Economics 9708/13 October/November 2024: question paper and mark scheme

Question

The diagram shows a country’s production possibility curve. 100 food (units) 0 0 50 drink (units) What can be concluded from the diagram? A Food and drink are normal goods. B The country is self-sufficient in the production of food and drink. C The opportunity cost of food falls as more drink is produced. D There is a constant opportunity cost between food and drink.

Question

Which type of good does not consume scarce resources? A economic good B free good C merit good D public good

Question

The factors of production earn different rewards. What identifies the correct economic term for these rewards? A capital – surpluses B enterprise – dividends C labour – interest D land – rents

Question

What is most likely to be an advantage of the division of labour? A an increase in labour force creativity B an increase in labour productivity C an increase in workforce flexibility D an increase in worker satisfaction

Question

A government wishes to encourage the consumption of a merit good and reduce the consumption of a demerit good. Which policy should it adopt towards each good? merit good demerit good A impose a minimum price produce only in the public sector B increase advertising on the benefits put legal controls on output of the good C confine access to certain age groups tax output D subsidise the good set a minimum level of output

Question

Shoe manufacturers often use leather to make their most expensive shoes. Due to a world shortage of leather, the price of leather has risen. What will be the effect of this price change? A The demand curve for leather shoes will shift to the left. B The demand curve for a substitute for leather shoes will shift to the right. C The supply curve for leather shoes will shift to the right. D The supply curve for a substitute for leather to make expensive shoes will shift to the right.

Question

The Chinese government relaxed controls on private house ownership. Private house ownership rose sharply, replacing demand for apartments rented from the state. What would have been most likely to happen to private house prices and the rents of apartments? private house apartment prices rents A decrease decrease B decrease increase C increase decrease D increase increase

Question

The supply, S, of a product is determined by the equation S = 10 + 10P, when P is the price of the product. What is the price elasticity of supply when the price changes from $1 to $2? A 0 B 0.5 C 1.0 D 2.0

Question

A good has the following elasticity values. cross elasticity of demand +1.4 income elasticity of demand –0.8 Which statement is correct? A The good is a complement and inferior. B The good is a complement and normal. C The good is a substitute and inferior. D The good is a substitute and normal.

Question

Different areas on the diagram represent different aspects of a market. S price R T S U D E F O G H I quantity Which row correctly identifies the three variables shown? consumer producer total consumer surplus surplus expenditure A RST TUOG STEU B RST UST STGO C RTU UTE STGO D RTEU TEF RFU

Question

Which combination of the classification of a good and market change will cause the demand curve for the good to shift to the right? classification of good market change A inferior good income decrease B inferior good price decrease C normal good income decrease D normal good price decrease

Question

Which policy is most likely to solve the free rider problem caused by public goods? A an advertising campaign B a direct provision by the government C a minimum price D a tax on a substitute good

Question

Very low interest rates in an economy encourage economic growth and cause a large increase in house prices. Which group of people is most likely to experience a fall in income and an increase in wealth as a result of these changes? A retired people living in rented houses B retired people who own their houses C young people buying their own houses D young people living with their parents

Question

A large-scale farming enterprise uses inputs of labour and capital equipment that are substitutes. If the government introduces a policy to subsidise capital equipment, how would this affect the factor inputs? quantity of quantity of capital labour equipment A decreases increases B decreases decreases C increases decreases D increases increases

Question

A country experienced an annual deflation rate of 2% for four successive years. Which statement is correct for the four-year period? A The price level fell by 8%. B The price level fell by less than 8%. C The real value of money fell by 8%. D The real value of money fell by less than 8%.

Question

In the circular flow of income model of an economy, Y, C, I, G, X, S, T and M represent total income, consumption, investment, government expenditure, exports, saving, taxation and imports respectively. Which statement is correct? A At equilibrium, the levels of Y and C are always the same. B Governments always adjust G so that the economy is in equilibrium. C If I is not equal to S, it is still possible for the national income to be in equilibrium. D If the national income is in equilibrium, X must be equal to M.

Question

What leads to a rise in frictional unemployment? A an economy moving into a period of recession B replacement of workers with computers in the service sector C a change from an agriculturally based economy to an industrial economy D a rise in the number of workers leaving one job to look for another job

Question

The information shows data from a country’s national income accounts. $ million gross domestic product at market prices 200 000 gross value added at basic prices 180 000 subsidies 5 000 capital consumption 30 000 What can be concluded from the income accounts? net domestic product indirect tax revenue at market prices $ million $ million A 170 000 15 000 B 170 000 25 000 C 150 000 15 000 D 150 000 25 000

Question

A government is considering building a large hospital. The impact on the country’s price level will depend partly on the amount of expensive raw materials the country imports for the hospital and the level of unemployment in the country. Which combination of imports of materials for the hospital and the level of unemployment is most likely to lead to the largest rise in the price level? imports of unemployment materials A high high B high low C low high D low low

Question

If interest rates are reduced, what is most likely to decrease? A borrowing by firms B consumer spending C import prices D export prices

Question

Supply-side policy often has fiscal consequences. Which statement is not correct? A Increased government spending supporting technical progress has beneficial long-term supply-side effects but may have short-term inflationary consequences. B Increased government expenditure on training increases a country’s long-run aggregate supply (LRAS) and also has an expansionary effect on aggregate demand (AD). C Reduced government infrastructure spending reduces an economy’s LRAS and has a short-term expansionary effect on AD. D Reduced rates of tax on higher incomes increases an economy’s LRAS and has an expansionary effect on AD.

Question

Changes in fiscal policy can affect the distribution of income and wealth. Which combination of fiscal policy would most likely be regressive? A a fall in the lowest level of income when income tax has to be paid and a fall in the rate of inheritance tax B a fall in the charge made for visits to a doctor and a rise in the level of unemployment benefit C a rise in the rate of income tax charged at higher levels of income and a rise in the standard rate of corporation tax D a rise in the standard rate of income tax and a fall in the standard rate of goods and services tax

Question

What does it mean when a government has a budget surplus? A Government revenue exceeds expenditure. B Imports exceed exports. C The government has an expansionary fiscal policy. D The national debt is increasing.

Question

A country subsidises domestic production of manufactured goods. What is the most likely outcome? A a rise in economic growth B a rise in imports of manufactured goods C a rise in the rate of inflation D a rise in unemployment

Question

What is not a valid explanation of why a government might allow a deficit on the balance of payments current account to continue? A The balance of payments account must always balance. B Foreign direct investment might help to finance the deficit. C The country may have a larger surplus on the other parts of its balance of payments account. D The standard of living is increased if the level of cheap food imports is significant.

Question

A country currently producing at point X on its production possibility curve decides to specialise in the manufacture of cars and import trucks. It finds it can import one truck in exchange for four cars. 2000 trucks X 1000 0 0 5000 10 000 cars What is the result in the domestic market if it exports all the extra cars? A 250 extra trucks B 1000 extra trucks C 1250 extra trucks D 2000 extra trucks

Question

What is most likely to cause a current account deficit? A a recession in the domestic economy B a relatively high rate of inflation C an undervalued exchange rate D high labour productivity

Question

Two statements describing forms of protectionism a government can use are listed. 1 There is a total ban on imports. 2 All imported goods have to be of a specified standard. Which combination correctly describes these two statements? statement 1 statement 2 A administrative barrier import quota B administrative barrier embargo C embargo administrative barrier D embargo import quota

Question

When is there an improvement in a country’s terms of trade? A when the price of exports falls more than the price of imports B when there is no change in the price of exports but a fall in the price of imports C when the value of exports increases relative to the total value of imports D when the volume of exports increases relative to the total volume of imports

Question

What is likely to happen if there is a rise in the international value of a country’s currency? A a fall in the foreign currency price of its exports B a fall in the volume of its exports C a rise in the domestic currency price of its imports D a rise in the domestic price level