economics

1 aneconomy is changing from a planned economy to a market economy.
which action would be expected during this change?
a the replacement of fiscal policy by monetary policy
b_ the replacement of multinational companies by national companies
c_ the replacement of nationalisation by privatisation
d_ the replacement of private property rights by common ownership

2.  a\local council provides a tap for drinking water in a town.
would this make drinking water a free good?
a_ no, because it is possible to exclude some people from using the tap.
b_ no, because it requires the use of scarce resources.
c_ yes, because it is available to all passers-by.
d_ yes, because it is impossible to charge for it.

3. food prices in a country increased by 20% in three months due to an infectious virus.
which statement about the cause of this rise in food prices is normative?
a consumers were scared of running out of food.
b farm workers demanded higher wages to cover extra hours worked.
c supply of foreign food was reduced because of closed borders.
d_ transport costs increased by 10%.

4 a doctor has very long working hours and a high level of stress. she can become a teacher
instead of continuing as a doctor.
what is the opportunity cost of choosing to continue as a doctor?
a the risk of mistakes caused by tiredness
b the possible costs of illness caused by high stress levels
c_ the potential salary as a teacher
d the retraining costs of becoming a teacher

5 when will the demand curve for motorcycles shift to the left?
a when the price of cars falls
b_ when the price of motorcycles falls
c_ when the tax on motorcycles rises
d_ when the price of public transport rises

6 the diagram shows the demand curve for housing.
™ nn
d

a quantity
what is not assumed to remain constant when drawing this curve?
a consumer incomes
b_ expectations about future house prices
c the price of houses
d the rate of interest charged on loans for house purchase

6 which products are likely to have a positive cross-elasticity of demand with tea?
a biscuits and cakes
b_ coffee and hot chocolate
c cups and saucers
d sugar and milk

9 what does not cause a shift in the supply curve of cars?
a achange in the car producers’ costs of production
b- achange in the price of fuel used by car owners
c  achange in the rate of sales tax on cars
d  achange in the wage rate of workers in the car industry

10 the diagram shows the market for pineapples. x is the original equilibrium point. pineapple
producers benefit from improved technology. at the same time, a new diet book suggests that
eating pineapples helps weight loss.

which point is the new equilibrium?
price
s,
a s,
b s;
cc
d
d, d, ds
je) quantity of
pineapples

11 the diagram shows the impact of a fall in the price of oil that will lead to a fall in energy costs for
many manufacturers.
s;
price
s2
j e a
k 1
g ‘
h fi
_ d:
oo e f
quantity
what will be the impact of this change on consumer and producer surplus?
consumer producer
surplus surplus
a falls falls
b falls rises
cc rises falls
d rises rises

12 when is the supply curve for a car manufacturing firm most likely to be price elastic?
a_ when the firm finds it difficult to recruit new labour
b_ when the firm has a large quantity of stock
c_ when the firm is operating in the short run
d_ when the firm is operating near to full capacity

13 the diagram shows the market for electric steel-plated switches used in new houses.
. s;
price
¥
xx
d,
d,
o quantity
what could not have caused the market equilibrium position to have changed from x to y?
a _ increasing the availability of loans for buying houses
bs granting a subsidy for producers of bricks
c_ removing sales tax on electric switches
d_ removing tariffs on imports of wood

14 in mixed economies, what explains why the provision of certain goods and services will remain
under government control?
a_ the market system fails to provide public goods.
b management ideas are hampered by excessive bureaucracy.
c ownership of companies depends on the ease of buying shares.
d_ the profit motive tends to improve efficiency in organisations.

15 the diagram shows the percentages of those on low pay and those on extremely low pay in a
country from 1976 to 2012. a national minimum wage was introduced in 1999.
25
% low paid a eee
15-4. pa ' introduction of
tan : minimum wage
10
extremely low paid t
5 ee ee
0 t
1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
year
which conclusion is consistent with the diagram?
a_ the minimum wage helped the low paid more than the extremely low paid.
b- the minimum wage reduced the numbers of both low paid and extremely low paid.
c_ the minimum wage reversed the trend in low pay of the previous 20 years.
d the minimum wage was responsible for the largest reduction of low pay in the period.

16 the government has decided to guarantee manufacturers a price op, for a product and to
provide a subsidy to ensure that the market clears.
in the diagram, q.p. was the original equilibrium before the policy changes.
ss
price =p, aoe a
p. kk----1x
are."
ms zo
1 ; d
0 q a
quantity
which area represents the total cost to the government of this subsidy?
a p,uzpp b p,wyp, c pexypp d vwyz

17 aconcert arena has a fixed capacity that allows it to sell 10000 tickets for a concert. the current
equilibrium price for a ticket is $10. the owners of the arena decide to set a minimum price for a
ticket.

under which conditions will there be the most unsold tickets?
minimum ticket price elasticity of
price ($) demand for tickets
a 11 inelastic
b 11 elastic
cc 12 inelastic
d 12 elastic

18 a government announces its intention to reduce the level of transfer payments in the economy.
which statement made by the government is consistent with this intention?
a_ there need to be more incentives for unemployed workers to seek jobs.
b_ state pensions need to be increased.
c_ the level of income tax needs to be raised.
d_ the level of government expenditure needs to be increased.

19 assuming the demand for oil is price-inelastic, what will be the effect on demand-pull inflation and
on cost-push inflation in an oil-importing country of an increase in the world price of oil?
effect on demand-pull | effect on cost-push

inflation inflation
a increase increase
b increase reduce
cc reduce increase
d reduce reduce

20 assume the chinese monetary authorities are committed to maintaining the exchange rate of
china’s currency, the yuan, against the us$ between p, and p2 on the diagram.
s,
price of yuan ss
(in us$) 2
ps enscarecnortestoetl natta angie saree misia
piha ego i oe et ets
d
[e) ‘
quantity of yuan
what might they do if supply changed from s, to s2?
a __ introduce controls on chinese investment overseas
b lower interest rates
c_ remove tariffs on imports from usa
d sell yuan on the foreign exchange markets

21 the diagram shows the demand and supply curves for solar panels in the us. in 2018, the us
put a tariff on imported solar panels.
price of .
solar domestic supply
panels
p, < fal ay =++-+-+--+-------world supply and tariff
od or a et
domestic demand
o m n xp r
quantity of solar panels
what is the quantity of imported solar panels after the imposition of the tariff?
a mn b mx c np d xp

22 the diagrams show initial equilibrium positions at yp.
which diagram reflects the impact on an economy of higher unit wage costs and an improvement
in the balance of trade?
a b
sras, ; sras,
price pice
level level
sras, | a: sras,
pal
| nad, p, ae ad,
: ad, 7.
oo yo yi o y, y;
real real
gdp gdp
cc d
sras, . sras,
price sras, ine
level level a
1 sras,
a
p, a la |
: | on p, —— ad,
_ 4 ;* | “ap,
[e) y; yes ie) y, y2
real real
gdp gdp

23 the table shows information from the current account of the balance of payments for canada and
singapore in 2019.
canada singapore
(us$ million) (us$ million)

exports of goods 448 360 440 800
imports of goods 462105 342 805
exports of services 100 350 204 810
imports of services 115270 119050
primary income balance -3 475 —34 340
secondary income balance —2 060 —6 280

what can be concluded from the table?

a canada exported more goods than singapore.

b canada and singapore had current account deficits.

c_ singapore had a surplus on its trade in goods and services.

d_ singapore imported cheaper goods than canada.

24 wvnat is a measure of a country s terms of trade index?
a price index of exports x 100
price index of imports
b pie nee of imports «100
price index of exports
c total value of eae x 100
total value of imports
d _ total value of exports — total value of imports

25 what is likely to cause an increase in the exchange rate of an economy?
a anincrease in demand-pull inflation
b_anincrease in national income
c_ adecision of the central bank to raise money supply
d_ adiscovery of a natural resource that replaces imports

26 what is likely to explain an increase in the deficit on a country’s current account of the balance of
payments?
a anincrease in government foreign aid to countries abroad
b_anincrease in government tax rates
c_anincrease in other countries’ exchange rates
d_anincrease in the proportion of income saved by the country’s residents

27 what does the marshall—lerner condition state must be present for a depreciation of a currency

to cause an improvement in the current account balance?

a the price elasticity of demand for exports and the price elasticity of demand for imports are
both greater than one.

b_ the price elasticity of demand for exports and the price elasticity of demand for imports are
both less than one.

c_ the sum of the price elasticity of demand for exports and the price elasticity of demand for
imports is greater than one.

d_ the sum of the price elasticity of demand for exports and the price elasticity of demand for
imports is less than one.

28 to encourage people to work, a government increases the minimum income level at which
people start to pay income tax.
which types of macroeconomic policy are being followed?
fiscal monetary supply side
policy policy policy
a v x v
b x v v
cc v v v
d v jv x

29 raising interest rates is proposed to reduce a balance of payments deficit.
which justification for this action is not valid?
a it will attract more foreign currency inflows.
b _ it will encourage exporters to find new foreign markets.
c it will lower the level of imported consumer goods.
d it will put downward pressure on the exchange rate.

30 which combination of changes is most likely to result in a fall in a country’s inflation rate?
[rae [ar
rate rate supply
a lower higher higher
b higher higher lower
cc higher lower lower
d lower lower higher

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