Economics 9708/12 October/November 2023: question paper and mark scheme

Question

PPC is the production possibility curve in country T. PPC 1 good Y 2 3 4 O good X Which changes take place in country T’s opportunity costs of producing X as it increases production of X? A Opportunity costs are constant between points 1 and 2, and between points 3 and 4. B Opportunity costs decrease between points 1 and 2, and increase between points 3 and 4. C Opportunity costs decrease between points 1 and 2, and between points 3 and 4. D Opportunity costs increase between points 1 and 2, and between points 3 and 4.

Question

What is considered the essential requirement for all entrepreneurs? A attracting customers B buying stock C managing staff D taking risks

Question

A new section of a road is provided toll-free by the government. What best describes this good? A a demerit good B a free good C a private good D a public good

Question

Eastern European nations have changed from planned to market economies. Which policy was least likely to have been adopted? A allowing prices to fluctuate B keeping established economic organisations C privatising essential industries D permitting changes in the money supply

Question

Rice and pasta are both basic foods in a country. How would a health scare concerning rice affect the market for pasta? A There will be a shift of demand and a contraction of supply. B There will be a shift of demand and an extension of supply. C There will be a shift of supply and a contraction of demand. D There will be a shift of supply and an extension of demand.

Question

Some goods are over-consumed in a market economy. What is likely to be the cause of this? A Consumer surplus exceeds producer surplus. B Consumers undervalue the benefits of consuming the goods. C There is excess supply in the market for the goods. D There is imperfect information in the market.

Question

A family is willing to pay a maximum of $600, $500 and $400 for air tickets for the mother, father and daughter to attend a wedding in another city. The airline announces a promotional air fare of $450 per ticket, provided at least three tickets are purchased. What will be the consumer surplus gained by the family if they use the promotional offer? A $100 B $150 C $200 D $250

Question

After a 10% decrease in a consumer’s income, the consumer’s demand for a good rises from 100 to 105. What is the value of the consumer’s income elasticity of demand for this good? A –2.0 B –0.5 C +0.5 D +2.0

Question

In 2010, poor harvests reduced fruit crops and furniture producers gave big discounts on furniture products. How might these changes have affected the position of the supply curve for the products? fruit furniture producers A no change shift to the left B shift to the left no change C shift to the left shift to the left D shift to the right no change

Question

In the diagram, D and S represent the demand for and supply of smartphones. Many components used in the production of smartphones are imported. The initial equilibrium is at point X. The exchange rate has depreciated at the same time as the price of a complementary good decreased. Which point in the diagram could represent the new equilibrium? S1 S price S2 B A X D C D1 D D2 O quantity

Question

The diagrams show the demand for and the supply of houses. In the short run, the stock of houses for sale, S1, is fixed. A government decides to allow some agricultural land to be used for building houses and subsidises lower-income buyers of the new houses. Which diagram shows the long-run situation? A B S1 S1 price of price of houses houses $ $ D2 D1 D1 O quantity O quantity C D S1 S1 price of price of houses houses $ $ D2 D1 D1 O O quantity quantity

Question

The equation for the quantity demanded, QD, for a product is QD = 400 – 20P where P = price in $. The quantity supplied, QS, is given by QS = 100 + 40P. Which change will occur if the price rises from $5 to $6? A The market will move from equilibrium to shortage. B The market will move from equilibrium to surplus. C The market will move from shortage to surplus. D The market will move from surplus to shortage.

Question

What is the most likely cause of the continuous increase in prices of famous paintings by now dead artists? A the increasing technological ability to copy famous paintings perfectly B the popular view that famous paintings are an appreciating asset C the totally inelastic supply of famous paintings by dead artists D the wish of governments to treat art galleries as merit goods

Question

What is most likely to be regressive? A corporate profit taxes B state pension benefits C specific tax on cigarettes D unemployment benefits

Question

What is necessary for an action to be classed as a transfer payment? A It must include a cash payment. B It must involve a banking transaction. C It must originate from government activity. D It must relate to a non-productive activity.

Question

The government imposes a specific indirect tax of $1 on each unit of a good sold. How does the imposition of the tax shift the demand or supply curve of the good? A The demand curve of the good will shift vertically downwards by $1. B The demand curve of the good will shift vertically upwards by $1. C The supply curve of the good will shift vertically downwards by $1. D The supply curve of the good will shift vertically upwards by $1.

Question

Which term relates to a fall in the domestic real value of a currency? A deflation B depreciation C appreciation D inflation

Question

What must be the result for a country of a rise in its export prices relative to its import prices? A a deficit in its trade in goods B an improvement in its terms of trade C an increase in its inflation rate D a rise in its exchange rate

Question

Country X can produce a product at a lower opportunity cost than country Y. Which term best describes this statement? A absolute advantage B comparative advantage C specialisation D terms of trade

Question

For a given year, economy X publishes the following. $bn Gross Domestic Product (GDP) 100 factor income earned by residents of 10 economy X working in foreign countries factor income earned in 25 economy X by non-residents What is the size of the Gross National Income (GNI) for country X? A $75bn B $85bn C $110bn D $115bn

Question

Which combination is possible for an economy experiencing zero inflation? average average nominal wages real wages A falling falling B falling rising C rising falling D unchanging rising

Question

The graph shows the rate of inflation in Japan from April 2020 to February 2021. 0.4 0.3 0.2 inflation 0.2 0.1 0.1 0.1 rate 0 0 –0.2 –0.4 –0.4 –0.4 –0.6 –0.6 –0.8 –1 –0.9 –1.2 –1.2 Apr May June July Aug Sept Oct Nov Dec Jan Feb 2020 2021 Over which period did disinflation occur in Japan? A July 2020 to February 2021 B July 2020 to September 2020 C October 2020 to December 2020 D October 2020 to February 2021

Question

The diagram shows three production possibility curves (PPC) for a country, labelled 3, 2 and 1. The original PPC for the country is 2. This country experiences a fall in its working population and then this is followed by a long period of recession. consumer goods s t u r 3 2 1 O capital goods If an increase in GDP then takes place, what is the increase in production? A r to s B r to u C s to t D t to u

Question

A government increases the rate of income tax. What is the effect, in the short run, on the aggregate demand curve or the aggregate supply curve? A The aggregate demand curve shifts left. B The aggregate demand curve shifts right. C The aggregate supply curve shifts left. D The aggregate supply curve shifts right.

Question

A country’s current account deficit is larger this year than last. What is the most likely reason for this increase? A Demand for domestically produced goods has risen. B Domestic inflation has risen faster than the inflation of its major trading partners. C Domestic unemployment has risen. D The exchange rate has depreciated.

Question

Which supply-side measure is most likely to produce short-run growth in a country’s aggregate supply? A easing of controls on immigration of workers B expenditure on primary education C expenditure on research and development D privatisation of public utilities

Question

Which tax may a government use to reduce inequality? A progressive income tax B proportionate income tax C proportionate indirect tax D specific indirect tax

Question

A foreign government pays a UK university to educate its students. How would this be recorded on the balance of payments current account of the UK? current account money flows component A secondary income inflow B secondary income outflow C trade in services inflow D trade in services outflow

Question

A government wants to reduce inflation. It has decided to cut government spending by $1bn. The diagram shows different starting positions for the country’s aggregate demand (AD) curve. AS price level AD4 AD3 AD2 AD1 O real GDP Which starting position for the aggregate demand curve would make this policy least effective? A AD1 B AD2 C AD3 D AD4

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