ECONOMICS
READ THE FOLLOWING INSTRUCTIONS CAREFULLY.
1.
This test consists of 60 items. You will have 75 minutes to answer them.
2.
In addition to this test booklet, you should have an answer sheet.
reading
3. • .• . Edch item in this test has four suggested answers lettered (A), (B), (C), (D). After
best.
item you are about to answer, decide which choice is
each
On your answer sheet, find the number which corresponds to your item and shade the space having
the same letter as the answer you have chosen: -Look at how it is-done in the sample item below.
Sample Item
Economics may be described as a 'Social Science'
because it deals with
(A)
(B)
(C)
(D)
the economy
the environment
human behaviour
production and consumption
Sample Answer
DO@
The best answer to this item is "human behaviour", so answer space (C) has been shaded.
6.
If you want to change your answer, erase it completely before you fill in your new choice.
If
When you are told to begin, turn the page and work as quickly and as carefully as you can.
you cannot answer an item, go on to the next one. You may return to the omitted item later. Your
score will be the total number of correct answers.
7.
The use of silent electronic calculators is allowed_
5.
-21.
Which of the following is the MAJOR
Problem facing all economies?
(A)
(B)
(C)
(D)
2.
4.
Allocating scarce resources among
competing users
Achieving an equal distribution of
income
Preventing the depletion of natural
resources
Achieving a fair distribution of
wealth
An 'economy' is BEST described as a system
where
A student has a daily allowance of $20 with
which he can purchase chicken and chips
or a burger, but NOT both. If he purchases
the chicken and chips, the opportunity cost
of his decision will be
(A)
(B)
(C)
(D)
5.
A 'free good' is BEST described as a good
(A)
(A)
(B)
(C)
(D)
3.
suppliers produce all the goods and
services needed by the consumers
resources are used by manufacturers
to produce goods and maximize
profits
all the goods and services used by
citizens of a country are provided
by the government
resources are used to produce goods
and services to meet the needs and
wants of society
Sita and Peter are planning to buy a new
house. Which of the following factors
should NOT affect the couple's decision?
(A)
(B)
(C)
(D)
(B)
(C)
(D)
6.
the burger he gave up
the satisfaction he gets from burgers
the price of the chicken and chips
the satisfaction he gets from the
chicken and chips
that is given away by a retailer to
promote the sale of another good
which gives no satisfaction to consumers
which has an infinite elasticity of
supply
whose opportunity cost is zero
Which of the following is NOT a primary
product?
(A)
(B)
(C)
(D)
Bauxite
Banana
Furniture
Petroleum
Their joint monthly income
The possibility of a job promotion
for Peter
The high cost of renting their current home
The acquisition of a new home by
Sita's best friend
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_r 1 r
3
Item 7 refers to the diagram below which
shows the production possibility curve for
an economy that produces bananas (X) and
oranges (Y).
An outward shift in a production possibility
curve can be caused by an
9.
(A)
(B)
(C)
(D)
10.
(A)
(B)
(C)
(D)
Unemployment that results from a change
in technology and the resulting re-training
and re-hiring of staff is an example of
(A)
(B)
(C)
(D)
If OX is the amount of bananas produced,
what is the greatest amount of oranges that
can be produced?
7.
increase in wages
increase in prices
increase in imports
improvement in technology
structural unemployment
cyclical unemployment
frictional unemployment
seasonal unemployment
Item 11 refers to the diagram below. Ss is
the supply curve before a subsidy is given.
OY
0Y1
0Y2
0Y3
Item 8 refers to the diagram below which
shows the production possibility curve for
two goods: shirts and shoes.
•• .
Quantity
0
Shoes
11.
Q. Qi
As a result of the granting of the subsidy it
is expected that
Shirts
8.
(A)
(B)
(C)
(D)
supply will increase
supply will decrease
demand will decrease
price will increase
At what point in the diagram are resources
underemployed?
(A) w
X
(B)
(C)
(D)
Y
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-4Item 12 refers to the table below which
- provides infoi illation on three similar goods,
• X, Y and Z. Consumers buy more of Good
Z because of its lower price.
12.
Price ($)
X
10
Y
8 -
Z
3
(B)
(C)
(D)
An increase in the supply of
Good Z
An imposition of a 100 per cent tax
on Good Z
The placement of a 100 per cent
subsidy on Good Z
The advertisement of Good Z as an
impressional good
Which of the following is an advantage of
a market economy?
(A)
(B)
(C)
(D)
16.
Which of the following factors will cause
consumers to buy less of Good Z?
(A)
13.
Good
15.
Prices of goods in market economies
fluctuate while prices of goods in planned
economies tend to be fixed. The MOST
likely reason for this difference is that, in
the market economy,
(A)
(B)
(C)
(D)
17.
(D)
(A)
(B)
(C)
(D)
14.
progress
productivity
specialisation
entrepreneurial ability
In a commercial bank, wages and salaries
are NOT paid to
(A)
(B)
(C)
(D)
shareholders of the bank
bank tellers and supervisors
investment managers of the bank
maintenance workers employed by
the bank
18.
profits are lower
producers are never efficient
buyers and sellers determine prices
there are higher unemployment
levels
Which of the following are NOT considered factors of production in_ the bauxite
industry?
(A)
(B)
(C)
In an attempt to increase the efficiency of
its staff, management assigns specific tasks
to each worker. This is an example of
There is equality of income.
It provides an incentive to produce.
It reduces pollution and congestion.
Price control measures can be effected.
Companies that use bauxite
Lands on which mines are located
Workers employed to work on the
mines
Persons who invest their capital to
carry out mining operations
Sam and Su started a catering business.
They organised the factors o fproducti on and
pooled their financial resources to produce
the goods and services. Which factors of
production should Sam and Su be classified
as?
(A)
(B)
(C)
(D)
Workers
Investors
Managers
Entrepreneurs
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-5an example
Which of the following is NOT
mercial
of a factor of production in a com
19.
is NOT a
Which of the following features
ition?
characteristic of perfect compet
23.
Freedom of entry and exit
(A)
products
(B) ' Selling of homogeneous
ler
sel
one
Many buyers and
(C)
ditions
con
Knowledge of market
(D)
bank?
The building
The bank's vault
Shareholders of the bank
stuSpecial savings accounts for
dents
(A)
(B)
(C)
(D)
20.
e changed
Many developing countries hav
rket-based
from command economies to ma
se
rea
economies in order to inc
(A)
(B)
(C)
(D)
21.
subsidies
efficiency
price control
government control
merit good
(A)
private good
(B)
(C) . positive externality
negative externality
(D)
likely to
Which of the following is MOST
demand
the
in
occur if there is an increase
for cameras?
25.
resources
An economy in which ALL of the
the state can
EXCEPT labour are owned by
be described as a
(A)
(B)
(C)
(D)
22.
ond-hand
According to economic theory, sec
of a
cigarette smoke is an example
24,
free economy
mixed economy
capitalist economy
command economy
ns will a
In which of the following situatio
duce slope
normal supply curve for farm pro
upwards from left to right?
(A)
(B)
(C)
(D)
(A)
(B)
(C)
(D)
t to
Farmers pass on increased cos
consumers.
as
Farmers' profit margins increase
price increases.
re
Farmers are willing to produce mo
as price increases.
se
Farmers are willing to increa
.
supply as demand increases
The price of cameras will fall.
The price of cameras will rise.
.
The supply of cameras will fall
s
The price and supply of camera
will remain the same.
Item 26 refers to the following
Price of
potatoes
($)
4
8
12
16
20
26.
Market demand
(000 kg)
table.
Market supply
(000 kg)
700
500
350
200
100
100
200
350
530
700
What is the equilibrium price?
(A)
(B)
(C)
(D)
$4
$8
$12
$16
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• -627.
An increase in the price of flour is MOST
likely to be followed by an immediate
(A)
(13)
(C)
(D)
rise in the quantity demanded for
bread
fall in the quantity supplied offlour
rise in the quantity supplied offlour
rise in the quantity demanded for
flour
Item 31 refers to the following diagrams,
I, II, III and IV.
P
D
D
D
Q
I
28.
Which of the following will NOT occur
when there is market failure?
(A)
(B)
(C)
(D)
P
A decline in social welfare
An increase in poverty throughout
the economy
Increasing levels ofunemployment
among skilled and unskilled labour
Adequate amounts of all goods and
services for consumers
29.
Which of the following is an example of
fixed capital?
(A)
(B)
(C)
(D)
32.
30.
Iv
Q
Which diagram above indicates that demand
is perfectly elastic?
(A)
(B)
(C)
(D)
Cash
Machinery
Bank balance
Raw material
Q
D
III
31.
0
I
II
III
IV
Which of the following is NOT TRUE of
perfect competition?
Large firms achieve savings in unit costs
from advertising or packaging. This is a
result of which of the following economies
of scale?
(A)
(B)
(C) (D)
(A)
(B)
(C)
(D)
Firms are price takers.
Products are homogenous.
There are no barriers to entry.
Firms engage in price discrimination.
Financial
Technical
Marketing
Managerial
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7
33.
Joe Brown sells his produce at the market
and saves his money until he• has enough
to buy a tractor. Which of the following
functions is money performing in this case?
(A)
(B)
(C)
(D)
34.
(B)
(C)
(D)
encourages the process of specialisation
removes the problems associated
with barter
enables small transactions to take
place
assists individuals to allocate wealth
in a profitable manner
38.
39.
(B)
(C)
(D)
Money that has no direct backing
of gold
Money that government declares
must be accepted if offered as
settlement of debt
Assets that perform only the function of a store of wealth
Assets that can be converted immediately into a known amount
of money
?(A)
(B)
(C)
Which of the following is NOT a financial
institution in an economy?
(A)
(B)
(C)
(D)
Development Bank
Share market
Credit union
Trade union
41.
issue notes and coins
provide loans to the public
deteimine the foreign exchange rate
keep the accounts of government
departments
The Central Bank calls for an increase in
the reserve requirements of commercial
banks. How will this affect the operations
of commercial banks?
(D)
36.
The World Bank
The Central Bank
A commercial bank
An investment bank
One of the functions of a commercial bank
is to
(A)
(B)
(C)
(D)
40.
Treasury bonds
Corporate bonds
Equity securities
Shares on the stock exchange
Which of the following is referred to as the
banker's bank?
(A)
(B)
(C)
(D)
To which of the following does the term
`legal tender' refer?
(A)
Which ofthe following financial instruments
are issued by the Government?
(A)
(B)
(C)
(D)
Divisibility is an important function of
money because it
(A)
35.
Store of value
Unit of account
Medium of exchange
Standard of deferred payment
37.
Their liquid assets will be reduced.
Their ability to create credit will
increase.
Their loans to money markets will
increase.
They will attract less deposits from
the public.
A treasury bill is an instrument for shortterm borrowing by
(A)
(B)
(C)
(D)
importers
governments
public companies
insurance companies
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8
Item 42 refers to the table below which
shows the rate of inflation and the average
percentage increase in wages over a fouryear period.
RATE OF
,_
LNFLATION (%)
YEAR
• 5
20
2007
10
. 20
2008
10
5
2009
15
5
Which of the following is usually a direct
effect of retrenchment in a country?
(A)
(B)
(C)
(D)
WAGE
INCREASES (%)
• 2006
42.
45.
46.
Which of the following measures is MOST
likely to reduce inflation?
(A)
(B)
(C)
(D)
Item 47 refers to the table below which
shows manufacturing output as a share of
Gross Domestic Product for four countries
A, B, C and D.
2006
2007
2008
2009
Items 43 - 44 refer to the following table
which shows Government revenue and
Government expenditUre for four countries,
B, C and D.
(A)
Government
Revenue
$ (Million)
3.2
Government
Expenditure
$ (Million)
3.2
(B)
3.2
2.2
(C)
2.2
• 3.2
(D)
0
Country
0
YEAR
COUNTRY
A
COUNTRY
B
COUNTRY
C
COUNTRY
D
1970
28%
40%
29%
29%
1990
23%
34%
26%
28%
2000
19%
31%
21%
23%
47.
What trend is common to ALL countries
shown in the table?
(A)
(B)
(C)
Which country has a fiscal deficit?
(D)
44.
Increasing bank lending
Increasing import duties
Reducing direct taxation
Reducing government expenditure
In which year was the increase in real wages
GREATEST?
(A)
(B)
(C)
(D)
43.
Increased standards of living
Reduced standards of living
Reduction in crime and violence
Equality in the distribution ofwealth
Which country has a budget surplus?
There was a decline in the Gross
Domestic Product.
There was a decline in the sale of
manufactured products.
There was an increase in employment in the manufacturing sector.
There was a decline in manufacturing output as a share of Gross
Domestic Product.
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9
48.
(A)
(B)
(C)
(D)
49.
Item 52 refers to the following information,
which provides data on two countries P and
Q, and two goods, X and Y.
Which of the following is LEAST likely to
be used as a measure to control inflation?
Increase in taxation
Reduction in government expendi•
ture
Reduction in the rate of interest on
loans
Restrictions on lending by commercial banks
Good Y.
Country P
Country Q
Some developing countries try to achieve
economic growth with less governmental
participation. This is MOST likely to be
achieved through increased
(A)
(B)
`(C)
(D)
trade barriers
state planning
private investment
public expenditure
Good X
52.
With reference to the diagram above, which
of the following is TRUE?
(A)
(B)
(C)
50.
Which of the following BEST explains the
term 'tariff'?
• (A)
(B'
(C)
(D)
51.
(D)
Country P has an absolute advantage in Good Y only.
Country P has an absolute advantage in Good Y and Good X.
Country Q has an absolute advantage in Good Y only.
Country Q has an absolute advantage in Good Y and Good X.
The amount of subsidies received
by local exporters
The level of tax that is levied on
imports entering a country
The amount of goods that can be
imported into a country
The common tax levied by countries on member countries within
a region
Which of the following will result in a surplus on the balance of trade of a country?
(A)
(B)
(C)
(D)
Value of imports is greater than the
value of exports.
Value of exports is greater than the
value of imports.
Volume of exports is greater than
the volume of imports.
Volume of imports is greater than
the volume of exports.
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- 10 55.
Items 53 - 54 refer to the following table
which illustrates the Balance of Payments
of Caribe Island.
Merchandise exports
. Merchandise imports
Balance of Trade
Export of Services
•
•Imports of Services
Balance of goods and services
Net investment income
Net transfers
Balance on current account
Capital inflows
Capital outflows
Balance of capital account
Current and Capital account balance
$ (billion)
500
54.
(B)
100
(C)
-200
(D)
12
56.
100
Which of the following is LIKELY to lead
to greater international iAvestment flows to
the Caribbean region?
-20
(A) , Globalisation
Specialisation
(B)
The World Bank
(C)
The International Monetary Fund
(D)
-59
0
57.
55
-55
1355
-1355
Which of the following statements BEST
describes globalisation?
(A)
(B)
(C)
The capital account in $ (billion) is
(A)
(B)
(C)
(D)
Reduce the volume of exports to
other countries.
Engage in trade with other low-cost
producers of goods.
Increase the importation of goods
from other countries.
Impose restrictions on goods imported from other countries.
4
The balance of trade in $ (billion) is
(A)
(B)
(C)
(D)
(A)
-555
Official Reserves
53.
Country A is experiencing a balance of
payments deficit. Which of the following
measures should it take to reduce the deficit
in the short-term?
80
-80
120
-120
(D)
58.
International trade of goods and
services including skilled workers
Movement in technology and financial markets worldwide
The integration of financial services, technology and commodities_
markets worldwide
Movement of tangible and intangible goods enhanced by growth in
the computer industry
Which of the following BEST defines the
team 'protectionism'?
(A)
(B)
(C)
(D)
Restriction ofimports into a country
Dependency on a primary product
for export
Free movement of goods and services among countries
Establishment of a trading bloc
among a group of countries
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