CSEC Economics May/June 2017

1. Which of the following rewards accrues to the Item 5 refers to the following incomplete table which
factor of production called ‘capital’? shows production cost of three units of a product.

Total Marginal Total

(A) Rent
Unit Fixed Cost ($) Cost ($)
(B) Profit
Cost ($)
(C) Wage
1 100 25 125
(D) Interest 2 130
3 60

2. Ana is considering purchasing a new laptop

computer. Which of the following factors is LEAST 5. What is the total cost of producing three units of
likely to influence her decision? the product?

(A) Her level of income (A) $125

(B) The price of the laptop computer (B) $130
(C) The cost of producing the laptop computer (C) $155
(D) Laptop computer advertisement in the (D) $190
newspapers

6. Which of the following is NOT one of the ways in

3. Which of the following factors causes money to which governments influence economic decisions
lose value and become less effective as a medium of the business?
of exchange?
(A) Increasing retirement benefits
(A) Inflation (B) Passing minimum wage legislation
(B) Market Failure (C) Regulating the emissions of toxic waste
(C) Unemployment (D) Identifying areas where businesses should be
(D) Negative externalities located

4. Which of the following is a primary product?

(A) Truck
(B) Bread
(C) Bauxite
(D) Clothing
 9. An outward shift in a production possibility curve
can be caused by an
Item 7 refers to the following diagram which illustrates the
production possibility frontier for an economy that is
(A) Increase in wages
capable of producing bauxite and sugar in different
(B) Increase in prices
combinations.
(C) Increase in imports
(D) Improvement in technology

Sugar
10. ABC Ltd. Purchases raw cotton and produces
fabric. XYZ Ltd. buys fabric from ABC Ltd. and
makes T-shirts which it markets directly to clothing
x stores. In which sector of economic activities are
both firms engaged?

(A) Tertiary
(B) Primary
(C) Quaternary
(D) Secondary
Bauxite

11. An advantage of a planned economic system is

7. Point X on the graph represents
that
(A) Economic growth
(A) there is usually a more equitable distribution
(B) Unemployed resources
of wealth
(C) An efficient combination
(B) firms have greater incentive to produce
(D) An unattainable combination
(C) workers are more motivated and diligent
(D) consumers have a wider variety of goods
8. A normal supply curve for farm produce will slope
upwards, from left to right, if farmers
12. The MAIN objective of a credit union is to
(A) Pass on increased cost to consumers
(A) Provide scholarships to students
(B) Are willing to produce more as prices increase
(B) Encourage thrift among its members
(C) Increase their profit margins as prices increase
(C) Provide credit to government agencies
(D) Are willing to increase supply as demand
(D) Provide investment funds for companies
increase
 13. Country X has a very low unemployment rate as 16. The government of Country X decides to switch
most of its citizens work overseas for 6-8 months resources from manufacturing to crop production.
during the year. The opportunity cost of this decision is the

This type of unemployment can be classified as (A) Profit earned by farmers

(B) Reduction of manufacturing
(A) Cyclical
(C) Wages earned by farmers
(B) Real wage
(D) Rent for the land on which crops are grown
(C) Seasonal
(D) Structural 17. A government reduces taxes on carrots. This causes
the price for carrots to fall by 50%. Quantity
demanded then rises by 50% The price elasticity of
14. Prices of goods in market economies fluctuate demand for carrots in this case is
while prices for goods in planned economies tend (A) 0
to be fixed. The MOST likely reason for this (B) 0.4
difference is that in the market economy, (C) 1
(D) 2.5
(A) Profits are lower
(B) Producers are never efficient
Item 18 refers to the following curves which shows the
(C) There are higher employment levels
demand for some products.
(D) Demand and supply forces determine prices

15. Item 15 refers to the following diagram which

illustrates the production possibility frontier for an
economy in Year 1 (AA) and Year 2 (BB).

Capital I II
goods

B X

III IV
B A Consumer
goods
18. Which of the curves above indicates that demand
15. From the diagram below, it can be deduced that
for the product is perfectly elastic?
(A) point X was unattainable in Year 2
(B) point X was efficient in Year 1 and Year 2
(A) I
(C) There was decreasing opportunity cost in
(B) II
Year 1 and Year 2
(C) III
(D) there was economic growth between Year 1 and Year 2
(D) IV
19. Which of the following is NOT an example of a 24. Which of the following is TRUE about the financial
factor of production in a commercial bank? institutions?

(A) The building (A) They provide insurance protection to speculators

(B) The bank’s vault (B) They are free from government interference
(C) Shareholders of the bank (C) They place emphasis on consumer education and
(D) Special savings accounts for students national development
(D) They channel funds from those who have saved to
those who wish to borrow
20. Shinelle spends 0.02% of her monthly income on a
particular good. Her demand for this good, in
terms of price, can be described as 25. A pure public good can be described as

(A) Elastic (A) Excludable

(B) Inelastic (B) Zero-priced
(C) Perfectly elastic (C) Diminishable
(D) Perfectly inelastic (D) Complimentary

21. Open competition on a world wide scale facilitates 26. Which of the following is usually a consequence of
widespread retrenchment in a country?
(A) High level of dependence on tourism
(B) Increases in trade unions’ negotiating power (A) Reduction in crime rate
(C) Government manipulation of market outcomes (B) Increase standard of living
(D) The development of comparative advantage (C) A fall in the standard of living
(D) Equality in income distribution

22. The term ‘money supply’ refers to the

27. Globalization may be MOST accurately defined as
(A) The total stock of money in an economy at any the
moment
(B) Amount of money traded in the foreign exchange (A) Movement of technology and financial markets
market worldwide
(C) Total assets base of the institutions in the financial (B) Movement of tangible and intangible goods
sector among countries
(D) Total amount of gold, silver and other precious (C) International trade of goods and services
metals in the reserve including skilled workers
(D) Integration of financial services, technology,
and commodity markets worldwide
23. The organization responsible for the regulation
and control of the financial sector is the

(A) Treasury
(B) Central Bank
(C) Board of Currency Control
(D) Institute of Monetary Affairs
 28. Which of the following is LEAST likely to occur 31. Line X represents payment
when there is market failure?
(A) Goods taken on credit
(A) A decline in social welfare (B) To the factor of production
(B) An increase in poverty through the country (C) Of taxes to the government
(C) An increase in the level of unemployment among (D) To the financial institutions for loans
skilled and unskilled labour
(D) An adequate amount of goods and services for
consumers Item 32 refers to the following diagram which shows the
price and quantity demanded for Good X.

29. Governments often put measures in place to Price

control monopolies because monopolies S

(A) Set fair prices

(B) Restrict supply D₁
(C) Earn normal profits
(D) Promote consumer sovereignty D
0 Quantity
32. The movement of the demand curve
30. Which of the following best defines the term Of Good X from D to D₁ results from an increase in
‘protectionism’?
(A) Consumer income
(B) The price of good X
(A) Restriction of imports into the country
(C) The price of a complement
(B) Dependency on a primary product for export
(D) The cost of inputs used to produce good X
(C) Free movement of goods and services among
countries Item 33 refers to the following market supply curves.
(D) Establishment of a trade bloc among a group of
countries I P II P
S

Item 31 refers to the following diagram which shows the S

circular flow of income.

Q Q
Households III P IV P
Payment for S
x Goods and
Services S

Firms Q
 (D) Flow of funds into the household sector
33. Which of the following curves shows that price 37. Which of the following statement best describes a
elasticity of supply is unitary. fiscal deficit?
(A) I (A) Government revenue exceeds government
(B) II borrowing
(B) Government revenues are greater than subsidies
(C) III (C) Government spending equals government revenue
(D) IV (D) Government spending exceeds government
revenue

34. Which of the following is NOT a function of the

financial sector?
38. Which of the following is an advantage of a market
economic system?
(A) Providing a safe place for savings
(B) Preventing liquidity within the economy
(A) There is equality in income
(C) Facilitating payments for goods and services
(B) It gives choice to consumers
(D) Making credit available to households and
(C) It reduce pollution and congestion
firms
(D) Price control measures can be effected

35. Which of the following has led to rapid expansion 39. Which of the following is a positive effect of ‘brain
of e-commerce? drain’ phenomenon for the country of origin?

(A) The emergence of the internet (A) Sustained growth

(B) The formation of regional groupings (B) Source of remittances
(C) The increase in the levels of income (C) Guaranteed development
(D) The rise in inflationary pressures (D) Discovery of more talent

Item 36 refers to the following diagram. 40. “Resources, both human and physical, are
required to produce goods and services.”
Financial Sector
The statement MOST accurately describes
Savings Loanable
Deposit funds for (A) Productivity
Sese (B) Entrepreneurship
Investment/
Firms/Households
Spending (C) Factors of production
(D) Factors of productivity

36. The diagram best describes the

(A) Functions of the central bank

(B) Flow of deposit into the financial sector
(C) Role the financial sector performs for
customers
41. Country A is experiencing a balance of payment 45. Which of the following is a likely DISADVANTAGE
deficit. Which of the following measures would of international trade?
the government MOST likely use to reduce the
deficit in the short term? (A) Economies of scale
(B) Improved international relations
(A) Reduce the volume of exports to other countries (C) Increased consumer choice and variety
(B) Engage in trade with other low-cost producers of (D) Stiff competition of local industries
goods
(C) Increase the importation of goods from other
countries 46. The terms of trade of country X is 150. This is
(D) Impose restrictions on goods imported from other considered to be
countries
(A) Neutral
(B) Inadequate
42. The term recession refers to a period of (C) Favourable
(D) Unfavourable
(A) Increased economic activity
(B) Gradual increase of GDP of a country
(C) National economic prosperity in a country 47. The currency of a country may appreciate in value
(D) Temporary economic decline if

(A) The demand for its imports rises

Item 43 refers to the following economic (B) The demand for its exports rises
measures. (C) Its balance of trade deficit rises
(D) Its balance of payment deficit rises
I. Reducing the bank rate
II. Increasing interest rate
III. Decreasing money supply 48. The economic system where major economic
decisions are made by private individuals and
43. Which of the measures above can be used to businesses is known as a
reduce inflation?
(A) Free market economy
(A) I and II only (B) Planned economy
(B) I and III only (C) Controlled economy
(C) II and III only (D) Subsistence economy
(D) I, II and III

44. Which of the following is NOT a benefit of

economic integration?

(A) Higher cost of living

(B) Increased productivity
(C) Improved competitiveness of products
(D) Mutual benefits among member countries
Item 49 refers to the following diagram which shows the 51. Which of the following will contribute to a surplus
price of an item and the quantity demanded and supplied on the balance of trade of a country?
before and after the item is subsidized. S is the supply
curve before a subsidy is given. (A) The value of exports is greater than the value of
Price S imports
(B) The value of imports are greater than the value of
exports
Ss (C) The volume of exports are greater than the volume
Po of imports
(D) The volume of imports are greater than the
P1 volume of exports

D
52. Which of the following is referred to as the
0 Q0 Q1 Quantity banker’s bank?

49. As a result of the granting of the subsidy, it is (A) The World Bank
expected that (B) The Central Bank
(C) A commercial bank
(A) Supply will increase (D) An investment bank
(B) Supply will decrease
(C) Demand will decrease
(D) Price will increase 53. Country X is obtained an inflow of $300, 000, 000
in foreign direct investment. IN which section of
the balance of payments accounts of Country X,
50. A country has a comparative advantage in the will this be recorded?
production of a commodity when it
(A) Capital
(A) Can produce more of that commodity than any (B) Visible trade
other country (C) Invisible trade
(B) Has a larger share of the market for that (D) Balance of trade
commodity than any other country
(C) Can produce that commodity at a lower
opportunity cost than any other country 54. The restrictions on international trade through
(D) Accounts for a greater percentage of global sales tariffs, embargoes, quotas, and exchange controls
of that commodity than any other country is referred to as

(A) Globalization
(B) Protectionism
(C) A bilateral agreement
(D) Structural adjustment
55. The term ‘e-commerce’ refers to Item 59 refers to the following table which shows a
country’s current account of its balance of payment for the
(A) Ecotourism year 2015.
(B) Export businesses
(C) Electronic businesses Item ($M)
(D) Economies of scale Invisible imports 50
Invisible exports 80
Visible imports 70
Visible exports 32
56. Country X allows foreign exchange markets to
determine the rate of its domestic currency based
on the forces of demand and supply. This type of 59. What is this country’s balance of merchandise
exchange rate is referred to as trade?

(A) Fixed (A) -$38M

(B) Pegged (B) $20M
(C) Floating (C) $38M
(D) Managed (D) $48M

57. Which of the following is referred to as a 60. If a country can produce 20 units of products X or
withdrawal from the circular flow of income? 10 units of product Y, the opportunity cost of 1
unit of a product Y is
(A) Exports
(B) Savings (A) 0.1 units of product x
(C) Investment (B) 1 unit of product x
(D) Household income (C) 2 units of product x
(D) 2.5 units of product x

58. The acronym FDI, in economics, means

(A) Foreign Direct Income

(B) Foreign Direct Investment
(C) Fixed Domestic Investment
(D) Floating Domestic Investment