Economics 9708/14 May/June 2022: question paper and mark scheme

Question

What will result from a government’s decision to allow health care to be provided entirely by market forces? A There will be a reduction in the provision of a public good. B All consumers will receive better health care. C Market failure will be eliminated in the health care market. D The health care market will reach an equilibrium.

Question

A farmer with a fixed area of land grows two crops, wheat and barley. Some land used for barley is flooded and cannot be used. The farmer then starts to plant genetically modified (GM) wheat that produces wheat more efficiently on the land that is not flooded. Which diagram shows the most likely effect of these changes on the farmer’s production possibility curve (PPC) as it moves from XX to YY? A B wheat wheat output X output X Y Y Y X X Y O barley output O barley output C D Y Y wheat wheat output X output X Y X X Y O barley output O barley output

Question

What would make online payment methods less acceptable as a medium of exchange? A a fee charged for use of the online payment service B both high and low priced goods can be paid for using the online service C payments can be made at any time of day and night D the online payment service can be accessed through a smartphone

Question

Professional gardeners now use power tools instead of hand tools to maintain their customers’ gardens. What can be concluded from this information? A Capital has replaced all labour for maintaining gardens. B Gardening has become more labour-intensive. C Land has become more productive. D New technology has been introduced.

Question

Goods X and Y are complements and have upward-sloping supply curves. What will be the effect on the equilibrium price and quantity of good X of an increase in the supply of good Y? price of X quantity of X A decrease decrease B increase decrease C decrease increase D increase increase

Question

A change in which factor will be least likely to alter a consumer’s ability to pay for a product? A a consumer’s income B a consumer’s tastes C a change in the price of the product D a fall in the tax on goods and services

Question

What is likely to decrease the price elasticity of supply (PES) of a product? A an increase in advertising the product B an increase in the firm's ability to substitute capital for labour C an increase in the time during which the product can be stored D an increase in the time required to produce the product

Question

SX, SY and SZ are the supply curves of goods X, Y and Z. SX SY SZ 10 price ($) 5 0 2.5 5 10 20 quantity supplied If the price of all three goods rises from $5 to $10, what are their price elasticity of supply values? good X good Y good Z A equal to 1 equal to 1 equal to 1 B equal to 1 greater than 1 greater than 1 C less than 1 equal to 1 greater than 1 D less than 1 greater than 1 greater than 1

Question

Each day there are hundreds of airline flights. Which combination would make the demand for flights most price-inelastic? distance of purpose of income of flight flight traveller A long business high B long leisure low C short business low D short leisure high

Question

The diagram shows the demand for and supply of tickets for a music festival. X S price of tickets P1 X1 P2 X2 D O Q1 Q2 quantity (thousands) If tickets are priced at P1, it is anticipated that demand will be Q1. There is a discount for those that buy tickets in the first hour, who will pay P2. All tickets are sold in the first hour. Which area on the diagram shows how much consumer surplus was increased by buying the tickets in the first hour? A P2X2Q2O B P1X1Q1O C P1X1X2P2 D XX1Q1O

Question

The price elasticity of demand for a high-quality smartphone is elastic. The price of the smartphone decreases. Which combination describes the impact of a fall in the smartphone’s price on the quantity demanded and total revenue? quantity demanded total revenue A rises by a greater percentage than the price fall falls B rises by a greater percentage than the price fall rises C rises by a smaller percentage than the price fall falls D rises by a smaller percentage than the price fall rises

Question

When the price of good X rises, total spending on good X rises, but the demand for good Y falls. What can be concluded about good X and good Y? cross-elasticity of price elasticity of demand for good Y demand for good X with respect to the price of good X A >1 >0 B >1 <0 C <1 >0 D <1 <0

Question

In the diagram, D1 and S1 represent the demand for and supply of luxury watches. Equilibrium is initially at point X. The cost of raw materials for manufacturing watches rises. At the same time, the incomes of the rich increase. Which point on the diagram is most likely to represent the new equilibrium? S2 B price S1 A S3 X C D D3 D1 D2 O quantity

Question

Money is paid by the government to an unemployed worker in the form of a benefit. Why is this called a transfer payment? A The payment comes from taxes paid by employed workers. B The payment comes from government savings, not current income. C The payment is made without the production of goods and services taking place. D The payment must be spent as directed by the government.

Question

What would be a valid objection to the government provision of goods and services? A There will be an increase in consumer sovereignty. B Only the private sector can provide merit goods. C Tax rates and tax income are likely to fall. D Investment in the private sector might be reduced.

Question

What will be the result of a subsidy that is given to the producers of a good with an inelastic demand curve? A The equilibrium price of the good will fall by a larger percentage than the fall in equilibrium quantity. B The equilibrium price of the good will fall by a larger percentage than the rise in equilibrium quantity. C The equilibrium price of the good will fall by a smaller percentage than the fall in equilibrium quantity. D The equilibrium price of the good will fall by a smaller percentage than the rise in equilibrium quantity.

Question

The market for good X is in equilibrium. A government then introduces an effective minimum price on good X. What will decrease as a result of this minimum price? A the excess supply of the product B the market price of the product C the quantity of the product supplied D the size of the consumer surplus

Question

A government introduces taxes on company profits. A 5% tax rate is levied on all profits up to the first $10 000 and a 10% rate is levied on all profits above $10 000. How would these taxes be described? up to $10 000 above $10 000 A progressive progressive B progressive proportional C proportional progressive D proportional proportional

Question

Which change will not affect the balance of payments current account? A a rise in export and import prices B a rise in foreign aid flows C a rise in international exchange rates D a rise in foreign direct investment

Question

Which statement correctly describes how an import quota works? A It is a ban on the import of demerit goods. B It imposes strict product regulations on imports. C It is a unit tax that raises the price of imported goods. D It limits the quantity of certain imported goods.

Question

Country X conducts 60% of its trade with country Y and 40% of its trade with country Z. The initial value of the trade-weighted exchange rate index of country X is 100. What will be its new trade-weighted exchange rate index value if its currency falls in value by 20% against the currency of country Y and rises by 10% against the currency of country Z? A 84 B 90 C 92 D 116

Question

The diagram shows a freely floating foreign exchange market in the United Kingdom (UK) for the demand and supply of pounds sterling (£) in exchange for United States (US) dollars ($). S£ 1 $ per £ S£ 2 D£ O quantity of £ What could cause the downward shift shown? A UK interest rate falls below US interest rate. B The demand for UK exports is price-elastic and prices increase. C The demand for US exports is price-elastic and prices decrease. D People believe that sterling will appreciate.

Question

What is a likely consequence of inflation? A Fixed-income earners gain more than those whose income is gained from the ownership of property. B Real wages rise more than money wages. C The assets of creditors decrease in value at the expense of those of debtors. D The domestic purchasing power of money increases.

Question

The diagram shows an aggregate demand (AD) and an aggregate supply (AS) curve. AS price level AD O national output There is a sustained rise in the prices of imported raw materials on which the economy depends. Assuming AD remains independent of AS, what are the most likely effects on the economy? AS price level A decreases falls B increases falls C decreases rises D increases rises

Question

The currency of country X has a floating exchange rate against other currencies. Under which circumstances will the value of country X’s currency fluctuate the most against other currencies on the foreign exchange market? price elasticity of price elasticity of demand for the supply for the currency of country X currency of country X A elastic elastic B inelastic elastic C elastic inelastic D inelastic inelastic

Question

A country has a floating exchange rate. An increase in which variable in the country will cause its currency to appreciate? A the budget deficit B the general price level C the interest rate D the trade deficit

Question

What is an accurate statement about possible causes and/or consequences of a worsening in a country’s terms of trade? A It will result from a fall in the demand for its exports. B It will result from an increase in consumers’ incomes in its major trading partners. C It will result in a decrease in interest rates by its major trading partners. D It will result in an improvement in its balance of trade.

Question

An economy has a balance of payments surplus, which it wishes to eliminate. In order to achieve this objective, which combination of policies would be most appropriate? A a depreciation of the currency and an increase in government spending B an appreciation of the currency and a cut in interest rates C an increase in the money supply and a pay freeze D increases in both direct and indirect taxation

Question

What would be increased by an expansionary fiscal policy? A budget deficit B exchange rate C money supply D rate of direct taxation

Question

A government decides to borrow from the general public in order to finance its extra spending on apprenticeship training schemes. Which types of macroeconomic policy are being used? fiscal monetary supply side A B C D