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Question: What is the most likely effect of increasing the rate of interest? A Investment increases. B The cost of government borrowing falls. C The exchange rate falls. D The rate of inflation falls. Answer: D

Question: What is the most effective way for a government to raise national output? A encourage a period of deflation B improve the productivity of resources C limit the size of its population D restrict its trade with other countries Answer: B

Question: A shop worker was made redundant due to the introduction of self-service checkouts. Which type of unemployment is this? A cyclical B frictional C seasonal D structural Answer: D

Question: A decrease in which variable is most likely to cause the rate of inflation to increase? A the average wage rate B the budget deficit C the interest rate D the money supply Answer: C

Question: Which type of goods have to be financed by a government? A capital goods B demerit goods C free goods D public goods Answer: D

Question: 0 imports of goods 350 exports of services 110 imports of services 60 net primary income – 40 What is the country’s balance on its current account? A a deficit of $60 million B a deficit of $160 million C a surplus of $20 million D a surplus of $760 million 28 Vietnamese companies buy insurance from companies in the US. How will this transaction be recorded in the Vietnamese balance of payments? section credit / debit A trade in goods credit B trade in services credit C trade in services debit D current transfers debit Answer: C

Question: Which row shows the potential benefits of free trade to consumers, producers and the economy? consumers producers economy A higher income lower costs deflation B lower quality higher prices greater equality C lower prices increased competition higher current account deficit D more choices larger market lower unemployment Answer: D

Question: A manufacturing firm in a low-income country has decided to close. What is most likely to have caused this decision? A increase in foreign multinational companies operating in its country B increase in global demand for its products C increase in its productivity D increase in subsidies received from its government BLANK PAGE Answer: A

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 a disadvantage of a market economy? A Consumer choice is ignored. B Consumers may lack information. C Government subsidies encourage efficiency. D There is no incentive to work. Answer: B

Question: What is the definition of price elasticity of demand? A the responsiveness of quantity demanded of a product to a change in income of consumers B the responsiveness of quantity demanded of a product to a change in the price of a complementary product C the responsiveness of quantity demanded of a product to a change in the price of that product D the responsiveness of quantity demanded of a product to a change in the price of a substitute product Answer: C

Question: To reduce traffic congestion, a government decides to build a new road. There is a toll charge on the new road. What is the main purpose of this government intervention? A to address the problem of market failure B to discourage people from using public transport C to ensure the supply of transport through the free market D to obtain revenue from the levy of a toll Answer: A

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: The central bank of a country decreases interest rates to help the economy out of a recession. How is this decrease in interest rates most likely to affect the levels of saving in and borrowing from the country’s commercial banks? saving borrowing A decreases decreases B decreases increases C increases increases D increases decreases Answer: B

Question: Which effect of increased specialisation by firms and workers is most likely to cause problems for an economy? A better product quality B greater interdependence C higher productivity D improved resource allocation Answer: B

Question: Which statement is correct when comparing small firms with large firms? A Small firms are more able to adapt to changes in market conditions. B Small firms are more able to reduce competition through barriers to entry. C Small firms benefit from lower cost per unit from economies of scale. D Small firms have higher total fixed costs and lower average fixed costs. Answer: A

Question: Which pair is included in a government’s budget? A consumption and factor income B exports and imports C investments and savings D public expenditure and tax revenue Answer: D

Question: A central bank reduces interest rates. What would not be a consequence of this action? A a benefit for borrowers receiving loans B a fall in the international value of the currency C a reduction in inflation D an increase in GDP Answer: C

Question: An individual decides to employ a professional decorator rather than buying the materials and decorating her house herself. Why would this decision cause GDP to rise? A The activity would be recorded as income for the decorator. B The individual would have more leisure time. C The professional decorator can purchase materials at a discount. D The professional decorator would work less efficiently than the individual. Answer: A

Question: What is the definition of the unemployment rate? A the benefits and allowances paid by the government to people without a job B the number of people without a job but seeking a job as a percentage of the labour force C the rate of change in the number of people who have not worked over the last year D the total number of people not working when the data was calculated Answer: B

Question: What is most likely to cause inflation? A a reduction in exports B a reduction in government spending C an increase in the rate of interest D an increase in trade union power Answer: D

Question: What is included in the Human Development Index (HDI)? environmental sustainability life expectancy years of schooling A no no yes B no yes no C no yes yes D yes yes yes Answer: C

Question: A fall in the level of absolute poverty can be best achieved by reducing A government unemployment benefits. B income tax. C the number of homeless people. D the rate of inflation. Answer: C

Question: 0 imports of goods 350 exports of services 110 imports of services 60 net primary income – 40 What is the country’s balance on its current account? A a deficit of $60 million B a deficit of $160 million C a surplus of $20 million D a surplus of $760 million 28 Vietnamese companies buy insurance from companies in the US. How will this transaction be recorded in the Vietnamese balance of payments? section credit / debit A trade in goods credit B trade in services credit C trade in services debit D current transfers debit Answer: C

Question: What is a restriction on the quantity of imports called? A dumping B quota C subsidy D tariff Answer: B

Question: Which combination of factors would attract a multinational company (MNC) producing smartphones to operate in a low-income country? A high economic growth rate and supply of cheap labour B low corporation tax and competitive local market C limited supply of skilled workers and cheap land D strict employment laws and high import duties BLANK PAGE Answer: A

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: A government decides to move towards a market economy by selling state-owned enterprises. What is a possible motive for this? A to create greater income equality B to extend government control of the economy C to increase efficiency of production D to take account of external costs Answer: C

Question: The shoppers in a country become worried about a sudden and dangerous rise in air pollution and so buy more food in case they have to stay at home. As the air pollution spreads, supermarket staff fall ill and the supermarkets struggle to keep their shelves full of food. X was the initial equilibrium in the market for food in supermarkets. What will be the new equilibrium as a result of the above situation? price of food O quantity of food D3 S3 D1 D2 S1 S2 A D B C X Answer: A

Question: Which factor can influence the price elasticity of supply of a product? A the degree of necessity of the product B the level of spare capacity in the industry C the price of substitutes D the proportion of income spent on the product Answer: B

Question: What is a possible consequence of market failure? A Consumers have complete information about goods. B Disequilibrium continues in the market. C Merit goods are under-supplied. D Some goods are no longer demanded. Answer: C

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 trade union states that its members have experienced a loss in real income over the past five years. What must have happened for this to be true? A Income tax rates have increased. B Prices have risen. C Savings have fallen. D Wages adjusted for inflation have fallen. Answer: D

Question: A firm provides a personal service to its customers. It prefers to remain labour-intensive rather than changing to more capital-intensive production. Which aspect of remaining labour-intensive would support this choice? A Customer satisfaction is higher. B Production costs are higher. C Production is less flexible. D Quality of customer service is worse. Answer: A

Question: A government decides to boost the economy through the use of a budget deficit. Which target should it adopt to achieve this aim? A Direct taxation should exceed indirect taxation. B Export earnings should exceed import expenditure. C Government savings should exceed government investment. D Government spending should exceed government revenue. Answer: D

Question: A government decides to use a fiscal policy measure. What is an example of this? A increasing the exchange rate B reducing the power of trade unions C reducing the rate of corporation tax D setting a low interest rate Answer: C

Question: What would the government reduce to decrease inflation? A income tax B its foreign exchange rate C the money supply D the rate of interest Answer: C

Question: A country wishes to encourage economic growth. Which policy measure is most likely to achieve this aim? A increasing interest rates B increasing spending on education C reducing the maximum permitted hours of work D reducing spending on infrastructure Answer: B

Question: How does a country usually measure its Gross Domestic Product? A by calculating the total value of all goods and services produced within the economy B by measuring the average prices of a basket of goods and services throughout the country C by subtracting government expenditure from government revenue D by surveying the number of people who are out of work but willing and able to work Answer: A

Question: What is the most likely consequence of increased unemployment? A higher output B higher government budget deficit C higher self-esteem D higher inflation Answer: B

Question: Why is deflation undesirable for an economy? A It reduces business confidence. B It reduces export competitiveness. C It reduces purchasing power. D It reduces real incomes. Answer: A

Question: Why does a government provide public goods? A Public goods are always used by everyone. B Public goods are not profitable for private firms. C Public goods can only be provided by monopolies. D Public goods create large external costs. Answer: B

Question: Which combination of government actions is most likely to raise the living standards of lower income groups in an economy? indirect tax spending on healthcare personal tax-free allowance A increase increase decrease B increase decrease increase C reduce increase decrease D reduce increase increase Answer: D

Question: What is the usual effect of net immigration for a high-income country? A an increase in the size of the labour force B a rise in the average age of the population C lower economic growth D reduced demand for housing Answer: A

Question: 0 imports of goods 350 exports of services 110 imports of services 60 net primary income – 40 What is the country’s balance on its current account? A a deficit of $60 million B a deficit of $160 million C a surplus of $20 million D a surplus of $760 million 28 Vietnamese companies buy insurance from companies in the US. How will this transaction be recorded in the Vietnamese balance of payments? section credit / debit A trade in goods credit B trade in services credit C trade in services debit D current transfers debit Answer: C

Question: Country X produces cars and also imports cars. Which group is least likely to benefit from the introduction of an import tariff on cars? A consumers of cars in country X B producers of cars in country X C the government of country X D workers making cars in country X Answer: A

Question: What may be a cost to its home country when a multinational company (MNC) expands abroad? A Increased competition from the MNC may force firms in the host country to close. B Many jobs created by the MNC may be low-skilled. C The MNC’s profits from the host country may be sent to its home country. D The MNC may cause job losses in its home country by moving production abroad. Answer: D

Question: production will cause external costs A relative poverty will gradually increase B sustainable development will take place C wants will exceed productive capacity D The diagram shows the production possibility curve (PPC) for an economy producing consumer goods and capital goods. Answer: D

Question: consumer goods N M L O G H J capital goods The economy is currently producing OM consumer goods and OG capital goods. It decides to increase production of capital goods to OH. What is the opportunity cost of this decision in terms of consumer goods? NL D MN C ML B JG A A hospital has spent all of its budget allocated for employing doctors. What is the opportunity cost to the hospital of employing an extra doctor? Answer: B

Question: a reduction in the number of nurses employed A an improvement in the recovery rate of patients B an increase in the number of patients treated C the salary paid to the extra doctor D There has been an increase in the demand for wheat. This has led to an increase in the demand for labour to harvest the wheat. Which branch of economics covers these two concepts? Answer: A

Question: increase in the demand for labour to harvest wheat increase in the demand for wheat macroeconomics macroeconomics A microeconomics macroeconomics B macroeconomics microeconomics C microeconomics microeconomics D In the United Kingdom (UK), the price of timber used in house building increased. This was because of a boom in the UK house building industry and a shortage of drivers to deliver the timber. What happened in the UK market for timber to cause this price increase? Answer: D

Question: A firm will supply more when consumers’ purchasing power increases. A The higher the price, the fewer goods are supplied as costs of production increase. B The lower the price, the more profit is made by the firm. C There is a positive relationship between quantity supplied and price. D A global pandemic causes the demand for air travel to decrease. Which value for the price elasticity of supply of air travel will cause the number of tickets for air travel to fall the most? Answer: D

Question: 1.5 D 1 C 0.5 B 0 A What is a disadvantage of a market economy? Answer: D

Question: not enough competition A not enough merit goods B no consumer choice C state intervention D Droughts in some countries caused the supply of wheat to fall. Wheat prices then rose providing an opportunity for wheat producers in other countries to increase supply. Why might the price of wheat continue to be high in the year following the drought? Answer: B

Question: Different weather conditions allowed a bumper harvest. A Suppliers unaffected by drought failed to increase output. B The government introduced a subsidy to wheat producers. C The wheat market returned to its original equilibrium. D Newly built houses tend to be inelastic in supply. A government aim is to make the supply more elastic by relaxing building regulations. Why is the government not likely to achieve this aim immediately? Answer: B

Question: Banks will only lend to high-income earners. A Costs of building materials fluctuate according to season. B Houses take a long period of time to be built. C Population increases lead to greater housing demand. D A person planning for old age saves in the form of money rather than goods. Which function does money perform when this is done? Answer: C

Question: medium of exchange A standard of deferred payment B store of value C unit of account D What is not normally a function of the central bank of a country? Answer: C

Question: acting as lender of last resort A issuing notes and coins B operating the government monetary policy C setting the government budget D What is a trade union most likely to protect? Answer: D

Question: the profit of a firm A the rights of a group of workers B the satisfaction of consumers C the social welfare of everybody D A person sets up a street food stall. What is necessary for the food stall to survive in the long run? Answer: B

Question: profitability growth no no A yes no B no yes C yes yes D A large privately owned firm is the sole supplier of electricity to a city. Which combination of characteristics is likely to exist for this firm? Answer: B

Question: pricing decision long-run profit barriers to entry price maker high high A price taker low high B price maker high low C price taker low low D When a firm produces 200 units, its total variable cost is $600 and its total fixed cost is $2000. What is the average cost at this output? Answer: A

Question: $2600 D $13 C $10 B $3 A The government of country Z announces a forecast budget deficit of $234 billion, as part of its fiscal policy. What is the effect of this forecast budget deficit likely to be? Answer: C

Question: a decrease in economic growth A a decrease in inflation B an increase in employment C an increase in unemployment D Low-income groups do not pay income tax but are able to use state-provided healthcare services. What does this illustrate? Answer: C

Question: monetary policy A privatisation B redistribution of income C regressive taxation D The government uses monetary policy and reduces the interest rate. What might be a consequence of this? Answer: C

Question: a decrease in the rate of inflation A an increase in the level of investment B an increase in the level of savings C an increase in unemployment D What is a likely objective of supply-side policy? Answer: B

Question: improving productive potential A increasing direct taxation B increasing the power of trade unions C promoting the public sector D An increase in which economic indicator best describes economic growth? Answer: A

Question: general price level A level of consumption B level of output C living standards D What is full employment considered to be? Answer: C

Question: no cyclical unemployment A no frictional unemployment B no private sector unemployment C no seasonal unemployment D Which group is most likely to benefit during a period of rapid inflation? Answer: A

Question: exporters A pensioners B people with debts C savers D What are the components of the Human Development Index (HDI)? Answer: C

Question: life expectancy at birth, expected years of schooling, gross national income (GNI) A life expectancy at birth, expected years of schooling, gross national income (GNI) per head B population growth, adult literacy rate, gross national income (GNI) per head C population size, expected years of schooling, number of doctors per head D Which situation must produce an ageing population? Answer: B

Question: a falling birth rate and a falling death rate A a rising birth rate and a rising death rate B a rising marriage rate and a falling death rate C a falling marriage rate and a rising death rate D The table shows the unemployment rate in three developed economies in one year. Answer: A

Question: unemployment rate % 7.6 United States 8.2 Sweden 10.9 France What is the main cause of high rates of unemployment in developed economies in periods of recession? decreases in total demand A movement of labour between countries B reduced levels of technological change C regional inequalities of wealth D What is most likely to result from an extension of specialisation in manufacturing? Answer: A

Question: for the consumer some prices will be reduced A for the country there will be less dependency on international trade B for the employee the work will become more varied C for the producer there will be less efficiency D A country imposes a tariff on an imported product. What is the effect of this change? Answer: A

Question: the quantity of the product imported is fixed the price of the product increases no no A yes no B no yes C yes yes D The world demand for oil is price-inelastic and oil is paid for in US dollars. If the price of oil falls rapidly, how might it affect the US dollar? Answer: C

Question: exchange rate for US$ market for US$ increases greater demand for US$ A decreases greater supply of US$ B decreases less demand for US$ C increases less supply of US$ D Which benefit do multinational companies (MNCs) bring to their home country? Answer: C

Question: flow of profits A higher wages B increased employment C more investment D BLANK PAGE BLANK PAGE Answer: A

Question: Economic goods are not scarce. A Economic goods have no opportunity cost. B Free goods are scarce. C Free goods have no opportunity cost. D The economy of country X is always on its production possibility curve (PPC). When will the goods and services produced by country X become more scarce? Answer: D

Question: population size PPC increases shifts left A unchanged shifts right B decreases unchanged C unchanged unchanged D What is capital? Answer: A

Question: the ability to organise the factors of production A the energy used in production B the factory used in production C the money invested in a firm D What are features of a market economy? Answer: C

Question: government allocation of production public ownership of factors of production private ownership of factors of production yes no no A yes yes no B no no yes C yes yes yes D Public transport and cars are substitute goods. The price of public transport rises. What will happen to the demand for cars? Answer: C

Question: It will contract. A It will extend. B It will decrease. C It will increase. D The markets of four products are all in equilibrium. The table gives the value of the price elasticity of supply (PES) for each product. The demand for each product shifts to the right by 5000 units at all prices. Which product will have the largest price increase? Answer: D

Question: price elasticity of supply 0 A 0.6 B 1.0 C 2.5 D What is the value of the price elasticity of demand (PED) for a product if total revenue remains the same when the price is reduced? Answer: A

Question: zero A between 0 and 1 B greater than 1 C 1 D The owner of a hotel in Malaysia finds that the price elasticity of demand (PED) for accommodation in the area is –1.7. If the hotel owner decreases the price of a room by 5%, how would the demand for a room change? Answer: D

Question: It would decrease by 2.9%. A It would decrease by 8.5%. B It would increase by 2.9%. C It would increase by 8.5%. D Good weather results in an increase in the demand for tomatoes. It also increases the supply of tomatoes. What must be a result of this? Answer: D

Question: The price of tomatoes will fall. A The price of tomatoes will rise. B The quantity of tomatoes traded will fall. C The quantity of tomatoes traded will rise. D What causes a change in the price of a product in a free market economy? Answer: D

Question: changes in demand and supply conditions A changes in external costs and external benefits B changes in government decisions C changes in the quantity of public goods D The ways of making and receiving payments continue to develop. Payments can now be made using smartphones, as well as cash, debit cards and credit cards. Which method of paying for products provides no information to sellers about their customers? Answer: A

Question: cash A debit cards B credit cards C smartphones D In most countries, which organisation controls the banking system? Answer: A

Question: central bank A commercial bank B investment bank C World Bank D What is not a reason for differences in the earnings of airline pilots in a particular country? Answer: A

Question: bargaining power of employees A discrimination B government policies C inflation D An airline takes over an online clothing company. What is an advantage of such a move by the airline? Answer: D

Question: to diversify their operations A to generate economies of scale B to improve lines of communication C to increase market share D In which type of industry is a firm most likely to make a large profit in the short run and in the long run? Answer: A

Question: barriers to entry into the industry number of firms in the industry high many A low many B high one C low one D A firm produces five units of output at an average cost of $20 per unit. The cost of the sixth unit is $26. What is the average cost of six units? Answer: C

Question: $21 D $8.33 C $6 B $4.33 A What is an example of government macroeconomic policy? Answer: D

Question: increasing the money supply A preventing price rises in the food industry B removing a monopoly’s barriers to entry C setting a maximum price for wheat D Why would devaluing the international value of an economy’s currency help reduce unemployment? Answer: A

Question: Devaluing the currency would increase the cost of production. A Devaluing the currency would increase the confidence of investors. B Devaluing the currency would increase the foreign demand for domestic products. C Devaluing the currency would increase the demand for imports. D What is likely to happen when the rate of interest increases? Answer: C