Economics 9708/13 October/November 2019: question paper and mark scheme

Question

Which is a positive statement? A A fall in the value of the Chinese yuan against the US dollar will make Chinese goods more price competitive in the USA. B Direct taxes are the best fiscal instrument to redistribute income in a developed economy. C The most important macroeconomic objective of the government is to reduce unemployment. D The UK government should not renationalise the railway infrastructure.

Question

Which is closest to being a public good? A electricity B health services C street lighting D water supply

Question

An individual has an appointment with his dentist. He has a choice between travelling to the appointment by car, or leaving the car at home and travelling by bus and then by train. The costs of the journey are given below. $ bus fare 2 train fare 3 car parking charge 4 petrol 2 car wear and tear costs 1 Given this information, what is the opportunity cost to the individual of travelling by car rather than by bus and train? A $2 B $4 C $7 D $12

Question

In the diagram the original production possibility curve is LM. L consumer N goods O P M capital goods What could cause the curve to shift to NP? A a fall in the working population B a reallocation of resources from consumer goods to capital goods C an increase in output per worker D an increase in unemployment

Question

The diagram shows the supply curve for bananas. price S ($ per kg) 6 5 0 100 150 quantity (kg) What is the price elasticity of supply when there is a rise in price from $5 to $6? A –2.5 B +0.4 C +2 D +2.5

Question

What causes an inelastic market supply curve for an agricultural crop such as wheat? A a government decision to import crops at times of shortage B an efficient use of fertilisers causing crop production to rise C the storage of excess production for future sale D the very long time required to produce additional output

Question

Travellers can cross the English Channel either by the Channel Tunnel or by a sea journey. The table gives details of the passengers, in thousands, using these services between 2005 and 2015. Between 2005 and 2015 the price of the Channel Tunnel fell and the price of sea journeys rose. Channel Tunnel sea journey year passengers passengers 2005 17 005 23 693 2010 18 303 21 883 2015 20 864 21 000 What does the data suggest? A The cross elasticity of demand between the two services is positive. B The market for crossing the English Channel grew continuously over the period. C The rate of decline in sea journeys accelerated over the period. D The two services for crossing the English Channel are complementary.

Question

The diagrams represent the demand curves for three goods X, Y and Z. They are drawn to the same scale and can be used to represent the price elasticity of each good. The three goods are lamb only, all meat and all food. price price price O quantity O quantity O quantity good X good Y good Z Which combination of goods is likely to represent lamb only, all meat and all food? good X good Y good Z A food meat lamb B lamb meat food C lamb food meat D meat lamb food

Question

The diagram shows the European market for diesel fuel and the original equilibrium is at M. S1 price M G H N J D1 D2 O RT quantity Europeans want low-emission cars and therefore the demand for diesel fuel has decreased from D1 to D2. Which area represents the new producer surplus for companies supplying diesel fuel? A GMNH B JGM C JHN D JNR

Question

A US study, published in July 2014, warned teenagers to reduce the amount of fizzy drink they consume. One can of fizzy drink contains an adult’s entire daily sugar allowance. If the advice were accepted, how might the effect be illustrated on demand and supply diagrams for fizzy drinks and for sugar? diagram for fizzy drinks diagram for sugar A demand curve moves to the left movement up the supply curve B demand curve moves to the left movement down the supply curve C movement up the demand curve supply curve moves to the right D movement up the demand curve supply curve moves to the left

Question

A government decides to put a tax on a good. Which price elasticity conditions would result in most of the tax being paid by the consumer? demand supply elasticity elasticity A elastic elastic B elastic inelastic C inelastic elastic D inelastic inelastic

Question

The diagram shows the income tax system adopted by a country. tax paid ($) O Y1 Y2 personal income ($) What are the average and marginal rates of tax as incomes rise from Y1 towards Y2? average rate marginal rate of tax of tax A constant constant B constant decreasing C decreasing constant D decreasing decreasing

Question

What is most likely to decrease if the government pays a subsidy to the producers of a product? A government spending B output of the product C price of the product D rates of taxation

Question

The government introduces a new transfer payment, to help people on low incomes afford housing. What will be the effects of this in the housing market? effect on the demand curve effect on the supply curve A a movement along demand a movement along supply B a movement along demand a shift in supply C a shift in demand a shift in supply D a shift in demand a movement along supply

Question

A specific tax is placed upon each bottle of perfume sold. In the diagram, SS is the supply curve before tax, StSt is the supply curve after tax. D St price S W R U Q X P St T D S O Y Z quantity Which area represents that part of the tax revenue paid by producers? A ORWY B PQUT C PRWT D QRWU

Question

In each diagram the initial supply is S1 and the new supply after subsidy is S2. The subsidy is identical in each case. Which diagram shows the greatest incidence of the subsidy on the consumers? A B S1 S1 price S2 price S2 P3 P3 P1 P1 P2 P2 D D O Q1 Q2 quantity O Q1 Q2 quantity C D price price P3 S1 P3 S1 P1 P1 S2 P2 S2 P2 D D O Q1 Q2 quantity O Q1 Q2 quantity

Question

Which statement is not correct? A A progressive tax usually improves the distribution of income. B A regressive tax benefits the rich more than the poor. C An ad valorem tax causes a parallel shift left of the supply curve. D Some consumers can avoid paying indirect tax.

Question

The diagram shows the market supply and demand curves for wheat. D S price P2 P1 O K L R output What should a government do to maintain a minimum price of OP2? A buy quantity KL B buy quantity KR C sell quantity LR D sell quantity KR

Question

Singapore imports almost all of its raw materials and its exports are a high percentage of its GDP. The price elasticity of demand for exports and the price elasticity of demand for imports are each less than 1. What would be the likely impact of a depreciation of the Singapore dollar? A The domestic inflation rate would fall. B The government’s budget deficit would move to surplus. C The price of imports would fall. D The value of exports would fall.

Question

The diagram shows the original aggregate demand curve, AD1, and the original aggregate supply curve, AS1. The original equilibrium is at X. What would be the new equilibrium if there is an increase in private sector investment and an increase in government spending on training courses? price AS2 level AS1 A AS3 D X B C AD2 AD3 AD1 O real GDP

Question

The graph shows the rate of inflation for seven countries for 2015 and 2016. 7 6 5 4 3 key 2015 2 2016 1 0 Costa Ecuador India Japan Malaysia Mauritius Thailand Rica –1 –2 What can be concluded from this graph? A Prices in Costa Rica rose in 2015 but remained constant in 2016. B Prices in Ecuador and Mauritius were lower in 2016 than in 2015. C Prices in India and Malaysia remained constant in 2016 and 2015. D Prices in Thailand and Japan were lower in 2016 than in 2015.

Question

The diagram shows the effect of a tariff on a product. price domestic supply P2 world supply plus tariff P1 world supply domestic demand O quantity From this diagram, what determines the gain the tariff generates for domestic producers? A the price elasticities of domestic supply and demand B the tariff rate and the price elasticities of both domestic demand and supply C the tariff rate and the price elasticity of domestic demand D the tariff rate and the price elasticity of domestic supply

Question

The European Union consists of a group of countries with free trade between its members and a common external tariff on trade with non-members. What would weaken the operation of this customs union? A devaluation of any member’s currency B differences in wage costs between members C entry tests for seasonal migrant workers D one member country agreeing a trade deal with a non-member country

Question

Which change is most likely to result in a worsening of a country’s balance of payments? A a reduction in remittances from citizens who work abroad B a rise in domestic rates of direct taxation C an expansion in the economy of a major trading partner D an increase in domestic interest rates

Question

What must be true if an economy is experiencing inflation? A Aggregate demand is increasing. B Aggregate supply is decreasing. C The interest rate is increasing. D The real value of money is decreasing.

Question

What is the most likely consequence of an appreciation in the value of the Malaysian ringgit? A a decline in the level of unemployment in Malaysia B a fall in the rate of growth of the general price level in Malaysia C a reduction in the volume of imports into Malaysia D an improvement in the Malaysian balance of trade in services

Question

Under which conditions will an appreciation of a floating exchange rate cause the current account of the balance of payments to worsen the most? price elasticity of price elasticity of demand for imports demand for exports A 0.4 0.4 B 0.4 0.6 C 0.6 0.4 D 0.6 0.6

Question

An economy experiences cost-push inflation. Which combination of policies would be best for the economy to use to reduce cost-push inflation? exchange rate supply-side policy A appreciate lower minimum wage B appreciate raise minimum wage C depreciate lower minimum wage D depreciate raise minimum wage

Question

A government reduces the rate of tax firms are charged on their land and buildings. How is this likely to affect the economy’s price level and real output? price level real output A fall fall B fall rise C rise fall D rise rise

Question

A government adopts a more expansionary fiscal policy and a more deflationary monetary policy. Which combination of changes in policy instruments is consistent with this? government taxation interest rate expenditure A decrease decrease decrease B decrease increase decrease C increase decrease increase D increase increase increase