Economics 0455/12 May/June 2023: question paper and mark scheme

Question

What is part of the economic definition of scarcity? A high levels of taxation B low levels of investment C unequal distribution of income D unlimited consumer wants

Question

A country’s production possibility curve (PPC) moves from PPC1 to PPC2. consumer goods PPC1 PPC2 O capital goods What could cause this movement in the PPC? better higher lower education investment unemployment A false false true B false true false C true false true D true true false

Question

A government spends $100m on subsidising wind farm construction instead of spending it on an increase in healthcare. Which economic concept does this spending decision illustrate? A external cost B free goods C market disequilibrium D opportunity cost

Question

What is an example of a macroeconomic indicator? A agricultural prices B average earnings in the secondary sector C real Gross Domestic Product (real GDP) D total costs of German pharmaceutical firms

Question

Good X is demanded in two areas, Y and Z. The table shows the amount of X demanded in these areas at different prices. price of quantity demanded good X per month (US$) area Y area Z 5 1000 200 10 800 150 15 600 100 20 400 50 25 200 0 What can be concluded from the table? A Consumers in area Y are more willing and able than consumers in area Z to buy good X. B Consumers in area Y are richer than consumers in area Z. C Consumers in area Y want the good more than consumers in area Z. D There are more consumers living in area Y than in area Z.

Question

Which price elasticity of demand (PED) would cause an increase in total revenue if the price of the good increased? A perfectly elastic B relatively elastic C relatively inelastic D unitary elastic

Question

The diagram shows the supply curve for coffee. supply price P2 P1 O Q1 Q2 quantity The price of coffee increases from P1 to P2. How would this benefit firms in the coffee industry? A A higher price gives firms the ability to increase profits. B A higher price gives firms the incentive to reduce total fixed costs. C A higher price will encourage consumers to buy more coffee increasing total revenue. D A higher price will encourage less firms to enter the market to supply coffee.

Question

What might be an external benefit of an increase in the number of university graduates in an economy? A an increase in revenue for the universities from fee-paying students B an increase in tax revenue from a more productive labour force C an increase in graduate employment as a percentage of the working population D an increase in wages for graduates

Question

The price of a good increases. What could cause this? A The cost of raw materials falls. B The incomes of consumers rise. C The price of a complement rises. D The price of a substitute falls.

Question

Imposing a maximum price for a good is an example of which type of government policy? A fiscal B monetary C regulation D supply-side

Question

Savers suffer as inflation rises to 4.4%. Which function of money is most involved in this statement? A means of deferred payments B medium of exchange C store of value D unit of account

Question

One of the functions of money is to act as a measure of value. What does this mean? A Money allows people to borrow and lend. B Money allows people to save their surplus income. C Money is used to buy goods and services. D Money is used to compare the worth of different goods and services.

Question

Which trade union activity will be beneficial for firms? A balloting for industrial action to prevent redundancies B campaigning to raise wages of trade union members C instructing workers to strike over a safety dispute D providing training which raises productivity of workers

Question

What is not a variable cost of production? A cost of fuel B cost of raw materials C extra pay for working additional hours D rent of offices

Question

What is a definition of a firm’s revenue? A money received from sales B sales volume C surplus over costs D tax payments

Question

What could cause internal diseconomies of scale for a firm? A a fall in demand for the products produced by the firm B a merger with another firm that results in slower decision-making C spending more on research and development to create new products D the lack of skilled labour in the geographical area where the firm is based

Question

A government decides to leave direct taxes unchanged but to increase indirect taxes. What is this policy intended to achieve? A to increase the value of the exchange rate B to redistribute income from higher to lower income groups C to reduce a budget deficit D to reduce the rate of inflation

Question

What is the most likely reason to increase government subsidies? A to decrease consumption of a merit good B to increase consumption of a merit good C to decrease consumption of a demerit good D to increase consumption of a demerit good

Question

Which people are most likely to gain at a time of inflation? A companies who sell abroad B foreign tourists visiting the country C those living on their savings D those who are repaying borrowed money

Question

The government of country Z announces an increase in spending on work-place training. What is the effect of this supply-side policy likely to be? A a decrease in country Z’s employment rate B a decrease in country Z’s exchange rate C an increase in country Z’s economic growth rate D an increase in country Z’s interest rate

Question

The table shows real GDP in US$ billion for a country over a three-year period. real GDP year US$ billion 1 205 2 215 3 219 What does the GDP data indicate for the country between year 1 and year 3? A a reduction in the rate of inflation B an increase in the rate of economic growth C the existence of economic growth D the existence of economic growth per capita

Question

What is a likely consequence of a falling level of unemployment? A downward pressure on wage rates B increase in welfare benefit payments C rise in absolute poverty D rise in income tax revenue

Question

The diagrams show Italy’s unemployment rate and GDP per head. Italy’s unemployment rate Italy’s GDP per head 13 39 000 % $ 38 000 11 37 000 9 36 000 35 000 7 34 000 5 33 000 2000 2005 2010 2015 2000 2005 2010 2015 year year When do Italy’s unemployment rate and GDP per head rise at the same time? A 2000–2001 B 2007–2008 C 2009–2010 D 2014–2015

Question

During a recession, many people in a city become unemployed and their incomes fall. Some people can no longer pay the rent on their houses or buy the food they need. What is the effect of the recession in the city? absolute poverty relative poverty A increases increases B increases unchanged C unchanged increases D unchanged unchanged

Question

The Peruvian government set itself the target of reducing the number of its population in poverty. What change does not indicate that the Peruvian government had made progress towards this target? A a rise in employment B a rise in infant mortality C a rise in life expectancy D a rise in the level of adult literacy

Question

What is not a reason for the decline in manufacturing industries in developed economies in recent years? A growth of newly industrialised competitor countries B invention of automated production methods C rising costs of factor inputs in the steel industry D considerable skill shortages as school-leavers prefer to work in the service sector

Question

The table shows a country’s exports and imports. $m exports of goods 200 imports of goods 190 exports of services 35 imports of services 38 What was the country’s balance of trade in goods and services? A a deficit of $7 million B a deficit of $13 million C a surplus of $7 million D a surplus of $13 million

Question

Country X exports steel to country Y at a price below its cost of production. This has led to a fall in demand for steel produced in country Y. What is a method of trade protection that country Y could use to reduce the imports of steel from country X? A apply anti-dumping tariffs B increase interest rates C revalue the currency D subsidise the export of steel

Question

What would increase the demand for a country’s currency on the foreign exchange market? A a decrease in its inward investment B a decrease in its rate of interest C an increase in its exports D an increase in its imports

Question

Country X has a persistent deficit on the current account of the balance payments. Which policy measure is most likely to improve this situation? A lowering import quotas B lowering income tax C lowering import tariffs D lowering export subsidies