Economics o Level MCQ From 2014

Economics (2281) O level MCQ
1. Basic economic problem: choice and the allocation of

resources
For examination from 2020
1.1 Using all available resources an economy produces different combinations of
two types of good, clothes and food, shown on
the production possibility curve (PPC) diagram.
What does the PPC indicate?
A It is more efficient to produce more of clothes
than food.
B It is only possible to increase the output of
clothes by reducing the output of food.
C The best situation is to produce equal units of
clothes and food.
D The cost of producing a unit of clothes is
always higher than the cost of producing a unit
of food.
2.2 A government subsidised a new factory in a rural area to create jobs. It also
provided training courses at a college. Objectors claimed the development
would destroy an area of natural beauty. What concepts are involved in this
statement?
A economic growth, resource allocation, free market equilibrium
B government intervention, monetary policy, opportunity cost
C public good, market prices, fiscal policy
D supply-side policy, negative externalities, factors of production
3.3 Reena makes a living by selling paintings of the town in which she lives. She sells
them in an open-air market once a week. In order to be able to sell more pictures
in a week she decides to buy a studio, pay someone to help in the studio and try
to increase demand by advertising in the local paper. Which factors of production
were changed?
A capital only B labour and capital C labour and land D labour only
October/November 2017/12
4.1 Economists refer to factors of production. Which is not a factor of production?
A the fields of a farm B the machinery in a factory
C the shares of a company D the staff in an office
5.2 A government allowed a building company to construct new houses which
destroyed an area designated as an area of natural beauty. Which concepts can
be applied to this statement?
A budget surplus; public sector B external cost; opportunity cost
C government subsidy; mixed economy D private enterprise; budget deficit
6.3 The diagram shows a production possibility curve. The country is using all its
resources to produce both manufactured
goods and services.
What movement would represent an

improvement of technology in
manufacturing?
A K to N B L to K C N to K D N to M
Zia-academy.com, Md. Ziaul Alam, 01712524004, zia524004@gmail (yahoo).com 1

7.1 What does an economist mean by the factor of production called capital?
A goods that can be used to produce other goods
B money used to start a business
C resources that cannot be replaced
D the profits of a company
8.2 A government decides to spend more on defence and cannot spend money on
a new airport. Which concepts can be applied to the above statement?
A budget surplus; external cost B factor of production; private monopoly
C public sector; opportunity cost D trade surplus; budget deficit
9.3 The diagram shows a production possibility curve diagram. A country’s initial
position is X.
Better manufacturing processes are introduced and the country improves its
tourist facilities. What would represent this?
A S to T B T to R C X to R D X to T
june 2017/11
10.1 Which combination of terms gives the general definition of the economic
problem?
A bigger families, less food, starvation
B falling supply, rising demand, shortage
C higher population, fewer jobs, unemployment
D limited resources, unlimited wants, scarcity
11.2 Helium is a gas that is limited in supply. It takes thousands of years to form from
decaying radioactive rocks. The US government holds 35% of the world’s supply
and has been selling its stocks. Helium is essential in medical scanners. It is also
used for party balloons which some say is a wasteful alternative use of a valuable
good. Which concepts can be applied to the above statement?
A demand and supply, government subsidy B excess demand, resource
allocation
C factors of production, private monopoly D opportunity cost, public sector
12.3 The diagram shows a production possibility curve for an economy. Which point
on the diagram is the most efficient for the economy to produce both consumer
goods and capital goods?

june 2017/12
13.1 Which is not a factor of production?
A a farm B a farmer C a farmer’s bank account D a second-hand tractor
14.2 Heavy rain caused floods in an area of a country. What may be an opportunity
cost of repairing the damage caused?
A the allocation of government funds to the area instead of on a new airport
B the cost of providing shelter for those made homeless
C the decline in the tourist industry in the area
D the loss of profits from businesses affected by the flood
15.3 The diagram shows a production possibility
curve for cars and furniture.
A recession causes a decrease in production in

both cars and furniture.
Which movement would represent this change?
A X to W B X to Y C Z to W D Z to Y
November 16/12
16.1 Each factor of production earns an income.
What correctly identifies the income for labour
and capital?
17.2 What could be the opportunity cost of a

nuclear power station?
A the running costs of the power station B a coal-fired power station

C the current value of the power station D the cost of building the power station
18.3 The diagram shows a production possibility curve for maize and cotton.
Bad weather causes a poor harvest for both crops.

Which movement could be used to represent this
change?
A P to R B Q to R C S to Q D S to R
November 16/13
19.1 What is not a factor of production?

A a $20 banknote B an office C a photocopier D a secretary
20.2 What could be the opportunity cost of a nuclear power station?
A the running costs of the power station B a coal-fired power station
C the current value of the power station D the cost of building the power station
22.3 In 2014 private companies began to drill in areas of the country to exploit
natural gas supplies that were known to exist. How
might this decision be represented on the diagram
which shows a production possibility curve for the
country?
A by a movement from R to S
B by a movement from R to V
C by a movement from S to T
D by a movement from U to V

June16/11
23.1 The diagram shows an initial production possibility curve of PPC1.
What may cause the movement of the production

possibility curve from PPC1 to PPC2?
A a better educated workforce
B a decrease in availability of raw materials
C increased wages
D lower productivity
24.2 An increase in the number of manufacturing robots in the car manufacturing
industry represents an increase in the quantity of which factor of production?
A capital B enterprise C labour D land
25.3 The diagram shows the choices for an individual between leisure and earnings.
What is the opportunity cost to the individual of the

extra earnings when moving from position X to
position Y?
A $10
B $40
C 3 hours of leisure per day
D 9 hours of leisure per day
June16/12
26.1 What economic concept must be at work when there is movement by a country
along its production possibility curve?
A economies of scale B equilibrium price
C maximum profit D opportunity cost
27.2 The diagram shows the choices for an individual between leisure and earnings.
The person decides to take a job that gives

more leisure time. What is the opportunity cost
to the individual of moving from position Y to
position X?
A $20
B $80
C 4 hours of leisure per day
D 12 hours of leisure per day
28.3 What is the best example of the existence of the economic problem?
A A government provides accommodation for all those who are homeless.
B A police force has a lengthening list of unsolved crimes.
C Janitha hands her homework in at the last permitted deadline.
D Musa completes his journey without putting petrol in his car.
November15/12
29.1 In a rural community of Southern Africa, women were
responsible for planting and weeding crops by hand,
while men used to control production and receive profits.
Which combination of factors of production was in
operation?

30.2 The government of a prosperous country announced that it would offer free food
to its citizens for a year. What would be the effect of this measure?
A Agricultural resources would become unlimited.
B Human wants would become finite.
C More resources would be devoted to food production.
D The basic economic problem would be solved.
31.3 The diagram shows a production possibility curve for an economy that can
produce rice or electronic equipment. The
economy is at point Q. A recession causes
unemployment in the electronics industries. At
which point will the economy be in the diagram?
32.4 A person works at home making table cloths.

He works for 6 hours each day and makes 15 table
cloths an hour. He sells them for $10 each. He then
decides to work for only 4 hours each day. What can be concluded from the
above information?
A The lost profit would be $300.
B The lost revenue would be $60.
C The daily opportunity cost would be 30 table cloths.
D The daily opportunity cost would be $50.
June 15/12
33.1 What is the basic economic problem?
A finite resources and limited wants B finite resources and unlimited wants
C infinite resources and limited wants D infinite resources and unlimited wants
34.2 New oil reserves are discovered. What has increased in supply?
A capital B enterprise C labour D land
35.3 The diagram shows production possibility curves (PPC) for a country that can
produce agricultural products or manufactured
products. Its current PPC passes through points Q
and S but the country is currently experiencing
unemployment. If there is now full employment at
the same time as new agricultural techniques
enable an increase in productivity, what would be
the movement on the PPC diagram?
A P to R B P to S C Q to R D S to Q
36.4 A person makes sandwiches at home for five hours each day. She makes 20
sandwiches per hour, and she sells each sandwich for $2 each. What is the
opportunity cost if she takes a holiday on a working day?
A $2 B $40 C 20 sandwiches D 100 sandwiches
November2014 / 12
37. 1 Economics textbooks often start by identifying the existence of the basic
economic problem. What is it that makes this problem ‘basic’?
A It affects all economies and individuals.
B It is the most urgent target of government economic policy.
C It only affects low-income developing economies.
D It relates to the production of raw materials in the primary sector.

38. 2 Which statement about the factors of production is correct?
A Capital includes man-made machines that do not keep their original value.
B Enterprise is a natural factor of production that cannot be taught.
C Labour is an immobile factor that does not change its skill level.
D Land is only agricultural fields that cannot be improved by human effort.
39.3 The diagram shows two production possibility curves for an economy.
What could have caused the change in the

economy’s production possibility curve from
XX to YY?
A a decrease in the price level
B a large number of industrial disputes
C a major earthquake
D an increase in unemployment
June2014 / 12
40.1 What is the cause of economic scarcity?
A limited wants with limited resources
B limited wants with unlimited resources
C unlimited wants with limited resources
D unlimited wants with unlimited resources
41.2 How is an immediate effect of an increase in unemployment illustrated on a
production possibility curve diagram?
A a movement of the production point closer to the curve
B a movement of the production point further inside the curve
C a shift of the production possibility curve inwards
D a shift of the production possibility curve outwards
42. 3 What is a factor of production?
A a semi-skilled, young worker
B direct taxes received by a government
C shares in a manufacturing company
D stocks of money held a bank

2. The allocation of resources: how the
market works; market failure
1.4 A market consists of 10 individuals with different demand curves in a given
period. What is a calculation that could be used as part of the process to
determine the market equilibrium in that period?
A at each price add the quantities demanded by each individual
B at each quantity average the price that each individual is prepared to pay
C combine the price elasticity of demand (PED) and the price elasticity of supply (PES) at
each price
D determine the PED and multiply it by the quantity demanded
2.5 The diagram shows the market for a good. The equilibrium is at point X. The
government fixes a minimum price for the
good at P2. What will happen in the market as
a result?
A The market equilibrium will remain the same.
B The quantity demanded will rise to Q2.
C The quantity supplied will fall to Q3.
D There will be an excess supply.
3.6 How might the concept of price elasticity of

demand (PED) be useful for a government?
A to determine the effect on employment of a change in income tax
B to determine the effect on government revenue of a rise in the rate of interest
C to determine the effect of providing a public good
D to determine the result of imposing a tariff on imports
4.7 Governments sometimes intervene in the economy when the market fails. What is
the most likely reason why government intervention may make the situation
worse?
A Government decisions can take a long time to have an effect.
B Governments consider the views of both consumers and producers.
C Governments have more resources to calculate costs and benefits than private firms.
D Governments may take decisions to reduce negative externalities.
5.4 What is the government most likely to produce in a mixed economy?
A all of the services and none of the goods
B amounts of goods and services equal to those of the private sector
C no goods and services
D some of the goods and services
6.5 Which of the effects of economic development is an external cost?
A higher employment B higher fixed costs
C increased production D increased traffic congestion
7.6 The table illustrates the demand and supply for coffee in a market in Africa.
When the price rises from $20 to $30 per

kg, what is the price elasticity of demand
for coffee?
A 0.2 B 0.5 C 2.0 D 5.0

8.7 It was reported that the supply of oil would be affected by the discovery of new
oil fields and demand would be affected by rapid
global economic growth. If point X is the initial
equilibrium point, which point could represent the new
equilibrium?
9.4 What might be an external cost of drinking alcohol?
A the cost of a bottle of wine B the risk of illness from drinking alcohol
C the risk of street violence D the tax paid to the government
10.5 What is a benefit of the market system?
A Competition ensures choice for consumers. B Prices equal supply costs.
C Unemployment is kept to a minimum. D Wage differentials are small.
11.6 The table illustrates the demand and supply for coffee in a market in Africa.
When the price rises from $20 to $30 per

kg, what is the price elasticity of
demand for coffee?
A 0.2 B 0.5 C 2.0 D 5.0
12.7 In recent years the price of crude oil on the world market has fallen
dramatically. One cause has been the increase in oil obtained by the new
extraction process of fracking. How is this shown on a demand and supply
diagram of the market for crude oil?
A a shift in the demand curve to the left B a shift in the demand curve to the right
C a shift in the supply curve to the left D a shift in the supply curve to the right
june 2017/11
13.4 The diagram shows the market for a product. Which statement about the
points marked on the diagram is correct?
A The distance from W to X shows a shortage of the product.
B The distance from Z to Y shows a surplus of the product.
C The movement from W to Y shows a fall in the quantity
demanded of the product.
D The movement from X to Z shows a fall in the quantity
supplied of the product.
14.5 The diagram shows the demand for chocolate.
What could cause the movement from point X to

point Y?
A a change in tastes
B a fall in the price of chocolate
C an increase in income
D a successful advertising campaign for chocolate
15.6 A football club raises all stadium seat prices by 5%. The stadium is divided into
four zones. The demand for seats falls by 1% in zone W, by 3% in zone X, by 5% in
zone Y and by 6% in zone Z. In which zone is the responsiveness of demand for
seats to the price change elastic?
A zone W B zone X C zone Y D zone Z

16.7 A project to build one of the world’s biggest coal mines was planned in
Australia. The project was estimated to cost
$US12.5 million. It would create employment but
threaten endangered species as large coal ships
would damage the Great Barrier Reef. What
effects would this project have on the following
costs and benefits?
june 2017/12
17.4 In response to an increase in price from $5 per kilo to $6 per kilo a chicken
farmer increased supply from 400 kilos to 500 kilos per week. What is the price
elasticity of supply?
A 0.8 B 0.9 C 1.2 D 1.25
18.5 The diagram shows the demand for chocolate.
What could cause the movement from point X to

point Y?
A a change in tastes
B a fall in the price of chocolate
C an increase in income
D a successful advertising campaign for chocolate
19.6 A bee-keeper maintains hives of bees to
produce honey. The bees can pollinate neighbours’ fruit trees but also give a
painful sting to gardeners. If both of these events occur, how will costs and
benefits be affected?
A External benefits will fall and social costs will fall.
B External costs will rise and social benefits will fall.
C Social costs and social benefits will fall.
D Social costs and social benefits will rise.
20.7 In 2015 there was a significant fall in the world price of petrol (gasoline). What
would not have been a cause of the price fall?
A the continuing global recovery from the world economic recession
B the increasing exploitation of US oil reserves
C the re-entry of Iranian producers to the world oil market
D the shorter journeys from using the new Suez Canal
November 16/12
21.4 The market for a good was in equilibrium. A change occurred which resulted in
a new equilibrium with a higher price for the good and a lower quantity traded.
What change would have caused this?
A the demand curve moved to the left B the demand curve moved to the right
C the supply curve moved to the left D the supply curve moved to the right
22.5 A demand curve shows the relationship between the quantity demanded and
A a change in income B consumer tastes
C the supply of the product D the price of the product
23. 6 A government subsidises the production of pineapples. This is likely to
A increase the price of pineapples
B raise the costs of supplying pineapples
C raise revenue for the government
D cause the supply of pineapples to increase at every price
24.7 What indicates the existence of external costs in an economy?
A An international trade deficit has caused the country to be in debt.
B National companies have borrowed from foreign investors.
C Private costs of production are less than social costs.
D Private costs of production are more than social benefits.

November 16/13
25.4 The market for a good was in equilibrium. A change occurred which resulted in
a new equilibrium with a higher price for the good and a lower quantity traded.
What change would have caused this?
A the demand curve moved to the left B the demand curve moved to the right
C the supply curve moved to the left D the supply curve moved to the right
26.5 The demand for cocoa beans is price-inelastic. What is most likely to decrease
as a result of an increase in demand for cocoa beans?
A price of cocoa bean products B production of cocoa beans
C profits of cocoa bean producers D unemployment among cocoa bean farmers
27.6 A government subsidises the production of pineapples. This is likely to
A increase the price of pineapples.
B raise the costs of supplying pineapples.
C raise revenue for the government.
D cause the supply of pineapples to increase at every price.
28.7 The use of cars in many cities creates negative externalities. The diagram shows
the free market equilibrium X1 and the socially
efficient market equilibrium X2.
Using the diagram, which statement is correct?
A Socially efficient supply is S and the market price
P is too high.
B Socially efficient supply is S and the market price
P is too low.
C Socially efficient supply is S1 and the market price
P is too high.
D Socially efficient supply is S1 and the market price
P is too low.
June16/11
29.4 A government taxes the production of cars. What is likely to decrease?
A the cost of supplying cars B the price of cars
C the revenue for the government D the supply of cars at every price
30.5 Which pair of economic institutions can be found in a market economy?
A charities and public corporations
B multinationals and commercial banks
C public corporations and private companies
D stock exchange and government hospitals
31.6 Developers want to increase the size of a major retail shopping area in a city. It
is thought that the proposal would create hundreds of jobs, be profitable for the
shops but cause major traffic congestion. What economic concepts are directly
involved in this statement?
A external cost and private benefit
B income distribution and inelastic demand
C private investment and a decrease in supply
D social benefit and perfect competition
32.7 The diagram shows the market for rice.
What would have caused the equilibrium price to
rise from OP1 to OP2?
A a government subsidy to rice farmers
B a successful advertising campaign for rice
C improved rice farming methods
D poor weather conditions

June16/12
33.4 A government taxes the production of cars. What is likely to decrease?
A the cost of supplying cars B the price of cars
C the revenue for the government D the supply of cars at every price
34.5 Which pair of economic institutions is most likely found in a market economy?
A free accident and emergency hospitals and charities
B partnerships and public corporations
C stock exchange and monopolies
D trade unions and local government schools
35.6 Developers want to increase the size of a major retail shopping area in a city. It
is thought that the proposal would create hundreds of jobs, be profitable for the
shops but cause major traffic congestion. What economic concepts are directly
involved in this statement?
A external cost and private benefit
B income distribution and inelastic demand
C private investment and a decrease in supply
D social benefit and perfect competition
36.7 The diagram shows the price of a product during year 1 and year 2. Which
changes in demand and supply are consistent with
the price behaviour in
year 2?
November15/12
37.5 What is meant by an equilibrium price?
A a government price that ensures fairness for all
B a price that has no pressure to rise or fall
C a price that maximises the profits of the producers
D a price that maximises the satisfaction of the consumers
38.6 In August 2013, a lengthy strike in north-east India, where the finest and most
expensive Darjeeling tea is grown, shut down the tea industry at harvest time.
What is the likely outcome of such a situation on a demand and supply diagram
for Darjeeling tea?
A The price will rise because demand will switch to other teas.
B The price will rise because the strike will cause a movement down the supply curve.
C The price will rise because the supply curve will move to the left.
D The price will rise because there will be a fall in demand for the remaining Darjeeling
tea.
39.7 Air travel and rail travel are substitute forms of transport. The diagram shows the
effect of new technology on the market for air
travel. What would be the most likely effect on
the market for rail transport?
A a decrease in demand for rail transport
B an increase in the price of rail tickets
C an increase in supply of rail transport
D an increase in the total income of rail
companies
40.8 A developer built some large houses in a
rural area which poorer people could not afford. The houses destroyed an area of
natural beauty. What type of market failure resulted from the development?
A ignoring external cost B inequality of income
C lack of information D price discrimination

June 15/12
41.5 What would not be an example of the working of a market system?
A a high price charged because of costly research to produce the good
B a high price charged for a well-known painting
C a low price charged because of economies of scale
D a low price charged for subsidised bus travel
42.6 A product has a price elasticity of supply of +2. A change in price causes the
quantity supplied to change from 100 units to 120 units. What is the price change?
A a fall of 10% B a fall of 40% C a rise of 10% D a rise of 40%
43.7 The diagram shows the market for fresh fish in the Caribbean with equilibrium
point X. A new type of fishing boat increases production, which reduces costs.
Which point represents the new equilibrium?
44.8 A large supermarket applied to build on land which was in an area of natural
beauty. The local government allowed the building, even though the natural
beauty of the area would be lost, because many jobs would be created and
much needed income would be brought to the local community. Which
economic ideas cannot be found in the above statement?
A external cost and private enterprise
B free market and the conservation of resources
C opportunity cost and improved standards of living
D public sector and external benefit
November2014 / 12
45.4 What is most likely to influence the price elasticity of demand for a food?
A a change in consumer tastes B the number of close substitutes
C the rate of inflation D whether the food can be stored easily
46.5 What is meant by the equilibrium quantity in the market for a product?
A the average quantity produced over the year
B the average quantity sold over the year
C the quantity at which profit occurs
D the quantity at which the demand and supply curves intersect
47.6 The following is a headline from the newspaper. Car drivers to pay higher taxes
What will result from an increased tax on cars?
A increased employment in the car industry B increased petrol (gas) sales
C reduced external costs of car use D reduced number of bus journeys
48.7 The diagram shows the market for refined oil with equilibrium of X. What will be
the new equilibrium when a major oil refinery shuts down for repair work?
June2014 / 12
49.4 A supply curve shows the link between the quantity
supplied and
A demand.
B equilibrium output.
C the price of the product.
D the scale of production.

50.5 Which headline could apply to a mixed economy but not a free market
economy?
A ‘Cheap imports put domestic producers out of business.’
B ‘Local government planning decision angers residents.’
C ‘Many fish die as a company pollutes a river with waste material.’
D ‘Small shops close as large supermarkets open in the area.’
51.6 In 2012 the local government of a city decided to increase parking charges for
motorists. It was intended to raise money to correct a deficit in the local
government’s budget. The local government said if they did not increase charges
they would not be able to provide all their current services. Businesses
complained about the likely loss of revenue if parking charges were increased.
Which concepts does this statement involve?
A inflation and the private sector
B opportunity cost and public expenditure
C private benefit and the free market
D unlimited resources and a centrally planned economy
52.7 In 2011 the US Government declared that the country must increase the
manufacture of fuel from crops such as corn that have previously only been used
for food. What is likely to happen in the market for corn?
A a movement along the demand curve for corn
B a movement along the supply curve for corn
C a shift to the left in the demand curve for corn
D a shift to the left in the supply curve for corn

3. The individual as producer, consumer
and borrower
1.8 Which function do central banks and commercial banks have in common?
A acting as a banker’s bank B controlling monetary policy
C dealing with foreign exchange D supervising the banking system
2.9 What may cause an individual to save a higher proportion of their income?
A a belief that the price of goods will rise in the future
B a fall in the rate of interest paid by the country’s banks
C a fear that income will fall in the future
D a rise in the individual’s wish to enjoy higher consumption immediately
3.10 When might a trade union be most likely to achieve a good pay deal for its
members?
A when labour costs are a high percentage of the firm’s total costs
B when rival firms successfully introduce an alternative product
C when the firm is introducing capital-intensive production
D when the firm is making large profits
4.8 What is likely to decrease the level of saving in an economy?
A an increase in the general level of income
B an increase in the number of cheap offers in shops
C a redistribution of income from poor to rich households
D a rise in the rate of interest
5.9 Which change will make a manufacturing company replace machines with
labour to maintain the most efficient combination of factors of production?
A The price of the product manufactured has increased.
B The productivity of labour has increased.
C The productivity of machinery has increased.
D The wages of labour have increased.
6.10 Although there are higher paid jobs in offices many workers stay in low-paid
jobs on farms. What might explain this in developing economies?
A Agricultural workers lack the necessary education and skills.
B Governments plan to increase indirect taxes on services.
C Manual workers are being replaced by machines.
D Workers on farms have high labour mobility.
7.8 What is the best example of specialisation?
A a diversified engineering company B a general repairs handyman
C a self-sufficient, non-trading country D an old person’s helper and care assistant
8.9 Which workers are most likely to gain the highest increase in wages from a pay
rise of 2%?
A airline pilots B farm workers C nurses D shop assistants
9.10 A female accountant in a private firm earns $80 per hour; a male Professor of
Finance in a government university earns $40 per hour. Each works the same
number of hours. What could explain the difference in earnings?
A It is difficult to measure the output per hour in each profession.
B Pay in the private sector is profit-related but is not in the public sector.
C Qualifications of accountants are lower than those of Professors of Finance.
D Women are generally given preference over men in professional jobs.

10.11 Each of the four sets of descriptions in the table refers to a person applying for
a job. Which person is likely to receive higher pay?
june 2017/11
11.8 What is likely to happen when the rate of interest increases?
A consumer spending increases B firms buy fewer machines
C people hold more cash D savers earn lower rewards
12.9 In which type of work are employees most likely to earn their highest income at
a relatively young age?
A manual building work B professional legal work
C skilled craft work D university teaching work
13.10 Individuals produced their own goods. They then decided to specialise. They
formed a group and offered their skills to each other but without the use of money.
What is not likely to be the result for the group?
A It will enjoy a rise in its material standard of living.
B It will have a wider choice of goods and services.
C It will need to use a system of barter.
D It will save time in obtaining goods and services.
14.11 Tea is a very popular drink in Turkey and Morocco but coffee is an alternative
drink preferred by many people. Many cafés provide a small biscuit with either a
cup of tea or coffee. Some people put sugar in the drinks to sweeten them. How
would the relation between these goods be classified?
15.12 To achieve horizontal integration, a firm

producing tyres could merge with another
firm producing
A motor cars. B rubber.
C tyre-producing machinery. D tyres.
june 2017/12
16.8 Which statement about financial matters is correct?
A Commercial banks’ main activity is the finance of international trade.
B Paper banknotes possess all the desirable properties needed to act as money.
C Stock exchanges trade mainly in second-hand stocks and shares.
D The central bank acts as the lender of last resort to companies facing bankruptcy.
17.9 What is most likely to be used to support a claim for wage increases in an
industry?
A a decrease in the industry’s sales
B a decrease in the need for specialist training
C an increase in cheap imports of a rival product
D an increase in wages in a similar industry
November 16/12
18.8 What might be a disadvantage to a trade union when arguing for an increase in
its members’ pay?
A an increase in imports of a cheaper, similar product
B the closure of a local training college resulting in fewer potential workers
C the development of a new and profitable brand of the company’s product
D the development of new techniques that increase productivity

19.9 What shows the correct examples of income and wealth?
20.10 Nazmin Uddin works in a local office as a secretary three days a week. She
lives with her parents in a small apartment. Meer Ali owns a successful fitness
centre that employs about twenty people. He owns a large house. Which is most
likely to be correct?
A Nazmin spends a smaller proportion of her income than Meer.
B Nazmin saves most of her income.
C Nazmin would find it easier than Meer to borrow money.
D Nazmin has a lower disposable income than Meer.
November 16/13
21.8 What could increase the ability of a trade union to gain a pay rise for its
members in a coat factory?
A a decrease in the demand for coats
B a decrease in the number of people willing to work in the coat industry
C a decrease in the productivity of workers making coats
D a decrease in the sale of coat exports
22.9 What does net income mean?
A income after allowing for price changes
B income after paying regular household bills
C income less tax and government deductions
D income plus overtime payments
23.10 Nazmin Uddin works in a local office as a secretary three days a week. She
lives with her parents in a small apartment. Meer Ali owns a successful fitness
centre that employs about twenty people. He owns a large house. Which is most
A Nazmin spends a smaller proportion of her income than Meer.
B Nazmin saves most of her income.
C Nazmin would find it easier than Meer to borrow money.
D Nazmin has a lower disposable income than Meer.
June16/12
24.8 A trade union agrees on a ‘closed shop’ policy with employers in an industry.
How does this operate?
A All workers will be members of the trade union.
B Employment will be open only to skilled workers.
C The employers cannot make workers redundant.
D Workers cannot move between employers.
25.9 When will a central bank act as lender of last resort to a commercial bank?
A when a commercial bank faces a liquidity crisis
B when a commercial bank fails to make a profit
C when a commercial bank needs to raise share capital
D when a commercial bank reduces its lending rates

26.10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of
labour. W indicates a legal minimum wage. An influx of immigrant labour causes
the supply curve for labour to shift from S1S1 to S2S2.
How many people will be employed if the minimum

wage legislation is then abolished?
A 4 million B 5 million C 6 million D 7 million
27.11 The table shows how three people spend their income.
For these three people, what is the most
likely order of income, from lowest
income to highest income?
AX→Y→Z
BY→X→Z
CY→Z→X
DZ→X→Y
November15/12
28.9 How do high direct taxes affect spending and how do high interest rates affect
saving by wageearners?
29.10 A national trade union wishes to increase the wages of its members without
reducing the numbers employed. Which factor would help the union to do this?
A The demand for the industry’s product is high.
B The industry consists of a small number of well-organised employers.
C The union workers have low-level skills.
D The workers’ wages are the largest cost of the industry.
30.11 The wage rate of a worker is reduced. Which combination of characteristics of
the job is most likely to cause the worker to stay in thejob?
June 15/12
31.9 A businesswoman seeks a 10-year loan from a bank. She has listed her four
most valuable possessions which could be offered to the bank in order to obtain
the loan. Which item would the bank be least likely to accept as security for the
loan?
A a collection of gold coins, jewellery and antiques
B a house in a desirable part of town
C a part ownership in a race horse
D a portfolio of government bonds

32.10 A trade union and employers agree a minimum wage (W1) which is above the
market equilibrium wage (W) for that industry.
What is the effect of paying the minimum wage

(W1)?
A demand for workers will exceed the supply
B fewer workers will be employed
C some workers will continue to be paid at wage W
D workers will be less willing to work for the minimum
wage
33.11 In choosing their occupation, people often
take into account aspects of the job other than
pay. Which would not be a good match for the
aspects of employment a worker is looking for?
November2014 / 12
34.8 A group of workers in a firm joins a trade union. What would the union be
expected to do?
A arrange for labour-saving technology to be introduced
B discuss safety issues in the workplace with the employer
C ensure job security by promoting the firm’s products through advertising
D negotiate new contracts with major buyers of the firm’s products
35.9 In which occupations do wages tend to be lowest?
A in those where the work is dangerous
B in those where there is an excess supply of labour
C in those where workers are paid on a monthly basis
D in those where workers need long training
36.10 When might rapid inflation together with low interest rates be a source of
concern for a consumer?
A when a consumer lives on a pension linked to the consumer price index
B when a consumer needs to use savings for regular expenditure
C when a consumer pays a fixed rent for their accommodation
D when a consumer wishes to buy a good on credit
37.11 Asda, a supermarket chain, noticed a regular, sharp decrease in sales in the
third week of the month as people ran out of cash before their next wage
payment. The supermarket offered their biggest price reductions at that time. Why
might this policy increase total revenue?
A because consumers’ demand curve shifts to the left in the third week of the month
B because consumers’ demand curve shifts to the right in the third week of the month
C because the price elasticity of demand for Asda’s products decreases in the third week
of the month
D because the price elasticity of demand for Asda’s products increases in the third week
of the month

June2014 / 12
38.8 What may cause an individual to save a higher proportion of their income?
A a belief that the price of goods will rise in the future
B a fall in the rate of interest paid by the country’s banks
C a fear that income will fall in the future
D a rise in the individual’s wish to enjoy higher consumption immediately
39.9 In a particular industry, male workers on average are paid more than female
workers. What might explain this?
A Female workers are less likely to take time off work.
B Female workers are more likely to be in trade unions.
C Male workers have higher qualifications.
D Male workers live nearer to their place of work.
40.10 In South Africa, the rate of consumer spending is relatively high compared with
other developing countries. However, the unemployment rate is high at 25% and
only 27% of students complete the 12 years of basic education. As a result, what is
also likely to be found in South Africa?
A a high average standard of living
B a high current rate of savings
C a high level of debt among consumers
D a high supply of skilled workers
41.11 A trade union is negotiating a wage rise for its members. What will increase the
chance of the wage rise being granted?
A The company’s product has many substitutes.
B The economy is entering a period of recession.
C The government has made strike action illegal.
D Wages are a small part of the company’s costs.

4. The private firm as producer and
employer
1.11 What is found in a competitive market?
A Every firm earns large profits.
B Firms with limited capital can enter the market.
C The costs of production are always lower than in a monopoly.
D There is limited choice for consumers.
2.12 What benefit is likely to result from the extension of specialisation within
manufacturing?
A For a consumer, there are more individually made goods available.
B For a consumer, there could be a lower cost of living.
C For an employee, job satisfaction will increase.
D For an employee, the nature of work is more varied.
3.13 The diagrams show the average total cost (ATC) curves of four firms and how
they change as output increases. Which firm has the highest fixed costs?
4.14 The table shows a firm’s total revenue and total cost at different levels of output.
Which level of output gives maximum profit?
5.15 A large pizza chain in the US decided to sell sandwiches as well to try to
increase its revenue. Which term describes this change?
A diversification B externalities C horizontal merger D vertical merger
6.16 Why might a government encourage a monopoly?
A It can compete against foreign firms. B It can have high average costs.
C It can make excessive profits. D It can prevent innovation.
7.17 What is the most likely result of an increase in interest rates?
A a fall in consumer spending B a fall in productivity
C a rise in borrowing D a rise in investment
8.18 The table shows a government’s receipts from taxation.
What is the total amount of revenue raised by

direct taxes?
A $280m B $700m C $730m D $950m

9.19 Which combination of government policies is most likely to increase the rate of
growth of domestic production in an economy?
A an increase in expenditure on infrastructure and an increase in income tax
B an increase in interest rates and an increase in quotas on imported goods
C an increase in sales tax and an increase in education expenditure
D an increase in subsidies to domestic industry and an increase in tariffs
10.11 The diagram shows two curves. One is the demand for labour, the other is the
supply of labour. A government fixes a minimum wage (MW) that must be paid by
employers. What will be the effect of this minimum
wage?
A fewer workers will be employed
B no change in the market equilibrium
C no worker will be paid wage
D supply of labour will exceed demand
11.12 Which is an internal diseconomy of scale?

A a lack of communication in a firm B a reduction of cost by buying in bulk
C a shortage of skilled labour in an area D traffic congestion in a particular area
12.13 What distinguishes a multinational company from other types of company?
A It exports its products. B It imports its raw materials.
C It produces outside its country of origin. D It promotes its products in trade fairs abroad.
13.14 A major computer company announced that its profits had fallen below the
level predicted. What might have caused this?
A increased advertising costs that greatly improved sales
B low prices that made the company’s product competitive
C new technology that reduced costs
D reduced sales and low prices
14.15 The table shows the variable costs of a firm. It can sell the units for $5 each. Its
fixed costs are $10.
How many units will the firm produce to maximise profits?

A 10 B 11 C 12 D 13
15.12 Which is an internal diseconomy of scale?
A a lack of communication in a firm B a reduction of cost by buying in bulk
C a shortage of skilled labour in an area D traffic congestion in a particular area
16.13 Private multinational clothing companies operate in developing countries to
reduce their average costs of production. Which feature of developing countries
attracts them for this purpose?
A In developing countries, clothing workers receive low wages.
B In developing countries, foreign managers are allowed to pay no income tax.
C In developing countries, multinationals are allowed to take profits out of the country.
D In developing countries, there is a large market for fashion clothing.
17.14 A major computer company announced that its profits had fallen below the
level predicted. What might have caused this?
A increased advertising costs that greatly improved sales
B low prices that made the company’s product competitive
C new technology that reduced costs
D reduced sales and low prices

18.15 An entrepreneur buys a workshop for $10 000 to make picture frames. In the
first year he spent $40 000 on materials and employed two workers. He paid the
workers for each frame produced with a total cost of $30 000. He bought a vehicle
to deliver the frames for $10 000. What were his total variable costs?
A $40 000 B $70 000 C $80 000 D $100 000
june 2017/11
19.13 Which cost would be considered variable by a bus company?
A a new bus B diesel fuel C loan repayment D rent
20.14 A monopoly takes over an industry from competitive firms. What is not likely to
be true about a monopoly compared with a competitive firm?
A A monopoly will earn a higher rate of profit.
B A monopoly will gain a greater share of the market.
C A monopoly will offer a wider choice to the consumer.
D A monopoly will operate on a larger scale of production.
21.15 The table shows how a firm’s production changes as it employs more workers.
What happens to productivity as more workers are employed?

A It is constant then falls. B It is constant then rises.
C It rises then becomes constant. D It rises continuously.
june 2017/12
22.10 The government increases the rate of income tax and decreases the rate of a
sales tax (VAT). From the initial equilibrium point of X, which letter indicates the
new equilibrium point in a market for normal goods?
23.11 In South Africa, the number of skilled workers is relatively low. However,
average wages in South Africa are double the average wage in Brazil and Turkey
and they are 1.6 times higher than in Malaysia. What may be concluded from this
information?
A Malaysian workers are more skilled than South African workers.
B Prices in South Africa are double those in Brazil.
C South Africa’s labour productivity is low.
D South African trade union bargaining power is strong.
24.12 To achieve horizontal integration, a firm producing tyres could merge with
another firm producing
A motor cars. B rubber. C tyre-producing machinery. D tyres.
25.13 Which costs will necessarily fall continuously as output increases?
A average fixed costs B average variable costs
C opportunity costs D repayment costs of borrowing

26.14 A monopoly takes over an industry from competitive firms. What is not likely to
be true about a monopoly compared with a competitive firm?
A A monopoly will earn a higher rate of profit.
B A monopoly will gain a greater share of the market.
C A monopoly will offer a wider choice to the consumer.
D A monopoly will operate on a larger scale of production.
27.15 The table shows the costs of a firm.
What is the value of the firm’s fixed costs?

A $10 B $15 C $70 D $85
November 16/12
28.11 The table shows how household spending changes with income.
What is the first level of income shown at which

savings are positive?
A $4000 B $4600 C $4900 D $5200
29.12 A survey of managers in the USA revealed that

most businessmen feel that a company’s
responsibility is ‘to serve the interests of owners,
employees, customers and the public’. The idea of
profit maximisation, in contrast, implies that a company’s main responsibility
should be to the
A customers B employees C owners D public
30.13 Some agricultural co-operatives have changed from labour-intensive to
capital-intensive methods of production. What might be a cause of this change?
A Average productivity of agricultural workers has increased.
B Farming equipment has become more efficient.
C People are eating less food for health reasons.
D Some agricultural land has been sold for housing.
31.14 A firm has fixed costs of $200 for its daily output. The table shows its daily total
variable costs.
What can be concluded about the firm’s average total cost?

A it falls continuously B it is highest at output 4 units
C it is lowest at output 4 units D it rises continuously
32.15 The table shows the growth rate of output (%) in four sectors of an economy.
Which two sectors showed an increase in the growth rate in the first half of 2014?
A construction and energy B construction and manufacturing
C services and construction D services and manufacturing

33.16 A government decides to sell the monopoly supply of gas to households to a
private firm. How could the government protect the interests of households after
selling a large company to the private sector?
A by excluding all competition from foreign companies
B by imposing a tax on excess profits
C by introducing a quota system for imports of gas
D by removing price controls on gas
November 16/13
34.11 The table shows how household spending changes with income.
What is the first level of income shown at which savings are

positive?
A $2600 B $2900 C $3200 D $3500
35.12 A survey of managers in the USA revealed that most

businessmen feel that a company’s responsibility is ‘to
serve the interests of owners, employees, customers and
the public’. The idea of profit maximisation, in contrast, implies that a company’s
main responsibility should be to the
A customers. B employees. C owners. D public.
36.13 Why is a firm in perfect competition a price taker?
A It has no information about market price.
B Its output is too small to have any effect on market equilibrium.
C There are few barriers to entry.
D There are only a few firms in the industry.
37.14 A firm produced 200 cars a week and employed 50 workers. A fall in demand
caused the firm to reduce its output to 160 cars a week and its labour force to 32.
What was the percentage change in the firm’s productivity?
A It fell by 20%. B It fell by 25%. C It increased by 20%. D It increased by 25%.
38.15 A firm has fixed costs of $100 for its daily output. The table shows its daily total
variable costs.
What can be concluded about the firm’s average total cost?

A It falls continuously. B It is highest at output 4 units.
C It is lowest at output 3 units. D It rises continuously.
June16/11
39.12 How does a firm guarantee that it makes the maximum profit?
A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost
40.13 Which characteristic does a firm in perfect competition have in common with
a monopoly?
A the ability to exclude rivals B the benefit of internal economies of scale
C the problem of diseconomies of scale D the wish to maximise profits

41.14 The table shows the units of factors of production that a firm needs to employ
for two different levels of output. What is the firm experiencing?
A constant returns to scale
B diseconomies of scale
C external diseconomies of scale
D external economies of scale
42.15 The diagram shows the demand and supply of places in independent (private)
schools which charge fees. The equilibrium position is X. The costs of independent
(private) schools rise. Also a report is issued which states that Government schools
achieve very good examination results. What is likely to be the new equilibrium
position?
June16/12
43.12 How does a firm guarantee that it makes the maximum profit?
A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost
44.13 Two firms agree to integrate their activities. What must result?
A a change in their ownership structure
B a lowering of average costs of production
C a move from national to international markets
D a reduction in the level of market risk
45.15 By 2014, government subsidies for the Chinese steel industry led to 200 million
tonnes of excess output. The diagrams show the market for Chinese steel. Which
would represent the position after the subsidy but before the market adjusted?
46.14 The table shows the units of factors of production that a firm needs to employ
for two different levels of output.
What is the firm experiencing?
A constant returns to scale
B economies of scale
C external diseconomies of scale
D external economies of scale

November15/12
47.12 What characteristics are found in a monopoly?
A freedom of entry to the market and a single seller
B freedom of entry to the market and many sellers
C many buyers and a single seller
D many buyers and many sellers
48.13 What must be falling if a firm is experiencing economies of scale?
A average costs B external costs C fixed costs D total costs
49.14 A company supplying water spent $470 million creating a network of pipes to
distribute water more efficiently. It employed local workers and boosted the local
economy. It also provided better facilities for the tourist industry. What cannot be
concluded from the above?
A The company increased its profits.
B There was a decrease in regional unemployment.
C There were fixed costs of $470 million.
D There were positive externalities.
50.15 The table shows the information that managers of a company have from a
week of business activity.
Assuming there are no other costs, what is the

value of the fixed costs?
A $300 B $10 000 C $20 000 D $30 000
51.16 What is most likely to be the responsibility of a government?

A the building of a food processing plant
B the building of a housing estate
C the building of a large shopping centre
D the building of a major rail link
June 15/12
52.12 What may exist in monopoly but not in perfect competition?
A barriers to entry B identical products
C market price D perfect knowledge
53.13 What is not a reason for the decline in manufacturing industries in developed
economies in recent years?
A growth of newly industrialised competitor countries
B invention of automated production methods
C rising costs of factor inputs in the steel industry
D considerable skill shortages as school-leavers prefer to work in the service sector
54.14 In 2013, Barclays Bank had two branches in a city. It decided to close them
both, move to a different building and employ fewer hourly-paid staff. What is
likely to have happened to the bank’s fixed and variable costs?

55.15 The diagram shows the costs of a firm.
What is the firm's total variable cost at an output of

100 units?
A $100 B $500 C $10 000 D $50 000
November2014 / 12
56.12 A large tyre manufacturer expands by taking over a rubber plantation. Of what
is this an example?
A backward vertical integration B diversifying integration
C forward vertical integration D horizontal integration
57.13 What may exist in perfect competition but not in monopoly?
A barriers to entry B economies of scale
C many sellers D product differentiation
58.14 The diagram shows the cost and revenue curves of a firm which starts to make
a profit only after producing 100 units of
output. What are the correct labels for line 1
and line 2?
59.15 The table shows output and total costs of production of a firm with three
workers.
How did output per worker and average cost of the
product change over the period?
June2014 / 12
60.12 When a shoe manufacturer doubles all factors of production output more than
doubles. Which economic concept does this illustrate?
A diseconomies of scale B economies of scale
C increasing profits D opportunity cost
61.13 Which market conditions apply to firms that operate in perfect competition
and which to a monopoly?

62.14 The diagram shows the fixed costs, variable costs and total costs of a firm.
Which distance represents the firm’s fixed

costs?
A PS B QR C QS D RS
63.15 When it produces 100 units, a firm’s
total variable cost is $300 and its total
fixed cost is $2700.
What is the average cost?
A $3 B $24 C $27 D $30

5. Role of government in Economy
1.20 The managers of a firm have to discuss the following topics. Which topic is least
likely to be directly affected by the government’s influence on the firm?
A health and safety laws
B replacing one of its managers
C the interest it pays on borrowed money
D the minimum wage it must pay its workers
2.16 What, when increased, will help a government to reduce the rate of inflation?
A budget deficit B consumer spending C income tax D pensions
3.17 The government introduces a new tax. It adds $1 to the price of every $10 good
and $2 to the price of every $20 good. What can be concluded about the nature
of this tax?
4.18 The graph shows the percentage of income paid in taxation. Which line
represents a proportional tax?
5.19 A worker earns $40 000 a year and pays 20% income tax. He spends $5000 on
electrical goods and $10 000 on a car, and pays 20% sales tax on each. How
much indirect tax does he pay?
A $3000 B $5000 C $8000 D $11 000
6.20 Why is the Human Development Index (HDI) often considered to be better than
Gross Domestic Product (GDP) per head as a measure of living standards?
A GDP per head excludes economic growth.
B GDP per head ignores population growth.
C HDI includes more than the production of goods and services.
D HDI is calculated by the national government.
7.21 A finance minister reported that the economy was experiencing inflation and
economic growth. What would be evidence that both of these had occurred?
A increased exports and increased output
B increased imports and increased income tax
C increased interest rates and increased net migration
D increased prices and increased employment
8.16 What, when increased, will help a government to reduce the rate of inflation?
A budget deficit B consumer spending C income tax D pensions

9.17 Which policy is most likely to increase the level of economic activity?
A increasing the exchange rate B increasing the rate of interest
C reducing government spending D reducing the general tax level
10.18 The graph shows the percentage of income paid in taxation. Which line
represents a proportional tax?
11.19 A government collects the following revenue in a year.
What is the amount of indirect tax revenue?

A $200 m B $400 m C $500 m D $600 m
june 2017/11
12.16 When is a tax progressive?
A when some goods have a higher tax than others
B when the rate of tax increases as income increases
C when the tax is linked to the rate of inflation
D when the tax is on incomes rather than on goods or services
13.17 A government intends to improve skills by offering free training to school
leavers at age 16 until they reach 18 years. It proposes to pay for this by taxing
the profits of firms. Which policies do these proposals involve?
14.18 In trying to achieve one of its aims a government may make it difficult to
achieve another aim. What is an example of this conflict?
A Achieving a more even distribution of income may prevent a rise in the average
standard of living.
B Achieving an increase in economic growth may prevent full employment.
C Achieving full employment may prevent stable prices.
D Achieving stable prices may prevent a current account surplus on the balance of
payments.
15.19 The charts relate to the Financial Statement of the government of New Zealand
for 2014.
What can be concluded?

A Expenditure on welfare was higher than the combined expenditure on education and
health.
B The government was $2.8 billion in surplus.
C The largest source of the government’s income was from direct taxation.
D The number of business corporations was very small.
16.20 A newspaper reported that a country’s economy had grown by 3% during the
last year. What must have increased in that year?
A costs of production B gross domestic product
C unemployment D wage levels
june 2017/12
17.16 When is a tax progressive?
A when some goods have a higher tax than others
B when the rate of tax increases as income increases
C when the tax is linked to the rate of inflation
D when the tax is on incomes rather than on goods or services
18.17 A government wishes to try to make the distribution of income in the country
more equal. Which policy would be most likely to achieve this?
A reducing housing subsidies
B reducing indirect tax on food
C reducing inheritance tax
D reducing tax on the dividends on stocks and shares
19.18 In trying to achieve one of its aims a government may make it difficult to
achieve another aim. What is an example of this conflict?
A Achieving a more even distribution of income may prevent a rise in the average
standard of living.
B Achieving an increase in economic growth may prevent full employment.
C Achieving full employment may prevent stable prices.
D Achieving stable prices may prevent a current account surplus on the balance of
payments.
20.19 Which policy combination will be the most effective if a government wishes 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
November 16/12
21.17 In 2015, 70 000 extra people lost their jobs but total employment rose by 75
000. What could explain this?
A Some people may have emigrated.
B Some people may have gone back to education.
C Some people may have re-entered the labour force.
D Some people may have retired early.
22.18 The table shows taxes as a percentage of Gross Domestic Product (GDP) for
four countries. From this information, which country had the highest percentage of
direct taxation as a percentage of GDP?

23.19 A government gives farmers a subsidy of $5 per kilo to supply food on the
open market where X is the original equilibrium position. The effect is illustrated in
the diagram.
What will be the new equilibrium price and
quantity supplied as a result of the subsidy?
November 16/13
24.16 A government decides to sell the monopoly supply of gas to households to a
private firm. How could the government protect the interests of households after
selling a large company to the private sector?
A by excluding all competition from foreign companies
B by imposing a tax on excess profits
C by introducing a quota system for imports of gas
D by removing price controls on gas
25.17 A government decides to increase the rate of income tax and spend the extra
revenue on providing training colleges. How might this be described?
A as fiscal and monetary policy
B as fiscal and supply-side policy
C as fiscal, monetary and supply-side policy
D as monetary and supply-side policy
26.18 A government taxes farmers $12 per kilo when they supply food on the open
market where X is the original equilibrium position. The effect is illustrated in the
diagram below. What will be the new equilibrium
price and quantity supplied as a result of the tax?
.
27.19 The table shows taxes as percentages of Gross Domestic Product (GDP) for four
countries. From this information, which country had the lowest percentage of
direct taxation as a percentage of GDP?
June16/11
28.16 A government wishes to stimulate economic recovery.Which action will assist
this?
A decreasing government investment B decreasing income tax
C increasing indirect taxation D increasing interest rates

29.17 What is an expansionary monetary policy?
A a decrease in the interest rate
B a decrease in the rate of value added tax
C an increase in the power of trade unions
D an increase in the standard rate of income tax
30.18 A government decides to make two changes to its taxation policies. It lowers
the tax on petrol and raises the tax on food. How do these changes affect the
regressive nature of the taxes?

What is the total amount of revenue raised by
indirect taxes?
A $95 m B $300 m C $400 m D $495 m
June16/12
32.16 A government wishes to stimulate economic
recovery. Which action will assist this?
A decreasing government investment
B decreasing income tax
C increasing indirect taxation
D increasing interest rates
33.17 A government fixes the rate of income tax at $0.20 per dollar earned. What
describes this type of taxation?
A indirect B progressive C proportional D regressive
34.18 A government introduces a law to reduce the restrictive practices of trade
unions. What would be the most likely purpose of this law?
A to change from a mixed to a planned economy
B to ensure a fairer distribution of earnings
C to increase competition in labour markets
D to reduce government expenditure on job training
What is the total amount of revenue raised by indirect taxes?

A $300 m B $350 m C $385 m D $435 m
November15/12
36.17 Which statement about the meaning of government
economic aims is correct?
A Economic growth means that a country’s real output must rise over time.
B Full employment means that no one must be unemployed.
C Price stability means that the price of all goods and services must remain unchanged.
D Redistribution of income means that everyone must have equal incomes.

37.18 A government wishes to close the gap between the earnings of the rich and
the poor. What should it do to achieve this aim?
A increase progressive taxation B increase the rate of interest
C increase the rate of sales tax D increase the supply of money
38.19 A government decided to increase its spending on building schools and
hospitals. Which aim of government policy is most likely to be achieved by this
increase?
A a balance of payments surplus B a stronger exchange rate
C economic growth D price stability
39.20 The forecast for Germany’s GDP growth in 2013 was 1.5%. What might cause
economic growth?
A an increase in imports B an increase in interest rates
C an increase in productivity D an increase in unemployment
40.21 The proportion of workers employed varies between different industries and
between developing and developed economies. Which combination in the table
is likely to have the highest percentage of workers employed?
June 15/12
41.16 What is most likely to cause a fall in the rate of inflation?

A an increase in consumer spending B an increase in import prices
C an increase in income tax D an increase in wage rates
42.17 In recent years, governments have had to manage the effects of a world
recession. Which supply-side policy could have been used to stimulate economic
growth?
A increases in income tax B investment in skills training schemes
C payments of unemployment benefits D reduction in interest rates
43.18 Russia exports wheat. In 2010, a bad harvest led the Russian government to
prevent the export of wheat, to ensure enough supplies were kept for domestic
use. What was the most likely outcome of the government’s action?
A prices were fixed by the wheat producers
B the amount produced was determined by the government
C the price of wheat abroad fell
D there was a redistribution of domestic production
44.19 A government increases expenditure on infrastructure to stimulate an
economy. With which of the other government aims for an economy might this
conflict?
A a decrease in income inequality B a higher rate of economic growth
C a lower level of unemployment D a steady price level
45.20 Who is most likely to benefit during a period of inflation?
A creditors (lenders) B debtors (borrowers)
C fixed income earners D holders of cash

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46.16 A government aims to keep domestic prices stable in a fully employed
economy. Which policy should it use?
A increase expenditure on defence B increase indirect taxes
C increase the rate of interest D increase the wages of government workers
47.17 What describes a regressive tax?
A It is paid by a higher proportion of high income earners.
B It is paid by a higher proportion of low income earners.
C It takes a higher proportion from high incomes.
D It takes a higher proportion from low incomes.
48.18 In 2011 the Egyptian Government increased the top rate of income tax. What is
likely to have been the main aim of this policy measure?
A a reallocation of resources from producing necessities to producing luxury products
B a redistribution of income from the rich to the poor
C a reduction in the deficit on the current account of the balance of payments
D a reduction in the level of cost-push inflation
49.19 The table shows the tax paid at different levels of income.
Which describes this tax?

A progressive at all levels of income
B proportional at all levels of income
C proportional at lower incomes, progressive at higher
incomes
D proportional at lower incomes, regressive at higher
incomes
June2014 / 12
50.16 Which policy is an example of an expansionary monetary policy?
A lower interest rates B lower money supply growth
C lower public sector spending D lower taxation
51.17 What is not a public sector expenditure?
A claims paid on travel insurance for cancelled flights
B collections of rubbish by a local council to meet regulations on recycling waste
C grants from central funds to compensate people whose property has been damaged
by storms
D the establishment of a national database to assist the police in finding criminals
52.18 Which pair of government actions combines a fiscal policy with a supply-side
policy?
A changing government spending with changing interest rates
B cutting tax rates with providing information on job vacancies
C limiting bank lending with the privatisation of industry
D restricting credit with less control over labour markets
53.19 A government collects the following revenue in a year.
What is the amount of indirect tax revenue?

A $30 m B $70 m C $100 m D $500 m
54.20 Which type of unemployment occurs when the total demand for goods and
services in the economy falls?
A cyclical B frictional C seasonal D structural

6. Economic indicators
1.21 In the construction of a consumer prices index (CPI), a total weight of 1000 is
used. If a weight of 300 is given to food and a weight of 150 is given to transport,
then
A consumers are spending half as much on transport as they do on food.
B consumers must be spending more on necessities than on luxury goods.
C food prices must be rising twice as fast as transport prices.
D the weights cannot be changed until the index reaches 1000.
2.22 The table shows unemployment and inflation statistics for the US, Japan and
Sweden for year 1 and year 2.
Which conclusion can be made from the table?

A In year 1, the cost of living rose in the US.
B In year 1, the same number of people were unemployed in Sweden and Japan.
C The number of unemployed people decreased in all three countries.
D Unemployment and inflation moved in the same direction in Japan.
3.23 Why is the Human Development Index (HDI) a better indicator of comparative
living standards than Gross Domestic Product (GDP) per head?
A It includes international trade.
B It includes more measures of living standards.
C It is measured in money terms.
D It is more directly linked to economic growth.
4.22 The diagrams show percentage employment in different sectors in two
countries.
Which statement is correct when comparing country X and country Y?

A Country X employs more workers in secondary industry than country Y.
B Country X produces more primary output than country Y.
C Country Y is more developed than country X.
D Country Y produces more secondary output than country X.
5.23 What would be a cause of cost-push inflationary pressure in an industry which
supplies mobile (cell) phones?
A an increase in advertising expenses for mobile phones
B an increase in export duties on mobile phones
C an increase in income taxes on wages of employees
D an increase in world demand for mobile phones

Gross Domestic Product (GDP) per head as a measure of living standards?
7.26 The table shows the Consumer Prices Index (CPI) for selected cities for August
2015 relative to New York, USA at 100.
What can be concluded from the table?

A Geneva had the highest average price level.
B Living standards were highest in Lima.
C Singapore was more expensive than Oslo.
D The annual rate of inflation was the same in Istanbul and
Johannesburg.
june 2017/11
8.21 A country has a low GDP and a large population but ranks relatively highly on
the HDI. Which combination may exist in the country?
9.22 The information below refers to an economy for a financial year. government
expenditure = $2866 million government revenue = $1940 million What was the
budget balance of the government in that year?
A $926 million in deficit B $4806 million in deficit
C $926 million in surplus D $4806 million in surplus
10.23 In a developing country real incomes have risen. Which situation would
definitely have caused this?
june 2017/12
11.20 A newspaper reported that a country’s economy had grown by 3% during the
last year. What must have increased in that year?
A costs of production B gross domestic product
C unemployment D wage levels
12.21 What is meant by deflation?
A a fall in the general price level
B a fall in the international value of a currency
C a fall in the rate of inflation
D a fall in the real value of money

13.22 The information below refers to an economy for a financial year. government
expenditure = $2866 million, government revenue = $1940 million. What was the
budget balance of the government in that year?
A $926 million in deficit B $4806 million in deficit
C $926 million in surplus D $4806 million in surplus
14.23 What is the change in GDP per head, after taking account of price increases
(real change), between 2000 and 2013?
A from $15 to $125
B from $1250 to $1333
C from $1333 to $1250
D from $1333 to $1500
November 16/12
15.20 What is involved in the construction of a Retail Price Index?
A a base year B incomes C price elasticity of products D quantity supplied
16.21 Why is nominal Gross Domestic Product not a good measure to compare the
standard of living in a country between two years?
A It does not account for inflation.
B It does not allow for savings.
C It does not include government expenditure.
D It only compares export prices with import prices.
17.22 In 2010 there was an increase in net emigration from Ireland. What is most
likely to have caused this increase?
A a decrease in job security abroad B a decrease in wage rates abroad
C an increase in Ireland’s real GDP D an increase in unemployment in Ireland
18.23 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 Retail
Price Index?
A by deducting the goods and services
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
June16/11
19.20 What is Gross Domestic Product (GDP) divided by to calculate GDP per head?
A net migration B the birth rate C the total population D the working population
20.21 Who is made worse off during a period of deflation?
A cash holders B creditors C debtors D fixed income earners
21.22 The table gives information about three economic indicators in four countries.
What may be concluded from this information?

A Countries with higher inflation have higher interest rates.
B Countries with higher interest rates have lower unemployment.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the lowest inflation.
22.23 What must result when a country experiences economic growth?
A a higher Gross Domestic Product B a lower rate of inflation
C a surplus on the balance of trade D an improved standard of living for everybody

23.24 Why may the figure calculated for a developing country’s Gross Domestic
Product be inaccurate?
A There are unused resources.
B There is a high reliance on imports.
C There is a large amount of subsistence farming.
D There is a small amount of skilled labour.
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24.20 What would best indicate the start of an economic boom?
A negative growth of Gross Domestic Product
B rising interest rates
C rising levels of employment
D steadily falling price levels
25.21 A country has a very high Gross Domestic Product and a small population but
has a low standard of living. What may be the cause of this low standard of living?
A There is a high inequality of income distribution and a high provision of merit goods.
B There is a high inequality of income distribution and a limited provision of merit goods.
C There is equality of income distribution and a high provision of merit goods.
D There is equality of income distribution and a low provision of merit goods.
26.22 The table gives information about three economic indicators in four countries.
What may be concluded from this information?

A Countries with higher inflation have higher interest rates.
B Countries with higher interest rates have lower unemployment.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the lowest inflation.
27.23 The weight for a product in the consumer price index was increased. What is
most likely to have caused this adjustment?
A The product has become more expensive to produce.
B The product has been offered for sale in more retail outlets.
C The product has improved in quality and performance.
D The product has taken a bigger share of consumers’ income.
28.24 China is classified as a developing country. Recently, contributions to its Gross
Domestic Product (GDP) were agriculture 10%, construction 13%, manufacturing
32% and services 45%. Which contribution to GDP usually decreases first when
countries move to a higher level of development?
A agriculture B construction C manufacturing D services
November15/12
29.22 In 2009, a country had an inflation rate of 2%. The table shows the inflation rate
in the following years. In which year did deflation start?
A 2010 B 2011 C 2012 D 2013
23 Which item does the Human Development Index (HDI)
of a country include, in addition to real GDP per head and
life expectancy at birth?
A expenditure on law and order
B literacy rate among adults
C number of doctors
D retirement age

30.24 Why might real GDP per head not be a good indicator of the standard of living
in developing countries?
A It does not account for inflation. B It does not account for population changes.
C It does not include primary production. D It does not include unpaid work on farms.
June 15/12
31.21 The Human Development Index (HDI) measures more than just average
incomes. What are two additional measures it includes?
A life expectancy years of schooling B percentage unemployed number of hospitals
C poverty rate years of schooling D years of schooling access to clean water
32.22 The table shows some economic indicators for four countries.
What can be concluded from the table?

A high GDP growth occurred with low
unemployment
B high inflation occurred with high GDP growth
C low GDP growth occurred with low inflation
D low inflation occurred with high unemployment
33.23 When would an increase in aggregate demand be least likely to result in
inflation in an economy?
A when it is the result of an increase in government expenditure
B when it is the result of an increase in expenditure on consumer goods
C when there are substantial unemployed resources in the economy
D when there is a substantial increase in expenditure on imports
November2014 / 12
34.20 What must be a consequence of deflation in a country?
A a decrease in its exports B a decrease in its saving
C an increase in its employment D an increase in the real value of its money
35.21 World population increased from 5.26 billion in 1990 to just over 7.00 billion in
2012. It is predicted to rise to 8.00 billion by 2025. What is most likely to explain
this?
A an increase in migration from developing to developed countries
B an increase in the birth rate in developing countries
C an increase in the death rate in developed countries
D an increase in the death rate in developing countries
36.22 The table shows the rate of unemployment and the annual rates of change of
gross domestic product (GDP) and consumer prices for four countries in 2012.
Which country was experiencing the worst economic recession?
37.23 The table shows the percentage change (%) in employment over a period for
a country with three economic sectors.
What could be concluded from this information?

A Agricultural output fell.
B The country became more developed.
C The working population stayed constant.
D Total employment remained the same.

June2014 / 12
GDP per head as a measure of living standards?
39.22 In 2013 there was a period of low interest rates and high inflation in an
economy. Who would be most likely to benefit and who most likely to lose during
such a period?
40.23 In which case is success for the government in achieving the first aim likely to
cause problems in achieving the second?

7. Developed and developing economies:
trends in production, population and living
standards
1.24 The diagram shows percentage changes in house prices in an economically
developed country.
What might have caused these changes in

prices?
A an increase in government subsidies to house
builders
B an increase in income
C an increase in the supply of houses
D an increase in unemployment
2.25 What is meant by an optimum population for a country?

A a population that balances its birth rate and its death rate
B a population that maximises output per head
C a population that results in fewest negative externalities
D a population that uses all resources available
3.26 What does a population pyramid of a country show?
A its age and sex distribution B its employment pattern
C its income distribution D its migration pattern
4.27 What is usually found in a developed country?
A a high GDP per head with a low level of employment
B a high level of labour skills with a low level of car ownership
C a high rate of adult literacy with a low level of poverty
D a high rate of population growth with a low level of labour productivity
5.24 What is most likely to cause an increase in the population growth of a
developing country?
A a decrease in immigration B a decrease in the birth rate
C a decrease in the death rate D a decrease in the standard of living
6.25 The charts show the population structure of a country in 1960 and 2015.
What decreased between 1960 and

2015?
A average age
B number of people below 15
C number of people over 60
D total population

7.26 At the start of the year a developing country had a population of 1 000 000, its
birth rate was 16.0 per thousand per annum and its death rate was 8.0 per
thousand per annum. At the end of the year the population was 1 005 000. What
could explain this change in the population
A The birth rate rose. B The death rate fell.
C There were 3000 emigrants. D There were 5000 immigrants.
8.21 What may cause an immediate increase in the working population?
A a higher birth rate B a higher death rate
C a higher fertility rate D a higher rate of net immigration
9.22 The diagrams show percentage employment in different sectors in two
countries.
Which statement is correct when comparing country X and country Y?

A Country X employs more workers in secondary industry than country Y.
B Country X produces more primary output than country Y.
C Country Y is more developed than country X.
D Country Y produces more secondary output than country X.
10.23 What is likely to fall when the rate of unemployment falls?
A business confidence B consumer spending
C government revenue D government welfare payments
11.24 The birth rate and death rate in a country are the same. What is likely to
happen if there is a decrease in the birth rate, while the death rate and migration
remain the same?
A population structure will remain the same B population will decrease
C the standard of living will decrease D the working population will increase
What decreased between 1960 and 2015?

A average age B number of people below 15
C number of people over 60 D total population

june 2017/11
13.23 In a developing country real incomes have risen. Which situation would
definitely have caused this?
14.24 Which characteristic do developed and developing economies have in

common?
A participation in international trade B high birth rates and high death rates
C rapid economic growth D stable financial conditions and institutions
15.25 The diagram shows population projections until the year 2075 for selected
areas.
Assuming no migration, which situation

must exist if the population is to change
in the manner shown in the diagram?
A birth rate falling and death rate falling
B birth rate greater than death rate
C death rate greater than birth rate
D death rate rising and birth rate falling
16.26 The table gives information about four countries. Which country is likely to have
the highest standard of living?
june 2017/12
17.24 Which statement about the poorest families in developing economies is not
A The children will be expected to work to help provide income.
B The family will find it easy to obtain loans to develop their farms.
C The family will have a low earning capacity.
D The family will suffer from malnutrition and lack of medical care.
18.25 The diagram shows population projections until the year 2075 for selected
areas.
Assuming no migration, which situation

must exist if the population is to change in
the manner shown in the diagram?
A birth rate falling and death rate falling
B birth rate greater than death rate
C death rate greater than birth rate
D death rate rising and birth rate falling

19.26 The table shows information about four countries. Which country is likely to be
least developed?
November 16/12
20.24 Which outcome is least likely to be found with greater economic
development?
A A greater percentage of the population are highly educated.
B A greater percentage of the population are homeowners.
C A greater percentage of the population are old.
D A greater percentage of the population are very poor.
21.25 A government introduces state benefits for the unemployed and increases the
top rate of income tax to pay for the benefits. What effect will these changes have
on poverty and the tax system?
22.26 The chart shows total world carbon emissions in 1995 and predicted emissions
by 2035.
If the chart proves to be correct, what will have happened by 2035?

A Africa and the Middle East will have responsibility for the same amount of carbon
emissions in 2035 as in 1995.
B Between 1995 and 2035, the Middle East will have increased its industrialisation by as
much as Latin America.
C By 2035 the combined percentage of carbon emissions caused by Africa and Latin
America will have doubled.
D The US will have decreased its carbon emissions by a smaller percentage than Western
Europe.

November 16/13
23.20 A newspaper reports that there has been an economic slump in an economy.
What would an economist expect the immediate effect to be?
A Production will decrease. B Saving will decrease.
C Taxation will decrease. D The population will decrease.
24.21 How is the pattern of employment likely to change when a country becomes
more developed?
A from regular employment to seasonal employment
B from rural employment to urban employment
C from skilled employment to manual employment
D from tertiary employment to primary employment
25.22 In 2010 there was an increase in net emigration from Ireland. What is most
likely to have caused this increase?
A a decrease in job security abroad B a decrease in wage rates abroad
C an increase in Ireland’s real GDP D an increase in unemployment in Ireland
26.23 The table shows some economic indicators. Which increase in the first
indicator is most likely to lead to an increase in the second indicator?
27.24 What would be most likely to cause the population to decrease if other things
remain constant?
A a decrease in the birth rate B a decrease in the death rate
C an increase in net immigration D an increase in the fertility rate
28.25 Developed countries have a high and increasing proportion of their population
over the age of 65. Which economic consequence will be most likely to result
from this kind of population change?
A Government transfer payments will increase.
B More facilities will be needed to retrain workers.
C There will be a rise in the economic growth rate.
D The total savings in the economy will increase.
29.26 The chart shows total world carbon emissions in 1995 and predicted emissions
by 2035.
If the chart proves to be correct, what would have happened by 2035?

A Africa will emit the least carbon.
B China will cause about a third of the emissions of all developing areas shown.
C Developed areas will have reduced their absolute amount of carbon emissions.
D The US will have decreased its carbon emissions by a smaller percentage than Western
Europe.

June16/11
30.25 The table gives information on four countries. Which country is likely to be most
developed?
31.26 It has been predicted that by 2050 China will have 53 million fewer children
under 14, 100 million fewer workers and 234 million more people aged over 60.
What will be the likely effect in China of these changes?
A The dependency ratio will fall. B The Government’s expenditure will fall.
C The Government’s income will fall. D The total population will fall.
June16/12
32.25 Some people think that the debts and interest payments of the poorest
countries in the world should be cancelled. What might be a disadvantage for the
poorest countries if this were done?
A International banks might be less willing to give loans to poor countries.
B Interest payments to the lenders would fall.
C The standard of living of people in the poorest countries would fall.
D Trade between the poorest countries and the rest of the world would increase.
33.26 Which country is likely to have the highest standard of living?
November15/12
34.25 The richest 60% of the population in a developed economy received an
increase in income. Which row is correct as a result of this increase?
35.26 According to the United Nations, the share of world population living in
developing countries will increase from 83% in 2003 to 88% in 2050. What is likely
to be the major cause of this predicted change?
A Climate change will lead to lower food output and starvation.
B Improved education for girls will lead to a small decline in birth rates.
C Increasing numbers of people will migrate to developed countries.
D Modern medicine and sanitation will lead to a rapid decline in death rates.

June 15/12
36.24 In 2013, subsistence farming, which involved a large percentage of the

population, was a significant activity in the Philippines and Indonesia. What can
be concluded about the Philippines and Indonesia from this information?
A a good use was being made of natural resources
B production was likely to involve skilled labour
C the GDP in these countries was likely to be underestimated
D there was no need to import food because the population was self-sufficient
37.25 Which feature is not a typical characteristic of a developed country?
A a high death rate B a high literacy rate
C a large elderly population D a low number of doctors per head
During this period, how did birth and

death rates change?
39.27 Which combination of changes is most likely to result in a fall in living

standards in a country?
November2014 / 12
40.24 What is most likely to be found in a developed country?
A a small amount of income spent on leisure and entertainment
B a small average family size
C a small number of old people
D a small number of professional people
41.25 What will increase the level of economic development in a country?
A a higher infant mortality rate B a higher inflation rate
C a higher interest rate D a higher literacy rate
42.26 Developing countries have, relatively, far more poor people than developed
countries. What is the reason for this?
A Developing countries have much higher fertility rates.
B It is not possible for migrants from developing countries to work in developed countries.
C The natural increase in population is lower in developing countries.
D There is an ageing population in all developing countries.

43.27 The table shows statistics for four countries in southern Africa. From the
information given, which country has the lowest standard of living?
June2014 / 12
44.24 Which combination of influences must have occurred for a population to be
falling when there is no migration?
45.25 Developing countries often wish to prevent the population in rural areas
moving to the towns. Investment grants are given to companies if they set up their
businesses in rural areas. What is this policy intended to achieve?
A decreased transport costs B decreased external cost
C increased economies of scale D increased use of labour
46.26 Increasing numbers of qualified medical workers from developing economies
migrate to developed economies. What explains this migration?
A There are better working conditions in hospitals and clinics in developed economies.
B There are fewer patients requiring medical treatment in developing countries.
C There is a lack of training opportunities for medical staff in developed economies.
D There is an oversupply of qualified medical workers in developing countries.
47.27 The table gives information about four countries. Which country has the lowest
standard of living?

8. International aspects
1.28 What is the least likely feature of globalisation?
A integration of trade B international capital flows
C the spread of multinational companies D unrestricted movement of labour
2.29 The diagrams show the composition of exports and imports of a country.
What is true for this country?

A There is a deficit in the balance of trade in goods.
B There is a deficit in the balance of trade in services.
C There is a surplus in the balance of trade in goods.
D There is a surplus in the balance of trade in services.
3.30 Countries in Europe were in a recession in 2012. World oil prices were expected
to fall. In fact in 2012, oil prices rose. Which international events might explain this?
4.27 What is a benefit of tariffs?
A increased choice B increased government revenue
C more competition D more trade
5.28 Which name is given to the external value of a currency in terms of another
currency?
A the balance of trade B the exchange rate
C the relative inflation rate D the supply of money
6.29 It was reported in 2011 that the United States (US) needed to achieve a lower
current account deficit. What would help this in the short run?
A a protectionist policy
B a strong exchange rate
C increased private sector spending
D investment in the US by multinational firms

7.30 The table shows the number of units of foreign currency that the UK pound (UK£)
could buy in August 2012 and August 2013.
What can be concluded from the table about the change in currency values
between 2012 and 2013?
A The Argentine peso appreciated against the UK pound.
B The Argentine peso depreciated against the euro.
C The euro depreciated against the UK pound.
D The South African rand appreciated against the euro.
8.27 What is a benefit of tariffs?
A increased choice B increased government revenue
C more competition D more trade
29.28 What is an increase in the value of an exchange rate of a currency in a
floating system called?
A appreciation B depreciation C devaluation D revaluation
29 A developing economy has a surplus on its trade in goods of $75 billion and a
deficit on its trade in services of $25 billion, while its current account is in overall
balance. Which values for net income (primary income) and net transfers
(secondary income) result in the current account being in balance?
30 What policy would encourage greater international specialisation?

A the promotion of industrial diversification
B the protection of new businesses
C the reduction of tariffs
D the subsidising of service industries
june 2017/11
27 Which government policy is most likely to increase the volume of exports?
A devaluation B embargoes C quotas D tariffs
28 What is necessarily involved in international free trade?
A the absence of transport costs
B the gift of foreign aid from charities
C the supply of zero interest rate government loans
D the unrestricted exchange of goods and services
29 In recent years, the US has experienced a deficit on its overall current account of
the balance of payments. What could have led to an increase in the size of the
deficit?
A increased competitiveness of goods made in the US
B increased earnings by US investors in foreign companies
C increased numbers of overseas visitors to the US
D increased spending on US military bases abroad

30 In 2015, China was the world’s largest exporter of manufactured goods and a
major importer of oil and minerals. China devalued the yuan (renminbi) by 2%.
According to economic theory, what would have been a consequence of this
devaluation?
A China paid less in foreign currencies for imports.
B China reduced its demand for oil and minerals.
C China’s exports became less competitive.
D China’s trading partners improved their balance of trade with China.
june 2017/12
27 Which government policy is most likely to increase the volume of exports?
A devaluation B embargoes C quotas D tariffs
28 What might encourage international specialisation between countries?
A free trade B inefficiencies in production C labour immobility D tariffs
29 In 2015, Russia banned the imports of food, such as milk, from the European Union
(EU). Which outcomes are most likely to happen as a result?
30 In 2010, Vietnam experienced a deficit in the value of its trade in goods (visible)
despite exporting a greater number of goods than it imported. What could explain
this?
A The average price of its goods imported exceeded the average price of its goods
exported.
B The average value of its goods exported exceeded the average value of its goods
imported.
C The country had a deficit on its trade in services.
D The country’s government imposed tariffs on imports.
November 16/12
27 What encourages international specialisation?
A a foreign exchange shortage B diseconomies of scale
C free trade D quotas
28 A Japanese car manufacturer decided to produce its cars in a factory in Europe.
What would not be a reason why they might have chosen to do this?
A cheaper wage costs in Europe
B the availability of raw materials
C to gain external economies from skilled labour in Europe
D to increase Japanese self-sufficiency
29 A government removed the quota on goods imported into the country. What is
the most likely result of this?
A a decrease in demand for domestic production
B a decrease in domestic unemployment
C a decrease in exports
D a decrease in the balance of trade deficit

30 The table shows components of Japan’s current account balance in trillion Yen for
2011 and 2012.
Which balance improved between 2011 and 2012?

A balance of current transfers B balance of goods
C balance of income D balance of services
November 16/13
27 What encourages international specialisation?
A a foreign exchange shortage B diseconomies of scale
C free trade D quotas
28 A Japanese car manufacturer decided to produce its cars in a factory in Europe.
What would not be a reason why they might have chosen to do this?
A cheaper wage costs in Europe
B the availability of raw materials
C to gain external economies from skilled labour in Europe
D to increase Japanese self-sufficiency
29 A government removed the quota on goods imported into the country.
What is the most likely result of this?
A a decrease in demand for domestic production
B a decrease in domestic unemployment
C a decrease in exports
D a decrease in the balance of trade deficit
30 In 2009 the exchange rate of the Singapore dollar changed from 1.49 = 1 US dollar
to 1.43, Singapore dollars = 1 US dollar. How would this affect the import prices
and export prices for Singapore?
June16/11
27 What might cause the balance on the current account of Mauritius to improve?
A increased purchases of coffee from Kenya
B increased transport of Mauritian goods in Greek ships
C increased spending by Mauritians on holidays in South Africa
D increased spending by tourists in Mauritian hotels
28 A country says that it wishes to increase its trade protection policies.
What might that involve?
A conservation of resources and taxes on external costs
B eliminating waste in the use of resources and grants to multinational companies
C increased self sufficiency and increased tariffs
D price controls and increased regulations on domestic monopoly industries

29 It has been suggested that all countries producing arms should ban the export of
weapons and cut production in order to reduce the risk of war. What would
happen if this occurred?
A The balance of payments on current account of countries exporting weapons would
immediately improve.
B The price of existing weapons would fall.
C There would be a risk of structural unemployment in countries that are major producers
of weapons.
D There would be no overall effect on the balance of payments as countries would
produce their own weapons.
30 70% of the 10 million kilograms of tea produced in India is exported. The UK,
Japan, and Germany buy the most. Wholesale prices rose 10% in 2013 as supply
was restricted because of a strike. How would these circumstances be shown in
international trade accounts?
A a credit on the goods and services account for Germany
B a debit on the goods and services account for Japan
C a 10% fall in the balance of the goods and services account for India
D a 10% rise in the balance of goods and services account for the UK
June16/12
27 What might cause the balance on the current account of Mauritius to improve?
A increased purchases of coffee from Kenya
B increased transport of Mauritian goods in Greek ships
C increased spending by Mauritians on holidays in South Africa
D increased spending by tourists in Mauritian hotels
28 A country says that it wishes to increase its trade protection policies.
What might that involve?
A conservation of resources and taxes on external costs
B eliminating waste in the use of resources and grants to multinational companies
C increased self sufficiency and increased tariffs
D price controls and increased regulations on domestic monopoly industries
29 It has been suggested that all countries producing arms should ban the export of
weapons and cut production in order to reduce the risk of war. What would
happen if this occurred?
A The balance of payments on current account of countries exporting weapons would
immediately improve.
B The price of existing weapons would fall.
C There would be a risk of structural unemployment in countries that are major producers
of weapons.
D There would be no overall effect on the balance of payments as countries would
produce their own weapons.
30 The US currently trades in oil with the UK. The discovery of new oil and gas
deposits in the US will mean that its oil imports decrease and its oil exports
increase. From the initial equilibrium point of X, which letter indicates the new
equilibrium point for the US exchange rate?

November15/12
27 The diagram shows China’s trade with Brazil for 1999 and 2003 in billions of dollars.
With reference to the diagram, what happened to China’s trade balance with Brazil
between 1999 and 2003?
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.
28 A country imposes tariffs and quotas on imported goods. What will citizens of that
country experience?
A higher prices B higher welfare
C higher unemployment D wider consumer choice
29 What is most likely to encourage international specialisation?
A similarities in climate in different countries
B the ability to produce products more cheaply than other countries
C the discovery of oil in a country that had no oil before
D very high international transport costs
30 Turkey’s agricultural sector employs 48% of the country’s workforce, compared
with 17% in the United States (US) and 3.9% in France. What could be concluded
from this?
A France is likely to import more agricultural produce than the US.
B The workers in France are not as productive as those in Turkey.
C Total agricultural production is likely to be higher in Turkey than in the US.
D Turkey is likely to be less developed than France.
June 15/12
28 What is an advantage of international specialisation?
A choice is limited
B countries become overdependent on each other
C resources are used more efficiently
D transport costs are decreased
29 The table shows information on the trading position of four major economies in
2013. Which country had the strongest trading position?
30 The table shows the trade in goods balance and the current account balance of
the balance of payments for four countries during a year. Which country had the
largest surplus on its trade in services, assuming no other transfers or income
flows?

November2014 / 12
28 When the US$ exchange rate falls it will usually
A help to reduce a US trade deficit.
B increase the foreign price of US exports.
C reduce the price of US imports.
D reduce US inflation.
29 Which change will increase the demand for imports?
A Consumer credit becomes more expensive.
B Income tax rates increase.
C The exchange rate appreciates.
D The government increases tariffs.
30 In recent years, the US has experienced a deficit on its overall current account of
the balance of payments. What could have led to an increase in the size of the
deficit?
A increased competitiveness of goods made in the US
B increased earnings by US investors in foreign companies
C increased numbers of overseas visitors to the US
D increased spending on US military bases abroad
June2014 / 12
28 The citizens of a country which avoids international trade may benefit from
A an increase in specialisation.
B better political and cultural ties.
C competitive pressure to improve the quality of goods.
D more employment in their industries.
29 In 2012, Nokia, a mobile phone manufacturer, produced 18% of Finland’s exports.
Why might this be undesirable for Finland?
A Foreign demand for mobile phone firms may grow continuously.
B Nokia may introduce new technology which raises total costs by less than output.
C There may be a reduction in trade restrictions on mobile phones.
D There may be an industrial dispute at Nokia.
30 The table shows the values of the items in a country’s current account in two
years.
How did the value of the net transfers change between year 1 and year 2?
A decreased by $10m
B decreased by $20m
C increased by $20m
D increased by $30m

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Economics (2281) O level MCQ

1. Basic economic problem: choice and the allocation of

What movement would represent an

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A recession causes a decrease in production in

17.2 What could be the opportunity cost of a

A the running costs of the power station B a coal-fired power station

Bad weather causes a poor harvest for both crops.

19.1 What is not a factor of production?

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What may cause the movement of the production

What is the opportunity cost to the individual of the

The person decides to take a job that gives

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32.4 A person works at home making table cloths.

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What could have caused the change in the

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3.6 How might the concept of price elasticity of

When the price rises from $20 to $30 per

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When the price rises from $20 to $30 per

What could cause the movement from point X to

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What could cause the movement from point X to

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15.12 To achieve horizontal integration, a firm

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How many people will be employed if the minimum

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What is the effect of paying the minimum wage

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What is the total amount of revenue raised by

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11.12 Which is an internal diseconomy of scale?

How many units will the firm produce to maximise profits?

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What happens to productivity as more workers are employed?

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What is the value of the firm’s fixed costs?

What is the first level of income shown at which

29.12 A survey of managers in the USA revealed that

What can be concluded about the firm’s average total cost?

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What is the first level of income shown at which savings are

35.12 A survey of managers in the USA revealed that most

What can be concluded about the firm’s average total cost?

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Assuming there are no other costs, what is the

51.16 What is most likely to be the responsibility of a government?