economics

1 in the diagram jk is the initial production possibility curve for an economy producing computers

and cars.

j

computers
2) lk
cars

what could cause the curve to shift to jl?
a afall in output per worker in the car industry
b a fall in the level of competition in the car industry
c arise in the potential workforce of the economy
d arise in the price of cars

2 consumers in country x buy some goods and services from private sector firms. other goods
and services are provided by the state.
what is this type of economy?
a free market economy
b_ joint economy
c mixed economy
d_ planned economy

3. in 2017 the bank of england introduced a new version of the £1 coin as there were concerns that
large quantities of illegal £1 coins had been put into circulation.
which characteristic of money did the illegal £1 coins threaten?
a acceptability
b . divisibility
c_ durability
d portability

4 which statement is a positive statement?
a low inflation is preferable to low unemployment as a government aim.
b_ low inflation will provide a more stable macro economy.
c_ the government must intervene in all markets to improve resource allocation.
d_ the government should cut income tax so living standards can improve.

5 what could cause an increase in consumer surplus in the market for a good?
an increase in an increase in

demand for supply of

the good the good
a no no
b no yes
cc yes no
d yes yes

6 [he diagrams snow the effect of a change in the market for good x on the market for good y.
s> ss, ss
price price
pa) papas en
i, _
o q,q, oo q,q,
quantity quantity
change in the market effect on the market
for good x for good y
what can be concluded from the diagrams?
a xand y are complements.
b= xand y are in joint supply.
c xand vy are substitutes.
d y isa derived demand from x.

7 the diagram shows the average world price of coffee in us cents per pound weight (ib) between
1997 and 2005.
wt ttt
ae
100 . nx
et | a | lt ly
berne
*cccpet al
ot
0
1997 2001 2005
year
which event is consistent with the price behaviour shown in the specified time period?
a acontinuous rise in the price of tea between 1997 and 2001
b the entry to the market of new producers of coffee between 1997 and 2001
c_ aseries of good coffee harvests between 2001 and 2005
d increasing health worries about drinking coffee between 2001 and 2005

8 the diagram shows a shift in the supply curve for a product from s; to sz.
price y, s2
(2) quantity
what could cause this shift in the supply curve?
a _anincrease in the cost of producing the product
b_anincrease in the income of consumers of the product
c_ anincrease in the demand for a product that is jointly supplied
d_anincrease in the price of the product

9 the diagram shows four supply curves.
for which curve is the price elasticity of supply constant?
a
price b
cc
d
o quantity

10 what would be the price elasticity of demand for smartphones if their price fell from us$100 to
us$90 and the quantity demanded rose from 200 to 250?
a 0.2 b 04 c 25 d 5.0

11. the diagram shows the demand for and supply of a normal good. e; is the initial equilibrium
position.
price
e, ss
e
e,
d
o quantity
which changes could result in a new equilibrium e2?
a adecrease in both the demand for and the supply of the good
b_anincrease in both the demand for and the supply of the good
c_anincrease in consumer incomes, and a decrease in the supply of the good
dan increase in the price of a complement to the good, and an increase in the supply of the
good

12 the table shows the market demand and market supply for kiwifruit over a year.
at a market price of $3 per kg there is disequilibrium in the market.
kiwifruit demand supply
($ per kg) | (thousand tonnes) | (thousand tonnes)

1 220 120

2 190 130

3 160 140

4 130 150

5 100 160
which action would the government have to take to achieve market equilibrium at a price of
$3 per kg?
a_ impose an indirect tax of $2 per kg on kiwifruit
b_ purchase the entire supply at $3 per kg and sell at $2 per kg
c_ set a maximum price of $3 per kg
d subsidise kiwifruit production by $2 per kg

13 the cross-elasticity of demand of good s with respect to the price of good p is +1.5.
the cross-elasticity of demand of good s with respect to the price of good r is —1.5.
the cross-elasticity of demand of good p with respect to the price of good r is —-1.5.
what can be concluded about goods p, r and s?

a sand p are complements; p and r are substitutes.
b- sand p are complements; r is an inferior good.

c sand p are substitutes; p and r are complements.
d sand p are substitutes; r is an inferior good.

14 a government wishes to impose a tax on a good so that the consumer pays most of the tax
increase.
which type of elasticity would best achieve this aim?
a high price elasticity of supply
b low price elasticity of supply
c unitary price elasticity of supply
d perfectly inelastic price elasticity of supply

15 why does the production of public goods have to be financed by the government?
a_ one person’s consumption of a public good means it is not available for anyone else.
b_ people are able to consume public goods without paying for them.
c_ private sector firms will charge a price significantly above cost for public goods.
d_ the cost of producing public goods is higher in the private sector.

16 which payment is a transfer payment?
a households’ payments of indirect taxes
b government pension payments
c payments between firms for the supply of raw materials
d payment of salaries

17 the diagram shows the effects of a subsidy in the market for wheat.
s;
rice
pi ss,
pil heel
ps |
p, j
py 'h !
i d,
o q, q .
quantity
which area shows the total government spending on the subsidy?
a op2jq2 b op3fq, c p3fjp2 d- p»p,lj

18 a government wishes to reduce the consumption of alcohol.
which policy will it use to achieve this aim by fixing the price of alcohol?
a fix maximum price above market price
b fix maximum price below market price
c fix minimum price above market price
d fix minimum price below market price

19 according to the theory of comparative advantage, what makes trade beneficial between two
countries?
a_ each country has different goods to sell and different tastes.
b_ each country has different opportunity costs of production.
c one country has the absolute advantage in producing both goods.
d_ the prices of goods are different between each country.

20 the demand for a country’s exports is price-elastic. its government introduces export subsidies.
what will be the effect on its balance of trade and on its terms of trade?
[[tatenesofvade [tems ofvaae |

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

21 the table shows the average changes in the prices and volumes of exports and imports.
which combination of changes would result in an increase in the terms of trade?
export export import import
prices volumes prices volumes
a -10% +15% -15% +10%
b -3% +6% 2% +1%
cc +5% -5% +6% —-1%
d +10% -5% +12% 6%

22 a government decides to increase a quota on an imported good.
what is likely to happen?
a the demand for the good will fall.
b_ the good will become more expensive.
c_ the government's revenue will decline.
d_ there will be more of the good imported.

23 the diagram shows aggregate demand (ad) and aggregate supply (as) for an economy.
as
price "as,
level
p, iia”,
sad
- y1 y2
real
output
what is most likely to cause the shift from as, to as2?
a adecrease in the exchange rate
b adecrease in the price level
c a fall in immigration
d a fall in the average level of wages

24 country x places a tariff of 20% on steel products imported from country y. country y retaliates
with a 20% tariff on computers imported from country x.
what is a certain economic consequence of these actions?
a_ the balance of payments of country x and country y will remain unchanged.
b the exchange rate value on which trade between the two countries is based will be
maintained.
c_ the profits and employment of domestic firms in both countries will be preserved.
d_ the volume of bilateral trade between country x and country y will be reduced.

29 a couniry nas a floating exchange rate.
an increase in which variable within that country can cause its exchange rate to appreciate?
a employment levels
b_ income levels
c interest rates
d price levels

26 the diagram shows the effects of the imposition of a tariff on an internationally-traded good. sgom
is the supply and d the demand in country r. sy is the world supply curve of the product and sw
is the world supply curve after the imposition of a tariff by country r.

soom
price
os ss
pen “
—— — sw
ee en
e) 0; q: gs q
quantity
which combination describes the effect on domestic supply of and demand for the good in
country r after the imposition of the tariff?
| oman | cere
supply
a falls falls
b falls rises
cc rises falls
d rises rises

27 the graph shows the change in the current account of belgium’s balance of payments from 2016
to 2017.
3.6
us$ '
billion
-2.8
2016 2017
what will be the most likely impact of the change shown by the graph on belgium’s domestic
economy?
a afallin the rate of economic growth
b a fall in the foreign currency reserves
c a fall in the number of unemployed
d a fall in the rate of inflation

28 what is an example of the use of monetary policy?
a acutin the rate of corporation tax
bareduction in interest rates
c a switch from direct to indirect taxation
d the introduction of maximum price controls to reduce inflation

29 which policy would be likely to increase inflation?
a anincrease in income tax
b_anincrease in interest rates
c limiting the amount banks can lend
d raising the level of import tariffs

30 what are the components of aggregate demand?
a_ consumption + investment + government spending + (exports — imports)
b_ consumption + investment + taxation — (exports — imports)
c consumption + saving + taxation — (exports — imports)
d_ consumption + saving + taxation + (exports — imports)

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