economics

1. agood is most suitable to be provided by the market if it is
a excludable and non-rival.
b_ excludable and rival.
c_non-excludable and non-rival.
d_non-excludable and rival.

2  whatis the definition of long run?
a the time period when all factors of production are specialised
b the time period when all factors of production are variable
c the time period when all key inputs into production are variable
d the time period when at least one factor of production is fixed

3 the table states the consequences of two macroeconomic policies.
what correctly identifies whether the statements are normative or positive?
a depreciation of an — -
: a rise in the minimum
exchange rate will :
wage rate will cause
cause the balance of ;
: unemployment to rise
payments to improve
a normative normative
b normative positive
cc positive normative
d positive positive

4 the diagram shows the production possibility curve for wheat and corn.
m
output
of wheat
n
oo output of corn

what can be deduced from the diagram?
a_ as the price of corn falls, more of it is demanded.
b_ resources used in producing corn are more efficient than in producing wheat.
c_ the opportunity cost of producing corn falls when moving from m to n.
d_ the opportunity cost of producing corn is constant when moving from m to n.

5 a supply curve is represented by the equation
quantity supplied = 10 + 5p
where p = the price of the product.
which price rise would cause the quantity supplied to double?
a $1 to $2 b_ $1 to $3 c $1 to $4 d $1 to $5

6 which diagram illustrates unitary elasticity of supply?
a b
ss ss
price price
o quantity o quantity
cc d
is}
price price
ss
o quantity o quantity

7 inwhich case is the price system not a possible method of allocating resources?
a inthe distribution of foodstuff among the population
b in the hiring of workers by employers
c_ inthe ownership of land for agricultural use
d in the provision of public goods by the government

8 a sports stadium has two prices of seats. the cheaper seats are $10 and the more expensive
seats are $20. when the prices of all seats are increased by 10%, the effects on demand are a
fall of 5% for the cheaper seats and a fall of 12% for the more expensive seats.

what describes the responsiveness of demand to the change in price?
| creersens | more cger |
seats
a elastic elastic
b elastic inelastic
cc inelastic elastic
d inelastic unitary elasticity

9 which statement correctly describes the shape of the demand curve for a normal good?
a_ it shows an inverse relationship between income and quantity demanded.
b_ it shows an inverse relationship between the price of the good and quantity demanded.
c_ it shows a positive relationship between the price of the good and quantity demanded.
d_ it shows a positive relationship between income and quantity demanded.

10 why does the basic economic problem of scarcity apply to both the rich and the poor?
a_ the choices people make are not dependent on income inequalities.
b consumers pay the same prices for goods and services to satisfy their wants.
c human wants exceed what can be produced from available resources.
d_ natural resources are unevenly distributed amongst nations.

11 butter and buttermilk are goods in joint supply. supply curves in both markets slope upwards to
the right. health concerns cause people to reduce their consumption of butter.
what are the initial consequences of this for supply in the markets for butter and buttermilk?
| | supply of butter supply of buttermilk
a move left along supply curve move left along supply curve
b move left along supply curve shift left of the supply curve
cc shift left of the supply curve move left along supply curve
d shift left of the supply curve shift left of the supply curve

12 the diagram shows the demand and supply of a good.
price
ss
f 1
d
o q
quantity
when the market is in equilibrium, which area measures the difference between what consumers
are willing and able to pay and what producers receive at that output?
a x b y c xty d x-y

13 why do some local governments subsidise the provision of bicycles to encourage their use?
a consumers are afraid of having car accidents.
b consumers are unable to afford bicycles.
c consumers are not aware of the external benefits of using bicycles.
d consumers ignore the external costs of using bicycles.

14 the table shows gini coefficients for both income and wealth in two countries.
[county [county |
wealth 0.4 0.7
which statement is correct?
a_ gini coefficients are not comparable between income and wealth because one is a flow
concept and the other is a stock concept.
b_ income inequality is greater in country p than in country q.
c_ wealth inequality is greater in country p than in country q.
d wealth inequality is greater than income inequality in both countries.

15 a government is faced with rising inflation. it wishes to reduce inflationary pressure while avoiding
a fall in output.
which action is most likely to meet its needs?
a_anincrease in laws to promote competition
b_anincrease in taxation
c_anincrease in the budget surplus
d_anincrease in the exchange rate

16 the table shows selected information from a country’s national accounts.
gdp 28
net property income from abroad -3
capital consumption 6
national debt 2
what is the country’s net national income?
a $19 billion b_ $25 billion c $31 billion d $33 billion

17 the graphs show the changes in the exchange rates of the pound sterling (£) against the us
dollar (us$) and the euro (€) between the years 2001 and 2003.
us$ per £ £per€
1.750 0.728
: £04 | a _
¥88 tof | j] * 0700 av
od ns a i)
dr i
cool ey id 0.625 | aya
iol a | | 0.600
‘iol a
1.400 0.575
2001 2002 2003 2001 2002 2003
year year
what happened to the value of the £ between the years 2001 and 2003?
a_ the £ appreciated against the us$ and depreciated against the €.
b_ the £ appreciated against the us$ and the €.
c_ the £ depreciated against the us$ and appreciated against the €.
d_ the £ depreciated against the us$ and the €.

18 which statement about the circular flow of income is correct?

a exports and imports do not affect the equilibrium level of national income because they
always cancel each other out.

b_ the greater the level of saving, the greater the level of injections in the form of investment
must be.

c when consumers use past savings to increase their spending, there will be a rise in national
income.

d when a government increases withdrawals by increasing the rate of income tax, there must
be an equivalent increase in injections to compensate.

19 the graph shows a country’s average annual inflation rate over a five-year period.
average annual
inflation rate (%)
ar a a | year
what can be concluded about the general price level during the five years?
a it fell in only one year.
b sit fell in only two years.
c_itrose in only two years.
d_ it was constant in only one year.

20 in an economy, wages and prices are both rising but wages are rising faster.
which features are likely to exist in this economy?
[er | a

inflation incomes
a no no
b no yes
cc yes no
d yes yes

21 the diagram shows the aggregate demand (ad) and long-run aggregate supply (lras)
curves for a country. x is the original equilibrium position.
in one year, over one million foreign workers left the country and at the same time the
country’s currency appreciated against the currencies of its major trading partners.
what will be the most likely new equilibrium position for this country?
lras; lras, lras,
general d
price
level a
ad.
c 2
b ad,
ad;
ie) real ouput

22 what is most likely to cause a rise in a country’s exchange rate?
a afall in its direct taxes
b sa fall in its export orders
c arise in its interest rates
d arise in its imports

23 which change affecting the foreign exchange market for the us$ would be most likely to result in

a shift to the right of the demand curve and a movement along the supply curve?

a_ the us government reduces subsidies on exports to the eu.

b_ foreign currency speculators in switzerland believe that the us$ is undervalued and act
accordingly.

c_ the us government intervenes in the foreign exchange market so as to bring about a drop in
the value of the us$.

d_ us pharmaceutical companies experience a fall in demand for their products from the rest of
the world.

24 what can be best understood from a knowledge of a country’s terms of trade?
a its balance of payments performance
b_ the purchasing power of its exports
c the standard of living within the country
d the value of its real exchange rate

25 acompany produces goods for export only.
which change could cause a rise in the price of its goods while the quantity sold is unchanged?
domestic foreign
workers’ consumers’
wages wages
a unchanged fall
b fall unchanged
cc fall fall
d rise rise

26 under which current conditions will supply-side policy measures be most likely to achieve a
country’s key macroeconomic goals?
a high stable
b high rising
cc low stable
d low rising

27 why might a government prefer to use floating exchange rates?
a it allows the government more independence in policy making.
b_ it encourages the government to build up its foreign exchange reserves.
c_ it eliminates the instability of free markets.
d it gives firms more confidence in future costs and prices.

28 what is least likely to rise as a result of the use of expansionary fiscal policy?
a_ aggregate demand
b_ budget surplus
c nominal income
d inflation

29 the table shows gdp indices for a country over a three-year period.
[peart [veare [years |
real gdp 100 105 106
money gdp 100 107 115
inflation and economic growth are two macroeconomic policy objectives.
which row gives a correct assessment of the country’s achievement of these two objectives over
the period?
rate of inflation fate a
economic growth
a cannot tell positive
b declining cannot tell
cc positive declining
d rising negative

30 a government raises interest rates to improve the current account of the balance of payments.
what might reduce the effectiveness of this policy?
a _afall in domestic growth
b consumer pessimism
c_ increased domestic saving
d__price-elastic demand for exports

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