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Question: An economy is experiencing rising prices. Which government policy will help reduce consumer expenditure? A introducing compulsory saving for income earners B investing more in building infrastructure C issuing more banknotes and coins D reducing indirect taxes Answer: A

Question: Some goods take a greater percentage of a typical household’s total spending than others. How is this accounted for in the construction of a consumer prices index? A by deducting the goods B by giving a weight to the goods C by taking an average of price fluctuations during a year D by using the price elasticity of demand for the goods Answer: B

Question: A low-income country experiences extreme poverty in its rural areas. What is a possible cause of this? A development of better irrigation techniques B distribution of international food aid C high trade barriers imposed by high-income countries D higher prices for agricultural produce Answer: C

Question: Which factor in the world’s low-income countries limits their economic development? A balance of payments surpluses B high saving ratios C large inflows of foreign investment D rapid population growth Answer: D

Question: A government is faced with an unwanted deficit on the current account of its balance of payments. Which action is most likely to reduce the deficit? A raising government spending on welfare benefits B reducing income tax C restricting imports by raising tariffs D revaluing its currency Answer: C

Question: What is meant by a depreciation in the foreign exchange rate? A The government intervenes to reduce the exchange rate of the country’s currency. B The rate of exchange of exports for imports for a country deteriorates. C The rate of inflation in a country continues to rise. D The value of a country’s currency falls on the international exchange market. Answer: D

Question: What causes economic agents to make choices? A limited needs and wants B the existence of finite resources C the existence of free goods D the market mechanism Answer: B

Question: Which combination of a factor of production and its factor income is not correct? factor of production factor income A capital interest B enterprise profit C labour dividends D land rent Answer: C

Question: What is an example of a macroeconomic aim? A to create and maintain full employment B to improve efficiency in the manufacturing sector of the economy C to provide consumers with greater information when buying goods and services D to encourage greater occupational mobility of labour Answer: A

Question: Why might a market economy fail to achieve the best use of scarce resources? A Consumers may lack information about which good to buy. B Demerit goods are underconsumed. C Public goods are overconsumed. D Most resources are owned by the government. Answer: A

Question: Which task is not a function of a trade union? A agreeing the minimum number to be employed on a particular job B deciding on the level of a national minimum wage C negotiating working hours and conditions of work D providing legal advice on unfair dismissal Answer: B

Question: What does not have an effect on wages in a free market economy? A danger levels in the workplace B government regulations C the number of people willing and able to work D the years of training required Answer: B

Question: Firm X supplies bricks and decides to merge with firm Y that also supplies bricks. Which form of merger has taken place? A backward vertical B conglomerate C forward vertical D horizontal Answer: D

Question: Who owns a public sector organisation? A individuals B shareholders C specialist managers D the government Answer: D

Question: What are two aims that a government normally pursues when managing the performance of the whole economy? A to encourage an increase in production and to prevent high inflation B to ensure no one is unemployed and to reduce exports C to give everyone equal incomes and to increase government revenue D to protect the environment and to reduce interest rates Answer: A

Question: What is most likely to be the responsibility of a central government? A the provision of immigration officials at an airport B the provision of security cameras in a shopping centre C the provision of security staff at a bank D the provision of ticket inspectors on a train Answer: A

Question: The government wants to reduce the consumption of cigarettes. Which policy would be most likely to do this? A increasing a subsidy on cigarettes B increasing income tax C increasing interest rates D increasing the indirect tax on cigarettes Answer: D

Question: Which group should not be included in the measurement of unemployment? A redundant unskilled workers seeking alternative work B seasonal agricultural workers in out-of-season periods C students over 18 years continuing with full-time education D those who have left school and cannot get a job Answer: C

Question: An economy is experiencing rising prices. Which government policy will help reduce consumer expenditure? A introducing compulsory saving for income earners B investing more in building infrastructure C issuing more banknotes and coins D reducing indirect taxes Answer: A

Question: Some goods take a greater percentage of a typical household’s total spending than others. How is this accounted for in the construction of a consumer prices index? A by deducting the goods B by giving a weight to the goods C by taking an average of price fluctuations during a year D by using the price elasticity of demand for the goods Answer: B

Question: In countries with absolute poverty, low incomes can start a process that keeps incomes low. What are the stages of this process? A low incomes  low consumption  low prices  low output  low incomes B low incomes  low government spending  high taxation  low employment  low incomes C low incomes  low investment  high profits  low dividends  low incomes D low incomes  low saving  low investment  low productivity  low incomes Answer: D

Question: Which factor in the world’s low-income countries limits their economic development? A balance of payments surpluses B high saving ratios C large inflows of foreign investment D rapid population growth Answer: D

Question: What causes the birth rate to fall in a country? A Fewer women work. B Infant mortality rates rise. C Medical supplies and healthcare improve. D The optimum population increases. Answer: C

Question: A country wishes to increase a current account surplus on the balance of payments. Which action would it take? A abolish an import quota B increase import tariffs C remove export subsidies D tax export producers Answer: B

Question: Why do consumers have to make choices when spending their income? A Advertising encourages consumer spending. B Consumers have unlimited incomes. C Consumer wants cannot all be satisfied with their income. D Not all products will be attractive to consumers. Answer: C

Question: What is the key role of an entrepreneur? A inventor B risk taker C shareholder D worker Answer: B

Question: Economics is divided into two: microeconomics and macroeconomics. statement 1 When the price of oil falls there is an expansion in demand. statement 2 The Organization of the Petroleum Exporting Countries (OPEC) can influence the price of oil. Which combination correctly describes these two statements? statement 1 statement 2 A macroeconomic statement macroeconomic statement B macroeconomic statement microeconomic statement C microeconomic statement macroeconomic statement D microeconomic statement microeconomic statement Answer: D

Question: What is a disadvantage of a market economic system? A Entrepreneurs lack incentives to produce what consumers want. B Government intervention will reduce the efficiency of firms. C Market dominance by firms can lead to higher prices. D There is underproduction of demerit goods. Answer: C

Question: In which occupation would wages tend to increase? A in those where a worker is paid weekly B in those where a worker needs less training C in those where there is an excess demand for labour D in those where work becomes less dangerous Answer: C

Question: Which row shows a characteristic of money and a function of money? characteristic function A acceptability medium of exchange B cash measure of value C divisibility portability D store of value bank deposit Answer: A

Question: Which combination is usually found in a monopoly? A many buyers and many sellers B many buyers and single seller C single buyer and many sellers D single buyer and single seller Answer: B

Question: What is usually considered to be an advantage to a firm of using division of labour? A high labour turnover B increased mechanisation C movement of labour between tasks D need for quality control Answer: B

Question: What are two aims that a government normally pursues when managing the performance of the whole economy? A to encourage an increase in production and to prevent high inflation B to ensure no one is unemployed and to reduce exports C to give everyone equal incomes and to increase government revenue D to protect the environment and to reduce interest rates Answer: A

Question: What is most likely to be the responsibility of a central government? A the provision of immigration officials at an airport B the provision of security cameras in a shopping centre C the provision of security staff at a bank D the provision of ticket inspectors on a train Answer: A

Question: A government decreased the tax on all goods produced in its country. What is the most likely consequence of this? A a decrease in exports B an increase in imports C an increase in production D a worsening of the balance of trade in goods Answer: C

Question: Which government policy measure would cause an increase in a country’s supply of labour? A increasing unemployment benefits B lowering interest rates C raising income tax D raising the age of retirement Answer: D

Question: Due to a rise in the number of retired people, there has been increased demand for some government expenditure. Which type of government expenditure is most likely to be directly affected? A defence B health services C re-training grants D street lighting Answer: B

Question: An economy is experiencing rising prices. Which government policy will help reduce consumer expenditure? A introducing compulsory saving for income earners B investing more in building infrastructure C issuing more banknotes and coins D reducing indirect taxes Answer: A

Question: Some goods take a greater percentage of a typical household’s total spending than others. How is this accounted for in the construction of a consumer prices index? A by deducting the goods B by giving a weight to the goods C by taking an average of price fluctuations during a year D by using the price elasticity of demand for the goods Answer: B

Question: One of the indicators of living standards is the Human Development Index (HDI). What is not taken into consideration when calculating the HDI? A education B income per head C level of savings D life expectancy Answer: C

Question: Which factor in the world’s low-income countries limits their economic development? A balance of payments surpluses B high saving ratios C large inflows of foreign investment D rapid population growth Answer: D

Question: What would not be included in the current account of the balance of payments? A dividends earned from a firm in another country B imports of TVs from another country C purchase of a house in another country D rents paid to owners of land in another country Answer: C

Question: What is most likely to discourage international specialisation and trade for an economy? A decreasing labour supply B decreasing transport costs C increasing oil prices D increasing trade barriers Answer: D

Question: Many low-income countries rely on multinational companies (MNCs) to provide economic development. What is a disadvantage of this for the low-income country? A Local firms close because MNCs are more efficient. B New production techniques are introduced. C The balance of payments may improve. D The MNCs have to pay taxes on their profits. Answer: A

Question: To help reduce the price of oil, new supplies are needed. However, objectors oppose exploration of new sites because of the environmental damage it may cause. Why is this statement an example of the basic economic problem? A Oil is a limited resource. B Oil is expensive. C The exploration involves demand and supply. D There are external costs involved in production. Answer: A

Question: 0 0 3 6 9 12 15 entertainment (hours) revision (hours) The student revises for 3 hours a day. As exams approach, the student decides to revise for 9 hours a day. What is the opportunity cost of this decision? A 3 hours of revision B 6 hours of entertainment C 6 hours of revision D 9 hours of entertainment 3 Helium is a gas that is limited in supply because it takes thousands of years to form. The US government holds 35% of the world’s supply of helium and has been selling its stocks. Helium is essential in medical scanners. It is also used for party balloons, which is a wasteful alternative use of a valuable good. Which two concepts apply to this statement? A demand and supply, government subsidy B excess demand, resource allocation C opportunity cost, private monopoly D public sector, factors of production Answer: D

Question: When is production certain to harm society? A when the private costs are greater than the private benefits B when the production results in externalities C when the social costs are greater than the private costs D when the social costs are greater than the social benefits Answer: D

Question: What is the role of the price mechanism in a market economy? A to allocate scarce resources B to increase the provision of merit goods C to make the distribution of goods and services more equal D to reduce the negative externalities of production and consumption Answer: A

Question: What is a macroeconomic concept? A the effect of a price change of a good B the equilibrium price in the market for a good C the reason for a change in a firm’s behaviour D the total spending in an economy Answer: D

Question: The price elasticity of demand (PED) for bottled water is – 0.9. What will happen to the quantity demanded for bottled water if its price increases by 10%? A decrease by 0.9% B decrease by 9% C increase by 0.9% D increase by 9% Answer: B

Question: What will increase the demand for labour in an industry? A a decrease in labour productivity in that industry B a decrease in the demand for the good made in that industry C an increase in labour productivity in that industry D an increase in wages in that industry Answer: C

Question: Which government policies will both reduce the difference in income between low-paid and high- paid workers? A a decrease in the maximum wage and a more regressive income tax system B a decrease in the maximum wage and a reduction in trade union power C an increase in the minimum wage and a more progressive income tax system D an increase in the minimum wage and a more regressive income tax system Answer: C

Question: Wages for nurses decrease, while working hours for pilots decrease. Assuming other factors do not change, what is the likely effect on the number of individuals choosing to become nurses or pilots? nurses pilots A decrease decrease B decrease increase C increase decrease D increase increase Answer: B

Question: For some months the price of petrol (gas) decreased significantly. How would this affect a delivery firm that delivers goods for other firms using petrol (gas) powered vehicles? A Average fixed costs would decrease. B Profits would decrease. C Total fixed costs would decrease. D Variable costs would decrease. Answer: D

Question: The size of the domestic car industry in Japan has enabled Japanese car producers to be more price competitive than rival car producers. What is an explanation for this? A Economies of scale are present in the Japanese car industry. B Managerial problems exist in the Japanese car industry. C Productivity is low in Japan. D The Japanese car industry is very labour-intensive. Answer: A

Question: What is a major advantage of a horizontal merger compared with a conglomerate merger? A It causes more motivation of the workforce. B It gains financial economies of scale with cheaper borrowing from banks. C It leads to a diversification making the firm less vulnerable. D It reduces competition and increases the merged firm’s market share. Answer: D

Question: Recession is when there are two consecutive quarters (six months) of A deflation. B falling GDP. C rising prices. D rising unemployment. Answer: B

Question: An economy is operating with all resources fully employed. Which would be an outcome of a significant increase in government expenditure? A deflation B demand-pull inflation C falling output D increased employment Answer: B

Question: What causes economic growth? A availability of more resources B higher imports of consumer goods C higher unemployment D lower investment Answer: A

Question: 0 inheritance tax 50 sales tax (VAT) 300 What is the total amount of revenue raised by indirect taxes? A $300 m B $350 m C $385 m D $435 m 20 Which statement about supply-side policy is correct? A It aims to increase the productive potential of the economy. B It aims to increase total demand in the economy. C It involves changes in the equilibrium foreign exchange rate. D It involves changes in the rate of interest. Answer: A

Question: Why is weighting used in the Consumer Prices Index (CPI)? A to ensure that all items in the index are treated equally B to ensure that all price changes are included in the index C to ensure that the index includes changes in the quantity consumed D to ensure that the index reflects the spending patterns of consumers Due to an issue with Question 22, the question has been removed from the question paper. 23 Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate of interest B decrease general taxation and increase the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest 24 What is a certain cause of absolute poverty? A growing old B insufficient income for basic needs C lack of good healthcare D many dependants in the family 25 The birth rate in a country is higher than the death rate. What might prevent the country’s population from rising? A Emigration is greater than immigration. B The birth rate is falling. C The country’s medical care improves. D The death rate is rising. 26 The table shows statistics for four countries, A–D. Which country has the lowest standard of living? average annual growth rate of population (%) population density (per square kilometre) life expectancy (years) real GDP per head ($) A 1.9 19 46 190 B 2.7 2 58 1700 C 3.7 45 59 210 D 4.2 89 44 190 27 Why can specialisation cause economic growth? A Specialisation can allow a country to produce many different goods and services. B Specialisation can lead to a reduction in average costs of production. C Specialisation can mean that firms in a country will face diseconomies of scale. D Specialisation can reduce a country’s need to depend on other economies. 28 The diagram shows China’s trade with Brazil for two years. 0 1 2 3 4 5 China’s exports China’s imports year 1 year 2 key $ billion What happened to China’s trade balance with Brazil between year 1 and year 2? A It experienced a falling surplus. B It experienced a rising deficit. C It moved from deficit to surplus. D It moved from surplus to deficit. 29 Why do some governments limit the operations of multinational companies (MNCs) within their domestic economy? A MNCs contribute to technological advances. B MNCs decrease a country’s unemployment rate. C MNCs gain profits which are transferred out of the country. D MNCs increase a country’s current account surplus. 30 What is an immediate effect for a country of a fall in its foreign exchange rate? A a fall in the money supply B an increase in purchasing power C cheaper imports D more competitive exports BLANK PAGE Answer: D

Question: To help reduce the price of oil, new supplies are needed. However, objectors oppose exploration of new sites because of the environmental damage it may cause. Why is this statement an example of the basic economic problem? A Oil is a limited resource. B Oil is expensive. C The exploration involves demand and supply. D There are external costs involved in production. Answer: A

Question: What is an opportunity cost for a consumer spending money on a holiday? A the potential interest earned if the holiday money had been saved B the price paid for an air ticket to the holiday destination C the rubbish created during the holiday which affects the local community D the satisfaction that the consumer gains from the holiday Answer: A

Question: Helium is a gas that is limited in supply because it takes thousands of years to form. The US government holds 35% of the world’s supply of helium and has been selling its stocks. Helium is essential in medical scanners. It is also used for party balloons, which is a wasteful alternative use of a valuable good. Which two concepts apply to this statement? A demand and supply, government subsidy B excess demand, resource allocation C opportunity cost, private monopoly D public sector, factors of production Answer: D

Question: Which combination of characteristics describes a public good? A excludable and non-rival in consumption B excludable and rival in consumption C non-excludable and non-rival in consumption D non-excludable and rival in consumption Answer: C

Question: What is an advantage of a market economy? A Equilibrium market price clears the market. B Producers and consumers have the same aims. C The government has no need to intervene in markets. D The lowest price possible is always charged. Answer: A

Question: What is a macroeconomic aim of a government? A balance of payments stability B deflation C income inequality D unemployment Answer: A

Question: For which fall in price is the demand price-inelastic? A from $6 to $5 B from $5 to $4 C from $4 to $3 D from $3 to $2 9 Which government policy will increase productivity? A decreasing the number of training programmes B encouraging labour-intensive production C promoting good industrial relations D reducing private sector investment Answer: C

Question: Which result of increased specialisation in a firm is an advantage for the firm, but a disadvantage for some of the workers in the firm? A greater mechanisation B higher labour productivity C higher skill levels D longer training times Answer: A

Question: Two car manufacturers agree to merge. Which outcome would be a disadvantage for customers? A increased capital for research and development B lower average costs through economies of scale C reduced range of vehicles produced D use of a wider range of marketing information Answer: C

Question: An economy recorded a second month of deflation. What does this mean? A It was facing a recession. B Price levels were falling. C Total demand was rising. D Unemployment was falling. Answer: B

Question: What is a cause of demand-pull inflation? A a surplus of skilled labour B higher government expenditure C higher tax rates D lower net exports Answer: B

Question: What is the consequence of economic growth for individuals and for the economy? individuals the economy A increase in absolute poverty increase in inflation B increase in average incomes increase in government tax revenue C increase in the variety of goods and services reduction in exports D increase in unemployment reduction in the standard of living Answer: B

Question: 0 inheritance tax 50 sales tax (VAT) 300 What is the total amount of revenue raised by indirect taxes? A $300 m B $350 m C $385 m D $435 m 20 Which supply-side policy measure would help to match the skills of workers to job vacancies? A encouraging the modernisation of factories B offering retraining to unemployed workers C reducing taxes to provide incentives to work D replacing government enterprises with private enterprises Answer: D

Question: How is the rate of inflation measured? A by calculating the change in the price of goods and services from one year to the next B by calculating the real value of all output of goods and services in an economy C by calculating the total number of people willing and able to work but cannot find work D by calculating the total value of exports minus the total value of imports Due to an issue with Question 22, the question has been removed from the question paper. 23 Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate of interest B decrease general taxation and increase the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest 24 Poverty in households may be defined in relative terms. What indicates relative poverty? A falling below society’s expected standard of living B income level required to meet basic needs C lack of access to clean water D living on less than $2 a day 25 What is the effect on an economy of net emigration of people aged 20–40? A a more mobile labour force B an ageing population C higher government tax revenue D rising house prices 26 The table shows statistics for four countries, A–D. Which country has the lowest standard of living? average annual growth rate of population (%) population density (per square kilometre) life expectancy (years) real GDP per head ($) A 1.9 19 46 190 B 2.7 2 58 1700 C 3.7 45 59 210 D 4.2 89 44 190 27 A country specialises in the production of steel, toys and textiles. What is a disadvantage of specialisation for the country’s workers? A They cannot afford to buy products from other countries. B They could become structurally unemployed if global demand changes. C They have to learn a variety of skills. D They have too much choice which wastes their time. 28 The diagram shows China’s trade with Brazil for two years. 0 1 2 3 4 5 China’s exports China’s imports year 1 year 2 key $ billion What happened to China’s trade balance with Brazil between year 1 and year 2? A It experienced a falling surplus. B It experienced a rising deficit. C It moved from deficit to surplus. D It moved from surplus to deficit. 29 The US imposed tariffs on cars and motorcycles from Germany. What is the effect of these tariffs? A decrease in inflation in the US B decrease in trade between the US and Germany C increase in profits of car and motorcycle producers from Germany D increase in standards of living in the US and in Germany 30 What is an immediate effect for a country of a fall in its foreign exchange rate? A a fall in the money supply B an increase in purchasing power C cheaper imports D more competitive exports Answer: A

Question: To help reduce the price of oil, new supplies are needed. However, objectors oppose exploration of new sites because of the environmental damage it may cause. Why is this statement an example of the basic economic problem? A Oil is a limited resource. B Oil is expensive. C The exploration involves demand and supply. D There are external costs involved in production. Answer: A

Question: Helium is a gas that is limited in supply because it takes thousands of years to form. The US government holds 35% of the world’s supply of helium and has been selling its stocks. Helium is essential in medical scanners. It is also used for party balloons, which is a wasteful alternative use of a valuable good. Which two concepts apply to this statement? A demand and supply, government subsidy B excess demand, resource allocation C opportunity cost, private monopoly D public sector, factors of production Answer: D

Question: What is an example of a public good? A healthcare B street lights C unemployment benefits D vaccinations Answer: B

Question: Why does a government provide certain goods and services in a mixed economic system? A The government always provides goods more cheaply than private firms. B The government considers only private costs and benefits. C The government provides goods to prevent the development of monopolies. D The government provides public goods because private firms cannot charge for them. Answer: D

Question: What is a microeconomic decision? A a central bank reducing interest rates B a gas firm reducing its prices C a government increasing income tax D a government increasing the national minimum wage Answer: B

Question: 40 B 40 640 C 50 750 D 100 500 10 What is an advantage of labour-intensive production and what is an advantage of capital-intensive production? labour-intensive capital-intensive A each item can be individually made average costs of production are low B keeps unemployment down fixed costs are high C workers have pride in the product machinery may break down D workers have to work hard there is a ready market for the product Answer: A

Question: The market equilibrium wage rate is $10 per hour. What explains why the wage rate actually paid is $12 per hour? A Employers are competing for labour. B The government sets a minimum wage of $12 per hour. C There is a surplus of skilled labour. D Workers have received unpaid training. Answer: B

Question: A firm imports 20 high quality bicycles into the US at a cost of $3000 each. It sells them all, making a profit of $1000 per bicycle. What is the firm’s average revenue? A $1000 B $2000 C $3000 D $4000 Answer: D

Question: A clothing manufacturer expands by taking over a clothing retailer. Which type of merger is this? A backward vertical B conglomerate C forward vertical D horizontal Answer: C

Question: Which economic situation exists when there are two consecutive quarters (six months) of negative economic growth? A budget surplus B current account deficit C inflation D recession Answer: D

Question: Why might measures to reduce unemployment also make inflation rise? A They encourage cheap imports. B They increase demand. C They reduce firms’ costs. D They require wages to fall. Answer: B

Question: Which change affecting an economy’s labour market promotes economic growth? A increasing trade union strike action B lowering the age of retirement C reducing training of workers D removing immigration controls Answer: D

Question: 0 inheritance tax 50 sales tax (VAT) 300 What is the total amount of revenue raised by indirect taxes? A $300 m B $350 m C $385 m D $435 m 20 Which statement relating to supply-side policies is correct? A They aim to increase aggregate demand. B They aim to increase the long-run capacity of the economy. C They aim to reduce cyclical unemployment. D They aim to work in the short term. Answer: B

Question: What is always indicated by an increase in the Consumer Prices Index (CPI)? A an increase in consumer spending in an economy B an increase in living standards C an increase in the average cost of living D an increase in the purchasing power of money Due to an issue with Question 22, the question has been removed from the question paper. 23 Which combination of policy measures is most likely to increase the level of employment? A decrease general taxation and decrease the rate of interest B decrease general taxation and increase the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest 24 What could reduce poverty? A greater economic growth B less spending on education C more regressive taxation D privatisation of hospitals 25 The table shows information about four countries, A–D. Which country is most likely to have a falling population? access to a healthy diet cost of bringing up children A falling falling B falling rising C rising falling D rising rising 26 The table shows statistics for four countries, A–D. Which country has the lowest standard of living? average annual growth rate of population (%) population density (per square kilometre) life expectancy (years) real GDP per head ($) A 1.9 19 46 190 B 2.7 2 58 1700 C 3.7 45 59 210 D 4.2 89 44 190 27 Malaysia and Indonesia specialise in the production of palm oil. What is a disadvantage of specialisation? A concentration of labour in the activity in which it is most productive B creation of jobs to meet world demand C reliance on trade with other countries for other goods D rising palm oil prices 28 The diagram shows China’s trade with Brazil for two years. 0 1 2 3 4 5 China’s exports China’s imports year 1 year 2 key $ billion What happened to China’s trade balance with Brazil between year 1 and year 2? A It experienced a falling surplus. B It experienced a rising deficit. C It moved from deficit to surplus. D It moved from surplus to deficit. 29 What is a reason for trade protection? A to reduce a deficit on the current account of the balance of payments B to reduce a surplus on the current account of the balance of payments C to reduce economic growth D to reduce inflation 30 What is an immediate effect for a country of a fall in its foreign exchange rate? A a fall in the money supply B an increase in purchasing power C cheaper imports D more competitive exports BLANK PAGE Answer: C

Question: The Chinese government is concerned about the level of poverty and the need for more resources in low-income regions of the country. As a result, it is increasing its expenditure in those regions and reducing it in high-income regions. Which economic concept does this government policy illustrate? A diseconomies of scale B market forces C opportunity cost D specialisation Answer: C

Question: An airline needs people and equipment. These can be divided into factors of production. What is allocated to its correct factor of production? people or equipment factor of production A aircraft capital B airline owners labour C computer network land D pilots enterprise Answer: A

Question: What is the significance to firms of price elasticity of demand? A It allows firms to measure the effect of a change in the price of their competitors. B It allows firms to measure their ability to change production due to a change in price. C It allows firms to predict the change in costs of production. D It allows firms to predict the effect of a change in price on their total revenue. Answer: D

Question: In a free market, market failure causes a misallocation of resources. What is not an example of market failure? A external costs of production B internal diseconomies of scale C over-consumption of demerit goods D under-consumption of merit goods Answer: B

Question: Which organisations can directly fund the growth of firms? central banks commercial banks governments A no yes no B no yes yes C yes no no D yes no yes Answer: B

Question: Which statement about different income groups is correct? A High-income groups do not need to borrow money. B High-income groups save less money than low-income groups. C Low-income groups find it easier to borrow than high-income groups. D Low-income groups save a smaller percentage of their income than high-income groups. Answer: D

Question: A musician has a choice of playing for an orchestra in either Germany or England. Which combination of incomes and cost of living is most likely to cause her to choose the German orchestra? incomes and cost of living in Germany compared with those in England pre-tax (gross) income after-tax (net) income cost of living A higher higher higher B higher lower lower C lower higher higher D lower higher lower Answer: D

Question: A firm sells 50 units at a price of $3 per product. What is the firm’s total revenue and average revenue? total revenue $ average revenue $ A 50 3 B 50 50 C 150 3 D 150 50 Answer: C

Question: Two large-scale firms involved in chemical manufacturing wish to merge. Why might the government decide to prevent the merger? A It enables greater economies of scale to operate. B It increases productivity per worker employed. C It reduces competition in the industry. D It results in higher wages paid to labour. Answer: C

Question: What is included in a government budget calculation? A export revenue B external costs C indirect tax revenue D opportunity cost Answer: C

Question: Which change is an example of monetary policy? A a depreciation of the foreign exchange rate B a reduction of unemployment benefits C an increased import tax D the introduction of import quotas Answer: A