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TEST CODE
FORM TP 2016060
CARIBBEAN
01216020
MAY/ JUNE 2016
EXAMINATIONS
COUNCIL
CARIBBEAN SECONDARY EDUCATION CERTIFICATE ®
EXAMINATION
ECONOMICS
Paper 02 - General Proficiency
2 hours
( 01 JUNE 2016 (a. m.))
READ THE FOLLOWING INSTRUCTIONS CAREFULLY.
I.
Answer ALL FOUR questions in Section I and TWO questions in Secti on II.
2.
Number EACH answer in your b oo klet correctly.
3.
Beg in EACH answer on a new page.
4.
Use the blank form(s) supplied to prepare answers where necessary.
5.
You may use a silent, non-programmable calculator
necessary working should be clearly shown.
to answer questions but ALL
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SECTION I
'
1.
Answer ALL FOUR questions in this section.
(a)
Define the term 'diseconomies of scale' .
(2 marks)
(b)
In which time period does 'economies
(1 mark)
(c)
Identify TWO types of diseconomies of scale.
(d)
Explain how the THREE resource allocation decisions are made
(e)
Identify TWO ' fixed costs' and TWO 'variable costs' associated with setting up a
(4 marks)
hairdressing salon or a barber shop.
of scale' occur?
(2 marks)
in a free market economy.
(6 marks)
Total 15 marks
2.
(a)
Define the term 'market failure'.
(2 marks)
(b)
List THREE causes of market failure.
(3 marks)
(c)
Explain the impact on the demand curve when the
(d)
(i)
price of a good falls
(ii)
income of the population rises.
(6 marks)
The price of Good A rises from $2 to $4, causing a decrea se in demand for Good B from
I 0 units to 5 units.
(i)
Using the information provided, calculate the cross-pri
ce elasticity of demand.
(3 marks)
(ii)
Using the result obta ined in (d) (i) above, determine the classification
in relation to Good B.
of Good A
(1 mark)
Tota115 marks
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01 2 16020/F 20 16
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3.
(a)
Define the term 'g loba lizat io n'.
(2 marks)
(b)
List TPIREE cha llenges of e-commerce to the consumer.
(3 marks)
(c)
CA RICOM is currently a common market.
economic integration, justify this statement.
(d)
Explain TWO benefits to Cari bbean states of being a member ofCARICOM.
Us ing the characteristics of the stages of
(6 marks)
(4 marks)
Total 15 marks
4.
(a)
Define the term ' balance of pa yme nts'.
(2 marks)
(b)
List THREE types of exc hange rate regimes.
(3 marks)
(c)
(i)
Disting uish between ' investment income' and ' foreign
direct investment' .
(4 marks)
(ii)
Indicate where 'investment income' and 'foreign direct
balance of payments.
investment' occ ur in the
(2 marks)
(d)
Explain TWO ways in which de va luation can impr ove a country 's balance of payments
deficit.
(4 marks)
Total 15 marks
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,
5.
(a)
SECTION II
Answer any TWO questions in this section.
Define EACH of the following terms:
(i)
Economics
(2 marks)
(ii)
Money cost
(2 marks)
(b)
List the THREE main sectors in an economy.
(c)
Explain the difference between 'increas
costs'.
(d)
Describe the impact on the production possibility curve
situations occur:
(e)
(i)
There is heavy unemployment
(ii)
Large-scale migration occurs
(3 marks)
ing opportunity costs' and 'constant opportunity
(4 marks)
of a country if the following
(2 marks)
(2 marks)
in developed countries.
Draw a diagram of the production possibility curve and label it to show increasing
(5 marks)
opportunity costs.
Total 20 marks
6.
(a)
Define the term ' price el ast icity of supply'.
(2 marks)
(b)
List THREE characteristics of a perfectly competitive market.
(3 marks)
(c)
Identify TWO types of market structures OTHER THAN perfect competition.
(2 marks)
(d)
Explain the difference between an ' increase in supply' and an 'increase in quantity supplied' .
(4 marks)
(e)
Expla in TWO factors that may affect the supply
(f)
Describe h ow the market for cigarettes can contribute to market fai lure.
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of a good.
(4 marks)
(5 marks)
Total 20 marks
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01216020/F 2016
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7.
[
(a)
Define the term ' rece ss ion' .
(b)
Identify TWO withdrawals from the circular flow
(c)
List THREE types of unemployment.
(d)
Explain TWO ways in which fiscal policy can
tourism sector.
(e)
The retail price index is given
$500 billion.
(2 marks)
of income .
(2 marks)
(3 marks)
be used to reduce unemployment in the
(8 marks)
as 115 and gross domestic product is
current ly recorded at
(i)
Calcul ate the real output.
(3 marks)
(ii)
What does the retail price ind ex imply about inflation?
(2 m arks)
Total 20 marks
8.
(a)
Define the term ' barter' .
(2 marks)
(b)
List T HR EE disadvantages of bartering.
(3 marks)
(c)
State TWO functions of the financial sector in an economy.
(2 marks)
(d)
Explain h ow the central bank would use EACH of the fo llowing methods to increase the
money supply:
(e)
(i)
Discount rates
(4 marks)
(ii)
Reserve r eq uireme nt ratios
(4 marks)
Using examples, ex plain how the use of credit cards has impr oved the function of money
as a medium of exchan ge .
(5 marks)
Total 20 marks
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END OF TEST
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.
01216020/ F 2016
-8-
4.
Explain TWO impacts of rising oi I prices on businesses
and the economy.
(6 marks)
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5.
(a)
Calculate the price elasticity
of demand for oil.
(4 marks)
(b)
Interpret the result obtained
in (a) above .
(2 marks)
(c)
Explain the relationship between rising oil prices, elasticity, and the revenue earned by
the oil producing territories of the Ca ribbean.
........ .
........ .
,;
,;
,;........ .
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(4 marks)
Total 40 marks
END OF TEST
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON TIDS TEST.
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