economics

1. the production possibility curve for a country is shown.
manufactured
goods
o :
agricultural
goods

what can be determined from the diagram?
a_ the consumers’ preferred combination of output
b the level of economic growth
c the opportunity cost of manufactured goods in terms of agricultural products
d the preference for present consumption rather than future consumption

2 inaclothing business, after specialisation, real output per worker increased in the first six months
but then output per worker began to fall.
what might be the most likely reason for the reduction in productivity?
a_ anincrease in output per worker in the long run depends on an increase in pay.
b_ anincrease in output per worker requires more capital.
c_ specialisation means workers lose skills.
d_ workers get bored if they are repeating the same work.

3 a wine producer and bottler wanted to expand its production significantly. to finance the
expansion it offered investors discounts on restaurant meals if they bought 2000 shares in the
company.

which factors of production are most likely to be involved in this expansion?
a labour, land, capital and enterprise

b labour, land and capital only

c_ enterprise and land only

d_ enterprise only

4 which statement is positive?
a_ all taxes should be proportional to income.
ba progressive tax is a fair tax.
c_ greater equality of income is desirable.
d_ income inequality is decreasing.

5 the diagram shows the change in a country’s production possibility curve from pq to pr.
p
public
goods
ie) q r
private goods
what increases as a result of the change from pq to pr?
a the price of private goods
b _ the price of public goods
c_ the opportunity cost of private goods
d_ the opportunity cost of public goods

6 the graph shows the demand and supply curves for an industry.
s2
s;
price
d,
ie) quantity

what would cause a shift in the supply curve from s, to s2?
a_anincrease in the number of firms in the industry
b_anincrease in the number of workers employed
c_anincrease in the productivity of the workforce
d_anincrease in the wage rates paid to workers

7 a firm produces a good using a very labour-intensive process. there is an increase in the price of
the good.
under which conditions will the supply of the firm’s good be most price elastic?
nature of the level of
labour employed | unemployment in
by the firm the economy

a skilled high

b skilled low

cc unskilled high

d unskilled low

8 what is most likely to cause the demand curve of an inferior good to shift to the right?
a_ arise in consumers’ incomes
b_ arise in income tax
c arise in sales tax
d arise in the price of a complement

9 the diagram shows four supply curves.
which curve has a price elasticity of supply of 1 for all levels of quantity supplied?

a

b cc
price
d
o amount supplied
per period

10 the diagram shows a shift of the supply curve in a market from s, to so.
s2
price
$ s,
p2
p, >
“
o quantity
how will the consumer surplus and producer surplus change?
a decreases by s increases bys +u-t
b decreases by s increases by u+v—ww
cc decreases bys +t increases by s+t-—v
d decreases by s +t increases bys +z-—v

11 good x has a substitute, good y, and a complement, good z. the price of good y decreases and
the price of good z increases.
why might the equilibrium price of good x remain unchanged?
a_ producers of good x adopt new technology.
b_ producers of good x receive a subsidy.
c some firms stop production of good x.
d_ the tax on the production of good x is cut.

12 in the diagram, s; and sz are the supply curves for an agricultural product in years 1 and 2
respectively. d is the demand curve in years 1 and 2.
in year 1, the government purchased an amount necessary to ensure that the price was op.
s, ss,
price (year 1) (year 2)
p ‘i
pti‘
o wx y z
quantity
the price is held at op in year 2.
how much more must the government buy in year 2 than it bought in year 1?
a wz b xy cc xz d yz

13 inequality in an economy can be categorised as either income inequality or wealth inequality.
what is most likely to cause greater wealth inequality than income inequality?
a anincrease in indirect taxation
b_anincrease in the value of property
c  areduction in the minimum wage
d_ areduction in the rate of interest paid on savings

14 a product with infinite elasticity of supply has sales of 1000 units a week at a price of $1 per unit.
price elasticity of demand is 1.5 over the relevant range.
the government imposes a tax of 10%.
what will be the government’s weekly tax revenue from this product?
a $15 b $85 c $100 d $150

15 the table shows the values of consumer prices index (cpi) and a worker’s salary in 2022 and
2023.
cpi 2022 100
cpi 2023 110
worker's salary 2022 $20000
worker's salary 2023 $25 000
what is the real value of the worker's salary in 2023 compared with 2022?
a $18182 b  $22727 c $25000 d $27500

16 an economy experiences rising unemployment due to incomes falling as a result of a virus
pandemic.
how would this unemployment be classified?
a cyclical
b _ frictional
c seasonal
d © structural

17 what is likely to move an economy’s aggregate demand curve to the right?
a afall in income equality
bsa fall in incomes abroad
c a fall in the exchange rate
d sa fall in the government budget deficit

18 which items have to be added to and subtracted from gross domestic product at market prices
to calculate the value of gross domestic product at basic prices?
a_ capital consumption and net property income from abroad
b expenditure taxes and capital consumption
cnet property income from abroad and subsidies
d subsidies and expenditure taxes

19 in an economy with an interest rate of 4% per annum, the rate of inflation falls from 5% to 3% per
annum.
what will be a benefit of this fall?
a menu costs will fall to zero.
b_ people on fixed incomes will be better off in real terms.
c_ savers will gain in real terms.
d_ the purchasing power of the currency will rise.

20 what is an example of a macroeconomic policy?
a_ encourage the consumption of merit goods
b_ reduce pollution in the steel industry
c_ maintain general price stability
d_ reduce unemployment in the service sector

21 which supply-side policy is likely to lower real output before raising it?
a increased spending on early years education
b_ increased spending on infrastructure
c_ reduced import barriers
d subsidies to exporters

22 an economy is in equilibrium at point e on the diagram.
the government reduces its expenditure on defence.
which point on the diagram shows the new equilibrium?
as, as,
price
level
py, [eee eee geese 8 e
a
p, sy ad,
' rt ad,
| le nap.
ie) yi yo y3
national income

23 the number of people employed in a country and the level of unemployment both decrease.
what could explain this?
a net inward immigration
b_anincrease in the level of unemployment benefits
c_anincrease in the age at which state pensions are payable
d_anincrease in the number of university students

24 which circumstances would most help a firm to gain from a depreciation of the exchange rate?
a_ it sells mainly abroad and relies on domestic suppliers for inputs.
b_ it sells mainly abroad and relies on foreign suppliers for inputs.
c_ it sells mainly in its home market and relies on domestic suppliers for inputs.
d_ it sells mainly in its home market and relies on foreign suppliers for inputs.

25 a country has a floating exchange rate. its current account on the balance of payments moves
from a surplus to a deficit.
which rate is likely to increase in the short run as a consequence of this worsening of its current
account?
a economic growth rate
b_ exchange rate
c interest rate
d unemployment rate

26 which policy is most likely to reduce a balance of payments deficit without causing inflation?
a decreased import quotas
b_ depreciation of currency
c higher interest rates
d_ decreased import tariffs

27 the table shows the average price of exports and imports.
which combination of changes in export prices and import prices could result in a country’s terms
of trade increasing from 100 to 110?
the average price the average price
of exports of imports

a falls by 5% rises by 5%

b remains unchanged rises by 10%

cc rises by 5% falls by 5%

d rises by 10% remains unchanged

28 what is not an example of protectionism?
a the european union (eu) requiring goods imported into member states to meet safety
standards
b_ the pakistan government increasing the rate of goods and services tax (gst) on some
exported goods from 2% to 5%
c the nigeria government banning the import of packaged sugar
d_ the us imposing a 35% tariff on tyres imported from china

29 turkey imported $220 million worth of goods and services. turkey exported $12 million worth of
goods and services during the same period. its net income was —$15 million.
what is turkey’s current account balance?
a -$223 million
b  -$217 million
c  +$208 million
d  +$247 million

30 the table shows the exchange rate for national currencies per us dollar.
which currency has the smallest percentage appreciation against the us dollar between 2019
and 2020?
| | 2019 2020
a 6.91 6.90
b 70.4 74.1
cc 14.4 16.5
d 0.99 0.94

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