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FORM TP 2013061
CARIBBEAN
TEST CODE
MAY/JUNE 2013
EXAMINATIONS
COUNCIL
CARIBBEAN SECONDARY EDUCATION CERTIFICATE®
EXAMINATION
ECONOMICS
Paper 01 - General Proficiency
1 hour 15 minutes
I
( 05 JUNE 2013 (p.m.))
READ THE FOLLOWING INSTRUCTIONS CAREFULLY.
1.
This test consists of 60 items. You will have 1 hour and 15 minutes to answer them.
2.
In addition to this test booklet, you should have an answer sheet.
3.
Each item in this test has four suggested answers lettered (A}, (B), (C), (D). Read each item you
are about to answer and decide which choice is best.
4.
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)
Sample Answer
the economy
the environment
human behaviour
production and consumption
The best answer to this item is "human behaviour", so answer space (C) has been shaded.
5.
If you want to change your answer, erase it completely before you fill in your new choice.
6.
When you are told to begin, turn the page and work as quickly and as carefully as you can. If you
cannot answer an item, go on to the next one. You may return to this item later. Your score will
be the total number of correct answers.
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DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
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Copyright © 2011 Caribbean Examinations Council
All rights reserved.
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01216010/F 2013
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1.
Which of the following rewards accrues to
the factor of production called 'capital'?
(A)
(B)
(C)
(D)
2.
Rent
Profit
Wage
Interest
(B)
(C)
(D)
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
6.
(A)
(B)
(C)
(D)
Description/Activity
White Ltd
Red Ltd
Yellow Ltd
Green Ltd
Flour processing
Tomato cultivation
Private taxi services
Herbal medicine
production
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)
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
The
The
The
The
leisure time lost
income from the job
income tax he now pays
cost of travelling to work
Item 7 refers to the following diagram
which illustrates the production possibility
frontier for an economy in Year 1 (AA) and
Year 2 (BB).
Capital
goods
7.
4.
primary sector
secondary sector
tertiary sector
quaternary sector
An unemployed person accepts a job. What
is the opportunity cost of his decision?
(A)
(B)
(C)
(D)
Which of the following companies operates
in the primary sector?
Company
ABC Ltd purchases raw cotton and
produces fabric. XYZ Ltd buys fabric
from ABC Ltd and makes T-shirts which it
markets directly to clothing stores. BOTH
firms engage in economic activity in the
(A)
(B)
(C)
(D)
An 'economy' is BEST described as a
system where
(A)
3.
5.
From the diagram above it can be deduced
that
(A)
(B)
(C)
(D)
point X was unattainable in Year 2
point X was efficient in Year 1 and
Year2
there was decreasing opportunity
cost in Year 2
there was economic growth
between Year 1 and Year 2
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01216010/F 2013
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8.
A country faces the following production
combinations:
9.
curve can be caused by an
X = production with unemployed resources
Y = unattainable production combination
Z = efficient production combination
(A)
(B)
(C)
(D)
Which of the following production
possibility curves (PPC) correctly illustrates
·
the information above?
(A)
An outward shift in a production possibility
.
Item 10 refers to the following table which
shows units of labour and total output.
Capital
goods
Units ofLabour
X
z
Consumer
goods
10.
Capital
goods
X
6
372
455
8
496
9
531
10
580
What is the number of labour units that
produces the HIGHEST average product
of labour?
(A)
(B)
(C)
(D)
PPC
Total Output
7
PPC
(B)
.
.
mcrease m wages
increase in prices
increase in imports
improvement in technology
6
7
8
9
Consumer
goods
(C)
11.
Capital
goods
Which of the following does NOT affect
the efficiency of labour?
(A)
(B)
(C)
(D)
Firm's profitability
Worker motivation
Level of technology
Education and training
PPC
Consumer
goods
(D)
Capital
goods
12.
Economic choices are made because
(A)
(B)
eY
(C)
(D)
PPC
people's needs exceed their wants
resources are unlimited and
people's wants are limited
resources are scarce while people's
wants are unlimited
people may not always have the
money to conduct business
Consumer
goods
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01216010/F 2013
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13.
In an attempt to increase the efficiency of
its staff, management assigns specific tasks
to each worker. This is an example of
(A)
(B)
(C)
(D)
14.
Countries
shareholders of the bank
bank tellers and supervisors
investment managers of the bank
maintenance workers employed by
the bank
a bottle of soda water
loan approved by a bank
extra lesson at a school
beauty makeover at a spa
profits are lower
producers are never efficient
buyers and sellers determine prices
there are higher unemployment
levels
47
89
X
y
z
17.
18.
50
3
mixed
planned
subsistence
free market
In Country N , the government provides
essential goods such as water, electricity
and housing for its citizens. However,
other goods are provided by priv ate
companies. To which economic system
does Country N MOST likely belong?
(A)
(B)
(C)
(D)
19.
·;
The economic system of Country X is
MOST likely
(A)
(B)
(C)
(D)
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)
Government Spending
as a Percentage of GDP
w
One example of a 'good' is
(A)
(B)
(C)
(D)
16.
progress
productivity
specialization
entrepreneurial ability
In a commercial bank, wages and salaries
are NOT paid to
(A)
(B)
(C)
(D)
15.
Item 17 refers to the follo wing table
which shows government spending as a
percentage of Gross Domestic Product for
four countries, W, X, Y and Z.
Mixed
Planned
Traditional
Free market
Which of the following is NOT an example
of a factor of production in a commercial
bank?
(A)
(B)
(C)
(D)
The building
The bank's vault
Shareholders of the bank
Special savings accounts for
students
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01216010/F 2013
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20.
A government reduces tax on carrots. This
causes the price of carrots to fall by 50%.
Demand then rises by 50%. The price
elasticity of demand for carrots in this case
is
(A)
(B)
(C)
(D)
0
0.4
1
2.5
23.
(A)
(B)
(C)
(D)
24.
Item 21 refers to the following table which
shows the price of a product, the quantity
demanded (QD) and quantity supplied
(QS).
Price
QD
($)
(Units)
21.
8
20
8
12
14
16
29
16
14
12
8
22.
and
and
and
and
Pnce of
Potatoes
($)
$4
$6
$8
$10
(B)
(C)
(D)
total stock of money in an economy
at any moment
amount of money traded in the
foreign exchange market
total asset base of the institutions
in the financial sector
total amount of gold, silver and
other precious metals in reserve
diminishable
zero-priced
excludable
rivalrous
Item 26 refers to the following table.
4
8
12
16
20
The term 'money supply' refers to the
(A)
A pure public good can be described as
(A)
(B)
(C)
(D)
At which of the following prices are there
shortages in the market?
$2
$4
$6
$8
Reduction in crime rate
Equality in income distribution
Increased standard ofliving
A fall in the standard of living
QS
(Units)
10
(A)
(B)
(C)
(D)
Free·dom of entry and exit
Selling ofhomogeneous products
Many buyers and one seller
Knowledge of market conditions
Which of the following is usually a
consequence of widespread retrenchment
in a country?
·;
(A)
(B)
(C)
(D)
25.
6
4
2
Which of the following features is NOT a
characteristic of perfect competition?
26.
Market
Demand
(000 kg)
700
500
350
200
100
Market
Supply
(000 kg)
100
200
350
530
700
What is the equilibrium price?
(A)
(B)
(C)
(D)
$ 4
$ 8
$ 12
$ 16
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01216010/F 2013
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27.
'Globalization' may be MOST accurately
defined as
(A)
(B)
(C)
(D)
28.
movement of technology and
financial markets worldwide
integration of financial services,
technology and commodity
markets worldwide
international trade of goods and
services including skilled workers
movement of tangible and
intangible goods among countries
31.
Which of the following items is considered
as 'legal tender'?
(A)
(B)
(C)
(D)
32.
A fractional reserve banking system is one
where banks hold reserves of less than
100% of
(A)
(B)
Which of the following is TRUE about
financial markets and institutions?
(C)
(D)
(A)
(B)
(C)
(D)
They provide insurance protection
to speculators.
They place emphasis on consumer
education.
They are free from government
interference.
They channel funds from those who
have saved to those who wish to
borrow.
33.
(A)
(B)
(D)
Which ofthe following financial instruments
are issued by the Central Bank on behalf of
the government?
(A)
(B)
(C)
(D)
34.
Treasury bills
Corporate bonds
Equity securities
Shares on the stock exchange
Store of value
Unit of account
Medium of exchange
Standard of deferred payment
The organization responsible for the
regulation and control of the financial
sector is the
(A)
(B)
(C)
(D)
30.
retained earnings
securities
deposits
loans
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?
(C)
29.
Gold
Lumber
Cheque
A ten-dollar bill (note)
Treasury
Central Bank
Board of Currency Control
Institute of Monetary Affairs
For anything to serve as money, it must
(A)
(B)
(C)
(D)
be limited in supply
have limited demand
be backed by law
be acceptable by banks as deposit
35.
Which of the following is a function of the
commercial bank?
(A)
(B)
(C)
(D)
Printing currencies
Accepting deposits
Fixing import quotas
Fixing currency exchange rates
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01216010/F 2013
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36.
Which ofthe following is NOT a financial
institution in an economy?
Item 39 refers to the following economic
measures.
(A)
(B)
(C)
(D)
I.
II.
III.
Development bank
Commercial bank
Credit union
Trade union
39.
37.
The government of Country M has been
accumulating a fiscal deficit for the past
three years without any surpluses. This is
known as Country M's
Which of the above can be used to reduce
inflation?
(A)
(B)
(C)
(D)
(A)
(B)
(C)
(D)
foreign surplus
interest rate
national debt
national budget
40.
Firms
I only
II only
I and II only
II and III only
'Resources, both human and physical, are
required to produce goods'.
The statement above MOST accurately
describes
Item 38 refers to the following diagram
which shows the simple circular flow of
income for an economy.
I
Decreasing money supply
Increasing interest rates
Reducing the bank rate
(A)
(B)
(C)
(D)
I
productivity
entrepreneurship
factors ofproduction
factors of productivity
y
41.
I
38.
Households
I
The nominal flow labelled Y refers to
(A)
(B)
(C)
(D)
Which of the following is NOT a service?
(A)
(B)
(C)
(D)
Education
Health care
Hairdressing
Motorcycle
investment
factor incomes
savmgs
factors of production
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01216010/F 2013
-8-
Item 42 refers to the following table which
shows the rate of inflation and the average
percentage increase in wages over a fouryear period.
Year
Rate of
Inflation
45.
(A)
(B)
Wage
Increases(%)
(C)
(D)
(%)
2006
2007
2008
2009
42.
5
10
10
15
' 20
20
5
5
The MAIN advantage of quotas as
compared to tariffs is that quotas
46.
In which year was the increase in real wages
GREATEST?
Which of the following is a positive effect
of the 'brain drain' phenomenon for the
country of origin?
(A)
(B)
(A)
(B)
(C)
(D)
43 .
2006
2007
2008
2009
(C)
(D)
47.
Which of the following is NOT a characteristic of Caribbean countries?
(A)
(B)
(C)
(D)
(C)
(D)
48.
44.
The role of trade unions in the economy is
to
(A)
(B)
(C)
(D)
establish a minimum wage rate
increase the wage rate of
employees
negotiate wages on behalf of
workers
create conflict between employers
and employees
Economies of scale
Improved international relations
Increased consumer choice and
variety
Stiff competition for local industry
Which of the following bodies tries to
get nations to end preferential trade
arrangements with other nations?
(A)
(B)
(C)
(D)
49.
Source ofremittances
Sustained growth
Guaranteed development
Discovery of more talent
WhichofthefollowingisaDISAVANTAGE
of international trade?
(A )
(B)
High debt burden
High levels ofunemployment
Low level of capital formation
Major producers of manufactured
goods
are less expensive to administer
have the strong support of
economists
are easier to get passed in Parliament
remove uncertainty about the
quantity of imports
European Union (EU)
World Trade Organization (WTO)
International Monetary Fund (IMF)
Caribbean Community (CARl COM)
A computer is purchased from the US at a
price of US$500. If the exchange rate is
given as TT$1 0 = US$1.00, the price of the
computer will be
(A)
(B)
(C)
(D)
TT$3
TT$3
TT$5
TT$5
050
150
000
630
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01216010/F 2013
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50.
Which of the following BEST explains the
term 'tariff'?
(A)
(B)
(C)
(D)
51.
(B)
(C)
(D)
52.
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
regwn
Which of the following will contribute
to a surplus on the balance of trade of a
country?
(A)
53.
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.
The Central Bank calls for an increase in
the reserve requirements of commercial
banks. How will this affect the operations
of commercial banks?
(A)
(B)
(C)
(D)
54.
The restriction of international trade
through tariffs, embargoes, quotas and
exchange controls is referred to as
(A)
(B)
(C)
(D)
55.
Which of the following is NOT a function
of the International Monetary Fund?
(B)
(C)
(D)
Overseeing payments and exchange
rates between countries
Promoting the financial stability of
countries
Assisting countries with balance of
payment difficulties
Settling trade disputes between
countries
(B)
(C)
(D)
56.
structural adjustment
globalization
bilateral agreement
protectionism
Country A is experiencing a balance of
payments deficit. Which of the following
measures would it normally take to reduce
the deficit in the short-term?
(A)
(A)
Their liquid assets will be reduced.
Their ability to create credit will
mcrease.
Their loans to money markets will
mcrease.
They will attract less deposits from
the public.
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.
Which of the following is MOST likely
to lead to greater international investment
flows to the Caribbean region?
(A)
(B)
(C)
(D)
Globalization
Specialization
Trade unionism
Currency fluctuation
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01216010/F 2013
- 10-
57.
Which of the following are ways of
calculating national income?
I.
II.
III.
IV.
Income method
Elasticity method
Output method
Expenditure method
(A)
(B)
(C)
(D)
I and II only
II and III only
I, III and IV only
II, III and IV only
59.
One example of an 'entrepreneur' is
(A)
(B)
(C)
(D)
60.
Trade liberalization should result in several
benefits to consumers. Which of the
following is NOT a benefit to consumers?
(A)
58.
The term 'e-commerce' refers to
(B)
(A)
(B)
(C)
(D)
(C)
ecotourism
export business
electronic business
economies of scale
a shop owner
a store worker
a bank manager
an airline employee
(D)
Prices of goods and services will
increase.
Prices of goods and services will
decline.
Cost of providing goods and
services will be lower.
There will be greater access to a
variety of goods and services.
ENDOFTEST
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.
0121601 0/F 2013