
d omar

26 which condition is necessary for a country’s balance of payments on its current account to

improve if it reduced its exchange rate?

a both the price elasticities of supply for its imports and its exports must be elastic.

b_ the importing country will buy all the excess supplies of its trading partner to clear the
market.

c_ the sum of the price elasticities of domestic demand for imports and the foreign demand for
exports must be greater than one.

d_ the trading partners need to agree on the maximum prices to be charged for imports and
exports.

27 the diagram shows the effect of the united states (us) imposing a tariff on the import of steel in
2018.
z domestic supply of steel
price of
steel
y .
p, 4—------\<----------- world supply of steel plus tariff
v w! \x
p (--\-----~-4--n------- world supply of steel
| | domestic demand for steel
ie) q, g, g, g,
quantity of steel
which statement about the impact of the tariff is correct?
a consumer surplus falls from p;to to puo.
b domestic output increases from oq; to oq3.
c imports fall from q;q, to q2q3.
d_ the tax revenue raised on imports is p;ywp.

28 in 2012, the indian government stated that it aimed to reduce its budget deficit to 5.1% of gdp.
which policy is most likely to help this aim in the short run?
a adecrease in import tariffs
b adecrease in the rate of interest
c_ anincrease in the sale of state-owned assets
d_anincrease in government pension payments

29 what would make a policy of raising interest rates less likely to be effective in reducing inflation?
a aggregate supply is increasing faster than aggregate demand.
b consumers expect prices to rise even faster in the future.
c consumers’ spending is largely paid for on credit.
d interest rates are still higher abroad.

30 country x is an open economy with a floating exchange rate. it changes to a fixed exchange rate.
which combination of policy changes would be most effective in reducing inflation?
| teeatpoiey [new hed echargerate |
a higher direct taxes above purchasing power parity
b higher direct taxes below purchasing power parity
cc higher indirect taxes above purchasing power parity
d higher indirect taxes below purchasing power parity

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