Economics 0455/12 May/June 2022: question paper and mark scheme

Question

What is an example of a free good? A defence B education C health services D sunshine

Question

A student has nothing to do on a Friday evening. She withdraws $5 from the $100 she has in a savings account and buys a present to take to a party, to which admission is free. What does this involve? A an opportunity cost equal to $95 B an opportunity cost equal to other goods she could have bought for $5 C no opportunity cost, as entrance to the party is free D no opportunity cost, as she had no better way of using the time

Question

The diagram shows two production possibility curves for a country. capital goods K L O consumer goods What might cause a shift from point K to point L in the country’s production? A a change in what consumers want to buy B a recession C more investment D the use of previously unemployed resources

Question

Which relationship would be studied by an economist specialising in macroeconomics? A the relationship between the inflation rate and the unemployment rate B the relationship between the output of a firm and its costs of production C the relationship between the price of a product and the quantity demanded by a consumer D the relationship between the wage rate of workers and demand for labour in an occupation

Question

In recent years, a government has started to make more use of the free market system. However, they are doing it very slowly to avoid the disadvantages that a free market system might bring. What is a possible disadvantage of the free market system? A decreased incentive to work B decreased levels of pollution C increased efficiency D increased inequality of income

Question

What will cause the demand curve for a good to shift to the right? A a decrease in the disposable income of consumers B a decrease in the price of a complement good C a decrease in the price of a substitute good D a decrease in the price of the good

Question

In the diagram, which demand curve has perfectly elastic demand? A B C price D O quantity

Question

The table shows the demand and supply schedules for rice. The current price is $2.00 per kilo. quantity demanded quantity supplied price per kilo $ (million tonnes) (million tonnes) 2.50 5 30 2.00 10 25 1.50 20 20 1.00 30 15 0.50 40 10 What will happen if the price is reduced to $1.00 per kilo? A The demand schedule will shift to the left. B The market will move from shortage to surplus. C The market will move from surplus to shortage. D The supply schedule will shift to the right.

Question

The diagram shows the fixed costs, variable costs and total costs of a firm at output S. costs P Q R O S output Which distance represents the firm’s variable costs? A PQ B PS C QR D QS

Question

What could cause profits to be high in a monopoly market? A barriers to entry B diseconomies of scale C elastic demand for the product D high number of substitutes for the product

Question

Which firm is most likely to be classified as a small firm in the tertiary sector? A a farm B a hairdresser C a steelworks D a supermarket

Question

Germany is considered a capital-intensive economy while Indonesia is considered a labour-intensive economy. What does this mean about the economies of Germany and Indonesia? A Capital is relatively cheaper than labour in Germany while labour is relatively cheaper than capital in Indonesia. B Germany has many primary sector workers while Indonesia has many tertiary sector workers. C Indonesia has a higher growth in its population size than Germany. D Relatively more low-cost labour is available in Germany while capital is more efficient than labour in Indonesia.

Question

A bank continues to operate loss-making branches. Which objective is the bank trying to achieve? A growth B efficiency C profit maximisation D social welfare

Question

The table shows how three people, X, Y and Z, spend their income. person X person Y person Z food, clothing and housing 30% 25% 50% entertainment and leisure 35% 35% 25% luxury goods 35% 40% 25% What is the likely order of income, from lowest income to highest income, for these three people? A Y→X→Z B Y→Z→X C Z→X→Y D Z→Y→X

Question

Which activity is correctly linked to the organisation that provides it? organisation activity A central bank regulate the rate of inflation B central bank set direct tax rates C commercial bank manage the government’s financial accounts D commercial bank safeguard the country’s foreign reserves

Question

The chart shows a government’s spending in a year. 40 000 $ (millions) 35 000 34 006 30 000 25 000 20 000 18 660 15 280 15 000 10 000 5050 5000 2390 0 social security health education law and defence and welfare order What was the total government spending on public goods? A $2390 million B $5050 million C $7440 million D $33 940 million

Question

A government levies a specific tax on the supply of cigarettes. At the same time it starts a campaign to explain the health risks of smoking cigarettes. Which diagram illustrates the effects on the demand and supply of cigarettes? A B price price S1 S2 S2 S1 D D O quantity O quantity C D price price S2 S1 S1 S2 D2 D1 D1 D2 O quantity O quantity

Question

A government wishes to pursue an expansionary monetary policy. What should it do? A discourage bank lending B give subsidies to firms C lower income tax thresholds D lower interest rates

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A government introduces a series of economic measures. What is a supply-side policy measure? A building more affordable homes to improve labour mobility B controlling consumer spending to reduce inflation C lowering interest rates to encourage purchase of expensive goods D raising pensions to help retired people pay their fuel bills

Question

What is identified as economic growth? A a fall in labour productivity B an increase in the productive capacity of the economy C an increase in the Consumer Prices Index (CPI) D the economy enters a period of recession

Question

The retail trade in a country has unemployed workers in one region and job vacancies in another region. What could explain this? A Costs of employing workers are lower when there is unemployment. B It is more expensive to live in the area where the retail jobs are available. C Retailing demands the same skills everywhere. D The geographical mobility of labour has increased.

Question

A country wishes to reduce the level of inflation. Which combination of policy measures will be most successful? policy measure 1 policy measure 2 A decrease exchange rates increase interest rates B decrease interest rates increase exchange rates C increase government spending decrease interest rates D increase interest rates decrease government spending

Question

A government wants to reduce both its budget deficit and the amount of poverty in its country. Which fiscal policy measure is most likely to achieve both of these aims? A decreasing the rate of progressive income tax B decreasing government spending on welfare benefits C increasing the rate of progressive income tax D increasing government spending on welfare benefits

Question

Which components, in addition to Gross Domestic Product (GDP) per head, are included in the Human Development Index (HDI)? A average earnings and inequalities of incomes B balance of trade and balance of payments C life expectancy at birth and expected years of schooling D size of population and age structure of population

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What is likely to cause an immediate decrease in the size of the labour force? A a fall in the average size of families B a fall in the birth rate C a reduction in the age of retirement D an increase in net immigration

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The table shows some economic indicators. Which increase in the first indicator is most likely to lead to an increase in the second indicator? first indicator second indicator A budget surplus consumer saving B consumer spending unemployment C inflation trade surplus D productivity living standards

Question

The price of a currency in a fixed exchange rate system is reduced. What is this called? A appreciation B depreciation C devaluation D revaluation

Question

A government removed the quota on goods imported into the country. What is the most likely result of this? A a decrease in demand for domestic production B a decrease in domestic unemployment C a decrease in exports D a decrease in the balance of trade deficit

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What is most likely to result from a reduction in the value of a country’s currency if there are no other changes in the economy? A A trade in goods surplus will fall. B Export prices will rise. C Import prices will rise. D The inflation rate will fall.

Question

The governments of low-income countries often allow foreign multinational companies (MNCs) to mine minerals in their country. Which conflict between benefit and cost might this cause the low-income countries? benefit cost A improved balance of trade training by the MNCs B higher employment loss of a finite resource C increased profits for the MNCs efficient production D more sustainable development economic growth