MCQ Topic Vise-Min

TABLE OF CONTENTS
TOPICS Page No.
BASIC ECONOMIC PROBLEM
1 The Basic Economic Problem & The 3 Economic Questions 3 - 10

2 Factors of Production 11 - 22
3 Labor & Capital Intensive Production 23 - 26
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4 Opportunity Cost 27 - 36
5 Production Possibility Curve 37 - 46
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ya N
o.
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ALLOCATION OF RESOURCES
ho
6@ S
6-7 Types of Economic Systems & Government Intervention 47 - 56
24 HA
Equilibrium Price & Factors for Demand and Supply for a

8-9 57 - 96
Product
an R
10 Price Elasiticity of Demand & Price Elasiticity of Supply 97 - 110

SI
11-12 Market Failure 111 - 124
PRODUCER, CONSUMER AND BORROWER

ss
13-16 Money 125 - 130

ha
17-19 Commercial Banks, The Central Bank & Stock Exchange 131 - 136
20-27 Wages 137 - 152
28 Spending & Savings 153 - 166
29 Trade Unions 167 - 174
30 Specialisation 175 - 180
Compiled by Sir Hassan Copyright of 1

[email protected] Cambridge University
BUSINESS ORGANISATIONS
31-34 Types of Business Organisations & Multinationals 181 - 190

35 Average Cost, Variable Cost & Fixed Cost 191 - 210
36-38 Integration & Economies of Scale 211 - 224
39-42 Small Firms & Market Structures 225 - 234
ROLE OF GOVERNMENT
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43-44 Economic Growth & Economic Development 235 - 246
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45-46 Taxes & Subsidies 247 - 264
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SA
47-51 Macro-Economic Objectives & Monetary and Fiscal Policy 265 - 276
ho
6@ S
ECONOMIC INDICATORS
24 HA
52 Inflation & The Retail Price Index 277 - 296

an R
53 Unemployment / Full Employement 297 - 308

SI
Gross Domestic Product / Gross National Product & The

54-55 309 - 318
Trade Cycles
56 Standard of Living / Human Development Index 319 - 330
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DEVELOPED AND DEVELOPING

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57-59 The Developed V/S Developing Countries 331 - 358

60-62 Population 359 - 372
INTERNATIONAL ASPECTS
63-64 Balance of Payments 373 - 386

65 Exchange Rate 387 - 394
66-67 Free Trade and Protectionism 395 - 405
2 Compiled by Sir Hassan Copyright of
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1. THE BASIC ECONOMIC
co
ya N
PROBLEM & THE 3 ECONOMIC
o.
SA
QUESTIONS ho
6@ S
24 HA
an R
ss SI
ha

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 Q1/J/V17
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

2) 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. Q3/J/16
3) 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.
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D The basic economic problem would be solved. Q2/N/15
co
ya N
4) What is the basic economic problem?
o.
SA
A finite resources and limited wants
ho
B finite resources and unlimited wants
6@ S
C infinite resources and limited wants
24 HA
D infinite resources and unlimited wants Q1/J/15
5) Economics textbooks often start by identifying the existence of the basic economic problem.
What is it that makes this problem ‘basic’?
an R
A It affects all economies and individuals.

SI
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. Q1/N/14
ss
6) What is the cause of economic scarcity?

ha
A limited wants with limited resources

B limited wants with unlimited resources
C unlimited wants with limited resources
D unlimited wants with unlimited resources Q1/J/14
7) Why will the economic problem never be solved?

A People will always want more products than can be produced.
B People will never agree on what is the best economic system.
C There will always be an uneven distribution of income.
D There will always be some people unemployed. Q1/J/13

8) A country with a low income per head discovers large quantities of oil, which eventually makes everybody
better off.
Why is the basic economic problem of scarcity not solved by this discovery?
A People may not get jobs in the oil industry.
B People’s wants are always changing and increasing.
C Prices of oil can fluctuate on the world market.
D Production of oil can damage the environment. Q2/N/12
9) Economics is primarily concerned with

A allocating scarce resources for unlimited wants.
B controlling unemployment and inflation.
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C determining the level of government expenditure.
co
D studying how new wants and economic resources can be produced. Q1/J/12
ya N
o.
SA
10) Every business organisation faces the problem of satisfying wants.
ho
What is the reason why wants are not fully satisfied?
6@ S
A An economy can only produce a limited amount of goods and services.
24 HA
B Governments cannot print enough money to pay for goods and services.
C There is an over-production of goods and services by business organisations.
D Workers are too skilled for the requirements of the jobs available. Q3/N/11
an R
SI
11) What is meant by the economic problem?

A how to achieve efficiency with the existence of fixed resources and limited wants
B how to allocate resources between public and private sectors
C how to balance unlimited wants against finite resources
ss
D how to decide which methods to use to exploit all resources Q5/J/11

ha
12) What makes choice an important element in the basic economic problem?
A Increased demand leads to higher market prices.
B Limited resources have many alternative uses.
C Reaching a market equilibrium may take a long time.
D Scarce economic resources are distributed equally. Q3/N/10

13) Which terms summarise the nature of the 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 Q2/J/10
14) Which economic change would increase the problem of scarcity?

A a decrease in fish stocks
B a discovery of a new oil field
C an increase in labour productivity
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D a reduction in waste Q5/J/10
co
ya N
15) A friend said his French grandmother kept switching off the lights but left the tap running. His Namibian relative
left the lights on while shouting at him to turn off the water.
o.
SA
Which availability of resources and level of prices would make economic sense of these consumer actions?
ho
6@ S
in France in Namibia
24 HA
A adequate water supplies expensive electricity

B cheap electricity adequate water supplies
C expensive electricity scarce water supplies

an R
D scarce water supplies cheap electricity

SI
Q3/N/09
16) What is not one of the basic questions in Economics?

A For whom will goods be produced?
ss
B How will goods be produced?

ha
C How will goods be transported?

D What goods will be produced? Q5/N/09
17) What is the basic economic problem facing all societies?

A how to achieve price stability
B how to keep employment levels high
C the extent to which incomes should be redistributed
D what will be produced, how and for whom Q1/J/09

18) A hospital cannot treat all the people that need medical care.
This is an example of
A excess supply.
B limited wants.
C scarcity.
D unlimited resources. Q5/J/09
19) Which economic question is least likely to arise as a result of scarcity?

A For whom shall we produce?
B How shall we produce?
m
C What shall we produce?
D When shall we produce? Q5/N/07
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ya N
o.
SA
20) What is the basic economic problem facing all economies?
A inequality of income
ho
6@ S
B insufficient resources
C low economic growth
24 HA
D shortages of skilled labour Q1/N/05

an R
21) Which statement best explains why drought is an economic problem?

SI
A Drought cannot be controlled.

B Rainfall is unreliable.
C The effects of drought involve the government.
D Water is a scarce good. Q2/J/04
ss
22) To help reduce the price of oil, new supplies are needed. However, in 2013, objectors opposed attempts to
ha
explore new sites because of the environmental damage the exploration might cause.
How does this illustrate the basic economic problem?
A Oil is a limited resource.
B Oil is expensive.
C The exploration involves demand and supply.
D There are external costs involved in production. Q2/J/V15

23) A tractor factory runs out of important components and has to stop production.
How does this illustrate the economic problem?
A The factory lacks a competitive advantage.
B The factory lacks economies of scale.
C There are limited wants.
D There is evidence of scarce resources. Q1/J/V13
24) Which combination of resources and wants causes the economic problem?
resources wants
A limited limited
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B limited unlimited
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C unlimited limited
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D unlimited unlimited
o.
SA Q1/J/V12
ho
6@ S
25) Every business organisation faces the problem of satisfying wants.
24 HA
What is the reason why wants are not fully satisfied?

A An economy can only produce a limited amount of goods and services.
B Governments cannot print enough money to pay for goods and services.
an R
C There is an over-production of goods and services by business organisations.

SI
D Workers are too skilled for the requirements of the jobs available. Q1/N/V11
26) What is meant by the economic problem?

A how to achieve efficiency with the existence of fixed resources and limited wants
ss
B how to allocate resources between public and private sectors

ha
C how to balance unlimited wants against finite resources

D how to decide which methods to use to exploit all resources Q1/J/V11
27) What makes choice an important element in the basic economic problem?
A Increased demand leads to higher market prices.
B Limited resources have many alternative uses.
C Reaching a market equilibrium may take a long time.
D Scarce economic resources are distributed equally. Q1/N/V10

1. THE BASIC ECONOMIC PROBLEM AND THE 3 ECONOMIC Qs
1) D 2) B
3) C 4) B 5) A 6) C
7) A 8) B 9) A 10) A
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11) C 12) B 13) B 14) A
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15) C 16) C 17) D 18) C
ya N
19) D 20) B 21) D 22) A
o.
23) D
SA
24) B 25) A 26) C
27) B
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6@ S
24 HA
an R
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co
ya N
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2. FACTORS OF PRODUCTION
ho
6@ S
24 HA
an R
ss SI
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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 Q1/J/17
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.
m
Which concepts can be applied to the above statement?
A demand and supply, government subsidy
co
ya N
B excess demand, resource allocation
o.
C SA
factors of production, private monopoly
D opportunity cost, public sector Q2/J/V17
ho
6@ S
24 HA
an R
ss SI
ha

3) Each factor of production earns an income.
What correctly identifies the income for labour and capital?
labour Capital
A profit interest
B rent profit
C wages profit
D wages interest
Q1/N/16
4) 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.
m
Which combination of factors of production was in operation?
co
men Women
ya N
o.
A capital Land
B enterprise
SA Labour
ho
6@ S
C labour Capital
24 HA
D land Enterprise
Q1/N/15
5) New oil reserves are discovered.

an R
What has increased in supply?

SI
A capital
B enterprise
C labour
ss
D land Q2/J/15
ha
6) 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. Q2/N/14

7) 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 Q3/J/14
8) In which case is it possible to set the level of reward before production takes place for the first factor of
production but not for the second?
first factor second factor
A capital land
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B enterprise labour
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C labour capital
ya N
D land enterprise
o.
SA Q3/N/13
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9) Reena makes a living by selling paintings of the town in which she lives. She sells them in an open-air market
6@ S
once a week.
24 HA
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?
an R
A capital and enterprise

SI
B enterprise and labour

C labour and capital
D labour only Q3/J/13
ss
10) Two telecommunications companies are to merge to finance investments in new technology, which will be more
efficient and require smaller buildings. Three hundred workers will lose their jobs.
ha
What will happen to the factors of production used?
land labour capital enterprise

A fall fall rise fall
B fall fall uncertain rise
C rise rise rise rise
D uncertain rise fall fall
Q3/N/12

A Capital includes factories and machinery but not roads and ports.
B Enterprise is more often found in the public sector rather than the private sector.
C Labour is the factor that takes risks and can become unemployed.
D Land is the natural factor that can be improved by human action. Q2/J/12
12) A university rejects 2000 qualified applicants who wish to study there.
What factor of production could have caused the university to make this decision?
A infinite quantity of capital
B scarcity of labour
m
C surplus of land
D unlimited supply of enterprise Q4/N/11
co
ya N
o.
SA
13) Each of the factors of production earns an income.
What are the incomes for land and capital?
ho
6@ S
land capital
24 HA
A rent interest
B rent profit
an R
C wages interest
SI
D wages profit
Q1/J/11
14) A farmer pays a landowner for the use of a field.

ss
What is the income to the landowner called?

A interest
ha
B profit
C rent
D wages Q1/N/10

A an advantage of producing on a large scale
B a resource used to produce goods and services
C a sub-section of a manufacturing process
D a unit of output Q4/N/10

A A river from which a company draws water is called land.
B Raising finance for a company is called capital.
C Supervisors employed in a company are called enterprise.
D The owner of a company is called labour. Q1/J/10
17) Nolwazi lived in a rural area in Botswana and made baskets to sell to the tourists. The local government gave her
a loan to buy a car to take the baskets to the city market.
Which factor of production increased?
A capital
B enterprise
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C labour
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ya N
D land Q1/N/09
o.
SA
18) A major airline needs a range of people and equipment. These can be divided into factors of production.
ho
Which is allocated to its correct factor of production?
6@ S
people or equipment factor of production
24 HA
A aircraft capital
B computer network land
an R
C pilots enterprise
SI
D shareholders labour
Q2/J/09
19) What is not a factor of production?

ss
A company shares
B machinery
ha
C raw materials
D unskilled workers Q1/N/08
20) Which of the following is a factor of production?

A the payment of interest on a bank loan
B the profit declared by a company in its annual report
C the skill of the managers of a business
D the taxes paid to the government Q2/J/08

21) Hong Kong lacks natural resources. Its best asset is its people.
What can be concluded about Hong Kong’s factors of production?
well supplied poorly supplied
A capital enterprise
B enterprise labour
C labour land
D land capital
Q4/J/08
22) A water pump has been invented which is operated when people play on a roundabout in the village. The
m
roundabout provides the power to pump water from the well.
co
Of what is this an example?
ya N
A conserving labour and conserving natural resources
o.
B
SA
conserving labour and using natural resources
ho
C using labour and conserving natural resources
6@ S
D using labour and using natural resources Q38/N/07
24 HA
23) $2 bn is invested in developing a country’s natural resources and infrastructure.

Which two factors of production does this refer to directly?
an R
A capital and labour

SI
B capital and land

C enterprise and land
D labour and land Q1/J/07
ss
24) What is an example of the factor of production enterprise?

ha
A a shop assistant
B a shop’s profits
C a shop owner
D a shopping centre Q4/N/06
25) A boat owner employs a crew to catch fish to sell on the market.
Which factors of production are involved in this activity?
A labour, capital and enterprise only
B land, labour and capital only
C land, labour and enterprise only
D land, labour, capital and enterprise Q3/J/06
26) An entrepreneur can use either capital or labour in the production process. The actual combination changes as
the prices of the factors alter.
When is capital most likely to replace labour?
price of capital price of labour

A constant falling
B falling rising
C rising constant
D falling falling
Q20/J/06
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27) What is not a factor of production?
co
A a $20 banknote
ya N
B an office
o.
C a photocopier SA
ho
D a secretary Q1/N/V16
6@ S
24 HA
28) The following are four ways factors of production are used.
What is likely to require the greatest use of the factor enterprise?
A a carpenter making wooden articles in his leisure time for sale at a monthly market
an R
B a corn farmer negotiating with other farmers to hire expensive machinery

SI
C a food shop owner sometimes selling flowers in the shop

D a householder harvesting vegetables grown at home Q1/J/V15
29) Which resource is an example of capital used in the fishing industry?

ss
A a fishing boat
ha
B fish
C owners of firms in the industry
D skilled workers in the industry Q1/N/V14

30) In a region of high unemployment, a manufacturer applied for a loan from the government so that the number
of machines in an existing factory could be increased. It was hoped this would also enable more workers to be
employed.
Which factors of production does this decision involve?
A labour and capital only
B labour, capital and enterprise only
C land, labour and capital only
D land, labour, capital and enterprise Q3/N/V13
31) Which group linked to a firm always bears the risk of the decision to produce?
A creditors
m
B managers
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C owners
ya N
D workers Q3/J/V13
o.
SA
ho
32) As the need for energy increases, energy suppliers use a mix of resources.
6@ S
Which resource is renewable?
24 HA
A coal
B gas
C oil
an R
D water Q2/N/V12
SI
33) A public limited company delivers groceries which customers order on the Internet.
What is an example for the firm of the factor of production called capital?
A the computers required to receive the orders
ss
B the fuel used by the delivery vehicles

ha
C the money required to pay the firm’s costs

D the shares it sells on the stock exchange Q3/N/V12
34) What does an economist mean by capital?

A man-made goods that do not directly satisfy human wants
B money used to set up new businesses and expand existing businesses
C natural resources that will not be replaced
D the ability to earn profits by combining resources to produce goods Q2/J/V12

35) A university rejects 2000 qualified applicants who wish to study there.
What factor of production could have caused the university to make this decision?
A infinite quantity of capital
B scarcity of labour
C surplus of land
D unlimited supply of enterprise Q2/N/V11
36) Each of the factors of production earns an income.

What are the incomes for land and capital?
land capital
m
A rent interest
co
B rent profit
ya N
C wages interest
o.
D
SA
wages profit
ho
Q2/J/V11
6@ S
24 HA
A an advantage of producing on a large scale

B a resource used to produce goods and services
C a sub-section of a manufacturing process
an R
D a unit of output Q2/N/V10

SI
38) A farmer pays a landowner for the use of a field.

What is the income to the landowner called?
A interest
ss
B profit
ha
C rent
D wages Q4/N/V10

A A river from which a company draws water is called land.
B Raising finance for a company is called capital.
C Supervisors employed in a company are called enterprise.
D The owner of a company is called labour. Q2/J/V10

40) 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 Q2/J/V16
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

2. FACTORS OF PRODUCTION
1) C 2) D 3) D
4) B 5) D 6) A 7) A
8) D 9) C 10) B 11) D
12) B 13) A 14) C 15) B
m
16) A 17) A 18) A 19) A
co
ya N
20) C 21) C 22) D 23) B
o.
24) C 25) D
SA 26) B 27) A
28) B
ho
6@ S
29) A 30) B 31) C 32) D
24 HA
33) A 34) A 35) B 36) A

37) B 38) C 39) A 40) A
an R
ss SI
ha

m
co
ya N
o.
SA
3. LABOUR & CAPITAL
ho
6@ S
INTENSIVE PRODUCTION
24 HA
an R
ss SI
ha

1) 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. Q13/N/16
2) Changes in demand mean that the government of Bangladesh hopes to switch some production
from clothes made by low-paid, unskilled workers to medicines produced by highly-trained
technicians.
m
Which policies would enable Bangladesh to achieve this switch in employment and production?
A close clothes factories and decrease imports
co
ya N
B encourage immigration of foreign labour and introduce tariffs on clothing
o.
C
D
SA
invest in education and purchase new machines
substitute labour for machines and encourage emigration of workers from Bangladesh
Q26/J/12
ho
6@ S
24 HA
3) The government pays a subsidy for each worker employed by a firm in an area of high unemployment.
When would this policy be most successful in reducing unemployment?
A when the firm is capital-intensive
an R
B when the firm is labour-intensive, requiring mainly unskilled labour

SI
C when the firm provides professional services

D when the firm requires mainly specialist, skilled labour Q25/N/09
4) What makes an industry capital-intensive?

ss
A It employs many unskilled workers.

B It manufactures expensive products.
ha
C It occupies sites on cheap land.

D It uses a large amount of equipment and a small labour force. Q3/N/06
5) A firm finds that it can increase its production by replacing some of its workers by a machine.
If this happens, what changes occur?
A Fixed costs increase and variable costs increase.
B Fixed costs increase and it becomes more capital-intensive.
C Variable costs decrease and it becomes more labour-intensive.
D Variable costs increase and fixed costs decrease. Q19/N/05

6) When is a firm considered more capital-intensive than another firm?
A when it has a lower ratio of workers to machines than the other firm
B when it has fewer workers than the other firm
C when it has higher variable costs than the other firm
D when it has more machines than the other firm Q13/J/V15
7) What will make an industry capital-intensive?

A employing many unskilled workers
B manufacturing expensive products
C occupying cheap land
m
D using expensive equipment and a small labour force Q20/Specimen
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

3. LABOUR & CAPITAL INTENSIVE PRODUCTION
1) B
2) C 3) B 4) D 5) B
6) A 7) D
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co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
4. OPPORTUNITY COST
6@ S
24 HA
an R
ss SI
ha

1) 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 Q2/J/17
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

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 Q2/N/16
3) 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
m
D opportunity cost Q1/J/16
co
ya N
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.
o.
SA
He then decides to work for only 4 hours each day.
ho
What can be concluded from the above information?
6@ S
A The lost profit would be $300.
24 HA
B The lost revenue would be $60.

C The daily opportunity cost would be 30 table cloths.
an R
D The daily opportunity cost would be $50. Q4/N/15

SI
5) 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
ss
B $40
C 20 sandwiches
ha
D 100 sandwiches Q4/J/15

6) Sam wrote a list of how he would prefer to spend his Saturday afternoon.
first choice go to a cricket match

watch the annual town
second choice
parade
third choice go to the cinema
fourth choice visit relatives
Unfortunately a thunderstorm caused the cricket match and the town parade to be cancelled.
Sam went to the cinema.
What was the opportunity cost of going to the cinema?
A going to the cricket match
m
B watching the town parade
co
C visiting his relatives
ya N
D losing his Saturday free time Q1/N/13
o.
SA
ho
7) In China the government is concerned about the level of poverty and the need for more resources in the poorer
regions of the country. As a result, it is increasing its expenditure there and reducing it in the wealthier regions.
6@ S
Which economic concept does this government policy illustrate best?
24 HA
A diseconomies of scale
B market forces
an R
C opportunity cost
SI
D specialisation Q1/N/12
8) A student leaves school and decides to spend the next two years at a college to improve her qualifications.
What is the opportunity cost to the student of taking this decision?
ss
A the cost of the course fees at the college

B the increase in job opportunities she will have as a result of her extra qualifications
ha
C the lost production due to her not being in work

D the money she would have earned if she had been in work for the two years Q3/J/12

9) 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?
m
A $20
co
B $80
ya N
C 4 hours of leisure per day
o.
D
SA
8 hours of leisure per day Q1/N/11
ho
6@ S
10) A firm decides to stop manufacturing ovens and to produce washing machines instead.
24 HA
What is the opportunity cost to the firm?

A the additional washing machines produced
an R
B the cost of producing ovens

C the cost of producing washing machines
SI
D the loss of the production of ovens Q2/J/11
11) A government is faced with the choice of spending on either education or healthcare.
ss

A conservation of resources
ha
B monetary policy
C opportunity cost
D substitution of factors Q5/N/10

12) The government of a country with a rapidly increasing population decides to switch resources from investment
to increased subsidies to farmers.
What is the opportunity cost of this decision?
A the profit earned by farmers
B the rent of the land on which food is grown
C the reduction in investment
D the wages of the farm workers Q4/J/10
13) What, according to the definition of opportunity cost, is sacrificed when a decision is taken?
A an identical alternative
B any possible alternative
m
C the least valuable alternative
co
D the next best alternative Q2/N/09
ya N
o.
SA
14) A large supermarket applied to build on land which was an area of natural beauty. The local government allowed
ho
the building, even though the natural beauty of the area would be lost, because many jobs would be created
6@ S
and much needed income would be brought to the local community.
Which economic ideas cannot be found in the above statement?
24 HA
A external cost and private enterprise

B free market and the conservation of resources
an R
C opportunity cost and improved standards of living

SI
D public sector and external benefit Q8/N/09
15) Commercial companies are cutting down tropical rainforests for hardwood timber.
What is the opportunity cost to society of this activity?
ss
A tax revenue from the sale of the timber

B the environment that is destroyed
ha
C the products made from the timber

D the profits of the companies Q3/J/09
16) A woman playing a quiz game starts with no money, but correctly answers the question that is worth $4000. The
next question is worth $10 000 but if she answers incorrectly she will leave the game with no money.
What is her opportunity cost of choosing to answer the $10 000 question if her answer is incorrect?
A nothing B $4000 C $6000 D $10 000
Q5/N/08

17) The table shows the various combinations of food and clothing which a village can produce using all its
resources.
food units clothing units
0 500
100 400
200 250
300 50
400 0
What is the opportunity cost to the village of increasing the production of food from 200 to 300 units?
m
A 50 units of clothing
co
B 100 units of clothing
ya N
C 200 units of clothing
o.
D 250 units of clothing SA Q5/J/08
ho
6@ S
18) A government decides to spend more on defence and, therefore, cannot spend as much on improving the
country’s infrastructure.
24 HA
What economic idea is illustrated by this decision?

A budget surplus
an R
B monetary policy
SI
C opportunity cost
19) Construction companies are building new houses on land previously used for farming.
ss
What is the opportunity cost to society of this activity?

A improved living conditions
ha
B less congestion in city centres

C more homes for new homeowners
D some farm output Q1/J/06
20) A government spends $100 m on employing extra teachers instead of extra nurses.
What will be the opportunity cost of this?
A $100 m
B the cost of training extra teachers
C the extra nurses
D the reduction in unemployment among teachers Q3/N/05
21) A factory working at full capacity is producing tennis racquets and golf clubs. The management decides to
produce fewer racquets and more clubs because of an increase in demand for golf clubs.
What is the opportunity cost of producing more golf clubs?
A the cost of retraining some workers to make golf clubs
B the cost of transporting and selling the extra golf clubs produced
C the materials bought to make extra golf clubs
D the tennis racquets that will not now be produced Q3/J/05
22) In 2002 the government of Zimbabwe diverted US$18 million, originally intended to support private business, to
help feed millions of people threatened by famine. Some of the money was used to import up to 1.8 million
tonnes of corn.
m
What was the opportunity cost to Zimbabwe of this decision?
A the cost of the extra food
co
ya N
B the cost of the 1.8 million tonnes of corn
o.
C
D the US$18 million
SA
the effect on private business
Q3/J/04
ho
6@ S
23) In recent years more golf courses, which use large quantities of water, have opened in China.
24 HA
What may be the opportunity cost of this?

A cost of water
an R
B loss of farmland
SI
C sales of golf equipment

D wages of golf course staff Q3/N/V14
24) A generating station was built to supply electricity to a rural village in Africa.
ss
What was the opportunity cost to the local economy?

A the charge the villagers had to pay for the electricity
ha
B the cost of the building materials

C the school that was not built as a result
D the wages of the workers Q1/N/V13

25) 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
m
B a decrease in availability of raw materials
C increased wages
co
ya N
D lower productivity Q1/J/V16
o.
SA
26) What, according to the definition of opportunity cost, is sacrificed when a decision is taken?
ho
6@ S
A an identical alternative
24 HA
B any possible alternative

C the least valuable alternative
D the next best alternative Q2/Specimen
an R
ss SI
ha

4. OPPORTUNITY COST
1) A 2) B 3) D
4) C 5) D 6) C 7) C
8) D 9) C 10) D 11) C
12) C 13) D 14) B 15) B
16) B 17) C 18) C 19) D
20) C 21) D 22) C
m
23) B 24) C 25) A 26) D
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
5. PRODUCTION
ho
6@ S
POSSIBILITY CURVE
24 HA
an R
ss SI
ha

1) 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?
m
A X to W
B X to Y
co
ya N
C Z to W
o.
D Z to Y SA Q3/J/17
ho
6@ S
24 HA
2) 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? Q3/J/V17
an R
ss SI
ha

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?
m
A P to R B Q to R C S to Q D S to R
Q3/N/16
co
ya N
4) The diagram shows a production possibility curve for an economy that can produce rice or
o.
SA
electronic equipment. The economy is at point Q. A recession causes unemployment in the
electronics industries.
ho
6@ S
At which point will the economy be in the diagram?
24 HA
an R
ss SI
Q3/N/15
ha

5) 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.
m
If there is now full employment at the same time as new agricultural techniques enable an increase in
co
ya N
productivity, what would be the movement on the PPC diagram? Q3/J/15
A P to R B P to S C Q to R D S to Q
o.
SA
ho
6@ S
6) The diagram shows two production possibility curves for an economy.
24 HA
an R
ss SI
What could have caused the change in the economy’s production possibility curve from XX to YY?
A a decrease in the price level
ha
B a large number of industrial disputes

C a major earthquake
D an increase in unemployment Q3/N/14

7) 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 Q2/J/14
8) How does a production possibility curve show that scarcity exists?

A It shows that a rise in demand for one of the products increases its price.
B It shows that as more resources are used to produce a product, its price rises.
C It shows that at any point outside the production possibility curve an economy is wasting resources.
m
D It shows that there is a limit to the quantity of products that can be produced with existing resources and
co
technology. Q2/N/13
ya N
o.
SA
9) A country is producing at point X on its production possibility curve which shows how it can allocate its
production between capital goods and consumer goods.
ho
6@ S
A period of recession then causes some of its factories to close.
Which point could represent the country’s new position?
24 HA
an R
ss SI
ha
Q2/J/13

10) An economy is producing at X.
What is the opportunity cost of choosing to produce at Y instead of X?
m
A 25 machines
co
B 50 units of food
ya N
C 75 machines
o.
D 150 units of food
SA Q4/J/07
ho
6@ S
11) In 2014 private companies began to drill in areas of the country to exploit natural gas supplies that
24 HA
were known to exist.

an R
ss SI
How might this decision be represented on the diagram which shows a production possibility curve for the
ha
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 Q3/N/V16

12) With a given level of resources, an economy that can produce food or computers is at point Q on its production
possibility curve. Population growth means more resources need to be allocated to food production.
At which point in the short term will the economy be in the diagram?
m
co
Q3/J/V15
ya N
o.
SA
13) In the diagram, what does the production possibility line PQ illustrate?
ho
6@ S
24 HA
an R
SI
A constant opportunity cost

ss
B decreasing opportunity cost

ha
C diseconomies of scale
D economies of scale Q2/N/V14

14) An economy produces different types of goods using its limited resources. This can be illustrated by a production
possibility curve.
m
What does point X on the production possibility curve show?
co
ya N
A All resources are used for the production of consumer goods.
B More resources are allocated to producing capital goods than consumer goods.
o.
C
SA
Resources are allocated to produce a mixture of consumer and capital goods.
ho
D Total resources are not being fully utilised for production of these goods. Q2/N/V13
6@ S
24 HA
15) The diagram shows a production possibility curve for digital televisions and CD players.
an R
ss SI
ha
Which movement shows an increase in the use of existing resources to increase production for both digital
televisions and CD players? Q2/J/V13
A X to W B X to Z C Z to W D Z to Y

5. PRODUCTION POSSIBILITY CURVE
1) B 2) B 3) B
4) A 5) A 6) C 7) B
8) D 9) C 10) B 11) C
12) B 13) A 14) C 15) B
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
6. TYPES OF
co
ya N
ECONOMIC SYSTEMS
o.
SA
ho&
6@ S
24 HA
GOVERNMENT
INTERVENTION
an R
ss SI
ha

1) 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 Q5/J/16
2) 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
m
D the building of a major rail link Q16/N/15
co
ya N
3) What would not be an example of the working of a market system?
o.
SA
A a high price charged because of costly research to produce the good
B a high price charged for a well-known painting
ho
6@ S
C a low price charged because of economies of scale
D a low price charged for subsidised bus travel Q5/J/15
24 HA
4) Which headline could apply to a mixed economy but not a free market economy?
an R
A ‘Cheap imports put domestic producers out of business.’

SI
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.’ Q5/J/14
ss
5) What is most likely to be the responsibility of a central government?

A the provision of immigration officials at an airport
ha
B the provision of security cameras in a shopping centre

C the provision of security staff at a bank
D the provision of ticket inspectors on a train Q25/J/13
6) Why might a free market economy be more advantageous than a mixed economy?
A Equality of income is encouraged.
B In a mixed economy, governments use taxes which are inefficient.
C Production is determined solely by consumer wishes.
D Social costs are taken into consideration. Q4/N/12

7) What is true of a mixed economy but is not true of a free market economy?
A There is a mixture of agricultural, manufacturing and service industries.
B There is a mixture of central authorities, firms and consumers.
C There is a mixture of external benefits and private costs.
D There is a mixture of large and small companies. Q4/J/12
8) How are economic decisions determined in a pure market system?

A by a mixture of market forces and government regulation
B by central planners of production and consumption
C by government regulation of the price mechanism
m
D by the forces of demand and supply Q6/N/11
co
ya N
9) What is always a feature of a mixed economy?
o.
SA
A All capital goods are produced in the public sector.
B Resources are used in the public sector and the private sector.
ho
6@ S
C The allocation of all resources is determined by the price mechanism.
D The public sector is larger than the private sector. Q7/N/11
24 HA
10) Which person would wish to encourage the use of the market system?
an R
A someone who believes that people should have equal living standards
SI
B someone who believes that people should have freedom of action

C someone who believes that profit maximisation is wrong
D someone who believes that the government should correct peoples’ bad behaviour Q11/N/11
ss
11) What is an advantage of the market economic system?

A It aims for equality of income.
ha
B It ensures the provision of defence and law and order.

C It gives an incentive to produce.
D It reduces pollution and congestion. Q4/J/11
12) Which pair of economic institutions can be found in a market economy?

A commercial banks and public companies
B public corporations and partnerships
C public corporations and private companies
D stock exchange and local government schools Q11/J/11

13) The directors 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 the interest it pays on borrowed money
C the minimum wage it must pay its workers
D the replacement of the director of finance Q23/J/10
14) A government decides that an economy should make more use of the market.
Which policy might help to achieve this?
A a decrease in controls on imported goods
m
B an increase in government ownership of land
C an increase in subsidies to industry
co
ya N
D the fixing of minimum wage levels for workers Q6/N/09
o.
SA
15) Which argument can be used in favour of the market economy?
ho
6@ S
A It enables consumers to show their preferences for goods.
B It ensures that all capital resources are used.
24 HA
C It guarantees full employment.

D It leads to an equal distribution of wealth. Q6/J/09
an R
SI
16) What is a feature of a mixed economic system but not a planned economic system?
A It has both industrial and service sectors.
B It has both large and small firms.
C It has both public and private sectors.
ss
D It has both rural and urban areas. Q2/N/08

ha
17) What can happen in a planned economy that does not happen in a market economy?
A The allocation of resources can take account of the total effects on society.
B There can be full employment of factors of production.
C There can be inflation.
D There can be international trade. Q1/J/08

18) In a mixed economy, resources are used as a result of
A the decisions of consumers only.
B the decisions of firms only.
C the decisions of consumers and firms.
D the decisions of consumers, firms and government. Q3/J/08
19) What is found in a market economy but not a command economy?

A division of labour
B economies of scale
C money as a store of value
m
D the profit motive Q1/N/07
co
ya N
20) A free market economy is more likely than a planned economy to encourage development because
A equality of income is encouraged.
o.
SA
B factors of production would be employed efficiently.
ho
C government intervention uses taxes and subsidies.
6@ S
D social costs are taken into consideration. Q3/J/07
24 HA
21) Each country of Southern Africa has a mixed economy.

Which statement about a mixed economy is correct?
an R
A The government employs most primary sector workers.

SI
B The government owns all major secondary sector industries.

C The government owns the transport network.
D The government provides public and merit goods. Q5/J/07
ss
22) Countries that have changed from command to market economies will expect to find an increase in
ha
A choice.
B price control.
C rationing.
D subsidies. Q2/N/06
23) If a planned economy became a mixed economy, which industry would be most likely to remain under
government control?
A agriculture
B coal mining
C defence
D motor car production Q2/J/06
24) What occurs in a planned economy but not a market economy?
A allocation by the government
B allocation by the price system
C economies of scale
25) In a market economy, what does the entrepreneur decide?

A the combination of resources used
B the demand for the product
C the equilibrium price of the product
m
D the level of profits Q1/J/05
co
ya N
26) China is changing from a centrally planned economy towards a market economy.
o.
SA
How will the influence of consumers and the government change?
ho
consumers government
6@ S
A decrease decrease
24 HA
B decrease increase
C increase decrease
an R
D increase increase
SI
Q2/J/05

ss
B Resources are used in the public and the private sector.

ha
D The public sector is larger than the private sector. Q1/N/04
28) Which action is evidence that a country is a planned economy?

A A central bank plans an interest rate change.
B A government plans the allocation of all resources.
C A local authority plans a new library.
D A ministry of finance plans the annual budget. Q1/J/04

29) What can be found in a mixed economy but not in a market economy?
A a national economic development plan
B an unequal distribution of income and wealth
C the operation of the price mechanism
D the private ownership of factors of production Q5/J/V15
30) What is found in a mixed economy but not in a free market economy?
A equilibrium prices
B income tax
C small firms
m
D the profit motive Q5/N/V14
co
ya N
31) In a pure market economy, which secondary factor determines the distribution of goods and services?
o.
A fairness to the consumer
B needs of the consumer
SA
ho
6@ S
C price of the product
D quality of the product Q4/J/V13
24 HA
32) When is the market system not used to allocate resources?

an R
A When a local firm persuades people to buy its products through advertising.
SI
B When a local government fixes the price of rented accommodation.

C When a local shop has a monopoly in the area.
D When a local solicitor charges a different price for the same service to different people. Q10/J/V13
ss
33) What is likely to play a more important role in a mixed economy than in a free market economy?
A consumer wishes
ha
B government intervention
C international trade
D the profit motive Q4/N/V12
34) What is found in a mixed economy but not a free market economy?
A banks
B division of labour
C price controls
D profit motive Q4/J/V12

35) How are economic decisions determined in a pure market system?
A by a mixture of market forces and government regulation
B by central planners of production and consumption
C by government regulation of the price mechanism
D by the forces of demand and supply Q5/N/V11

B Resources are used in the public sector and the private sector.
m
D The public sector is larger than the private sector. Q6/N/V11
co
ya N
37) Which person would wish to encourage the use of the market system?
o.
SA
A someone who believes that people should have equal living standards
B someone who believes that people should have freedom of action
ho
6@ S
C someone who believes that profit maximisation is wrong
D someone who believes that the government should correct peoples’ bad behaviour Q10/N/V11
24 HA
38) What is an advantage of the market economic system?

an R
A It aims for equality of income.

SI
B It ensures the provision of defence and law and order.

C It gives an incentive to produce.
D It reduces pollution and congestion. Q5/J/V11
ss
39) Which pair of economic institutions can be found in a market economy?

A charities and public corporations
ha
B multinationals and commercial banks

C public corporations and private companies
D stock exchange and government hospitals Q5/J/V16

6. TYPES OF ECONOMIC SYSTEMS
&
GOVERNMENT INTERVENTION
1) C
2) D 3) D 4) B 5) A
6) C 7) B 8) D 9) B
10) B 11) C 12) A 13) D
14) A 15) A 16) C 17) A
m
18) D 19) D 20) B 21) D
co
22) A 23) C 24) A 25) A
ya N
26) C 27) B 28) B 29) A
o.
30) B
SA
31) C 32) B 33) B
ho
34) C 35) D 36) B 37) B
6@ S
38) C 39) B
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

8. EQUILIBRIUM PRICE
m
co
&
ya N
o.
SA
9. FACTORS FOR DEMAND AND
ho
6@ S
SUPPLY OF A PRODUCT
24 HA
an R
ss SI
ha

1) 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 Q7/J/17
2) 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? Q10/J/17
m
co
ya N
o.
SA
ho
6@ S
24 HA
3) The diagram shows the demand for chocolate

an R
ss SI
ha
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 Q5/J/17

4) The diagram shows the market for a product.
Which statement about the points marked on the diagram is correct?
m
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.
co
ya N
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. Q4/J/V17
o.
SA
ho
6@ S
5) Tea is a very popular drink in Turkey and Morocco but coffee is an alternative drink preferred by many people.
24 HA
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? Q11/J/V17
an R
tea and coffee tea and biscuits coffee and sugar

SI
A complement complement complement

B complement substitute substitute
C substitute complement complement
D substitute complement substitute
ss
ha

6) 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 Q5/N/16
7) 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?
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha
Q15/J/16
8) 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 Q4/J/16

9) The diagram shows the price of a product during year 1 and year 2.
m
Which changes in demand and supply are consistent with the price behaviour in year 2?
co
demand supply
ya N
A falls by 5% falls by 10%
o.
B
SA
falls by 10% falls by 5%
ho
C unchanged falls by 10%
6@ S
D rises by 15% falls by 5%
24 HA
Q7/J/16
an R
10) What is meant by an equilibrium price?

SI
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 Q5/N/15
ss
11) In August 2013, a lengthy strike in north-east India, where the finest and most expensive Darjeeling tea is grown,
ha
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. Q6/N/15

12) Air travel and rail travel are substitute forms of transport. The diagram shows the effect of new technology on
the market for air travel.
m
co
What would be the most likely effect on the market for rail transport?
ya N
A a decrease in demand for rail transport
o.
SA
B an increase in the price of rail tickets
ho
C an increase in supply of rail transport
6@ S
D an increase in the total income of rail companies Q7/N/15
24 HA
13) 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.
an R
Which point represents the new equilibrium?

ss SI
ha
Q7/J/15

14) 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 Q5/N/14
15) 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?
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
Q7/N/14
SI
16) A supply curve shows the link between the quantity supplied and
A demand.
B equilibrium output.
ss
C the price of the product.

D the scale of production. Q4/J/14
ha
17) 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 Q7/J/14

18) The diagrams show different conditions of demand and supply for a product.
In which diagram would market price remain unchanged if consumers’ incomes fell?
Q5/N/13
m
co
19) In 2011, a company selling milk in glass bottles replaced them with new plastic bottles. When they were
ya N
introduced, the equilibrium quantity on the market fell.
o.
SA
What could be a reason for this fall?
A Consumers preferred the new bottle because it was lighter to carry.
ho
6@ S
B Milk from the farms used to fill the bottle cost more.
24 HA
C The bottle was cheaper than the existing glass bottle to produce.
D The new bottle was introduced with a successful advertising campaign. Q6/N/13
an R
20) Many countries buy oil from Saudi Arabia.

SI
Which change is most likely to lead to a fall in the price of a barrel of oil?
A an increase in demand of 10% with no change in supply
B an increase in demand of 10% with an increase in supply of 10%
C no change in demand with a 10% decrease in supply
ss
D no change in demand with a 10% increase in supply Q6/J/13

ha
21) A supply curve for a commodity is drawn to show how quantity supplied varies with
A government taxes.
B income.
C tastes.
D the price of the commodity. Q6/N/12

22) In 2010, floods caused severe damage to wheat production.
How would this be shown on a market demand and supply diagram for wheat?
supply curve demand curve

A no change shift to the right
B shift to the left no change
C shift to the left shift to the left
D shift to the right shift to the left

Q7/N/12
23) The market for a normal good is in equilibrium at point X. Consumers’ incomes fall and the cost of producing the
m
good rises.
co
In which area of the diagram will the new equilibrium be?
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
Q10/N/12
24) What is not held constant in constructing a demand schedule?

A the incomes of consumers
ss
B the prices of complementary goods

C the price of the good itself
ha
D the tastes of consumers Q6/J/12

25) The diagram shows the demand and supply curves for digital cameras. The original equilibrium point is X.
What will be the new equilibrium point if these cameras become more fashionable and the rate of sales tax
rises?
m
Q7/J/12
co
ya N
26) What changes would move the equilibrium in the diagram from point X to a new point within area Z?
o.
SA
ho
6@ S
24 HA
an R
SI
A a decrease in demand with a decrease in supply

ss
B a decrease in demand with an increase in supply

ha
C an increase in demand with a decrease in supply

D an increase in demand with an increase in supply Q10/J/12

27) Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced
the sales tax (VAT).
How would these events be shown on a demand and supply diagram for summer clothes?
demand curve supply curve
A move to the left move to the right
B move to the left no change

C move to the right move to the left
D no change move to the right
Q8/N/11
m
28) Drought in African countries often results in poor harvests. Other countries then help by sending quantities of
co
food.
ya N
What are the likely results of these events for the price of food in the drought-affected countries?
o.
SA
A It will fall and then rise.
ho
B It will rise and continue to rise.
6@ S
C It will rise and remain at this higher level.
24 HA
D It will rise and then fall. Q9/N/11
29) The table shows the changes in two influences on the demand for and supply of televisions.
an R
If these two changes occurred at the same time, in which case is it impossible for the price of televisions to rise?
SI
consumers’ incomes costs of production
A fall fall
B fall rise
ss
C rise fall
ha
D rise rise
Q6/J/11

30) Due to changes in the costs of production, an industry’s supply curve shifted at various times from S1 to either
S2 or S3.
m
If a shift in supply was due to a seasonal increase in the cost of raw materials, what would have been the effect
co
on demand?
ya N
A The demand curve would move from D1 to D2.
o.
SA
B The quantity demanded would move from x to w.
ho
C The quantity demanded would move from x to y.
6@ S
D The quantity demanded would remain the same at x. Q10/J/11
24 HA
an R
ss SI
ha

31) A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X is the
equilibrium position.
The effect is illustrated in the diagram below.
m
co
ya N
o.
SA
What will be the new equilibrium price and quantity supplied as a result of the subsidy?
ho
6@ S
equilibrium price ($ per kilo) quantity supplied (’000 kilos)
24 HA
A 10 20
B 13 25
an R
C 15 20
SI
D 20 10
Q26/J/11
ss
ha

32) The diagram shows demand and supply curves for a product at its equilibrium price P.
m
How would the introduction of a subsidy be shown?
co
A Demand would shift to D1.
ya N
B Demand would shift to D2.
o.
C Supply would shift to S1.SA
ho
D Supply would shift to S2. Q9/N/10
6@ S
24 HA
33) Which statement could explain a decrease in the demand for natural rubber?
A Demand for car tyres has increased.
B New techniques of producing substitutes for rubber have been introduced.
an R
C Productivity of rubber plantations has increased.

SI
D The area of land on which rubber is grown has increased. Q10/N/10
34) The diagram shows the market for fresh fish in the Caribbean with equilibrium point X. New, more efficient
boats with lower running costs are then used.
ss

ha
Q7/J/10
35) The diagram shows the demand for and the supply of bread.
m
A maximum price P1 is fixed by the government.
co
What is likely to be the immediate result of this?
ya N
A a movement of the demand curve to the right
o.
SA
B a movement of the supply curve to the right
ho
C a shortage of bread
6@ S
D a surplus of bread Q8/J/10
24 HA
36) The diagram shows a market for wheat that is in equilibrium.

an R
ss SI
ha
Which area represents the total revenue for wheat farmers? Q9/J/10
A OTXY B OVXZ C OVXY D OWXY

37) South African companies are planning to undertake major investment in Zimbabwe in order to mine platinum.
If this investment occurs, what would happen in the short term to the supply of platinum, the price of platinum
and the profits of the companies?
supply curve price of platinum profits of the companies
A no change rise Rise
B shift to left no change Fall

C shift to right rise Rise
D shift to right fall uncertain
Q21/J/10
m
38) The diagram shows an initial equilibrium point (X) in a market and a new equilibrium point (Y).
co
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
Which combination of changes in demand and supply could have caused the movement from X to Y?
demand supply
A decrease decrease
ss
B decrease increase
C increase decrease
ha
D increase increase
Q7/N/09

39) The diagram shows a demand and supply schedule for tomatoes. The market is in equilibrium at point X.
m
co
What will happen if the government imposes a maximum price of $1 per kg?
ya N
A Demand will exceed supply by 30 kg.
o.
SA
B Demand will exceed supply by 60 kg.
ho
C Market price will fall to $1 but quantity will remain at 100 kg.
6@ S
D Market price will remain unchanged but quantity will fall to 70 kg. Q11/N/09
24 HA
40) In 2008 inflation was close to 100 000 % in Zimbabwe. In a bid to reduce this high rate, the Zimbabwean
Government imposed maximum prices on a range of products. This caused price rises amongst those goods sold
unofficially or illegally.
an R
What could explain this?

SI
A The maximum prices increased demand whilst reducing supply.

B The maximum prices reduced demand whilst increasing supply.
C The maximum prices were set above the equilibrium price levels.
ss
D The maximum prices were set at the equilibrium price levels. Q29/N/09
ha
41) 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. Q7/J/09

42) The diagram shows a change in demand for coffee.
m
What might cause the demand for coffee to change from D1 to D2?
co
A a good coffee harvest
ya N
B a rise in the price of alternative drinks
o.
SA
C a rise in the wages of coffee workers
ho
D a successful advertising campaign for tea Q11/J/09
6@ S
24 HA
43) A large amount of the agricultural products in a country were damaged by floods.
What is likely to have happened to the price of agricultural products and the volume of imports of agricultural
products?
an R
price of products volume of imports

SI
A fall fall
B fall rise
C rise fall
ss
D rise rise
Q37/J/09
ha
44) The UK government gave subsidies to orchestras so that the number of concert performances could be
increased. However, the advertisements for these concerts caused such extra demand that ticket prices rose
despite the subsidy.
What can be concluded about these changes?
A the demand curve for concerts moved to the left
B the government alone determined the market price
C the market allocation of resources was altered
D there is now no scarcity of resources available for concerts Q4/N/08

45) In 2004, Dyson, a UK company, launched a luxury version of its vacuum cleaner in Japan.
Within two years, it became the top-selling vacuum cleaner in the country.
What could have caused this increase in demand?
A a fall in the population of Japan
B a fall in the price of alternative vacuum cleaners in Japan
C rising levels of unemployment in Japan
D successful advertising of Dyson vacuum cleaners in Japan Q10/N/08
46) The diagram shows the market for a product. The equilibrium is at X.
m
co
ya N
o.
SA
ho
6@ S
24 HA
Which combination of demand and supply changes would result in a new equilibrium in the area marked Y?
an R
demand change supply change

SI
A decrease decrease
B decrease increase
C increase decrease
ss
D increase increase
Q11/N/08
ha
47) Four changes affecting the supply of a good are listed below.
Which would cause the supply curve to shift to the left?
A a decrease in its market price
B an improvement in technology
C an increase in labour productivity
D the introduction of a sales tax Q12/N/08

48) 25 % of both rural and urban consumers were reported to prefer products from Japan when buying electronic
goods.
Which combination of characteristics are the Japanese electronic goods likely to have which persuade
consumers to make this choice?
technology length of guarantee running costs

A latest 12 months high
B standard 12 months low
C latest 24 months low
D standard 24 months high
Q19/N/08
m
49) Due to good weather, there is a surplus in the market for an agricultural product.
co
Which change would cause the market to return to equilibrium?
ya N
A a decrease in demand
o.
B a fall in price SA
ho
C an increase in supply
6@ S
D a rise in price Q10/J/08
24 HA
an R
ss SI
ha

50) In July 2006, the UK chocolate producer, Cadbury Schweppes, had to withdraw one million bars of chocolate
from the market because of food contamination at one of its factories. This was widely reported in UK
newspapers.
Which diagram shows the likely effect on the market for chocolate produced by Cadbury Schweppes?
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
Q11/J/08
ss
51) What combination of events might cause a rise in the willingness and the ability of consumers to buy a product?
ha
price of a substitute product tax rates
A decrease decrease
B decrease increase
C increase increase
D increase decrease
Q12/J/08

52) Sometimes travel companies advertise holidays at prices below cost.
What might be a reason for this?
A an excess demand for holidays
B an excess supply of holidays
C a price inelastic demand for holidays
D insufficient competition in the holiday market Q11/N/07
53) X is the equilibrium point for a company that sells advertising space. During the year, the demand for advertising
decreased and the company’s labour cost increased.
What would be the new equilibrium?
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
Q14/N/07
54) A demand curve for a product shows the relationship between its price and
ss
A cost of production.
B population changes.
ha
C the income of the consumer.

D the quantity of the product consumed. Q10/J/07

55) The following was printed in a magazine.
More soft drinks are being consumed than ever before by the 16 – 34 age group. Schweppes, the
drink manufacturers, claim that over 45 per cent of their soft drinks are now being consumed
without alcohol as people switch away from alcoholic spirits.
How would this change be represented on a demand and supply diagram for soft drinks?
A decrease in demand
B decrease in supply
C increase in demand
D increase in supply Q11/J/07
56) Australian mines are among the world’s largest suppliers of uranium but the mines are contaminating Australia’s
m
natural environment. It is recommended that the mining companies install new equipment which causes less
pollution.
co
If this is done, how would it be represented on a demand and supply diagram for uranium?
ya N
o.
SA demand curve supply curve
ho
A shift to left no change
6@ S
B shift to right shift to left
24 HA
C no change shift to left
D shift to left shift to right

an R
Q13/J/07
SI
57) 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.
ss
What is likely to be the new equilibrium position?

ha
Q14/J/07
58) The diagram shows a change in the demand for a company’s products as a result of a change in advertising.
m
What has increased?
A the cost of advertising to the company
co
ya N
B the cost of advertising to a rival company
o.
SA
C the expenditure on advertising by the company
D the expenditure on advertising by a rival company Q8/N/06
ho
6@ S
59) The demand for and supply of a good both change. As a result the price of the good rises but the quantity traded
24 HA
remains the same.

What must have happened to demand and supply?
an R
demand supply
SI
A fallen fallen
B fallen risen
C risen fallen
D risen risen
ss
ha
Q9/N/06
60) In a market there is a shortage of a good.

What change would cause the market to come to an equilibrium?
A an increase in demand
B a decrease in supply
C a fall in price
D a rise in price Q10/N/06

61) The table shows the quantity of coffee demanded per day and the quantity supplied per day.
price ($) per kilo demand (kilos) supply (kilos)
12 16 26
11 18 23
10 20 20
9 22 17
8 24 14
7 26 11
m
At the equilibrium price, what will be the total expenditure on coffee? Q19/N/06
A $10 B $20 C $200 D $400
co
ya N
o.
SA
62) Tea and sugar are complementary goods.
What will happen if the price of tea falls, other things being equal?
ho
6@ S
A The demand curve for sugar will move to the right.
24 HA
B The demand curve for tea will move to the right.

C The price of sugar will fall.
D The supply curve of sugar will move to the left. Q8/J/06
an R
SI
63) The price of a good is temporarily above the market equilibrium price.
What must happen for the market to be brought back to equilibrium?
quantity demanded quantity supplied

ss
A rises rises
B rises falls
ha
C falls rises
D falls falls
Q9/J/06
64) What is not held constant in calculating a demand schedule?

D the tastes of consumers Q10/J/06

65) The table shows the demand schedule for maize.
quantity demanded
price per kilo ($)
(kilos per day)
3 300
4 240
5 200
6 150
7 140
8 100
m
What will happen if price rises from $5 to $6 per kilo?
co
A Total revenue will rise.
ya N
B Demand will rise.
o.
C Total revenue will fall. SA
ho
D Total costs will rise. Q19/J/06
6@ S
24 HA
66) What is most likely to cause a shift in the supply curve for oil?
A an increase in purchases of cars
B an increase in the price of oil
an R
C a rise in consumer incomes

SI
D the discovery of new oilfields Q8/N/05
67) In 2003 the US government was asked to stop subsidising tobacco growers.
What would happen if the government agreed?
ss
output of tobacco price of tobacco

ha
A fall fall
B fall rise
C rise fall
D rise rise
Q10/N/05

68) The diagram shows demand and supply curves for a good. The market is in equilibrium at point X.
What would be the new equilibrium position if there were a successful advertising campaign for the good and an
increase in the cost of raw materials?
m
co
ya N
Q11/N/05
o.
SA
69) In 2002 the world price of cocoa was higher than in 2001.
ho
6@ S
Which combination of changes in the demand for and the supply of cocoa would always lead to a rise in price?
24 HA
demand for cocoa supply of cocoa
A higher higher
an R
B higher lower
SI
C lower higher
D lower lower
Q12/N/05
ss
70) What would not cause a shift in the demand curve for a good?
A a change in incomes
ha
B a change in the price of a substitute good

C a change in the price of the good
D a change in the tastes of consumers Q8/J/05
71) Four changes affecting the supply of a good are listed below.
What would cause the supply curve to shift to the right?
A an improvement in technology
B an increase in its market price
C a reduction in labour productivity
D the introduction of a sales tax Q9/J/05
72) What is an example of complementary demand?
A buses and bus fares
B cotton and cotton seed
C televisions and electricity
D wood and sawdust Q10/J/05
73) A good is successfully advertised.

What is the most likely impact on the demand and supply curves for the good?
A shift to left shift to left
m
B shift to left shift to right
co
ya N
C shift to right shift to left
o.
D SA shift to right shift to right
ho
Q11/J/05
6@ S
24 HA
74) The diagram shows the supply and demand curves for a good. The market is in equilibrium at point X.
an R
ss SI
ha
What is the excess demand at price P? Q12/J/05

A PT B QR C QT D ST

75) The diagram shows the market for bicycles. The demand for bicycles increases and at the same time
manufacturers are able to cut costs through new production methods.
m
According to the diagram, what would be the result of these changes?
co
ya N
price Quantity
o.
SA A increase Increase
ho
B increase Unchanged
6@ S
C unchanged Increase
24 HA
D unchanged Decrease
Q10/N/04
an R
76) The major oil producers sometimes try to raise the price of oil.
SI
How would this be shown on a demand and supply diagram?

A a movement along the demand curve to the right
B a shift in the supply curve to the right
ss
C a shift in the demand curve to the left

D a shift in the supply curve to the left Q11/N/04
ha
77) The world price of cocoa has been falling while the prices of products made from cocoa have been rising.
Which combination might explain this?
advertising expenditure on
market for cocoa
products made from cocoa
A excess demand Decrease
B excess supply Decrease
C excess demand Increase
D excess supply Increase

Q14/N/04
78) Point X shows the original equilibrium in the market for nurses in a country.
There is a fall in the number of people who wish to be trained as nurses.
What is the new equilibrium point?
m
co
ya N
Q17/N/04
o.
SA
ho
79) The diagram shows the demand for and supply of a product. The original equilibrium is at X.
6@ S
Which point indicates the new equilibrium position if there is an increase in the price of a close substitute for
24 HA
the commodity while other things remain the same?

an R
ss SI
ha
Q10/J/04

80) The diagram shows the demand for and supply of a firm's product. The original equilibrium is at X.
The firm pays for a successful advertising campaign.
What is the new equilibrium?
m
co
ya N
o.
SA
ho
Q11/J/04
6@ S
24 HA
81) There are a fixed number of seats at a concert. Most of the audience would continue to attend even if the seat
prices were increased.
Which diagram represents this situation?
an R
ss SI
ha
Q15/J/04

82) The graph shows the market for unskilled workers in a city. The original equilibrium is at X.
What would be the new equilibrium if there was a migration of workers to the city?
m
co
ya N
o.
SA Q16/J/04
ho
6@ S
24 HA
an R
ss SI
ha

83) A government taxes farmers $12 per kilo when they supply food on the open market where X is the original
equilibrium position.
The effect is illustrated in the diagram below.
m
co
ya N
o.
SA
What will be the new equilibrium price and quantity supplied as a result of the tax?
ho
6@ S
equilibrium price ($ per kilo) quantity supplied (’000 kilos)
24 HA
A 20 40
B 25 50
C 35 30
an R
D 40 20
SI
Q18/N/V16
ss
ha

84) Newspapers recently reported there had been a decrease in the demand for beef and that its price per kilogram
had increased.
From the initial equilibrium point X, which point in the diagram illustrates the new market equilibrium?
m
co
ya N
o.
SA
ho
6@ S
24 HA
Q6/J/V15
an R
85) The diagram shows the market for fresh fish in the Caribbean with equilibrium point X.
SI
A new type of fishing boat increases production, which reduces costs.

ss
ha
Q7/J/V15
86) A bus driver works longer hours if the wage rate increases. As his earnings increase there reaches a point when
he prefers more leisure to work.
Which supply curve, S, represents this situation?
m
Q11/J/V15
co
ya N
87) The government reduces the rate of income tax and increases the rate of tax on producers.
o.
SA
From the initial equilibrium point X, which letter indicates the new equilibrium point in the market?
ho
6@ S
24 HA
an R
ss SI
ha
Q19/J/V15
88) As the demand for new houses increases, the demand for plumbers and electricians also increases.
What does this statement illustrate?
A The demand for plumbers and electricians is complementary (joint) demand.
B The productivity of plumbers and electricians increases continually.
C There is no limit to the number of plumbers and electricians employed.
D The supply of plumbers and electricians is totally elastic. Q4/N/V14

89) Supermarkets sell petrol (gas) outside their stores. They reduce the price of petrol below other suppliers to
attract more customers to buy goods in the store when they buy more petrol.
If this were successful, how might it be shown on demand and supply diagrams?
demand and supply demand and supply

diagram for petrol diagram for the store’s goods
A shift of the demand curve to the left shift of the supply curve to the left
B shift of the demand curve to the right shift of the demand curve to the left
C shift of the supply curve to the left shift of the supply curve to the right
D shift of the supply curve to the right shift of the demand curve to the right
Q6/N/V13
m
90) Maize and fuel are used in the production of Mexican tortillas. In 2010 Mexico produced a record maize crop but
co
in 2011 rises in the price of fuel increased costs for tortilla makers.
ya N
What is likely to have happened to the price of tortillas in 2010 and 2011?
o.
SA
ho
price in 2010 price in 2011
6@ S
A decreased decreased
24 HA
B decreased increased
C increased decreased
an R
D increased increased
Q6/J/V13
SI
91) A supply curve for a commodity is drawn to show how quantity supplied varies with
A government taxes.
ss
B income.
C tastes.
ha
D the price of the commodity. Q6/N/V12

92) In June 2010, a government published a proposal to increase Value Added Tax (Goods and Services Tax) on some
goods from January 2011. Between June 2010 and January 2011 consumers bought more of those goods before
the price increase occurred. After January, consumers bought less of the goods.
How would the changes be shown on a demand diagram for the goods?
from June-January after January
A a movement down the curve a shift of the curve to the right
B a movement up the curve a shift of the curve to the right
C a shift of the curve to the left a movement down the curve
D a shift of the curve to the right a movement up the curve

Q7/N/V12
m
co
93) The market for a normal good is in equilibrium at point X. Consumers’ incomes rise and the government gives a
ya N
subsidy to the producers of the good.
o.
SA
In which area of the diagram will the new equilibrium be?
ho
6@ S
24 HA
an R
ss SI
Q10/N/V12
ha
94) Russia exports wheat. In 2010, because of a bad harvest, the Russian Government prevented the export of
wheat to keep enough supplies for domestic use.
What happened as a result 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. Q25/N/V12

95) What is not held constant in constructing a demand schedule?
D the tastes of consumers Q6/J/V12
96) Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced
the sales tax (VAT).
How would these events be shown on a demand and supply diagram for summer clothes?
m
A move to the left move to the right
co
B move to the left no change
ya N
C move to the right move to the left
o.
D
SA no change move to the right
ho
Q7/N/V11
6@ S
24 HA
97) Drought in African countries often results in poor harvests. Other countries then help by sending quantities of
food.
What are the likely results of these events for the price of food in the drought-affected countries?
an R
A It will fall and then rise.

SI
B It will rise and continue to rise.

C It will rise and remain at this higher level.
D It will rise and then fall. Q8/N/V11
ss
98) The graphs, drawn to the same scale, show the demand curves of four firms. The market price is $10. The price
then falls to $8.
ha
Which firm will have the largest increase in total revenue?
Q9/N/V11
99) The diagrams show possible demand curves for four commodities.
Which diagram shows a completely inelastic demand curve?
Q11/J/V10
m
100) The diagram shows the market for rice.
co
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
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
ss
C improved rice farming methods

D poor weather conditions Q7/J/V16
ha

8. EQUILIBRIUM PRICE
&
9. FACTORS FOR DEMAND AND SUPPLY OF A PRODUCT
1) A 2) D 3) B 4) D
5) C
6) D 7) C 8) D 9) B
10) B 11) C 12) A 13) D
14) D 15) B 16) C 17) B
18) D 19) B 20) D 21) D
m
22) B 23) D 24) C 25) B
26) C 27) A 28) D 29) A
co
ya N
30) B 31) B 32) D 33) B
o.
34) D SA
35) C 36) C 37) D
ho
38) C 39) B 40) A 41) C
6@ S
42) B 43) D 44) C 45) D
24 HA
46) A 47) D 48) C 49) B

50) C 51) D 52) B 53) C
an R
54) D 55) C 56) C 57) A

SI
58) D 59) C 60) D 61) C

62) A 63) B 64) C 65) C
66) D 67) B 68) D 69) B
70) C 71) A 72) C 73) C
ss
74) C 75) C 76) D 77) D

ha
78) A 79) C 80) B 81) C

82) C 83) C 84) A 85) D
86) C
87) B 88) A 89) D 90) B
91) D 92) D 93) B 94) D
95) C 96) A 97) D 98) A
99) B 100) D

m
co
10. PRICE ELASTICITY OF
ya N
o.
SA
DEMAND &
ho
6@ S
PRICE ELASTICITY OF SUPPLY

24 HA
an R
ss SI
ha

1) 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 Q4/J/17
2) 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?
m
A zone W
co
B zone X
ya N
C zone Y
o.
D zone Z SA Q6/J/V17
ho
6@ S
24 HA
an R
ss SI
ha

3) 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% Q6/J/15
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
m
C the rate of inflation
co
D whether the food can be stored easily Q4/N/14
ya N
o.
SA
5) Asda, a supermarket chain, noticed a regular, sharp decrease in sales in the third week of the month as people
ho
ran out of cash before their next wage payment. The supermarket offered their biggest price reductions at that
6@ S
time.
Why might this policy increase total revenue? Q11/N/14
24 HA
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
an R
C because the price elasticity of demand for Asda’s products decreases in the third week of the month
SI
D because the price elasticity of demand for Asda’s products increases in the third week of the month
6) In the 2016 Olympics in Brazil, the opening ceremony will take place in the Maracana Stadium, which can seat
82 000 spectators. It is expected that all tickets for the ceremony will be sold quickly, leaving many people
dissatisfied.
ss
What can be concluded from this?

ha
A Price elasticity of demand for tickets will be perfectly elastic.

B Some people will be able to resell their tickets at a higher price than they paid for them.
C The Olympic authority will make more tickets available for sale.
D This will be an example of market failure. Q4/N/13
7) Which change would make the supply of a product more price elastic?
A an increase in the number of close substitutes for the product
B an increase in the proportion of firms working at full capacity
C a reduction in the time taken to make the product
D a reduction in the time that the product can be stored Q7/N/13
8) There is a sales tax (VAT) on a good which has a price elasticity of demand greater than 1 (>1).
Which of the following correctly matches a change in sales tax to the change in total expenditure on the good?
total expenditure
sales tax
on the good
A decrease increases
B decrease remains the same
C increase increases
D increase remains the same
Q10/N/13
m
9) There are a fixed number of seats at a concert. Most of the audience would continue to attend even if the seat
prices were increased.
co
ya N
Which demand and supply diagram represents this situation?
o.
SA
ho
6@ S
24 HA
an R
Q5/J/13
SI
10) A recent study has found that the price elasticity of demand for cigarettes in the USA is –0.7.
What can be concluded from this information?
ss
A A fall in the price of cigarettes would lead to a fall in the revenue of cigarette producers.
B A rise in the price of cigarettes would lead to a fall in consumer expenditure on cigarettes.
ha
C A 7% increase in the price of cigarettes would reduce the quantity demanded by 10%.
D A 10% increase in the cost of producing cigarettes would lead to a 7% fall in the quantity demanded.
Q7/J/13
11) When the price of a good doubles the demand falls by less than half, and the revenue received by the seller
increases.
What does this suggest about the good?
A it has substitutes
B it is a necessity
C it is in fixed supply
D it is perfectly elastic in demand Q9/J/13
12) The demand for a good is totally inelastic with regard to price.
What will happen to the firm’s revenue if the price rises by 20 %?
A It will fall by 20 %.
B It will fall to zero.
C It will remain unchanged.
D It will rise by 20 %. Q8/N/12
13) The table shows the demand for chocolates at two different prices.
price $ quantity demanded
0.50 400
m
0.45 480
co
ya N
What is the price elasticity of demand when the price falls from $0.50 to $0.45?
o.
A less than 0.5
SA
ho
B between 0.5 and 1
6@ S
C between 1 and 1.5
24 HA
D greater than 1.5 Q8/J/12
14) The graphs, drawn to the same scale, show the demand curves of four firms. The market price is $10. The price
an R
then falls to $8.

SI
Which firm will have the largest increase in total revenue?

ss
ha
Q10/N/11
15) In a country where the demand for petrol (gas) is price-inelastic, the incidence of any increase in petrol tax will
be mainly on
A the company that refines the oil.
B the motorist who buys the petrol.
C the petrol station that sells the petrol.
D the wholesale company that stores the petrol. Q7/J/11
16) The table illustrates the demand and supply for rice in a market in Africa.
quantity quantity
price per kg ($)
demanded (kg) supplied (kg)
10 50 10
20 40 20
30 30 30
40 20 40
Q11/N/10
When the price rises from $20 to $30 per kg, what is the approximate price elasticity of demand for rice?
A 0.25 B 0.5 C 1.0 D 2.0
m
co
17) The diagram shows the supply curve for a good.
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
What is the price elasticity of supply when the price rises from $2 to $4? Q10/J/10
A 0.2 B 0.5 C 1 D 2
ha
18) The diagrams show possible demand curves for four commodities.
Which diagram shows a completely inelastic demand curve?
Q12/J/10

19) For what would price elasticity of demand be used?
A calculating current disposable income
B calculating the rate of price inflation
C estimating changes in a company’s cost
D identifying changes in consumer spending patterns Q9/N/09
20) A product has a price elasticity of demand that is greater than one.
What will happen to total revenue if the price of the product is reduced by 3 %?
A It will fall by more than 3 %.
m
C It will be unchanged.
D It will rise. Q12/N/09
co
ya N
o.
SA
21) It was reported that a company producing designer clothes had increased its revenue by 20 % at a time when it
decreased its prices.
ho
What does this suggest about the demand for these goods at that time?
6@ S
A It was perfectly price elastic.
24 HA
B It was perfectly price inelastic.

C It was price elastic.
an R
D It was price inelastic. Q9/J/09

SI
22) A product has a totally inelastic price elasticity of demand.

What will happen to total revenue if the price of the product falls by 25 %?
A It will fall by 25 %.
ss

C It will remain unchanged.
ha
D It will rise by 25 %. Q12/J/09
23) The price elasticity of demand for a good is calculated as –0.5.

What will occur if the price of the good increases by 10 %?
A Demand will fall by 20 %.
B Demand will fall by 5 %.
C Revenue will fall by 20 %.
D Revenue will fall by 5 %. Q14/N/08

24) What could cause the demand for a product to become more price-elastic?
A a smaller proportion of income being spent on the product
B more substitutes coming onto the market
C the product becoming more of a necessity
D the product falling in price Q13/J/08
25) When the price of a product rises from $10 to $15, the demand falls from 5000 to 4000 units.
What is the value of the price elasticity of demand for the product? Q14/J/08
A 0.2 B 0.4 C 1.5 D 2.5
m
26) Good X has a price elasticity of demand of 0.25 while good Y has a price elasticity of demand of 1.5.
A likely explanation of these values is that compared to good Y, good X
co
ya N
A has more substitutes.
o.
SA
B is considered more of a luxury.
C is purchased more out of habit.
ho
6@ S
D takes up a larger proportion of consumers’ income. Q12/N/07
24 HA
27) A firm produces a good with a price elasticity of demand greater than 1.
What must the firm experience if there is a fall in the price of this good?
an R
A a decrease in costs
SI
B a decrease in sales
C an increase in revenue
D an increase in profits Q12/J/07
ss
28) A firm changes the price of its product and finds that its revenue increases.
What combination of price change and price elasticity of demand would have caused this?
ha
price price elasticity
A falls between 0 and 1
B falls equal to 1
C rises between 0 and 1
D rises greater than 1
Q12/N/06

29) A government wishes to impose a tax on a good to raise revenue.
It would be most likely to achieve this aim if the price elasticity of demand for the good were
A high.
B infinite.
C low.
D unitary. Q13/N/06
30) As petrol prices increase, demand for petrol remains constant.

What does this say about the price elasticity of petrol?
A The demand is price-elastic.
m
B The demand is price-inelastic.
C The supply is price-elastic.
co
ya N
D The supply is price-inelastic. Q11/J/06
o.
SA
31) The price elasticity of demand for a good is unitary.
ho
6@ S
What would be the effect of a 1 % fall in its price?
A to increase total revenue by 0.1 %
24 HA
B to leave quantity demanded unchanged

C to leave total revenue unchanged
an R
D to reduce quantity demanded by 1 % Q12/J/06

SI
32) What is an important influence on price elasticity of demand?

A average earnings
B tastes of consumers
ss
C the cost of living

D the number of close substitutes Q13/J/06
ha
33) A product has a price elasticity of demand that is greater than one.
What will happen to total revenue if the price of the product is reduced by 3 %?
A It will fall by more than 3 %.
C It will be unchanged.
D It will rise. Q13/N/05

34) The table shows the value of the price elasticity of demand for four products.
price elasticity of
product
demand
cars 2.0
mobile phones 1.0
radios 0.5
salt 0.1
What would have an increase in sales revenue if prices rose by 10 %?

A cars only
m
B cars and mobile phones
C radios and salt
co
ya N
D salt only Q13/J/05
o.
SA
35) If ‘Sunshine Oranges’ were successfully advertised with the statement ‘They help you live longer’ which would
ho
be likely to occur?
6@ S
24 HA
price elasticity of demand total revenue
A fall fall
B fall rise
an R
C rise fall
SI
D rise rise
Q12/N/04
36) The demand for cocoa beans is price-inelastic.

ss
What is most likely to increase as a result of a decrease in demand for cocoa beans?
ha
A income of cocoa bean producers

B price of cocoa bean products
C production of cocoa beans
D unemployment among cocoa bean farmers Q14/J/04

37) 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 Q5/N/V16
38) Many people are life-long, devoted fans of the Los Angeles Lakers basketball team in the United States. The
team’s stadium can seat 19 000 spectators and tickets are always sold out.
What does this suggest about the price elasticity of demand and the price elasticity of supply of tickets to watch
the Lakers play?
m
co
price elasticity of demand price elasticity of supply
ya N
A highly elastic perfectly elastic
o.
B SA highly elastic perfectly inelastic
ho
C highly inelastic perfectly elastic
6@ S
D highly inelastic perfectly inelastic
24 HA
Q7/N/V13
an R
39) When the price of shirts rises from $8 to $10, the demand for shirts falls from 1000 to 500.
What is the price elasticity of demand for shirts?
SI
A greater than 1
B unitary
C less than 1
ss
D zero Q7/J/V13
ha
40) When the price of a good doubles the demand falls by less than half, and the revenue received by the seller
increases.
What does this suggest about the good?
A it has substitutes
B it is a necessity
C it is in fixed supply
D it is perfectly elastic in demand Q9/J/V13

41) A shop sells chocolate birthday cakes. When the price was $15 it sold 40 cakes. It reduced the price to $10 and
sold 60 cakes.
What can be concluded from this? Q8/J/V12
A The firm will make less profit because the price has fallen.
B The firm will make more profit because sales have increased.
C The price elasticity is inelastic because demand only increased by 50 %.
D There is unit price elasticity because the firm’s revenue remained the same after the price change.
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

10. PRICE ELASTICITY OF DEMAND
& PRICE ELASTICITY OF SUPPLY
1) D 2) D
3) C 4) B 5) D 6) B
7) C 8) A 9) C 10) A
11) B 12) D 13) D 14) A
15) B 16) B 17) B 18) B
m
19) D 20) D 21) C 22) A
23) B 24) B 25) B 26) C
co
ya N
27) C 28) C 29) C 30) B
o.
31) C SA
32) D 33) D 34) C
ho
35) B 36) D 37) D 38) D
6@ S
39) A 40) B 41) D
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
11-12. MARKET FAILURE
ho
6@ S
24 HA
an R
ss SI
ha

1) 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. Q6/J/17
2) A project to build one of the world’s biggest coal mines was planned in Australia. The project was estimated to
cost $US 12.5 million. It would create employment but threaten endangered species as large coal ships would
m
damage the Great Barrier Reef.
co
What effects would this project have on the following costs and benefits? Q7/J/V17
ya N
o.
A decrease
SA
private costs private benefits
uncertain
external costs
uncertain
ho
6@ S
B increase decrease increase
24 HA
C increase increase increase
D uncertain increase rise

an R
ss SI
ha

3) 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. Q7/N/16
4) 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
m
C lack of information
co
D price discrimination Q8/N/15
ya N
o.
SA
5) A large supermarket applied to build on land which was in an area of natural beauty. The local government
ho
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.
6@ S
24 HA

an R

SI
D public sector and external benefit Q8/J/15
6) The following is a headline from the newspaper.
Car drivers to pay higher taxes

ss
What will result from an increased tax on cars?

A increased employment in the car industry
ha
B increased petrol (gas) sales

C reduced external costs of car use
D reduced number of bus journeys Q6/N/14

7) 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 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 Q8/N/13
8) A government makes public transport free to try to reduce car use in a city.
What might explain why people continue to use their own cars?
A Cars are less crowded than public transport.
m
B Car use does not cause external costs.
co
C Public transport has a better safety record than cars.
ya N
D Public transport networks require high capital costs. Q8/J/13
o.
SA
ho
9) What is an example of market failure?
6@ S
A a balance of trade deficit
24 HA
B monopoly profits
C rapidly rising price levels
an R
D the production of non-essential goods Q10/J/13

SI
10) An international company drilled for oil in deep water and caused a major oil leakage, which affected the jobs of
the fishing community. The government ordered the company to close the well and to stop drilling in the area.
What are the external costs of this incident?
A the costs borne by the fishing community
ss
B the costs of closing the well

ha
C the costs to the company of drilling the well in deep water

D the loss of revenue when the oil company stopped drilling Q5/N/12
11) Which is a type of market failure?

A a general increase in the price of hotel rooms in busy summer seasons
B an increase in house prices caused by easier borrowing for house buyers
C an increase in travel time caused by a road accident
D an increase in unsold goods because of a change in tastes Q9/N/12

12) Which government policy would best protect the environment?
A encouraging economic growth
B exploiting natural resources
C increasing tax on fuel
D removing controls on industry Q23/N/12
13) Journeys in city centres may be made by bus or by car.

What is an external cost of this?
A bus fares
B car fumes and noise
m
C licence fees for cars
D purchase of buses Q5/J/12
co
ya N
o.
A
SA
a monopoly making abnormal profit
ho
6@ S
B prices charged to cover social cost
C the closure of small, independent shops in a rural area
24 HA
D the inability of a car producer to achieve economies of scale Q9/J/12

an R
15) What is an example of an external cost?

SI
A a company’s transport costs

B the cost of bringing about a merger
C the cost of buying components from suppliers
D the cost of industrial pollution Q5/N/11
ss

ha
A a growth of competition
B an existence of scarcity
C a spread of pollution
D a surplus of production in the short-term Q8/J/11
17) Which action by the operators of an airport directly reduces external costs?
A the stopping of night flights
B the building of a new runway
C the payment of a productivity bonus
D the reduction of charges for landing aircraft Q9/J/11
18) A government intends to build a new international airport in an area of outstanding natural beauty.
What would be an external cost of this decision?
A the cost of importing construction materials
B the countryside that is lost
C the increase in profits for local businesses
D the wages paid to the construction workers Q8/N/10
19) What could a government do to reduce external costs in the economy?

A Decrease direct tax for higher income earners.
B Decrease direct tax for lower income earners.
m
C Increase indirect tax on petrol / gasoline.
D Remove indirect tax on tobacco. Q11/J/10
co
ya N
o.
A
SA
20) What is an external benefit when a charge is made for vehicles entering a city centre?
increased government revenue
ho
6@ S
B increased traffic
C reduced air pollution
24 HA
D reduced business activity Q10/N/09

an R
21) It was reported in 2002 that South Africa, a mixed economy, would face sharp increases in air and water
pollution unless action was taken to develop environmentally friendly policies for its citizens.
SI
Why is a mixed economy thought to be a satisfactory means of achieving environmentally friendly

development?
A because all development is paid for by the government
B because it allows external costs to be considered
ss
C because it ensures development at lowest cost

ha
D because it is the most productive system Q8/J/09
22) Which costs will be reduced if a factory decreases the amount of pollution it causes to the environment?
A average costs
B external costs
C fixed costs
D variable costs Q10/J/09

23) Greenhouse gases caused by burning fuel in Europe are leading to global warming.
This results in effects on non-European countries which are called
A average costs.
B external costs.
C private costs.
D social costs. Q40/N/08
24) What is the main reason why the government, rather than the private sector, builds and runs hospitals?
A Hospitals are expensive to build.
B The government has enough tax revenue to pay for hospitals.
m
C The government needs to be sure that the doctors are well-trained.
D The whole country can benefit from the provision of good health facilities. Q39/J/08
co
ya N
o.
SA
25) A conference representing countries from many parts of the world agreed to ban trade in ivory products in
order to try to stop the killing of elephants. Local people also argued that elephants are a menace: they threaten
ho
lives and destroy crops.
6@ S
Which policy do the above statements support?
24 HA
A All resources should be exploited fully.

B Government regulation of production is unnecessary.
C The market system should be used to make profits.
an R
D The social costs of production should be considered. Q40/J/08

SI
26) Why are schools provided by governments?

A Education generates external costs.
B The government controls the numbers of teachers.
ss
C Schools are too expensive for the private sector to provide.

ha
D The whole country can benefit from the provision of education. Q37/N/07
27) Which effect is an external cost when an airport is developed on the edge of a city?
A a reduction in local property values
B a reduction in noise pollution
C an increase in the profits of the railway company that serves the airport
D an increase in transport links for the city’s population Q39/N/07

28) What is an external cost of smoking cigarettes?
A the cost of the tobacco
B the danger to non-smokers’ health
C the harm done to smokers
D the tax on cigarettes Q37/J/07
29) In London, an extra charge is placed on the use of cars in the city centre which causes car drivers to switch to
public transport.
What is likely to happen to the private costs of those who continue to drive cars and to external benefits?
private costs external benefits
m
A fall fall
co
B fall rise
ya N
C rise fall
o.
D
SA
rise rise
ho
Q39/J/07
6@ S
24 HA
30) Which action by the operators of an airport directly reduces external costs?
A the abolition of night flights
B the building of a new runway
an R
C the payment of a productivity bonus

SI
D the reduction of charges for landing aircraft Q40/N/06
31) More people decide to travel by bus and train rather than by car because government subsidies result in
reduced fares.
ss
What will be the effect on the private benefit for passengers and external benefit?
ha
private benefit for passengers external benefit
A falls falls
B falls rises
C rises falls
D rises rises
Q39/J/06

32) Which of the effects of economic development would be classed as an external cost?
A higher wages
B increased pollution
C increased production
D more advanced technology Q40/J/06
33) It was reported in 2002 that South Africa, a mixed economy, would face sharp increases in air and water
pollution unless action was taken to develop environmentally friendly policies for its citizens.
Why is a mixed economic system thought to be a satisfactory means of achieving environmentally friendly
development?
A because all development is paid for by the government
m
B because it allows external costs to be considered
co
C because it ensures development at lowest cost
ya N
D because it is the most productive system Q4/N/05
o.
SA
ho
34) How is the social benefit of an activity calculated?
6@ S
A private benefit minus positive externalities
24 HA
B private benefit minus private cost

C private benefit plus negative externalities
D private benefit plus positive externalities Q40/N/05
an R
SI
35) In Indonesia the opportunity cost of producing timber is lower than in any other country.
To protect the environment, the Indonesian government decides to conserve its timber and ban timber exports.
What would happen in Indonesia to the balance of trade and external costs?
ss
balance of trade external costs
A worsens fall
ha
B worsens unchanged
C improves rise
D unchanged rise
Q38/J/05

36) A tax on which of the following would most reduce external costs?
A bicycles
B bus fares
C cars
D ferry services Q40/N/04
37) External benefits are

A private benefits minus private costs.
B private benefits plus social benefits.
C social benefits minus private benefits.
m
D social benefits plus social costs. Q39/J/04
co
ya N
38) 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
o.
SA
created and much needed income would be brought to the local community.
ho
6@ S
24 HA

D public sector and external benefit Q8/J/V15
an R
SI
39) A bridge is built over a river which enables journey times to be reduced.
The table shows costs and benefits from building the bridge.
$000
ss
private benefit 12
private cost 10
ha
external benefit 8
external cost 5
Which calculation represents social benefit?

A $12 000 – $10 000 = $2000
B $8000 – $5000 = $3000
C $12 000 + $5000 = $17 000
D $8000 + $12 000 = $20 000 Q6/N/V14

40) Which policy might a government adopt to reduce the external cost of urban traffic congestion?
A improving public transport
B reducing the tax on petrol
C subsidising car production
D taxing bus production Q8/N/V13

A a firm forced to close because of fierce competition
B a firm polluting rivers with waste chemicals
C a high price for an essential product
m
D a shortage of an agricultural crop Q10/N/V13
co
ya N
42) What is a likely reason why many countries’ governments subsidise scientific research?
o.
A SA
Private sector firms may overestimate the external benefits and ignore the private
benefits of scientific research.
ho
B Private sector firms may overestimate the external costs and ignore the private costs
6@ S
of scientific research.
24 HA
C Private sector firms may underestimate the private benefits and ignore the external
benefits of scientific research.
D Private sector firms may underestimate the private costs and ignore the external costs
an R
of scientific research. Q8/J/V13

SI
43) What necessarily happens when an external benefit exists?

A Social benefit is greater than private benefit.
B Social benefit is greater than social cost.
ss
C Social cost is equal to private cost.

D Social cost is greater than private cost. Q5/N/V12
ha
44) 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 inequality of income
B lack of information
C negative externality
D price discrimination Q9/N/V12

45) A large shop selling clothes opened in a town. Its prices were much cheaper than other shops selling similar
items. As a result many more customers came to the area. They also visited restaurants near the shop. The
restaurants reported a 10 % increase in sales.
What economic concept does the above statement best illustrate?
A external benefit
B inelastic demand
C market failure
D perfect competition Q5/J/V12
46) In 2010, a major oil leak from an oil rig affected many people living around the Gulf of Mexico.
What type of market failure did they experience?
m
A monopoly exploitation
co
B negative externality
ya N
C price discrimination
o.
D rising tax burden SA Q9/J/V12
ho
6@ S
47) Why are schools sometimes built and run with government money?
24 HA
A The private sector could not afford the cost of investment to build schools.
B The private sector would have lower standards than government schools.
C The provision of schools by the government ensures the widest choice for students.
an R
D There are external benefits from the provision of education. Q25/J/V12

ss SI
ha

11-12. MARKET FAILURE
1) C 2) D 3) C
4) A 5) B 6) C 7) A
8) A 9) B 10) A 11) C
12) C 13) B 14) A 15) D
16) C 17) A 18) B 19) C
20) C 21) B 22) B 23) B
m
24) D 25) D 26) D 27) A
co
ya N
28) B 29) D 30) A 31) D
o.
32) B
36) C
SA
33) B
37) C
34) D
38) B
35) A
39) D
ho
6@ S
40) A 41) B 42) C 43) A
24 HA
44) C 45) A 46) B 47) D

an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
13-16. MONEY
ho
6@ S
24 HA
an R
ss SI
ha

1) 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. Q10/J/V17
2) Which function of money enables people to compare the worth of different products?
A medium of exchange
B standard for deferred payments
m
C store of value
co
D unit of account Q16/N/13
ya N
o.
SA
3) A function of money is to act as a measure of value.
ho
What does this mean?
6@ S
A It is used to compare the worth of different goods.
24 HA
B It is used to enable monthly payments for expensive goods.

C It is used to pay the price of a good.
an R
D It is used for future savings. Q11/J/13

SI
4) Why do banknotes function as money?

A They are backed by gold.
B They are durable.
ss
C They are generally acceptable.

D They have intrinsic value. Q14/N/12
ha
5) For anything to be used as money, it must be

A a fixed value.
B in fixed supply.
C legal tender.
D readily acceptable. Q14/J/12

6) ‘Savers suffer as inflation rises to 4.4 %.’
Which function of money is most involved in this statement?
A means of deferred payments
B medium of exchange
C store of value
D unit of account Q15/N/10
7) One of the functions of money is to act as a measure of value.

A Money allows people to borrow and lend.
m
B Money allows people to save their surplus income.
C Money is used to buy goods and services.
co
ya N
D Money is used to compare the worth of different goods and services. Q15/J/10
o.
SA
8) In wartime conditions, cigarettes have been used as money.
ho
6@ S
What disadvantage do cigarettes have for trading compared with notes and coins?
A They cannot act as a medium of exchange.
24 HA
B They have no intrinsic value.

C They lack durability.
an R
D They make a double coincidence of wants necessary. Q4/N/07

SI
9) Anything used as money must have

A a fixed supply.
B general acceptability.
ss
C recognition as legal tender.

D value in itself. Q4/J/05
ha
10) What might increase the use of money as a medium of exchange?

A an increase in income tax
B an increase in interest rates
C an increase in savings
D an increase in specialisation Q4/J/04

11) Cigarettes have been used as money in exceptional circumstances.
What is the most likely reason that they are not acceptable as money in normal circumstances?
A cigarettes lack durability
B cigarettes lack intrinsic value
C cigarettes lack portability
D cigarettes lack uniformity Q9/J/V15
12) A merchant travels abroad for a few days to buy samples of low-value goods from a range of manufacturers.
Which property of money would be least necessary for this to take place smoothly?
A acceptability
m
B divisibility
C durability
co
ya N
D portability Q12/N/V13
o.
SA
13) The use of a mobile (cell) phone to make payments is an example of which function of money?
ho
6@ S
A a medium of exchange
B a standard of deferred payment
24 HA
C a store of wealth
D a unit of account Q11/J/V13
an R
SI
14) An individual has various financial assets.

What is the most easily available as cash?
A a current (checking) bank account
B government bonds
ss
C share certificates in a public company

D time deposits in a savings bank Q13/N/V12
ha
15) The ways of making and receiving payments continue to develop. As well as cash, debit cards and credit cards,
mobile (cell) phones are now being used to make payments.
Which method of paying for products provides no information to sellers about their customers?
A cash
B debit cards
C credit cards
D mobile (cell) phones Q15/N/V11

16) What is the usual reason why citizens trust their country’s banknotes?
A They are acceptable for trade and exchange.
B They are backed by gold at the central bank.
C They are convertible into the US$ or Chinese Yuan.
D They are recognisable and in infinite supply. Q9/J/V16
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

13-16. MONEY
1) D
2) D 3) A 4) C 5) D
6) C 7) D 8) C 9) B
10) D 11) A 12) C 13) A
14) A 15) A 16) A
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
17-19. COMMERCIAL BANKS,
co
ya N
THE CENTRAL BANK
o.
SA
ho
& THE STOCK EXCHANGE
6@ S
24 HA
an R
ss SI
ha

1) 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. Q8/J/17
D The central bank acts as the lender of last resort to companies facing bankruptcy.
2) 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
m
D when a commercial bank reduces its lending rates Q9/J/16
co
3) A businesswoman seeks a 10-year loan from a bank. She has listed her four most valuable possessions which
ya N
could be offered to the bank in order to obtain the loan.
o.
SA
Which item would the bank be least likely to accept as security for the loan?
ho
A a collection of gold coins, jewellery and antiques
6@ S
B a house in a desirable part of town
24 HA
C a part ownership in a race horse

D a portfolio of government bonds Q9/J/15
an R
4) Which function is performed by both commercial banks and central banks?

SI
A acting as bankers to the government

B advising the government on monetary policy
C dealing in foreign exchange
D fixing the main interest rate Q15/N/12
ss
ha
5) Which is a major function of a commercial bank?

A acting as the lender of last resort
B collecting direct and indirect taxes
C issuing bank notes and coins
D lending money to its customers Q15/J/12

6) In most countries, which organisation controls the banking system?
A central bank
B commercial bank
C investment bank
D World Bank Q14/N/11
7) The ways of making and receiving payments continue to develop. As well as cash, debit cards and credit cards,
mobile (cell) phones are now being used to make payments.
Which method of paying for products provides no information to sellers about their customers?
A cash
B debit cards
m
C credit cards
co
D mobile (cell) phones Q16/N/11
ya N
o.
SA
8) Which type of business organisation has its shares quoted on a stock exchange?
ho
A co-operative
6@ S
B private company
24 HA
C public company
D public corporation Q18/N/11
an R
9) Which statement about a country’s banks is correct?

SI
A Commercial banks hold the financial accounts of the government.

B Commercial banks settle debts by clearing customers’ cheques.
C The central bank sets the government’s tax and spending policies.
ss
D The central bank supplies foreign currency to members of the public. Q13/J/11
ha
10) Cathay Pacific, Hong Kong’s largest airline, flies to a number of countries.
Shares in the firm are owned by both individuals and other firms in a number of countries. The shares are traded
on the Hong Kong Stock Exchange.
Which type of business organisation is Cathay Pacific?
A a partnership
B a private limited company
C a public corporation
D a public limited company Q21/J/11

11) What is a function of a commercial bank?
A acting as the lender of last resort
B deciding what is a legal tender
C determining monetary policy
D providing overdrafts Q6/J/10
12) Which activity is correctly linked to the organisation that provides it?
organisation Activity
A central bank regulate the rate of inflation

B commercial bank manage the government’s financial accounts
m
C commercial bank safeguard the country’s foreign reserves
co
ya N
D stock exchange make loans to public companies
o.
SA Q18/J/10
ho
13) What function does a central bank provide for the general public?
6@ S
A accepting deposits
24 HA
B issuing banknotes
C making loans
D providing overdrafts Q13/J/09
an R
SI
14) A commercial bank is appointed to act as a country’s central bank.

What new function would it now have?
A controlling monetary policy
ss
B dealing in foreign exchange

C ensuring security for loans
ha
D holding liquid assets Q7/J/08
15) What is the function of a stock exchange?

A It enables shareholders to sell their shares.
B It fixes fair prices for shares.
C It promises to buy unsold shares.
D It sets the number of shares. Q8/J/07

16) Why might a country’s central bank raise its interest rate?
A to encourage saving
B to increase the money supply
C to raise funds for the government
D to reduce the level of employment Q6/N/06
17) What is most likely to be the main function of a central bank?

A controlling the money supply
B investing in commerce and industry
C issuing and processing credit cards
m
D making loans to individuals Q6/J/05
co
ya N
18) To whom does the central bank usually make loans?
o.
A
B
individuals
limited companies
SA
ho
6@ S
C the government
D trade unions Q8/N/04
24 HA
19) What is a function of a central bank?

an R
A to decide government spending

SI
B to determine all interest rates

C to issue new currency
D to lend to private businesses Q8/J/04
ss
20) Which function is performed by both commercial banks and central banks?
A acting as bankers to the government
ha
B advising the government on monetary policy

C dealing in foreign exchange
D fixing the main interest rate Q15/N/V12
21) A stock exchange is a market in which

A a system of barter operates.
B the interest rate is fixed.
C the value of the exchange rate is determined.
D shares are bought and sold. Q12/N/V10

17-18. COMMERCIAL BANKS, THE CENTRAL BANK
& THE STOCK EXCHANGE
1) C 2) A
3) C 4) C 5) D 6) A
7) A 8) C 9) B 10) D
11) D 12) A 13) B 14) A
15) A 16) A 17) A 18) C
19) C 20) C 21) D
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
20-27. WAGES
ho
6@ S
24 HA
an R
ss SI
ha

1) 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. Q11/J/17
2) 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
m
C skilled craft work
co
D university teaching work Q9/J/V17
ya N
o.
SA
3) The table shows how a firm’s production changes as it employs more workers.
ho
6@ S
number of workers 10 20 30 40
24 HA
total production (kilos) 50 100 300 600
What happens to productivity as more workers are employed?

an R
A It is constant then falls.

SI
B It is constant then rises.

C It rises then becomes constant.
D It rises continuously. Q15/J/V17
ss
ha

4) What shows the correct examples of income and wealth?
income wealth
A dividends from shares wages
B rent from a house overtime payments
C overtime payments wages

D wages house
Q9/N/16
5) Nazmin Uddin works in a local office as a secretary three days a week. She lives with her parents in a small
apartment.
m
Meer Ali owns a successful fitness centre that employs about twenty people. He owns a large house.
co
Which is most likely to be correct?
ya N
A Nazmin spends a smaller proportion of her income than Meer.
o.
SA
B Nazmin saves most of her income.
ho
C Nazmin would find it easier than Meer to borrow money.
6@ S
D Nazmin has a lower disposable income than Meer. Q10/N/16
24 HA
6) In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a legal minimum
wage.
an R
An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.
ss SI
ha
How many people will be employed if the minimum wage legislation is then abolished? Q10/J/16
A 4 million B 5 million C 6 million D 7 million

7) 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 the job?
additional bonuses job security unsocial hours
A high High many

B high High none
C low Low many
D low Low none
Q11/N/15
8) In choosing their occupation, people often take into account aspects of the job other than pay.
m
Which would not be a good match for the aspects of employment a worker is looking for?
co
ya N
desired aspect Occupation
o.
SA
a wish for an outdoor lifestyle
ho
A army officer
and to develop teamwork
6@ S
a wish for foreign travel
24 HA
B airline pilot
and to have responsibility
a wish for public respect and

C heart surgeon
to undertake precise work
an R
a wish to work with the general

SI
D marine biologist
public and investigate nature
Q11/J/15
9) In which occupations do wages tend to be lowest?

ss
A in those where the work is dangerous

ha
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 Q9/N/14
10) 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. Q9/J/14

11) A worker’s choice of occupation can be influenced by wage and non-wage factors.
What is a non-wage factor when choosing to work in a factory?
A bonuses paid for increases in productivity
B changes in hourly rates for items produced
C financial rewards for length of service
D opportunities for promotion and advancement Q12/N/13
12) The table shows the change in real incomes for a number of occupations between 1978 and 2008.
occupation change in real income %
doctors 153
m
lawyers 114
co
ya N
accountants 60
o.
SA bricklayers
bus and coach drivers
37
19
ho
6@ S
fork-lift truck drivers –5
24 HA
What can be concluded from the table?

A All occupations were better off in 2008 than in 1978.
an R
B Fork-lift truck drivers earned the lowest wages in 2008.

SI
C Doctors have earned more than lawyers since 1978.

D Professionals received higher percentage increases in income than manual workers. Q15/N/13
13) Which of the following is most likely to limit wage increases in an industry?
ss
A an increased demand for the industry’s product

B a rise in the industry’s profits
ha
C a rise in wages for workers in similar jobs

D the replacement of workers with robots Q13/J/13

14) The diagram shows how the weekly earnings of four workers changed between ages 16 and 64.
Which line is most likely to represent the change in the weekly earnings of an unskilled, manual labourer?
m
co
Q16/J/13
ya N
o.
SA
15) On average, doctors earn more than bus drivers.
Which change would be likely to reduce the earnings gap between doctors and bus drivers?
ho
6@ S
A a decrease in the profits earned by bus companies
24 HA
B a decrease in the qualifications needed to be a doctor

C an increase in demand for medical care
D an increase in the number of people passing the driving test Q11/N/12
an R
SI
16) Cleaning the streets can be an unpleasant job and yet in many countries it is badly paid.
What is likely to be the reason for this?
A There is a high degree of trade union membership among these workers.
B There is a high supply of labour because the work is unskilled.
ss
C There is a high demand for staff in busy urban areas.

D There is a long working year because there are few holidays. Q11/J/12
ha
17) Why might factory workers have higher wage rates than agricultural workers?
A Factory workers are in greater supply.
B Factory workers face fewer risks of accidents.
C Factory workers have cleaner working conditions.
D Factory workers use more productive equipment. Q14/J/11

18) Which change would be most likely to cause the earnings of hotel managers in Mauritius to rise more than the
earnings of sugar cane workers in Mauritius?
A a decrease in the number of tourists visiting Mauritius
B a decrease in the supply of sugar cane workers in Mauritius
C an increase in the price of sugar cane from Mauritius
D an increase in the productivity of hotel managers in Mauritius Q13/N/10
19) ‘There are actors who earn extremely high incomes.’

What best explains this?
A Acting is a popular career.
B Actors have regular employment.
m
C Actors work short hours.
co
D Some actors have a unique talent. Q17/N/10
ya N
o.
SA
20) In 2007 the average annual pay of a scientist in the UK was £37 290. The average annual pay of a laboratory
ho
technician was £26 157.
6@ S
What could explain this difference in earnings?
24 HA
A Laboratory technicians have stronger bargaining power than scientists.

B Laboratory technicians have to work more unsociable hours than scientists.
C The period of training for scientists is longer than that for laboratory technicians.
an R
D The supply of scientists is high relative to demand for their services. Q15/N/09
SI
21) Why are farm workers likely to be paid a lower wage rate than workers in manufacturing?
A Farm workers are more likely to be in a trade union.
B Farm workers are more likely to have a shorter working life.
ss
C Farm workers are more likely to have poorer working conditions.

ha
D Farm workers are more likely to produce goods with a lower value. Q15/J/09
22) Each of the four sets of descriptions applies to a different person who was appointed to a job.
Each job was different.
Which job was likely to have offered the lowest pay?
A skilled inexperienced older worker
B unskilled experienced older worker
C skilled experienced younger worker
D unskilled inexperienced younger worker
Q15/N/08
23) What is most likely to explain why a worker receives above average hourly earnings?
A Demand for the product is high and the production process is simple.
B The employer provides the worker with fringe benefits.
C The product is difficult to produce and requires the worker to be highly skilled.
D Working in the job provides the worker with a high level of job satisfaction. Q16/N/08
24) A supermarket wishes to recruit a qualified manager for a senior position to control the stocks of goods. Some
work will be required at night as the supermarket is open 24 hours. A good salary is being offered.
Which applicant would be most likely to be suitable for the position?
A a person currently employed as a supervisor in another supermarket
B a person who has experience of managing a small newsagents
m
C a person who has to travel a long way and has demanding family commitments
co
D a person who has recently graduated in Economics Q16/J/08
ya N
o.
SA
25) What is the most likely reason for a firm to offer higher wages to recruit more staff?
ho
A falling incomes
6@ S
B falling output
24 HA
C falling prices
D falling unemployment Q17/J/08
an R
26) The first worker in each pair of workers below is usually paid more.
SI
In which case is this not likely to be the result of the first worker’s greater value to the firm?
A a worker in a trade union compared with a worker with no trade union
B a worker with training compared with a worker with no training
ss
C a worker with supervisory responsibilities compared with a worker with no responsibility

D a worker with years of experience compared with a worker with no experience Q17/N/07
ha
27) What is not included in a person’s stock of wealth?

A a gold watch
B annual income
C an oil painting
D company shares Q16/J/07

28) What might cause the wages of bus drivers to rise?
A Their productivity falls.
B The number of bus routes falls.
C The number of people making bus journeys falls.
D The supply of bus drivers falls. Q17/J/07
29) Which feature of working in an occupation might tend to keep the basic wage rate down?
A handling dangerous materials
B receiving commission payments
C undertaking training
D working unsocial hours Q14/N/06
m
co
30) An athlete needs an income and also needs time for training and competitions.
ya N
Which occupation is most appropriate for the athlete?
o.
A
SA
department store manager who is paid a salary
ho
B livestock farmer working for profit
6@ S
C assembly-line worker who is paid a wage
24 HA
D self-employed photographer Q15/N/06
31) Which change would be most likely to cause the earnings of hotel managers in Mauritius to rise more than the
an R
earnings of sugar cane workers there?

SI
A a decrease in the supply of sugar cane workers in Mauritius

B a decrease in the price of hotel rooms in Mauritius
C an increase in the productivity of hotel managers in Mauritius
D an increase in the price of sugar cane from Mauritius Q16/N/06
ss
32) The table shows percentage increases in earnings in a country between 1997 and 2004.
ha
male workers female workers
highest paid lowest paid highest paid lowest paid

+117.5 % +80.0 % +126.6 % +97.8 %
According to the table what happened between 1997 and 2004?

A All female workers became better paid than male workers.
B The highest paid male workers had the most rapid growth in earnings.
C The earnings of male workers became more evenly distributed.
D The earnings of female workers became less evenly distributed. Q17/N/06
33) Why is a surgeon likely to have a higher wage rate than a hospital porter?
A The surgeon has been in the job a longer time.
B The surgeon has a longer training period.
C The surgeon is older.
D The surgeon is in a trade union. Q14/J/06
34) What is likely to cause wages in an occupation to be low?

A a high level of responsibility
B high unemployment
C the need for special skills
m
D unpleasant working conditions Q17/J/06
co
ya N
35) What is likely to cause a person’s wages to rise?
o.
A
B
additional responsibilitySA
falling demand for his output
ho
6@ S
C falling production
D rising unemployment Q14/N/05
24 HA
36) Which method of payment is a government official most likely to receive?

an R
A commission
SI
B hourly rates
C piece rates
D salary Q15/N/05
ss
37) What might explain why wages paid in a particular occupation are high?
A a large supply of labour
ha
B a low price for the good produced

C a strong trade union
D pleasant working conditions Q14/J/05
38) What is a non-wage factor that can affect an individual’s choice of occupation?
A bonuses
B commission
C long holidays
D overtime pay Q15/J/05

39) The table gives information about full-time workers in a country.
average annual earnings

hours worked
% increase in per week
$
2003–04
male 21 268 4.4 41.8
female 15 444 5.1 37.6

A All female workers earned less than male workers.
B The difference between male and female earnings became smaller.
m
C The hourly rate of pay for females was higher than for males.
D The productivity of female workers was higher than that of males. Q17/J/05
co
ya N
o.
SA
40) ‘International companies have made substantial investments in computer production in India.
India is now a major centre of the world computer industry. Profit margins are high since labour costs are a
ho
tenth of those in the USA.’
6@ S
What does this suggest is the reason for companies locating in India rather than in the USA?
24 HA
A access to cheap land

B availability of capital investment
an R
C availability of investment funds

D competitive wage rates Q7/N/04
SI
41) Which combination is most likely to result in lower rates of pay?
supply of workers productivity of workers

ss
A falls falls
ha
B falls rises
C rises falls
D rises rises
Q16/N/04

42) The diagram shows the average earnings of workers in the primary sector and the secondary sector between
1999 and 2001.
m
co
What happened in this period?
ya N
A Average earnings in the primary sector grew faster than those in the secondary sector.
o.
B
SA
Earnings in the secondary sector were a larger proportion of total cost than those in the primary sector.
ho
C Total earnings in the secondary sector were higher than those in the primary sector.
6@ S
D Workers in both sectors benefited from a continuous rise in average earnings. Q19/N/04
24 HA
43) The table shows how three people spend their income.
an R
person X person Y person Z

SI
food, clothing and housing 35 % 50 % 20 %

entertainment and leisure 25 % 20 % 40 %
luxury goods 40 % 30 % 40 %
ss
Place the three people in the most likely order of income, from highest income to lowest income.
ha
A X, Y, Z
B Y, Z, X
C Z, X, Y
D Z, Y, X Q17/J/04

44) The construction industry in Dubai relies on many migrant workers from India.
Which combination of changes in the economies of Dubai and India would be most likely to increase the wages
of construction workers in Dubai?
Dubai economy Indian economy
A decrease in economic activity decrease in economic activity
B decrease in economic activity increase in economic activity

C increase in economic activity decrease in economic activity
D increase in economic activity increase in economic activity
Q11/N/V14
m
45) Some lawyers charge very high rates per hour for their services.
co
ya N
What best explains this?
o.
A
B
SA
The lawyers are very skilled.
The lawyers work long hours.
C
ho
The lawyers work part-time and need a high hourly rate.
6@ S
D The law profession is a popular career. Q15/N/V13
24 HA
46) The table shows the average monthly wage in Bahraini Dinars (BHD) for different groups of workers in Bahrain in
2011.
an R
SI
private sector public sector
average monthly wage (BHD) 291 952

Bahraini citizen monthly wage (BHD) 589 910
non-Bahraini citizen monthly wage (BHD) 214 1208

ss
ha
Which statement is most likely to be consistent with these statistics? Q16/N/V13

A Bahraini citizens are more productive than non-Bahraini citizens in the public sector.
B The demand for Bahraini citizens is greater in the private sector than the public sector.
C The public sector employs better educated workers than the private sector in Bahrain.
D There is a greater supply of non-Bahraini citizens in the public sector than the private sector.

47) Official statistics in 2010 showed South Africa had a very high unemployment rate at around 25%, yet wages
were still double those in Brazil.
What might be a reason for South Africa’s high wages in a time of unemployment compared with Brazil?
A a skilled workforce in Brazil
B high levels of savings in South Africa
C increased use of labour-intensive production in Brazil
D strong trade unions in South Africa Q34/N/V13
48) Differences in earnings between higher paid and lower paid jobs have widened in developed countries.
What is the most likely reason for this?
A Immigration of unskilled workers has reduced.
m
B The demand for highly skilled workers has increased.
co
C Unemployment rates have remained low.
ya N
D Women are paid the same rates as men. Q16/J/V13
o.
SA
ho
49) What is usually true of workers approaching retirement when they are compared with new entrants to the
6@ S
workforce?
24 HA
A They will be more adaptable.

B They will be more experienced.
C They will be more mobile.
an R
D They will be physically stronger. Q34/N/V12

SI
50) A trade union negotiates a basic weekly wage for its members with all employers in an industry.
In addition to the basic wage, one company also operates a production bonus at factory level.
What is the aim of this company?
ss
A to give equal wages to all workers

B to increase the efficiency of the workers
ha
C to introduce a minimum wage

D to reduce its total wage bill Q12/J/V12

51) A musician has a choice of playing for an orchestra in either England or Germany.
Which combination of incomes and cost of living is most likely to cause her to choose the German orchestra?
Incomes and cost of living in Germany

compared with those in England
pre-tax (gross) after-tax (net)
cost of living
income income
A higher higher higher
B higher lower lower
C lower higher higher
D lower higher lower
Q17/J/V11
m
co
ya N
52) What is the most likely reason for a worker preferring to be employed by the government rather than by a firm
in the private sector?
o.
A SA
more chance of a fast changing environment
ho
B more chance to work in a large organisation
6@ S
C more opportunity to gain from successful risk taking
24 HA
D more possibility of productivity bonuses Q14/N/V10

an R
ss SI
ha

20-27. WAGES
1) D 2) A 3) B
4) D 5) D 6) D
7) B 8) D 9) B 10) C
11) D 12) D 13) D 14) D
15) B 16) B 17) D 18) D
19) D 20) C 21) D 22) D
m
23) C 24) A 25) D 26) A
co
ya N
27) B 28) D 29) B 30) D
o.
31) C
35) A
SA
32) D
36) D
33) B
37) C
34) B
38) C
ho
6@ S
39) B 40) D 41) C 42) A
24 HA
43) C 44) D 45) A 46) C

47) D 48) B 49) B 50) B
51) D 52) B
an R
ss SI
ha

m
co
ya N
o.
SA
28. SPENDING & SAVINGS
ho
6@ S
24 HA
an R
ss SI
ha

1) The table shows how household spending changes with income.
income spending
($ per month) ($ per month)
4000 4150
4300 4375
4600 4650
4900 4900
5200 4975
5500 5275
m
What is the first level of income shown at which savings are positive? Q11/N/16
co
A $4000 B $4600 C $4900 D $5200
ya N
o.
SA
2) How do high direct taxes affect spending and how do high interest rates affect saving by wage earners?
ho
6@ S
spending Saving
24 HA
A decrease Decrease
B decrease Increase
C increase Decrease
an R
D increase Increase
SI
Q9/N/15
3) 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
ss
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.
ha
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 Q6/J/14

4) 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 Q8/J/14
5) 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
m
D the establishment of a national database to assist the police in finding criminals Q17/J/14
co
ya N
6) What will be the most likely effect of a fall in interest rates on saving and borrowing?
o.
saving
SA borrowing
ho
A decrease decrease
6@ S
B decrease increase
24 HA
C increase decrease
D increase increase
an R
Q11/N/13
SI
7) The table shows spending in the leisure sector of a country ($ billion).
($ billion)
1995 1999 2005

ss
leisure spending 118 154 198

ha
as a % of total consumption 27.0 27.5 28.0

A Leisure spending, in billions of dollars, increased more between 1995–1999 than between 1999–2005.
B Leisure spending is growing in line with income growth.
C Leisure spending increased by an average of $10 billion a year between 1995–2005.
D Leisure spending is taking an increasing share of total consumption. Q31/N/13

8) Consumer spending increased in 2010.
What other economic indicator is most likely to have increased as a result of the rise in consumer spending?
A government budget deficit
B inflation
C terms of trade
D unemployment Q32/N/13
9) Why may a rise in the rate of interest cause some people to save less?
A They may be saving for a fixed 10 year term.
B They may be saving out of habit.
m
C They may be saving to leave as much money as possible to their children.
D They may be saving to raise a particular sum of money. Q12/J/13
co
ya N
o.
A a rise in investment
SA
10) What is the most likely result of an increase in interest rates?
ho
6@ S
B a rise in borrowing
C a fall in consumer spending
24 HA
D a fall in productivity Q24/J/13

an R
11) What might encourage a consumer to save rather than to spend?

SI
A being made unemployed

B discounts on products
C government subsidies to producers
D high interest rates Q13/N/12
ss
12) The table shows the proportion of income saved for different age groups.
ha
age 15 – 29 30 – 39 40 – 49 50 – 62 63+
% of income saved –34 % –4% 18 % 29 % –23 %
What can be concluded from this data?

A The 50 – 62 age group has the highest level of income.
B The 50 – 62 age group saves the highest proportion of its income.
C The older age groups earn more than the younger age groups.
D The youngest age group spends more than the oldest age group. Q16/N/12

13) In 2008–2009 the central bank of a developed country reduced interest rates from 5 % to 0.5 % per year to
stimulate the economy.
How would this policy have affected the amount saved and the cost of borrowing by individuals?
amount saved cost of borrowing
A decrease decrease
B decrease increase
C increase decrease
D increase increase
Q13/J/12
m
14) The table shows information for two workers.
co
ya N
doctor window cleaner
o.
SA
annual income ($) 50 000 20 000
ho
total deductions ($) 10 000 8 000
6@ S
24 HA
Both workers save 10 % of their disposable income.

How much is this in each case?
doctor window cleaner

an R
A $12 000 $40 000

SI
B $1 200 $4 000
C $40 000 $12 000
D $4 000 $1 200
ss
Q16/J/12
ha
15) In 2009, the Chinese Government tried to increase household spending.

Which policy measure would have been most likely to achieve this objective?
A an increase in both direct and indirect taxes
B a reduction in subsidies given to manufacturers
C a requirement for commercial banks to reduce their lending
D a switch from public to private sector provision of health care and pensions Q12/N/11

16) Which motive is most likely to increase the wish to open a savings account?
A to have cash immediately available
B to prepare for future expenditure
C to satisfy essential needs
D to widen present consumption choices Q13/N/11
17) Share prices on the stock market are most likely to rise if
A employment falls.
B interest rates fall.
C interest rates rise.
m
D tax rates rise. Q15/N/11
co
ya N
18) Between December 2008 and August 2009, the Central Bank of South Africa cut the rate of interest from 12.5 %
to 7 %.
o.
SA
What effect would this action be expected to have on economic growth and unemployment?
ho
6@ S
economic growth unemployment
24 HA
A decrease decrease
B decrease increase
C increase decrease
an R
D increase increase
SI
Q24/N/11
19) There was a fall in investment spending by businesses in the third quarter of 2008.
What would be the likely result of this?
ss
A an increase in economic growth

ha
B an increase in exports
C an increase in incomes
20) 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 Q17/J/11

21) What is the most likely reason for a worker preferring to be employed by the government rather than by a firm
in the private sector?
A more chance of a fast changing environment
B more chance to work in a large organisation
C more opportunity to gain from successful risk taking
D more possibility of productivity bonuses Q16/N/10
22) What is most likely to be the responsibility of a central government?

A the provision of immigration officials at an airport
B the provision of security cameras in a shopping centre
C the provision of security staff at a bank
m
D the provision of ticket inspectors on a train Q29/N/10
co
ya N
23) A person is most likely to save more when there is an increase in a country’s
o.
A exchange rate.
SA
ho
B inflation rate.
6@ S
C interest rates.
24 HA
D money supply. Q14/J/10

an R
24) In August 2007 the Central Bank of Swaziland increased its interest rate from 9.5 % to 10 %.
Which effect would this be likely to have on producers and consumers?
SI
producers consumers
A borrow less save more

B borrow less spend more
ss
C invest more save more

ha
D invest more spend more

Q13/N/09
25) A person is keen to repay a large debt owed on his credit card.
What is likely to cause that person to reduce the credit card repayment and spend more from his weekly wage?
A an increase in interest rates
B an increase in the price of essential products
C an increase in the range of products available
D an increase in weekly earnings Q14/J/09

26) In which way will an increase in income be most likely to affect the amount of spending and saving of an
individual?
spending Saving
A fall Fall
B fall Rise
C rise Fall
D rise Rise
Q17/N/08
27) Why might a person buy ordinary shares on the stock exchange rather than put the money in a savings account?
m
A to earn a fixed income
co
B to gain a high return
ya N
C to keep money in a safe place
o.
D to start a company
SA Q18/N/08
ho
6@ S
28) Which of the following is not included in public expenditure?
24 HA
A capital spending by public companies

B expenditure by government departments
C investment by nationalised industries
an R
D spending by local governments Q25/N/08

SI
29) In India, there is a considerable gap between the incomes of the rich and the incomes of the poor.
In 2006, there were 6 million rich households with an annual income above 215 000 rupees and 50 million poor
households with an annual income less than 22 000 rupees.
ss
What is most likely to be true about spending?

ha
the group spending most money on the group spending the highest
food per household proportion of its income on food
A the rich the rich
B the rich the poor
C the poor the poor
D the poor the rich

Q18/J/08

30) Why would people use their savings to buy shares on a stock exchange?
A to allow easy access to their income
B to earn a fixed income
C to keep their money in a safe place
D to make a capital gain Q19/J/08
31) In developed economies, as a person’s real income rises, a lower proportion of that income is usually spent on
A food.
B holidays.
C leisure activities.
m
D personal transport. Q15/N/07
co
ya N
32) Which is the most important factor that affects how much a family saves?
o.
A
B
the income of the family
the level of taxation
SA
ho
6@ S
C the rate of inflation
D the reliability of banks Q18/N/07
24 HA
33) Which group is likely to save the largest proportion of its income?
an R
A employed workers
SI
B retired people
C school students
D unemployed workers Q15/J/07
ss
34) What will lead to an increase in spending?

A an increase in the rate of unemployment
ha
B a reduction in the rate of interest

C a reduction in expenditure by firms on advertising
D an increase in the rate of income tax Q18/J/07
35) Why may it be better to increase public expenditure while reducing private expenditure?
A Goods and services which the market ignores can be provided.
B Government officials are likely to be more careful spending money than private individuals.
C The profit motive makes government departments more efficient than private firms.
D The government is the best judge of the satisfaction gained from goods and services. Q38/J/07

36) A person receives annual interest of 4 % on their saving. Inflation is 5 % per annum.
What is the change in the real value of their saving?
A It falls 1 %.
B It rises 4 %.
C It falls 5 %.
D It rises 9 %. Q31/N/06
37) Which factor is likely to cause an increase in people’s savings?

A an increase in tax rates
B an increase in the interest rate
m
C a reduction in economic uncertainty
D a reduction in real wages Q16/J/06
co
ya N
o.
A
SA
38) When is a firm most likely to undertake capital investment?
when it has increasing demand for its product
ho
6@ S
B when it has increasing variable cost
C when it has a decreasing rate of profit
24 HA
D when it has decreasing availability of finance Q22/J/06

an R
39) Which method of advertising is likely to be the most effective for promoting the sales of textbooks?
SI
A direct mail
B local radio
C national television
D posters on buses and taxis Q9/N/05
ss
40) What might cause a fall in the proportion of income that a person saves?
ha
A a rise in income tax

B a rise in interest rates
C a rise in real incomes
D a rise in the population Q16/N/05

41) A person has no outstanding debts.
What might cause that person to save more and spend less from their monthly income?
A a rise in the choice of products
B a rise in income tax
C a rise in interest rates
D a rise in the price of essential products Q16/J/05
42) The table shows the weekly values of certain items for the average person in each group.
Which group saves the most on average?
borrowing
income ($) spending ($)
m
($)
A employed workers 500 400 50
co
ya N
B retired people 150 140 0
o.
C SA
school students 25 30 5
ho
D unemployed 200 300 100
6@ S
Q18/J/04
24 HA
43) What would be most likely to encourage saving?

A a rise in the exchange rate
an R
B a rise in the goods and services tax rate

SI
C a rise in the income tax rate

D a rise in the interest rate Q28/J/04
44) On a holiday island criminals have frightened away tourists. To give tourists confidence the government has
ss
increased the number of police.

What is likely to happen as a result of such action by the government?
ha
A Overseas earnings fall.

B Public expenditure increases.
C Taxes fall.
D Unemployment increases. Q33/J/04

45) The table shows how household spending changes with income.
income spending
($ per month) ($ per month)
2600 2625
2900 2925
3200 3190
3500 3275
3800 3500
4100 3725
m
What is the first level of income shown at which savings are positive? Q11/N/V16
co
A $2600 B $2900 C $3200 D $3500
ya N
o.
SA
46) A government lowers the rate of interest.
ho
Who is most likely to be disadvantaged by this policy?
6@ S
A house buyers
24 HA
B manufacturers
C retailers
D savers Q16/J/V15
an R
SI
47) What is most likely to cause a person to save a larger proportion of their weekly income rather than spend a
larger proportion of their weekly income?
A a decrease in the tax on goods and services
B a decrease in weekly income
ss
C an increase in interest rates

D an increase in the range of products available Q12/J/V13
ha
48) In the first six months of 2011 a construction company, Morgan Sindall, saw its profits fall. Part of the reason
was the increased competition from foreign competitors.
Which government policy is most likely to help such a company?
A increasing benefits to the unemployed
B increasing tax-free allowances on new building projects
C putting a quota on imported raw materials used by the company
D raising interest rates Q26/J/V13

49) What might cause a rise in the proportion of income that a person saves?
A a fall in interest rates
B a fall in population
C a fall in real incomes
D a fall in the income tax rate Q13/J/V12
50) A person wishes to buy shares in order to make a long-term profit, but wants as little risk of short-term loss as
possible.
Which type of share is most likely to meet these wishes?
A a share in a coffee growing company
B a share in a fashion house
m
C a share in a high-tech electronics company
co
D a share in a supermarket chain Q13/J/V11
ya N
o.
SA
51) Why might a family increase the proportion of its income it spends on food?
ho
A Some of the children start work.
6@ S
B The government increases the benefits it pays to families.
24 HA
C The number of children in the family increases.

D The second parent becomes employed. Q11/Specimen
an R
ss SI
ha

28. SPENDING & SAVINGS
1) D
2) B 3) B 4) C 5) A
6) B 7) D 8) B 9) D
10) C 11) D 12) B 13) A
14) D 15) D 16) B 17) B
18) C 19) D 20) C 21) B
m
22) A 23) C 24) A 25) B
co
ya N
26) D 27) B 28) A 29) B
o.
30) D
34) B
SA
31) A
35) A
32) A
36) A
33) A
37) B
ho
6@ S
38) A 39) A 40) A 41) C
24 HA
42) A 43) D 44) B 45) C

46) D 47) C 48) B 49) D
50) D 51) C
an R
ss SI
ha

m
co
ya N
o.
SA
29. TRADE UNIONS
ho
6@ S
24 HA
an R
ss SI
ha

1) 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 Q9/J/17
2) 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
m
D the development of new techniques that increase productivity Q8/N/16
co
ya N
3) A trade union agrees on a ‘closed shop’ policy with employers in an industry.
o.
How does this operate?
A
SA
All workers will be members of the trade union.
ho
6@ S
B Employment will be open only to skilled workers.
C The employers cannot make workers redundant.
24 HA
D Workers cannot move between employers. Q8/J/16

an R
4) A government introduces a law to reduce the restrictive practices of trade unions.

What would be the most likely purpose of this law?
SI
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
ss
D to reduce government expenditure on job training Q18/J/16

ha
5) 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. Q10/N/15

6) A trade union and employers agree a minimum wage (W1) which is above the market equilibrium wage (W) for
that industry.
m
What is the effect of paying the minimum wage (W1)?
co
ya N
A demand for workers will exceed the supply
B fewer workers will be employed
o.
C
SA
some workers will continue to be paid at wage W
ho
D workers will be less willing to work for the minimum wage Q10/J/15
6@ S
24 HA
7) A group of workers in a firm joins a trade union.

What would the union be expected to do?
an R
A arrange for labour-saving technology to be introduced

SI
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 Q8/N/14
ss
8) A trade union is negotiating a wage rise for its members.

What will increase the chance of the wage rise being granted?
ha
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. Q11/J/14
9) When will a trade union find it easier to achieve higher wages for its members?
A when consumers demand more of the product made
B when the company has a decrease in profits
C when the cost of raw materials increases
D when unemployment increases Q13/N/13
10) What is a function of a trade union?
A to negotiate workers’ contracts
B to promote workers to more responsible jobs
C to recruit workers for the firm
D to supervise the workers in the firm Q14/J/13
11) What could reduce the ability of a trade union to gain a pay rise for its members in a shoe factory?
A an increase in sales of shoe exports
B a rise in the demand for shoes
C a rise in the productivity of shoe workers
m
D more people willing to work in the shoe industry Q12/N/12
co
ya N
12) What might be an advantage to a trade union when arguing for an increase in its members’ pay?
o.
A
B
SA
an increase in imports of a similar product
the development of a new and profitable brand of the company’s product
ho
6@ S
C the development of new machines requiring fewer workers
D the establishment of a local college providing training Q12/J/12
24 HA
13) A group of workers in a firm join a trade union.

an R
What would the union be expected to do?

SI
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 Q17/N/11
ss
14) What is the main purpose of a trade union?

ha
A to achieve profit maximisation

B to encourage free trade
C to promote private ownership of industry
D to protect the interests of its members Q15/J/11

15) The workers in a company belong to a trade union.
Which change might the union use to support a claim for an increase in its members’ wages?
A a decrease in demand for the company’s product
B a decrease in the rate of inflation
C an increase in company profits
D an increase in the supply of workers Q16/N/09
16) In which situation will a trade union be least likely to be effective in supporting the interests of its members?
A The economy is experiencing an increase in unemployment.
B The firms have a large increase in demand for the product.
m
C The government passes a law weakening the powers of employers.
D The workers’ wages are a small proportion of total costs. Q7/N/08
co
ya N
o.
A
SA
17) What is not a function of a trade union?
to act as a pressure group to change labour laws
ho
6@ S
B to negotiate with employers over conditions of work
C to promote the sales of products made by its members
24 HA
D to protect the living standards of its members Q8/J/08

an R
18) When will a trade union be most effective in pursuing its members' interests?
SI
A The economy is in recession with rising unemployment.

B The employers have few orders for the product.
C The government passes a law to increase competition in the labour market.
D The members' wages make up a small part of total costs. Q6/J/07
ss
19) What is usually a function of a trade union?

ha
A to determine the amount of dividend paid

B to negotiate wage levels with employers
C to recommend redundancies
D to take responsibility for organising sales of companies’ products Q7/J/06
20) What is least likely to be a function of a trade union?

A improving working conditions
B reducing the cost of labour
C representing members' interests
D securing adequate pay for members Q5/N/05
21) What is usually a function of a trade union?
A It advertises the products that the members make.
B It appoints company employees.
C It negotiates with employers for increased wages.
D It negotiates with suppliers for reduced costs of materials. Q5/N/04
22) In 2002 the trade union representing workers on the London Underground public transport system called a
strike.
Which condition would make a strike least likely to be successful?
A The demand has to be met at a certain time.
B The product or service is regarded as a necessity.
m
C The union represents a high percentage of the workforce.
co
D There is a wide range of alternative services. Q7/J/04
ya N
o.
SA
23) What could increase the ability of a trade union to gain a pay rise for its members in a coat factory?
ho
A a decrease in the demand for coats
6@ S
B a decrease in the number of people willing to work in the coat industry
24 HA
C a decrease in the productivity of workers making coats

D a decrease in the sale of coat exports Q8/N/V16
an R
24) The table shows a country’s trade union membership in millions between 2008 and 2011.
SI
trade union members in trade union members in

year
the private sector (millions) the public sector (millions)
2008 8.4 3.6
ss
2009 6.6 4.2
2010 5.1 6.0

ha
2011 3.4 7.1
What can be concluded about the country’s trade union membership in the period 2008 to 2011?
A Trade unions had least members in 2010.
B Trade unions had most members in 2011.
C Trade union membership fell between 2008 and 2009.
D Trade union membership rose between 2009 and 2011. Q10/J/V15

25) What are the actions of a trade union intended to achieve in the long run?
A benefits to society
B harm to employers
C help for members
D reduced company profits Q12/N/V12
26) What might a trade union usually be expected to do for its members?
A arrange childcare facilities for members’ children
B ensure adequate promotion prospects exist
C negotiate better working conditions
m
D provide medical insurance Q8/J/V16
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

29. TRADE UNIONS
1) D 2) A 3) A 4) C
5) A 6) B 7) B 8) D
9) A 10) A 11) D 12) B
13) B 14) D 15) C 16) A
17) C 18) D 19) B 20) B
21) C 22) D 23) B 24) C
m
25) C 26) C
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
30. SPECIALISATION
ho
6@ S
24 HA
an R
ss SI
ha

1) What might be a direct benefit to the individual worker of a specialised job?
A Specialisation enables a better quality product to be produced.
B Specialisation enables the firm to introduce more machinery.
C Specialisation enables the worker to become more skilled.
D Specialisation makes better use of resources. Q14/N/13
2) Each worker in a firm specialises in performing one task. The firm then decides that each worker should carry
out a variety of tasks.
Which benefit will the firm be expecting to gain from the change?
A a decrease in the equipment workers need to be given
B a decrease in the time it takes to train workers
m
C an increase in the ability to cover for absent staff
co
D an increase in the skill gained from repetition Q15/J/13
ya N
o.
SA
3) What might encourage international specialisation between countries?
ho
A free trade
6@ S
B inefficiencies in production
24 HA
C labour immobility
D tariffs Q39/N/11
an R
4) Firms often advertise saying that they specialise in providing a certain product or service.
SI
What is an advantage of such specialisation to the firm?

A Its workers are motivated by more varied tasks.
B Production is dependent on other firms supplying components.
ss
C The firm’s average cost of production is likely to fall. Q39/N/10

D The firm can quickly adapt production if their product or service is no longer required.
ha
5) Which policy would best enable a government to encourage greater specialisation in the use of its country’s
resources?
A encouraging diversification in industry
B protecting small businesses
C reducing tariffs on imports into its country
D subsidising job creation in rural areas Q36/J/10

6) 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. Q36/N/09
7) What is not an advantage of specialisation and division of labour?

A A product is manufactured in separate stages, making it easier to use machinery.
B Some workers become more dependent on other workers.
C Workers complete a limited range of tasks and become more efficient at them.
m
D Workers spend less time moving from one task to another. Q36/J/09
co
ya N
8) Which of the following increases specialisation?
o.
A
B
SA
A farmer decides to convert some of his farm buildings into holiday cottages for rent.
A government decides that a country should be more self-sufficient in food production.
ho
6@ S
C A restaurant owner decides to have only vegetarian meals on his menu.
D A taxi driver decides to train for an additional licence to drive a bus. Q38/N/08
24 HA
9) What is an advantage if a region specialises in a narrow range of products?

an R
A Other regions will become over-dependent on the region.

SI
B Scarce resources are used more efficiently.

C The level of production in the region will decrease.
D The region’s system of transport is improved. Q38/J/08
ss
10) Why might a country specialise in growing coffee?

A It has comparative advantage in coffee production.
ha
B It needs a diversified economy.

C Its export markets have tariffs on coffee imports.
D Other countries subsidise coffee growing. Q36/N/07
11) What makes specialisation easier?

A the imposition of taxation
B the protection of trade
C the system of barter
D the use of money Q2/J/07

12) A country’s farmers specialise in a single cash crop for export.
What might have encouraged this policy?
A a fall in commodity prices
B comparative advantage
C diminishing returns
D diseconomies of scale Q39/N/06
13) What is the most likely outcome of increased specialisation in a water bottling plant?
A higher costs per bottle
B higher wage rates
m
C increased job satisfaction
D increased output of bottles of water Q4/J/06
co
ya N
o.
SA
14) The central area of a country produces tea for which it has an ideal climate. The coastal area produces coconuts
because its climate is different.
ho
Assuming there is no change in market conditions, what will happen if this country subsequently produces only
6@ S
tea in both areas?
24 HA
A It will increase its costs of production.

B It will increase the productivity of its land.
C It will increase its total income.
an R
D It will make the best use of its resources. Q38/J/06

SI
15) What will increase the level of specialisation in an economy?

A A computer manufacturer takes over an advertising company.
B A retail store issues its own credit card.
ss
C A travel agent provides transport to the airport.

ha
D A vehicle assembler reduces its range of vehicles. Q3/N/04
16) What is an advantage of international specialisation?

A Choice is limited.
B Countries become over-dependent on each other.
C Resources are used more efficiently.
D Transport costs are decreased. Q39/N/04

17) What encourages international specialisation?
B foreign exchange
C free trade
D quotas Q40/J/04
18) Although car production is based on specialisation, fewer workers are employed than 20 years ago.
What might be the reason for this change?
A Speed of car production is slower.
B Various tasks are performed by machines.
m
C Wages of workers have declined.
D Work is repetitive and boring. Q15/J/13
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

30. SPECIALISATION
1) C 2) C 3) A 4) C
5) C 6) B 7) B 8) C
9) B 10) A 11) D 12) B
13) D 14) A 15) D 16) C
17) C 18) B
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
31-34. TYPES OF BUSINESS
ya N
o.
SA
ORGANISATIONS
ho
6@ S
& MULTINAITONALS
24 HA
an R
ss SI
ha

1) 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 Q12/N/16
2) 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
m
B the availability of raw materials
co
C to gain external economies from skilled labour in Europe
ya N
D to increase Japanese self-sufficiency Q28/N/16
o.
SA
3) Partnerships in the United States of America (US) can now issue tradable shares and can limit the amount of
ho
money that shareholders may lose.
6@ S
To which type of business organisation do these changes make US partnerships similar?
24 HA
A co-operatives
B public corporations
an R
C public limited companies

D sole traders Q20/N/12
SI
4) Which of these statements made by an Economics student about different types of business organisation is
true?
A Partnerships face problems in raising large sums of finance.
ss
B Private companies cannot have limited liability.

ha
C Public companies operate in the public sector of the economy.

D Public corporations operate in the private sector of the economy. Q20/J/12
5) What distinguishes a multi-national company from other companies?

A It has agents in other countries.
B It produces in other countries.
C It takes part in international trade.
D It uses raw materials and components from more than one country. Q17/N/09

6) Which organisation is most likely to raise large amounts of capital through shareholders?
A a group of lawyers
B a local builder
C a manufacturer and exporter of televisions
D a safari park with a hotel Q16/J/09
7) Three doctors decide to work together in one health centre.

What form of business organisation are they most likely to choose?
A a partnership
B a private company
m
C a public company
D a public corporation Q17/J/09
co
ya N
o.
SA
8) A company producing coffee in Europe has operations in Brazil and Kenya.
What is a reason why a company might decide to have operations in more than one country?
ho
6@ S
A availability of cheaper raw materials
B easier central control of operations
24 HA
C greater risk of supply disruption

D increased transport costs Q6/N/08
an R
9) Which disadvantage is likely to arise when a private company grows and becomes a public company?
SI
A Banks may have less confidence in its financial stability.

B Customers may expect a reduced range of products.
C Suppliers may be more uncertain about receiving payment for materials.
ss
D Workers may feel less motivated within a larger organisation. Q8/N/08

ha
10) The following table gives information about four companies.

Which one of these companies is not a multi-national company?
number of countries in number of countries in number of countries in

company which the company has which the company has which the company
shareholders factories sells its products
A 2 1 100
B 1 2 50
C 10 20 20
D 20 5 1
Q9/N/08
11) An Italian-owned tour operator needs its staff in Rome to be able to speak a number of languages so it employs
people from different countries. It also uses other firms in different countries to provide tour guides and coach
drivers. It is part of an organisation that has shares issued on the stock exchange.
Which type of company is this?
A a co-operative
B a private company
C a public company
D a multi-national Q6/J/08
12) What is always true about multi-national companies?

A They employ more workers abroad than in their home market.
m
B They operate in manufacturing industry.
co
C They originate from developed countries.
ya N
D They own production facilities abroad. Q9/J/08
o.
SA
ho
13) Why might the government of a developing economy welcome large-scale cutting of its limited hardwood
6@ S
forests for export by a multi-national company?
A It allows profits to be exported.
24 HA
B It conserves scarce resources.

C It ensures long-term future growth in living standards.
an R
D It increases employment. Q36/J/08

SI
14) What advantage is gained by a company that becomes a multi-national?

A It avoids trade barriers.
B It reduces its fixed costs.
ss
C It simplifies its management structure.

D It makes communication easier. Q7/N/07
ha
15) What is a firm seeking profit maximisation trying to achieve?

A the fastest rate of profit growth
B the highest level of profit per unit produced
C the highest level of total profit
D the lowest level of total cost Q22/N/07

16) The table gives information about four business organisations.
Which organisation is most likely to be described as a co-operative?
owners have limited owned by its

liability members
A no yes
B no no
C yes yes
D yes no
Q7/J/07
m
17) A French company employs French people, is located only in France, sells shares on the stock exchange but uses
other firms to transport its products to other countries.
co
ya N
What type of company is this?
A a co-operative
o.
B a private company
SA
ho
C a public company
6@ S
D a multi-national Q9/J/07
24 HA
18) What makes Barclays Bank a public limited company?

an R
A It experiences economies of scale.

B It has more than two directors.
SI
C It is quoted on the London Stock Exchange.

D It operates in more than one country. Q5/N/06
ss
19) What is a characteristic of a public corporation?

A It issues shares to the general public.
ha
B It is owned by the government.

C Its objective is to maximise profits.
D It is owned by more than twenty shareholders. Q5/J/06
20) What best describes a multi-national company?

A a company that is owned by the government
B a company that has many shareholders
C a company that trades internationally
D a company that produces in more than one country Q6/J/06

21) A shopkeeper runs a business as a sole proprietor.
A The business has limited liability.
B The business is owned by shareholders.
C The business is quoted on a stock exchange.
D The profits of the business go to the shopkeeper. Q6/N/05
22) Which group has profit maximisation as a goal?

A entrepreneurs
B governments
m
C savers
D workers Q20/N/05
co
ya N
o.
SA
23) A business has two owners. They have limited liability. Its shares are not sold on the stock exchange.
What type of business is this?
ho
6@ S
A partnership
B private limited company
24 HA
C public corporation
D public limited company Q5/J/05
an R
SI
24) What would prevent an Egyptian company being classified as a multi-national company?
A It concentrates on one stage of production only.
B It employs only Egyptians as managers.
C It manufactures only in Egypt.
ss
D It uses other firms to transport its goods. Q7/J/05

ha
25) Multi-national companies often set up business in developing countries. These countries benefit in a number of
ways.
What effect could not be considered a benefit for a developing country?
A Investment in infrastructure is increased.
B More local workers are employed.
C New ideas and skills are introduced.
D Profits earned are sent abroad. Q39/J/05

26) Shares in the Japanese part of the American fast-food giant McDonald's hit an all-time low in August 2002. Sales
at McDonald's 3800 restaurants in Japan fell dramatically despite the assurance that the company used only
imported beef, which was free from a disease affecting Japanese cows.
From the above statement what is true about McDonald's?
A It is a multi-national because it has 3800 restaurants.
B It is a multi-national because it imports raw materials.
C It is a public company because it issues shares on the stock exchange.
D It is a public company because it operates in America and Japan. Q6/N/04
27) A state-owned industry is sold to the private sector. The industry consists of a number of very large factories.
Which is the most likely change in business organisation to result from this?
m
A from private company to public corporations
co
B from public company to public corporations
ya N
C from public corporation to public companies
o.
D SA
from public corporation to private companies Q5/J/04
ho
6@ S
28) 39 of the 42 largest Chinese firms are described as state-owned enterprises.
24 HA
What form of organisation will these enterprises have?

A co-operative
B partnership
an R
C public company
SI
D public corporation Q19/N/V13
29) The government of a developing country allows a multinational mining company to mine minerals in order to
improve the standard of living of the local people.
ss
Which action by the multinational company will not lead to an improvement in the standard of living of the local
people?
ha
A building roads to assist transport

B exporting mineral ore
C providing skills training
D returning profits overseas Q35/N/V13

30) A group of hotels, owned and operated in France, needs its staff to be able to speak a number of languages so it
employs people from different countries. Different firms, providing tours from other countries, send customers
to the hotels in France. The hotel group has shares issued on the stock exchange.
What type of company is the hotel group?
A a multi-national
B a partnership
C a private company
D a public company Q20/N/V12
31) Amit and Pardeep set up in business together. Each has half of the shares in the business and limited liability.
What type of business organisation is this?
m
A a co-operative
B a partnership
co
ya N
C a private company
o.
D a public company SA Q20/J/V12
ho
6@ S
32) Which type of business organisation has its shares quoted on a stock exchange?
24 HA
A co-operative
B private company
C public company
an R
D public corporation Q23/N/V11

SI
33) Cathay Pacific, Hong Kong’s largest airline, flies to a number of countries.
Shares in the firm are owned by both individuals and other firms in a number of countries. The shares are traded
on the Hong Kong Stock Exchange.
ss
Which type of business organisation is Cathay Pacific?

A a partnership
ha
B a private limited company

C a public corporation
D a public limited company Q23/J/V11

31-34. TYPES OF BUSINESS ORGANISATIONS
&
MULTINATIONALS
1) C 2) D
3) C 4) A 5) B 6) C
7) A 8) A 9) D 10) A
11) C 12) D 13) D 14) A
15) C 16) C 17) C 18) C
19) B 20) D 21) D 22) A
m
23) B 24) C 25) D 26) C
co
27) C 28) D 29) D 30) D
ya N
31) C 32) C 33) D
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
35. AVERAGE COST,
o.
SA
ho
VARIABLE COST
6@ S
24 HA
& FIXED COST

an R
ss SI
ha

1) The table shows the costs of a firm.
units of output variable cost ($) total cost ($)
10 15 85
20 25 95
30 35 105
40 45 115
What is the value of the firm’s fixed costs?

A $10
B $15
m
C $70
D $85 Q15/J/17
co
ya N
o.
SA
2) Which cost would be considered variable by a bus company?
A a new bus
ho
6@ S
B diesel fuel
24 HA
C loan repayment
D rent Q13/J/V17
an R
3) A firm has fixed costs of $200 for its daily output. The table shows its daily total variable costs.
SI
output 1 2 3 4
total variable costs ($) 300 400 700 800
What can be concluded about the firm’s average total cost?

ss
A it falls continuously
ha
B it is highest at output 4 units

C it is lowest at output 4 units
D it rises continuously Q14/N/16

4) 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. Q14/N/15
5) The table shows the information that managers of a company have from a week of business activity.
m
number of employees 100
average wage $900
co
ya N
value of output $100 000
o.
SA rent $10 000
ho
raw materials $20 000
6@ S
24 HA
Assuming there are no other costs, what is the value of the fixed costs? Q15/N/15
A $300 B $10 000 C $20 000 D $30 000
an R
6) In 2013, Barclays Bank had two branches in a city. It decided to close them both, move to a different building
SI
and employ fewer hourly-paid staff.
What is likely to have happened to the bank’s fixed and variable costs?
fixed cost variable cost

ss
A fall fall
B fall rise
ha
C rise fall
D rise rise
Q14/J/15

7) The diagram shows the costs of a firm.
m
co
ya N
What is the firm's total variable cost at an output of 100 units? Q15/J/15
o.
A $100 B $500
SA C $10 000 D $50 000
ho
6@ S
8) The diagram shows the cost and revenue curves of a firm which starts to make a profit only after producing 100
24 HA
units of output.
an R
ss SI
ha
What are the correct labels for line 1 and line 2?
line 1 line 2
A average cost average revenue
B total cost total revenue
C total revenue total cost
D variable cost price

Q14/N/14

9) The table shows output and total costs of production of a firm with three workers.
output total costs ($)
week 1 5 1500
week 2 6 1600
week 3 7 1700
week 4 8 1800
How did output per worker and average cost of the product change over the period?
output per worker average cost
m
A decrease no change
co
B increase Decrease
ya N
C increase no change
o.
D no change
SA Increase
ho
Q15/N/14
6@ S
24 HA
10) The diagram shows the fixed costs, variable costs and total costs of a firm.
an R
ss SI
ha
Which distance represents the firm’s fixed costs? Q14/J/14

A PS B QR C QS D RS
11) 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? Q15/J/14
A $3 B $24 C $27 D $30

12) The diagrams represent total cost curves (TC) of four firms in the short run.
Which firm has only fixed costs?
Q18/N/13
m
13) An entrepreneur started a small business making candles. In the first month 1000 candles were made. The costs
were
co
ya N
$
o.
SA raw materials 1000
ho
packaging 800
6@ S
insurance 100
24 HA
depreciation 100
rent 500
an R
SI
What were the average variable costs for the month? Q21/N/13
A $1.00 B $1.80 C $1.90 D $2.00
14) Cocoa and sugar are used in a factory to produce chocolate.

ss
What is a fixed cost in the production of chocolate?

A cocoa
ha
B electricity
C rent
D sugar Q19/J/13
15) An entrepreneur buys a workshop for $200 000 to make plastic boxes. In the first year of operation he spends
$70 000 on materials, employs ten production workers paid by the amount produced (piece rate) at a total cost
of $80 000 and buys two delivery vehicles for $10 000 each.
What are his total variable costs? Q22/J/13

A $100 000 B $150 000 C $220 000 D $370 000

16) What is a variable cost to a firm producing bicycles?
A the component parts of the bicycles
B the interest on money borrowed
C the rent of the bicycle factory
D the salaries of the senior managers Q18/N/12
17) The graphs show the average total cost (ATC) curves of four firms and how they change as output increases.
Which firm has the highest fixed costs?
m
co
ya N
o.
SA
ho
6@ S
Q21/N/12
24 HA
18) When would a firm achieve maximum profits?

A when average revenue equals average cost
an R
B when average revenue minus variable cost is greatest

C when fixed costs are equal to variable costs
SI
D when total revenue minus total cost is greatest Q18/J/12
19) The table shows the total costs of a firm. It can sell the units for $4 each.
ss
quantity produced and sold (units) 5 6 7 8

ha
total cost $ 17 18 21 23
How many units will the firm produce to maximise profits? Q21/J/12
A 5 B 6 C 7 D 8

20) The table shows how a firm’s total cost rises with changes in output.
output total cost ($)
0 20 000
1000 30 000
2000 35 000
3000 40 000
4000 45 000
5000 50 000
m
What is the average fixed cost of producing 5000 units? Q20/N/11
A $4 B $5 C $6 D $10
co
ya N
o.
21) A firm is producing an output which enables it to make more than normal profit.
SA
What must be true at that output?
ho
A Average revenue must be greater than total revenue.
6@ S
B Average revenue must equal average cost.
24 HA
C Total revenue must be greater than total cost.

D Variable cost must equal price. Q22/N/11
an R
SI
22) Which statement about total fixed cost is correct?

A It falls as output increases.
B It is calculated by adding total cost and total variable cost.
C It is calculated by dividing total cost by output.
ss
D It must be paid even if output is zero. Q23/N/11

ha
23) A firm raised the price of its product from $10 to $15 and as a result its sales fell from 200 units to 150 units.
What happened to its average revenue and total revenue?
average revenue total revenue
A Decreased decreased
B Decreased increased
C Increased decreased
D Increased increased
Q18/J/11

24) If a firm increases its output in the short run, what will happen to its average fixed cost (AFC)?
A AFC will decrease continually.
B AFC will equal zero.
C AFC will increase then decrease.
D AFC will increase continually. Q20/J/11
25) 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
m
C new technology that reduced costs
D reduced sales and low prices Q22/J/11
co
ya N
o.
SA
26) The table shows a firm’s fixed and variable costs at four levels of output.
ho
output (units) fixed costs ($) variable costs ($)
6@ S
2 50 110
24 HA
3 50 130
4 50 210
an R
5 50 300
SI
At which level of output is average cost at its lowest? Q18/N/10

A 2 B 3 C 4 D 5
ss
27) In 2008, the world’s largest metal mining company, BHP, increased its profits by 20 %.
What could have helped that happen?
ha
A a decrease in economic growth in the UK and the US

B an increase in demand from China
C more competition from other companies
D more difficult mining conditions Q23/N/10

28) A firm which sells its product for $6 has the following total costs.
output (units) 0 10 20 30
total costs ($) 40 100 120 150
Which statement is correct?

A Average cost is lowest when 10 units are produced.
B The firm breaks even when 20 units are sold.
C The firm has no fixed costs.
D Total variable costs fall continuously over these outputs. Q17/J/10
m
29) Barilla, an Italian company, is the world’s largest pasta maker. It also produces bread.
co
In 2006 its bread production contributed $1.5 billion (bn) to its total revenue of $5.1 bn.
ya N
Overall profit was $0.6 bn.
o.
SA
What was the total cost to Barilla of producing pasta and bread in 2006? Q20/J/10
ho
A $2.1 bn B $3.0 bn C $3.6 bn D $4.5 bn
6@ S
24 HA
30) Cadbury Schweppes, the confectionery business, is reported to want to reduce the number of its offices in an
attempt to decrease its general and administrative costs.
Which type of cost does Cadbury Schweppes hope to decrease?
an R
A average variable cost

SI
B marginal cost
C total fixed cost
D total variable cost Q18/N/09
ss
31) A firm has fixed costs of $20 and the following total variable costs.
ha
output 10 20 30 40
total variable costs ($) 40 60 80 100
What happens to average total cost over this output?

A It falls continuously.
B It falls, then rises.
C It rises continuously.
D It rises, then falls. Q22/N/09

32) 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 amount of goods that it keeps in stock
D by minimising the difference between average revenue and average cost Q18/J/09
33) Some travellers complain about the disturbance caused when other people use their mobile (cell) phones. As a
result, a UK train operator announces that it will buy some new trains that will have a device fitted to prevent
the use of mobile (cell) phones.
What will definitely happen to the train operator?
A Its average revenue will decrease.
m
B Its total revenue will increase.
co
C Its fixed cost will increase.
ya N
D Its total cost will decrease. Q19/J/09
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha
What is the firm’s variable cost at an output of 100 units? Q21/J/09

A $500 B $10 000 C $50 000 D $60 000

35) The purchase of new machinery enables a firm to increase output with fewer workers.
What is the effect on labour productivity and total costs?
change in labour
change in total costs
productivity
A fall constant
B rise rise
C rise uncertain
D uncertain fall
Q3/N/08
36) The financial director of a company adds up the expenditure on items such as electricity, petrol (gas) and diesel
m
fuel and raw materials. The director then divides that total by the firm’s output.
co
What has the director calculated?
ya N
A average revenue
o.
B average fixed cost SA
ho
C average variable cost
6@ S
D average total cost Q20/N/08
24 HA
37) A business aims to maximise profits.

To do this, it will have to
an R
A maximise sales revenue.

SI
B maximise the difference between sales revenue and production costs.

C minimise production costs. Q21/N/08
D minimise the difference between actual production and maximum production.
ss
38) The following report appeared in a newspaper.
‘British American Tobacco (BAT), the cigarette producer, said it would invest $1.5 million in China
ha
during the next two years as it set up new factories. China is estimated to be the world’s most
important market for the sale of cigarettes.’
What is likely to happen to the total cost, total revenue and profit of BAT?
total cost total revenue profit
A decrease increase uncertain

B decrease decrease increase
C increase increase uncertain
D increase decrease increase

Q22/N/08
39) An Economics student made the following statements about costs of production.
Average costs remain the same at all levels of output.

Fixed costs can exist when there is no output.
Total costs can include both fixed and variable costs.
Total variable costs fall as output increases.
How many of these statements are correct? Q20/J/08

A 1 B 2 C 3 D 4
40) A Japanese company which has spare capacity has agreed to refine 20 000 barrels of oil a day for a Chinese
company.
m
What is likely to happen in the Japanese firm to fixed cost, to variable cost and to total cost?
co
ya N
fixed cost variable cost total cost
o.
A riseSA rise rise
ho
B rise fall stay the same
6@ S
C stay the same rise rise
24 HA
D stay the same fall fall

Q22/J/08
an R
41) A firm sells its products for $10 each. It produces 100 units. Its average variable cost is $5 and its average fixed
SI
cost is $2.
How much profit does the firm make from selling 100 units? Q23/J/08
A $1000 B $700 C $500 D $300
ss
42) In 2005, world oil prices increased significantly.

What effect would an increase in oil prices have on a firm that transports products for other firms?
ha
A average fixed costs would increase

B profits would increase
C total fixed costs would increase
D variable costs would increase Q20/N/07
43) Which statement is correct?

A Average revenue is total revenue divided by output.
B Fixed cost is total cost plus variable cost.
C Total cost is variable cost multiplied by fixed cost.
D Total revenue is fixed revenue minus variable revenue. Q21/N/07
44) A British firm, Dyson, moved production of its vacuum cleaners from the UK to Malaysia.
Why might it have made this change?
A average costs would fall
B average revenue would rise
C market share would fall
D transport costs would rise Q20/J/07
45) What is a fixed cost of production?

A the commission paid to sales staff
B the cost of using the telephone
m
C the interest paid on a bank loan
D the money spent on repairs Q21/J/07
co
ya N
o.
SA
46) What is not equal to the average revenue?
A the price of each unit
ho
6@ S
B the profit from each unit
C the revenue from each unit
24 HA
D the total revenue divided by output Q22/J/07

an R
47) What is most likely to increase a firm’s profits?

SI
A government controls on its prices

B grants for the purchase of new machines
C an increase in the wages paid to its workers
D rising costs of its raw materials Q18/N/06
ss
48) Which statement about fixed costs is correct?

ha
A They exist only in the long run.

B They include raw material and direct labour costs.
C They increase at the same rate as output.
D They must be paid even if there is no output. Q20/N/06

49) A firm’s average revenue is $10. It sells 2000 units.
What is the firm’s total revenue and the price of the product?
Total revenue ($) Price ($)

A 10 10
B 2 000 200
C 20 000 10
D 20 000 200
Q18/J/06
50) IKEA, the world’s largest retailer in home furnishings, opened a new store in Malaysia in 2003.
m
What was likely to happen to fixed costs, variable costs and profits for IKEA?
co
ya N
fixed costs variable costs profits
o.
A
B
SA
decrease
decrease
decrease
increase
uncertain
increase
ho
6@ S
C increase increase uncertain
24 HA
D increase increase increase

Q22/N/05
51) The following information relates to a company producing shoes.

an R
SI
total output of
total costs ($) total revenue ($)
pairs of shoes
100 1000 1300
200 1800 2200
ss
300 2700 3000

400 3200 3400
ha
What is the profit per pair of shoes when the firm is maximising its profits? Q23/N/05
A $0.50 B $1.00 C $2.00 D $3.00
52) A firm producing instant coffee previously paid for the disposal of the waste. It now sells the waste to be made
into garden fertiliser.
Which cost to the firm has not changed?
A average cost
B fixed cost
C total cost
D variable cost Q19/J/05
53) In 2003 Hewlett-Packard, 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 Q20/J/05
54) Ericsson is the world’s leading maker of mobile phone machinery. It announced that it had won a major contract
to supply a Chinese phone company, China Mobile, with machinery. Ericsson also announced that it would
become more efficient by reducing its workforce.
How would economists classify these changes for the two companies?
m
co
Ericsson China Mobile
ya N
A decreased average variable cost decreased fixed cost
o.
B
SA
decreased average variable cost increased fixed cost
ho
C increased fixed cost decreased average variable cost
6@ S
D decreased fixed cost decreased average variable cost
24 HA
Q22/J/05
an R
55) A firm bottles 10 000 bottles of cola a week. Its fixed costs are $1000 a week. Its variable costs
SI
are $0.50 a bottle. Each bottle of cola is sold for $1.

What is the profit per bottle of cola? Q23/J/05
A $0.40 B $0.50 C $0.60 D $0.90
ss
56) Which cost incurred by a firm manufacturing shirts is a variable cost?

A buildings insurance
ha
B interest on bank loans

C raw materials
D rent on property Q22/N/04

57) Fifty people are employed in a business to produce 10 000 units per week.
The weekly costs are:
hire of machinery 230

power 200
raw materials 1000
wages per employee 40
What are the variable costs for the week? Q23/N/04

A $1200 B $1430 C $1470 D $3200
m
58) The charts show the number of railway passenger journeys made and the miles of route open.
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha
What can be concluded from the charts?

A The overall trend in passenger journeys between 1990 and 1994 was upwards.
B The routes had more people travelling on them in 1994 than in 1992.
C The revenue of the railway decreased between 1990 and 1994.
D There were more trains running in 1994 than in 1992. Q12/J/04

59) The table shows a firm’s average revenue and average cost.
What level of output, A, B, C or D, gives maximum profit?
output average average

(units) revenue ($) cost ($)
A 5 10 30
B 10 20 20
C 15 25 15
D 20 30 18
Q21/J/04
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
Which distance represents the firm’s fixed costs? Q23/J/04

A PQ B PS C QR D QS
61) In 2009, Gulf Airlines, which was making a loss, stated it would reduce the number of new aircraft on order.
ss
If it did this, which of its costs would be directly affected?

A fixed costs
ha
B marginal costs
C opportunity costs
D variable costs Q14/J/V15
62) When personal computers (PCs) were first sold in the 1970s, prices were much higher than they are today.
What is the most likely explanation?
A Both quality and performance of PCs have improved.
B Demand has increased due to advertising.
C Improvements in technology have led to lower supply costs.
D Production requires more spending on research. Q7/N/V14
63) When a firm produces 500 units its total variable cost is $1000. Its total fixed cost is $1500.
What is the average cost of 500 units? Q17/N/V13
A $2 B $3 C $5 D $2500
64) The table shows the costs of a firm.
units of output variable costs ($) total costs ($)
10 20 80
20 50 110
30 80 140
m
40 110 170
co
ya N
What is the value of the firm’s fixed costs? Q22/J/V13
o.
A $20 B $30 C $60 D $80
SA
ho
65) As a firm increases its weekly output from 10 units to 20 units, its average cost falls from $15 to $10.
6@ S
Which of its costs have risen?
24 HA
A fixed costs and variable costs only

B fixed costs, variable costs and total costs
an R
C total costs only

SI
D variable costs and total costs only Q18/N/V12
66) The table shows the total costs of a firm. It can sell the units for $6 each.
quantity produced and sold (units) 3 4 5 6

ss
total cost $ 12 15 20 27
ha
How many units will the firm produce to maximise profits? Q17/Specimen
A 3 B 4 C 5 D 6

35. AVERAGE COST, VARIABLE COST & FIXED COST
1) C 2) B 3) C
4) A 5) B 6) A 7) D
8) C 9) B 10) D 11) D
12) C 13) B 14) C 15) B
16) A 17) A 18) D 19) D
20) A 21) C 22) D 23) D
24) A 25) D 26) B 27) B
m
28) B 29) D 30) C 31) A
co
ya N
32) A 33) C 34) C 35) C
o.
36) C
40) C
SA
37) B
41) D
38) C
42) D
39) B
43) A
ho
6@ S
44) A 45) C 46) B 47) B
24 HA
48) D 49) C 50) C 51) C

52) B 53) D 54) B 55) A
56) C 57) D 58) B 59) D
an R
60) A 61) A 62) C 63) C

SI
64) C 65) D 66) C

ss
ha

m
co
36-38. INTEGRATION
ya N
o.
SA
&
ho
6@ S
ECONOMIES OF SCALE
24 HA
an R
ss SI
ha

1) 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 Q12/J/17
2) Which costs will necessarily fall continuously as output increases?

A average fixed costs
B average variable costs
m
C opportunity costs
D repayment costs of borrowing Q13/J/17
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

3) 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 Q13/J/16
4) The table shows the units of factors of production that a firm needs to employ for two different levels of output.
land labour capital output
6 8 4 100
m
9 12 6 200
co
ya N
What is the firm experiencing?
o.
A constant returns to scale
SA
ho
6@ S
C external diseconomies of scale
24 HA
D external economies of scale Q14/J/16
5) What must be falling if a firm is experiencing economies of scale?

an R
A average costs
SI
B external costs
C fixed costs
D total costs Q13/N/15
ss
6) A large tyre manufacturer expands by taking over a rubber plantation.

ha

A backward vertical integration
B diversifying integration
C forward vertical integration
D horizontal integration Q12/N/14

7) When a shoe manufacturer doubles all factors of production output more than doubles.
Which economic concept does this illustrate?
C increasing profits
D opportunity cost Q12/J/14
8) What is a reason why firms making similar products sometimes locate near each other?
A competition is decreased
B there are external economies of scale
m
C there are internal economies of scale
D transport costs may be eliminated Q17/N/13
co
ya N
o.
SA
9) To achieve horizontal integration a record company producing compact discs (CDs) could merge with another
firm.
ho
What would this firm most likely be doing?
6@ S
A owning shops selling CDs
24 HA
B producing CDs
C producing CD players
an R
D producing machinery used in the making of CDs Q19/N/13

SI
10) What will happen to a firm that expands to take advantage of economies of scale?
A Average costs of production will decrease.
B Average costs of production will increase.
ss
C Profits will decrease.

D The price of the firm’s products will increase. Q18/J/13
ha
11) In August 2008, Infosys, an Indian information technology company, bought Axon, a UK information technology
company.
Which type of integration is this?
A conglomerate
B horizontal
C vertical backwards
D vertical forwards Q20/J/13

12) Which is an external economy of scale?
A availability of training facilities in local colleges
B greater production from employees
C increased credit facilities from banks
D lower costs through bulk buying Q17/N/12
13) In January 2008, ICI, a major UK chemical firm, was bought by its rival, a Dutch chemical firm.
What definitely occurred when the Dutch firm bought ICI?
A a partnership
m
C horizontal integration
D increased profits Q19/N/12
co
ya N
o.
A
SA
14) Which is a diseconomy of scale?
Bulk buying reduces costs.
ho
6@ S
B Communications deteriorate.
C Employees are more motivated.
24 HA
D Technological improvements take place. Q17/J/12

an R
15) Domino’s, the largest US pizza chain, decided also to sell sandwiches in an attempt to increase its revenue.
SI
Which term describes this change?

A amalgamation
B diversification
C externalities
ss
D vertical integration Q19/J/12

ha
16) General Motors, a large multi-national company based in the United States, sold some of its European car
assembly plants to other car manufacturers during the world recession (economic downturn) in 2009.
Which economic reason would have been most likely to influence this decision?
A to benefit from horizontal integration of manufacturing
B to diversify and expand its product range
C to encourage vertical integration of sales and production
D to reduce its excess capacity in car production Q21/N/11

17) Which change must occur when a firm starts to experience diseconomies of scale?
A Average costs begin to rise.
B Employees are made redundant.
C Profits turn into losses.
D Variable costs become fixed. Q19/J/11
18) A milk processing company takes over a group of dairy farms before merging with a chain of supermarkets.
Which types of integration have taken place?
A diversification followed by horizontal
B horizontal followed by vertical backward
m
C vertical backward followed by vertical forward
D vertical forward followed by diversification Q20/N/10
co
ya N
o.
SA
19) In 2008, XL, the UK’s third largest tour operator went out of business.
What would have been the effect of this on the level of competition in the industry, the external economies of
ho
scale experienced by the remaining firms and the level of business confidence in the UK?
6@ S
24 HA
level of competition external economies of scale UK business confidence

A increase increase reduce
B increase reduce increase

an R
C reduce increase increase

SI
D reduce reduce reduce
Q22/N/10
20) India is experiencing rapid growth in air travel. The number and size of airlines is increasing every year.
ss
Which effect arising from this growth is an external economy of scale?

ha
A Banks are more prepared to lend to large airlines rather than small airlines.
B Fuel suppliers charge less to airlines that buy in bulk.
C Institutions are established to train flight crew.
D Larger airlines operate aircraft which can carry more passengers. Q20/N/09

21) Increasing returns to scale means that if all inputs are doubled, output will
A remain the same.
B increase but less than double.
C double.
D more than double. Q23/N/08
22) A motor car manufacturer buys a chain of showrooms where the new cars are sold to the public.
A conglomerate integration
B horizontal integration
m
C vertical integration backwards
D vertical integration forwards Q24/N/08
co
ya N
23) In 2006, the Indian company, Ratnagin Gas and Power bought another Indian power company, Dabhol Power.
o.
SA
What type of integration is this?
ho
A conglomerate
6@ S
B horizontal
24 HA
C vertical backwards
D vertical forwards Q24/J/08
an R
24) What is happening when a firm is experiencing diseconomies of scale?

SI
A It has rising long-run average costs.

B It is operating in the short run.
C Its fixed costs are less than variable costs.
ss
D Its output is increasing faster than its inputs. Q19/N/07

ha

25) Which diagram represents a firm with economies of scale?
m
co
ya N
o.
SA
ho
6@ S
24 HA
Q19/J/07
26) What is an example of backward vertical integration?

an R
A An aircraft manufacturer takes over an airline.

SI
B A bank takes over another bank.

C A plastics manufacturer takes over a drinks firm.
D A tyre manufacturer takes over a rubber plantation. Q21/N/06
ss
27) What is happening when a firm is experiencing economies of scale?

A It has rising long-run average costs.
ha
B It is operating in the short run.

C Its fixed costs are less than variable costs.
D Its output is increasing faster than its inputs. Q21/J/06
28) In 2004 Banco Santander, a Spanish bank, bought Abbey National, a British bank.
What was achieved by this?
A diversification
D vertical integration forwards Q21/N/05
29) Wal-Mart, the world’s biggest food retailer, has acquired a large number of supermarkets.
What type of integration is this?
A conglomerate
B horizontal
C vertical backward
D vertical forward Q21/J/05
30) A large clothing manufacturer expanded by acquiring retail clothing outlets.

A diversification
m
B external economies of scale
C horizontal integration
co
ya N
D vertical integration Q20/N/04
o.
SA
ho
6@ S
24 HA
5 2 4 10
10 4 8 300
an R

SI

D external economies Q24/N/04
ss
ha
32) Why are firms making similar products often located near each other?
A Competition may be reduced.
B External economies may be possible.
C Land may be cheaper.
D Overheads may be increased. Q20/J/04

33) The following extract appeared in a UK newspaper.
‘The UK construction firm Wimpey yesterday announced an £85 million deal to buy two companies in the United
States which supply its raw materials.’
Which term best describes Wimpey's actions?

A diversification
D vertical integration forwards Q22/J/04
34) A firm produced 200 cars a week and employed 50 workers. A fall in demand caused the firm to reduce its
m
output to 160 cars a week and its labour force to 32.
What was the percentage change in the firm’s productivity?
co
ya N
A It fell by 20%.
o.
B
C
It fell by 25%.
It increased by 20%.
SA
ho
6@ S
D It increased by 25%. Q14/N/V16
24 HA
35) In 2013, a German company that manufactured medicines bought a UK company that ran a chain of pharmacies
that sold medicines.
an R
What term best describes this takeover?

A conglomerate
SI
B horizontal
D vertical integration forwards Q12/J/V15
ss
36) What must occur if a firm experiences economies of scale?

ha
A average costs decrease

B profits decrease
C the number of workers increases
D total advertising costs decrease Q13/N/V14
37) What is an external economy of scale for a firm?

A agreeing to produce large quantities exclusively for a major retailer
B bulk buying of raw materials
C obtaining discount rates from suppliers
D sharing research from other firms Q20/N/V13
38) A butcher has achieved backward vertical integration.
What could have happened?
A The butcher bought a cattle farm.
B The butcher employed more workers.
C The butcher merged with another butcher.
D The butcher sold cheese and eggs as well as meat. Q21/N/V13
39) In 2011, the UK-based Rio Tinto, the world’s second largest mining company, decided to bid for Australian Coal
and Allied Industries, another mining company.
Which economic concepts could be involved in this decision?
A amalgamation and external economies
m
B international finance and forward vertical integration
co
C monopoly power and horizontal integration
ya N
D multinational company and a more competitive market Q20/N/V13
o.
SA
ho
40) Which of the following is an internal diseconomy of scale?
6@ S
A a lack of communication in a firm
24 HA
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 Q20/J/V13
an R
SI
41) The multinational Indian Tata Group, which has companies in chemicals, consumer goods, engineering and
communications, has been buying foreign companies.
What does this action most likely suggest about the company?
A It intends to achieve a domestic monopoly position.
ss
B It intends to increase its level of specialisation.

C It intends to reduce fixed costs.
ha
D It intends to spread risks by diversification. Q21/J/V13
42) A firm opens new branches in four different cities. As a result, it can negotiate a better deal from its foreign
suppliers because it purchases larger quantities. However, it finds the distance between branches causes
organisational problems.
What describes the result for the firm?
A an external economy of scale and an external diseconomy of scale
B an external economy of scale and an internal diseconomy of scale
C an internal economy of scale and an external diseconomy of scale
D an internal economy of scale and an internal diseconomy of scale Q17/N/V12
43) Two private firms, an iron ore mining company and an iron and steel manufacturer, agree to amalgamate.
How would this action be described?
A co-operative
B horizontal take-over
C partnership
D vertical merger Q19/N/V12
44) A manufacturing firm wishing to have better control of its raw materials would seek to grow
A horizontally.
B laterally.
m
C vertically backwards.
D vertically forwards. Q19/J/V12
co
ya N
o.
SA
ho
6@ S
5 2 4 100
24 HA
10 4 8 150

an R

SI
B diseconomies of scale
D external economies of scale Q14/J/V16
ss
ha

36-38. INTEGRATION & ECONOMIES OF SCALE
1) D 2) A 3) A 4) B
5) A 6) A 7) B 8) B
9) B 10) A 11) B 12) A
13) C 14) B 15) B 16) D
17) A 18) C 19) D 20) C
21) D 22) D 23) B 24) A
25) D 26) D 27) D 28) B
m
29) B 30) D 31) B 32) B
co
ya N
33) C 34) D 35) D 36) A
o.
37) D
38) A
SA
39) C 40) B 41) D
ho
6@ S
42) D 43) D 44) C 45) B
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
39. SMALL FIRMS
o.
SA
& ho
6@ S
24 HA
40-41. MARKET STRUCTURES

an R
ss SI
ha

1) 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 Q12/N/15
2) What may exist in monopoly but not in perfect competition?

A barriers to entry
B identical products
C market price
m
D perfect knowledge Q12/J/15
co
ya N
3) What may exist in perfect competition but not in monopoly?
o.
A
B
barriers to entry
economies of scale
SA
ho
6@ S
C many sellers
D product differentiation Q13/N/14
24 HA
4) Which market conditions apply to firms that operate in perfect competition and which to a monopoly?
an R
perfect competition monopoly

SI
demand influenced by demand not influenced by

A
advertising advertising
B many barriers to entry no barriers to entry
C no influence on price strong influence on price

ss
D sales of branded products sales of unique products

Q13/J/14
ha
5) What is a difference between a monopoly and a perfectly competitive firm?

A A monopoly always has economies of scale and a perfectly competitive firm has diseconomies of scale.
B A monopoly always operates in the public sector and a perfectly competitive firm always operates in the
private sector.
C A monopoly is a price maker and a perfectly competitive firm is a price taker. Q20/N/13
D A monopoly seeks to maximise profits and a perfectly competitive firm seeks to maximise output.

6) In a competitive industry, a firm’s aim is to become a monopoly supplier.
Which policy is it most likely to use to eliminate competition?
A adopt price reductions and advertising
B avoid diseconomies of scale
C maximise output and profit
D reduce financial barriers to entry Q22/N/13
7) Why might a government encourage a monopoly?

A It can have high average costs.
B It can compete against foreign firms.
m
C It can prevent innovation.
D It can make excessive profits. Q25/N/13
co
ya N
o.
A
SA
8) A country needs extra nurses. How could this be encouraged in a mixed economy but not in a market economy?
Extra part-time nursing courses could be arranged by private colleges.
ho
6@ S
B Nurses could be given a higher statutory minimum wage.
C Nursing students could be asked to pay increased fees.
24 HA
D Nursing training colleges could have their subsidies reduced. Q4/J/13

an R
9) Why is a firm in perfect competition a price taker?

SI
A Demand for its product is perfectly inelastic.

B Demand for its product is unaffected by changes in market conditions.
C It is one of a small number of firms in the industry.
D Its output is too small to have any effect on a proportion of the total market. Q17/J/13
ss
10) In a city, both large and small shops sell clothes.

ha
Why do large and small shops exist together?

A Large clothing shops create barriers to entry.
B Small shops always sell clothes at lower prices.
C The market for clothing operates under perfect competition.
D There is demand from consumers for a range of fashions. Q21/J/13

11) What is a possible advantage to the consumer of a monopoly supplier in a market?
A It achieves average costs which are lower than if there were many suppliers.
B It achieves profits which are higher than if there were many suppliers.
C It conducts advertising campaigns to discourage competition.
D It decides which retail outlets may sell and distribute its goods. Q22/N/12
12) A monopoly takes over an industry from competitive firms.

What is not likely to be true about the 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.
m
C A monopoly will offer a wider choice to the consumer.
D A monopoly will operate on a larger scale of production. Q22/J/12
co
ya N
o.
SA
13) Mr Jones runs a small shop selling household appliances. His total revenue has declined due to the opening of a
large supermarket which sells a similar range of goods.
ho
How could Mr Jones compete with the supermarket?
6@ S
A develop financial economies of scale
24 HA
B engage in a price-cutting war

C introduce a massive advertising campaign
an R
D provide personal after-sales service Q19/N/11

SI
14) A person wishes to buy shares in order to make a long-term profit, but wants as little risk of short-term loss as
possible.
Which type of share is most likely to meet these wishes?
A a share in a coffee growing company
ss
B a share in a fashion house

ha
C a share in a high-tech electronics company

D a share in a supermarket chain Q12/J/11
15) What is an advantage of small-scale production?

B division of labour
C flexible production
D spreading of overheads Q23/J/11

16) What is unlikely to be a feature of a large firm in a monopoly position in a market?
A It achieves economies of scale.
B It charges high prices.
C It removes barriers to entry.
D It will attract government attention. Q19/N/10
17) What is usually an advantage of a small firm?

A the ability to benefit from bulk buying arrangements
B the ability to raise finance from a stock exchange
C the ability to respond quickly to changes in consumer demand
m
D the ability to run a national advertising campaign Q21/N/10
co
ya N
18) What is correct about a monopoly?
o.
A
B
SA
It may benefit from economies of scale.
It must be privately not state owned.
ho
6@ S
C Its costs are always higher than those of a firm in perfect competition.
D It sells only one product. Q22/J/10
24 HA
19) What is likely to be found when there are many small firms in an industry?
an R
A There are few barriers to entry.

SI
B There is high expenditure on research and development.

C There is little competition.
D Very large capital costs are needed to establish a firm. Q24/J/10
ss
20) Prices tend to be lower in a competitive industry than in a monopoly.

Why is this?
ha
A A monopoly has less influence on the market.

B Competitive industry has more economies of scale.
C New firms are free to enter the competitive industry.
D Profits are lower in a monopoly. Q19/N/09

21) In a popular tourist city there are three large hotels but many smaller guest houses.
The company which owns one of the large hotels decides to add more rooms to its hotel and also purchase one
of the other large hotels.
What will happen as a result?
A The company will be able to control the price of tourist accommodation in the city.
B The market for hotel accommodation will become less competitive.
C The smaller guest houses will be forced out of business.
D There will be a monopoly supply of tourist accommodation in the city. Q22/J/09
22) Many people prefer to buy clothes from a local shop rather than travel to a specialist tailor to have them made.
Which combination of characteristics of the local shop would make this most likely?
m
co
A easily accessible shop high quality product more expensive
ya N
B easily accessible shop average quality product less expensive
o.
C SA
shop owner known to customer average quality product more expensive
ho
D shop owner known to customer poor quality product less expensive
6@ S
Q13/N/08
24 HA
23) Which statement explains why cars are often repaired by small garages?
A bulk buying of spare parts can take place
an R
B car-repair jobs are varied

SI
C entry to the car-repair industry is restricted

D expensive machinery is required Q21/J/08
24) Why might a government discourage monopolies?

ss
A They can achieve low average costs.

ha
B They can compete against foreign firms.

C They can introduce new technology.
D They can make large profits. Q25/J/07
25) Which activity can a small firm carry out more easily than a large firm?
A adapting to changing fashions
B having specialised managers
C raising finance
D undertaking research and development Q18/N/05

26) 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. Q13/N/V16
27) What is correct for a private monopoly but is not correct for a firm in perfect competition?
A It aims to maximise its profits.
B It can make losses.
C It can restrict the level of competition.
m
D It is run by an entrepreneur. Q12/N/V14
co
ya N
28) Some resources in a market economy are switched from producing chocolate bars to producing ice cream.
o.
A
SA
an increase in the demand for ice cream and a decrease in the demand for chocolate bars
ho
B an increase in the profits from chocolate bars and a decrease in the profits from ice cream
6@ S
C an increase in the subsidy given to chocolate bar producers and a decrease in the subsidy given to ice cream
24 HA
producers
D an increase in the tax on ice cream and a decrease in the tax on chocolate bars Q4/N/V13
an R
29) Which characteristic relates to perfect competition and which to monopoly?

SI
perfect competition monopoly
A abnormal profit normal profit

B barriers to entry freedom of entry
ss
C few firms many firms

ha
D price taker price maker
Q17/J/V13
30) Machu Picchu is Peru’s most popular tourist destination. One train company, PeruRail, operates a monopoly
service up to the site.
Why might competition on the route increase the fares paid by passengers?
A Competitive firms have more influence on price than a monopoly.
B Competitive firms never make a loss.
C Less advantage may be taken of economics of scale. Q22/N/V12
D More profit may be available to spend on new technology to reduce costs of production.

31) 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 Q38/N/V12
32) If a perfectly competitive market becomes a monopoly, what will be likely to increase and what will be likely to
decrease?
increase decrease
m
A barriers to entry economies of scale
B long-run profits competition
co
ya N
C output market share
o.
D SA
consumer choice prices
ho
Q22/J/V12
6@ S
33) A government decides to sell to a private firm its monopoly supply of gas to households to a private firm.
24 HA
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
an R
B by imposing a tax on excess profits

SI
C by introducing a quota system for imports of gas

D by removing price controls on gas Q24/J/V12
34) Mr Jones runs a small shop selling household appliances. His total revenue has declined due to the opening of a
ss
large supermarket which sells a similar range of goods.

ha
How could Mr Jones compete with the supermarket?

A develop financial economies of scale
B engage in a price-cutting war
C introduce a massive advertising campaign
D provide personal after-sales service Q18/N/V11
35) 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 Q13/J/V16
39. SMALL FIRMS
&
40-41. MARKET STRUCTURES
1) C 2) A 3) C 4) C
5) C 6) A 7) B 8) B
9) D 10) D 11) D 12) B
13) D 14) D 15) C 16) C
17) C 18) A 19) A 20) C
21) B 22) B 23) B 24) D
m
25) A 26) B 27) C 28) A
co
29) D 30) C 31) D 32) B
ya N
33) B 34) D 35) D
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
43-44. ECONOMIC GROWTH
o.
SA
& ho
6@ S
24 HA
ECONOMIC DEVELOPMENT
an R
ss SI
ha

1) 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 Q20/J/17
2) What is the change in GDP per head, after taking account of price increases (real change), between 2000
and 2013?
m
consumer prices
Year population million GDP $billion
index (CPI)
co
ya N
2000 3 100 4000
o.
2013 SA 4 120 6000
ho
6@ S
A from $15 to $125
24 HA
B from $1250 to $1333

C from $1333 to $1250
D from $1333 to $1500 Q23/J/17
an R
ss SI
ha

3) The forecast for Germany’s GDP growth in 2013 was 1.5%.
What might cause economic growth?
A an increase in imports
C an increase in productivity
4) What will increase the level of economic development in a country?

A a higher infant mortality rate
B a higher inflation rate
m
C a higher interest rate
D a higher literacy rate Q25/N/14
co
ya N
o.
SA
5) Which combination of government policies would most likely increase the rate of growth of domestic
production in an economy?
ho
A an increase in expenditure on infrastructure and an increase in income tax
6@ S
B an increase in interest rates and an increase in quotas on imported goods
24 HA
C an increase in subsidies to domestic industry and an increase in tariffs Q25/J/12

D an increase in value added tax (goods and services tax) and an increase in education expenditure
an R
6) The inhabitants of an economy experience an increase in their cost of living, their living standards and their
SI
leisure time.
Which combination of events could explain these changes?
average
price level real GDP
working week
ss
A decrease decrease increase

ha
B decrease increase decrease

C increase decrease increase
D increase increase decrease

Q31/J/12
7) What is a long-term advantage of economic growth?
A employment falls
B incomes rise
C prices rise
D savings fall Q29/N/11

8) What is more likely to result from rather than cause economic development?
A a depletion of non-renewable resources
B a move towards free trade
C a stable political and legal system
D more private and less public sector activity Q35/N/10
9) Economic growth can be defined as

A an increase in a country’s exports.
B an increase in a country’s population.
C an increase in the productive capacity of an economy.
m
D a reduction in inflation. Q23/N/09
co
ya N
10) The table shows a number of economic indicators for four countries in 2004.
o.
SA
Which country best fits the description of ‘the fastest real economic growth with the strongest international
position’?
ho
6@ S
GDP prices trade balance foreign
country
(annual %change) (annual %change) ($bn) reserves ($bn)
24 HA
A Chile 4.8 1.1 +6.2 15.9
B Hungary 4.2 7.5 – 4.2 12.6

an R
C Peru 4.2 4.3 +1.5 10.4

SI
D Philippines 6.4 5.1 –1.3 13.0
Q30/N/09
11) What is likely to increase with economic growth?

ss
A cyclical unemployment
B income per head
ha
C the budget deficit

D the conservation of natural resources Q23/J/09
12) What might cause a decline in economic output?

A a decrease in income tax
B a decrease in sales tax
C an increase in company investment
D an increase in unemployment Q29/J/09

13) What is most likely to improve the economic performance of a country in the long run?
A a decrease in investment
B a decrease in the school-leaving age
C an increase in government spending on education
D an increase in the rate of interest Q26/N/08
14) What might a government increase if it wished to raise the growth rate of an economy?
A expenditure on road building
B goods and services tax (value added tax)
C the rate of income tax
D the rate of interest Q27/J/08
m
co
15) What is likely to be an advantage of economic growth?
ya N
A The country’s resources will be depleted.
o.
B
SA
The price level will increase.
ho
C The rate of employment will fall.
6@ S
D The standard of living will increase. Q29/J/08
24 HA
16) It was reported that the economic recovery in the first half of 2003 was poor.
What factor might have explained this?
an R
A a rise in consumer spending

SI
B a rise in investment
C a rise in oil prices
D a rise in world share prices Q31/J/08
ss
17) What is a possible disadvantage of the changes caused by long-term economic growth?
ha
A rising cyclical unemployment

B rising employment
C rising seasonal unemployment
D rising structural unemployment Q25/N/07
18) A report predicted that South Africa’s economy was likely to grow at 4.2 %.
What might cause this growth?
A an increase in exports
B an increase in imports
C an increase in interest rates
19) What might a government decrease if it wished to slow down the rate of growth in an economy?
A expenditure on defence
B goods and services (value added) tax
C interest rates
D the rate of income tax Q23/J/06
20) Why might policies to promote economic growth result in inflation?

A They increase competition.
B They increase saving.
C They increase spending.
m
D They increase unemployment. Q24/J/06
co
ya N
21) What is likely to be a disadvantage of economic growth?
o.
A
B
SA
Government tax revenue falls.
Resources are used up.
ho
6@ S
C The level of unemployment rises.
D The standard of living of the population falls. Q27/N/05
24 HA
22) The table gives information on the rate of economic growth in a country from 2001 to 2004.
an R
economic growth (%)

SI
2001 3.9
2002 2.6
2003 2.3
ss
2004 3.0
ha
What is likely to have fallen in this period?

A Gross Domestic Product
B imports
C prices
D unemployment Q24/J/05

23) The bar chart shows details of three economic indicators of several Asian economies in year 1 and year 2.
Which country improved its economic performance in all three indicators?
m
Q32/J/05
co
ya N
24) A newspaper reports that there has been economic growth in an economy.
o.
SA
What does this mean to an economist?
ho
A Population has increased.
6@ S
B Production has increased.
24 HA
C Saving has increased.

D Taxation has increased. Q32/N/04
an R
25) Chile specialises in the production of copper for export.

SI
How would the Chilean economy be affected by a large rise in the supply of copper from other countries?
employment economic growth
A fall fall
ss
B fall rise
C rise fall
ha
D rise rise
Q38/N/04
26) Botswana has achieved high rates of economic growth.

What is most likely to have fallen as a result of this economic growth?
A employment
B income per head
C infant mortality rate
D literacy rates Q35/J/04

27) Which is a supply-side policy that would increase output in the long-run?
A an increase in benefit payments
B an increase in places at training colleges
C an increase in the rate of income tax
D an increase in the rate of tax employers pay Q17/J/V15
28) What is most likely to cause economic growth?

A a better educated workforce
B a reduction in the right to own property
C decreased wages
m
D higher taxation Q20/J/V15
co
ya N
29) What might a government do if it wishes to increase the rate of economic growth in an economy?
o.
A
B
SA
agree a major contract for increased spending by the ministry of defence
increase the interest rates when house buyers take out a loan
ho
6@ S
C increase the rate of income tax for average income earners
D raise the sales tax (GST or VAT) on children’s clothes and books Q23/N/V13
24 HA
30) An economy is said to have a high economic growth rate.

an R
What is most likely to be found when this occurs?

SI
A a decrease in inflation and a budget deficit

B a decrease in the exchange rate and a fall in savings
C an increase in GDP and low unemployment
D an increase in inflation and a reduction in investment Q29/N/V13
ss
31) Between 2009 and 2010, an economy grew by 2.1 %.

ha
What is most likely to have increased during this period?

A population
B production
C unemployment
D wages Q31/J/V12

32) Between December 2008 and August 2009, the Central Bank of South Africa cut the rate of interest from 12.5 %
to 7 %.
What effect would this action be expected to have on economic growth and unemployment?
economic growth unemployment
A decrease decrease
B decrease increase
C increase decrease
D increase increase
Q28/N/V11
33) A newspaper reported that there were signs of economic growth and inflation in an economy.
m
What would not be evidence of such a situation?
A an increase in employment
co
ya N
B an increase in the general price level
o.
C
D
SA
an increase in the income tax rates
an increase in the standard of living Q32/N/V11
ho
6@ S
34) Developing countries are sometimes given aid by charities and foreign governments.
24 HA
Which aid programme would be least likely to lead to long-term economic growth?
A the building of an irrigation system
B the construction of a new airport
an R
C the distribution of gifts of food

SI
D the training of technical staff Q36/N/V11
35) In 2008, the Peruvian Government set itself the target of reducing the number of its people in poverty to 30 % of
the population.
Which change would be most likely to indicate that the Peruvian Government had made progress towards this
ss
objective?
ha
A a fall in employment
B a fall in infant mortality
C a lower level of adult literacy
D a lower life expectancy Q37/N/V10
36) In 2008, the government of Argentina imposed a tax on exports of wheat and soya beans.
What was the most likely aim of this tax?
A to increase agricultural output
B to increase exports
C to reduce a budget surplus
D to reduce the rise in domestic food prices Q27/J/V10
37) 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 Q23/J/V16
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

43-44. ECONOMIC GROWTH
& ECONOMIC DEVELOPMENT
1) B 2) C
3) C 4) D 5) C 6) D
7) B 8) A 9) C 10) A
11) B 12) D 13) C 14) A
15) D 16) C 17) D 18) A
19) A 20) C 21) B 22) D
23) C 24) B 25) A 26) C
m
27) B 28) A 29) A 30) C
co
31) B 32) C 33) C 34) C
ya N
35) A 36) A 37) A
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
45-46. TAXES & SUBSIDIES
ho
6@ S
24 HA
an R
ss SI
ha

1) 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 Q16/J/17
2) The charts relate to the Financial Statement of the government of New Zealand for 2014.
m
co
ya N
o.
SA
ho
6@ S
24 HA
What can be concluded?

an R
A Expenditure on welfare was higher than the combined expenditure on education and health.
SI
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. Q19/J/V17
ss
ha

3) 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 Q6/N/16
4) 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?
tax on tax on goods

income tax business tax on
m
and services
% profits % dividends %
%
co
A 12 14 2 5
ya N
B 14 15 2 14
o.
C 17
SA 13 5 10
ho
6@ S
D 18 10 1 10
Q18/N/16
24 HA
5) A government introduces state benefits for the unemployed and increases the top rate of income tax to pay for
the benefits.
an R
What effect will these changes have on poverty and the tax system?
SI
poverty tax system
A increase make it more progressive
B increase make it more regressive

ss
C reduce make it more progressive

ha
D reduce make it more regressive

Q25/N/16

6) 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 Q17/J/16
7) The table shows a government’s receipts from taxation.
$m
air passenger duty 10
m
company profits tax 100
co
ya N
import duty 75
o.
SA income tax
inheritance tax
200
50
ho
6@ S
sales tax (VAT) 300
24 HA
What is the total amount of revenue raised by indirect taxes? Q19/J/16

A $300 m B $350 m C $385 m D $435 m
an R
SI
8) 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.
ss
D It takes a higher proportion from low incomes. Q17/N/14

ha
9) 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 Q18/N/14

10) The table shows the tax paid at different levels of income.
income ($) amount of tax ($)
6000 600
7000 700
8000 900
9000 1100
Which describes this tax?

A progressive at all levels of income
B proportional at all levels of income
m
C proportional at lower incomes, progressive at higher incomes
co
D proportional at lower incomes, regressive at higher incomes Q19/N/14
ya N
o.
SA
11) A government collects the following revenue in a year.
ho $m
6@ S
taxes on goods 30
24 HA
taxes on income 500
taxes on services 20
an R
customs and excise duties 50

SI
What is the amount of indirect tax revenue? Q19/J/14

A $30 m B $70 m C $100 m D $500 m
ss
12) Which will encourage domestic producers to grow more maize?

ha
A granting subsidies to maize producers

B increasing the sales tax on maize
C removing guaranteed minimum prices for maize
D removing quotas on imported maize Q9/N/13

13) A country’s only income tax rate is 50 % on all incomes above $10 000 and its sales tax (VAT) is 20% on all
spending.
What type of taxes are these?
income tax sales tax (VAT)
A progressive and direct regressive and indirect
B progressive and indirect regressive and direct

C proportional and direct proportional and indirect
D proportional and indirect proportional and direct

Q23/N/13
m
14) Goods and Services Tax (GST) is charged on purchases at 15% in New Zealand and 10% in Australia.
co
This tax is considered to be
ya N
A direct.
o.
B progressive.
SA
ho
C proportional.
6@ S
D regressive. Q23/J/13
24 HA
15) The graph shows the impact of a tax on the supply of petrol (gas).
an R
ss SI
ha
What can be concluded from this graph?

A the government will receive no tax revenue
B the impact of the tax will be shared between the consumer and the producer
C the impact of the tax will fall entirely upon the consumer
D the impact of the tax will fall entirely on the producer Q27/J/13

16) A country has a proportional system of taxation.
A person pays $500 tax when earnings are $5000.
How much tax will be paid if earnings rise to $12 000? Q26/N/12
A $120 B $500 C $1200 D $7500
17) A country has a tax system which places no tax on incomes below $5000, is proportional on incomes between
$5000 and $10 000 and is progressive on incomes above $10 000.
Which graph illustrates this tax system?
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
Q27/J/12
ss
18) The following are a government’s receipts from taxation.

ha
$m
tax on company profits 100
income tax 600
import duties 30
sales tax (VAT) 250
What is the total amount of revenue raised by direct taxes? Q28/J/12

A $280m B $700m C $730m D $950m

19) Which government policy would be likely to help local companies expand?
A encouraging investment by foreign companies
B increasing income tax
C providing a subsidy
D raising interest rates Q25/N/11
20) Which type of tax is a sales tax (VAT)?

A a direct tax
B an indirect tax
C a progressive tax
m
D a proportional tax Q26/N/11
co
ya N
21) A tax on which of the following is usually progressive and is paid by a large number of tax payers?
o.
A
B
company profits
goods and services
SA
ho
6@ S
C incomes
D sales of shares Q28/N/11
24 HA
22) When is a direct tax described as progressive?

an R
A when the government changes the basic rate of tax in each budget
SI
B when the government taxes companies rather than individuals

C when the tax takes a larger proportion of earnings as earnings increase
D when the tax takes a smaller proportion of earnings as earnings increase Q24/J/11
ss
23) Which statement is most likely to be correct?

A A direct tax benefits the government.
ha
B An indirect tax benefits small shopkeepers.

C A progressive tax benefits successful entrepreneurs.
D A regressive tax benefits lower income earners. Q29/J/11

24) The diagram shows that when a tax of $2 on a good raises the supply curve from S1 to S2, the price to the
consumer rises from $4 to $5.
m
What is the total tax yield to the government? Q6/N/10
co
A $75 B $150 C $200 D $375
ya N
o.
25) Direct taxes can be used to
SA
ho
A place the burden of tax on sellers not buyers.
6@ S
B protect domestic industries from foreign competition.
24 HA
C raise revenue without affecting the number of hours employees work.

D redistribute incomes from rich to poor. Q27/N/10
an R
26) Brazil is a highly taxed economy. Some Brazilian economists have suggested that if the government were to cut
SI
tax rates, the government would actually receive more tax revenue.
Why may cutting taxes increase revenue?
A It may encourage emigration.
B It may increase the tax burden.
ss
C It may lead to a fall in investment.

ha
D It may reduce tax evasion. Q28/N/10
27) What is a direct tax?

A a tax on electricity
B a tax on imported goods
C a tax on services
D a tax on income and wealth Q25/J/10

28) A country has different rates of income tax depending on the level of income earned.
The highest rate of income tax is cut from 40 % to 38 %.
From this statement it can be deduced that taxation will become
A less indirect.
B less progressive.
C less regressive.
D more difficult to evade. Q24/N/09
29) What is the main reason why indirect tax is thought to be unfair?
A Not everyone pays an indirect tax.
m
B The consumer is unaware of the rate of tax.
C The retailer is forced to collect the tax for the government.
co
ya N
D The tax burden is greater for people on low incomes. Q26/N/09
o.
SA
30) In 2003 in the UK, income tax raised £110 billion at a cost of 1.4 p per £1 raised. Company tax raised £21.1 billion
ho
at a cost of 1.2 p per £1 raised.
6@ S
What can be concluded from comparing this information on the two taxes?
24 HA
A Company tax was the more productive tax.

B Company tax caused less tax avoidance.
an R
C Income tax was the more progressive tax.

D Income tax was less economical to collect. Q26/J/09
SI
31) Rose earns $12 000 per annum and pays $4000 per annum in income tax. Johann earns $20 000 per annum and
pays $5000 per annum in income tax.
What describes this system of income tax?
ss
A flat rate
ha
B progressive
C proportional
D regressive Q27/N/08
32) The government puts a $2.00 tax on each $8.00 DVD sold. As a result, the price of a DVD rises from $8.00 to
$8.50.
A The demand for DVDs is price inelastic.
B The government will receive only 25 % of its expected tax revenue.
C The incidence of the tax will fall mainly on the producer.
D The tax is progressive. Q29/N/08
33) A major market for bananas from Latin America is the European Union (EU). In 2006, the EU imposed a 35 %
tariff on banana imports from Latin America but not on substitutes from other regions.
What impact is the tax likely to have had on the price of Latin American bananas in the EU and the revenue of
Latin American producers?
EU price of revenue of
Latin American bananas Latin American producers
A decrease decrease
B decrease increase
C increase increase
D increase decrease
Q39/N/08
m
co
34) The diagram shows the price per litre paid for petrol in four countries in a year. The amount of tax included in
ya N
that price is shown by the shaded area.
o.
SA
If there was no tax on petrol, which country would have the highest petrol price?
ho
6@ S
24 HA
an R
SI
Q26/J/08
35) What is meant by a regressive indirect tax?

A a tax on income that falls more heavily on the poor
ss
B a tax on income that falls more heavily on the rich

ha
C a tax on spending that falls more heavily on the poor

D a tax on spending that falls more heavily on the rich Q28/J/08
36) What would cause disposable incomes to become less equal?

A increased employment
B increased welfare benefits
C more progressive taxes
D more regressive taxes Q16/N/07

37) The diagram relates the government's total tax revenue to the average tax rate.
m
What can be deduced from the diagram?
A A rise in the average tax rate may decrease government revenue.
co
ya N
B The tax system is regressive.
o.
C
D
SA
Low tax rates have an incentive effect upon labour.
The burden of taxation is evenly spread. Q23/N/07
ho
6@ S
38) A government wishes to increase demand in the economy.
24 HA
What should it reduce?

A benefits to the unemployed
an R
B borrowing by consumers
SI
C spending on health and education

D taxation Q27/N/07
39) What is most likely to happen if a regressive tax replaces a progressive tax?
ss
A the amount of tax paid by richer people increases

B incomes before tax become less equal
ha
C the majority of people continue to pay the same tax

D the amount of tax paid by poorer people increases Q23/J/07
40) A government decides to reduce income tax.

Which aims of government policy would this help to achieve?
A a smaller balance of payments deficit and lower inflation
B a smaller balance of payments deficit and more economic growth
C lower unemployment and lower inflation
D lower unemployment and more economic growth Q24/J/07

41) The governments of many countries raise revenue from a tax on a wide range of essential goods and services.
What is the nature of this tax?
A It is direct and proportional.
B It is direct and regressive.
C It is indirect and proportional.
D It is indirect and regressive. Q25/N/06
42) Why might a new indirect tax be undesirable?

A It encourages firms to export.
B It creates a more regressive tax system.
m
C It produces a narrower basis of taxation.
D It creates a more progressive tax system. Q27/N/06
co
ya N
o.
A
SA
43) What is meant by the incidence of a tax?
how the revenue raised by the tax is spent
ho
6@ S
B how the tax is collected
C why the tax is imposed
24 HA
D where the burden of the tax is finally felt Q27/J/06

an R
44) The graph shows the percentage of tax taken from different levels of income by four different taxes.
SI
Which illustrates a regressive tax?

ss
ha
Q26/J/05

45) In September 2002 a government minister warned that tax changes were necessary to redistribute wealth from
rich to poor.
Which policy would be likely to achieve that aim?
regressive taxes progressive taxes
A decrease unchanged
B increase decrease
C increase unchanged
D unchanged decrease
Q27/N/04
m
46) Which statement describes a progressive tax?
A a tax that increases government income over time
co
ya N
B a tax that places an increasing burden on the poor
o.
C
D
SA
a tax that rises in line with the rate of inflation
a tax that has a higher rate as income rises Q25/J/04
ho
6@ S
24 HA
47) What does net income mean?

A income after allowing for price changes
B income after paying regular household bills
an R
C income less tax and government deductions

SI
D income plus overtime payments Q9/N/V16
48) The table shows taxes as a percentage 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?
ss
tax on tax on goods

income tax business tax on
and services
ha
% profits % dividends %
%
A 12 14 2 5
B 14 15 2 13
C 17 8 5 9
D 17 13 5 9
Q19/N/V16

49) A worker earns $250 each week, which leaves a disposable income of $175.
What will affect the real value of the worker’s $250 earned income?
A a change in government spending
B a change in interest rates
C a change in the price level
D a change in the tax rate Q21/J/V15
50) A government policy results in an increase in government spending and a fall in the market price of a good.
What is the government policy?
A the application of an indirect tax to a luxury good
m
B the introduction of a subsidy to wheat farmers
C the privatisation of health services
co
ya N
D the setting of a minimum price for milk Q16/N/V14
o.
SA
51) The following are a government’s receipts from taxation.
ho
6@ S
$m
24 HA
tax on company profits 90
income tax 500

an R
import duties 25
SI
sales tax (VAT) 200
What is the total amount of revenue raised by direct taxes? Q28/J/V12

A $315m B $525m C $590m D $700m
ss
52) In a country where the demand for petrol (gas) is price-inelastic, the incidence of any increase in petrol tax will
ha
be mainly on
A the company that refines the oil.
B the motorist who buys the petrol.
C the petrol station that sells the petrol.
D the wholesale company that stores the petrol. Q9/J/V11

D to reduce the rise in domestic food prices Q27/J/V11
54) 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?
m
lower petrol tax higher food tax
co
A less regressive less regressive
ya N
B less regressive more regressive
o.
C
SA
more regressive less regressive
ho
D more regressive more regressive
6@ S
Q18/J/V16
24 HA
an R
ss SI
ha

45-46. TAXES & SUBSIDIES
1) B 2) C 3) D 4) C
5) C 6) C 7) C
8) D 9) B 10) C 11) C
12) A 13) A 14) D 15) C
16) C 17) A 18) B 19) C
20) B 21) C 22) C 23) A
24) B 25) D 26) D 27) D
m
28) B 29) D 30) D 31) D
co
ya N
32) C 33) D 34) C 35) C
o.
36) D
40) D
SA
37) A
41) D
38) D
42) B
39) D
43) D
ho
6@ S
44) D 45) A 46) D 47) C
24 HA
48) A 49) C 50) B 51) C

52) B 53) D 54) B
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
47-51. MACRO-ECONOMIC
co
ya N
OBJECTIVES
o.
SA
& ho
6@ S
24 HA
MONETARY AND
FISCAL POLICY
an R
ss SI
ha

1) 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 Q17/J/17
2) 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
m
C increase general taxation and decrease the rate of interest
co
D increase general taxation and increase the rate of interest Q19/J/17
ya N
o.
SA
3) The information below refers to an economy for a financial year.
government expenditure = $ 2866 million
ho
government revenue = $ 1940 million
6@ S
What was the budget balance of the government in that year?
24 HA
A $926 million in deficit

B $4806 million in deficit
C $926 million in surplus
an R
D $4806 million in surplus Q22/J/17

SI
4) What is likely to happen when the rate of interest increases?

A consumer spending increases
B firms buy fewer machines
ss
C people hold more cash

ha
D savers earn lower rewards Q8/J/V17
5) 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?
provision of skills training payment for skills training

A Fiscal fiscal
B Monetary monetary
C supply-side fiscal
D supply-side monetary
Q17/J/V17
6) 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 Q17/N/16
7) 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.
m
C Price stability means that the price of all goods and services must remain unchanged.
co
ya N
D Redistribution of income means that everyone must have equal incomes. Q17/N/15
o.
SA
8) A government wishes to close the gap between the earnings of the rich and the poor.
ho
What should it do to achieve this aim?
6@ S
A increase progressive taxation
24 HA
B increase the rate of interest

C increase the rate of sales tax
an R
D increase the supply of money Q18/N/15

SI
9) 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
ss
B a stronger exchange rate

C economic growth
ha
D price stability Q19/N/15
10) 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 Q17/J/15

11) 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 Q19/J/15
12) Which policy is an example of an expansionary monetary policy?

A lower interest rates
B lower money supply growth
m
C lower public sector spending
D lower taxation Q16/J/14
co
ya N
o.
A
SA
13) Which pair of government actions combines a fiscal policy with a supply-side policy?
changing government spending with changing interest rates
ho
6@ S
B cutting tax rates with providing information on job vacancies
C limiting bank lending with the privatisation of industry
24 HA
D restricting credit with less control over labour markets Q18/J/14

an R
14) In which case is success for the government in achieving the first aim likely to cause problems in achieving the
second?
SI
first aim second aim
A full employment price stability

B high economic growth full employment
ss
C price stability stable balance of payments

ha
D stable balance of payments more even distribution of income

Q23/J/14
15) Which aim of government policy is most likely to be achieved by an increase in interest rates?
A economic growth
B greater equality of income
C full employment

16) Which combination of government policies is most likely to be successful at reducing unemployment?
A budgeting for a surplus and lowering interest rates
B budgeting for a deficit and raising interest rates
C budgeting for a surplus and raising interest rates
D budgeting for a deficit and lowering interest rates Q26/N/13
17) Government advisers have suggested the following policies to reduce youth unemployment.
Which would not increase public expenditure?
A a cut in the minimum wage paid to young people
B a rise in the school-leaving age
m
C a subsidy to employers to recruit young people
D national military service for all Q28/N/13
co
ya N
o.
SA
18) A government reduces the interest rate to encourage economic growth.
Which other aim of government policy might now become more difficult to achieve?
ho
6@ S
A reducing a balance of trade in goods surplus
B reducing a government budget deficit
24 HA
C reducing the level of unemployment

D reducing the rate of inflation Q26/J/13
an R
SI
19) In 2010, the Brazilian Government stated it was concentrating on making the country the world’s fifth biggest
economy by 2025, and on narrowing the gap between the rich and the poor in the country.
What does the statement indicate were the main aims of the Brazilian Government?
A balance of payments stability and price stability
ss
B economic growth and redistribution of income

C price stability and economic growth
ha
D redistribution of income and balance of payments stability Q24/N/12
20) 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 Q25/N/12

21) The graph shows government revenue and spending in a country, as a percentage of GDP, between 2004 and
2011.
m
co
ya N
o.
SA
What can be concluded from the graph?
ho
A The balance of payments position improved.
6@ S
B The borrowing of the government increased.
24 HA
C The economy went into recession (economic downturn).

D The government budget moved from deficit to surplus. Q27/N/12
an R
22) A government decides to subsidise a major industry that is making a loss and also reduce sales tax (VAT) to
SI
increase consumer demand.

Which aim would these policies be likely to help and which aim would they be likely to hinder?
aim policies would help aim policies would hinder

ss
A balance of payments surplus economic growth

B economic growth full employment
ha
C full employment stable prices

D stable prices economic growth
Q27/N/11
23) A newspaper reported that there were signs of economic growth and inflation in an economy.
What would not be evidence of such a situation?
A an increase in employment
B an increase in the general price level
C an increase in the income tax rates
D an increase in the standard of living Q33/N/11
24) During 2009 some governments adopted policies to try to end the recession in their country and increase
economic growth.
Which combination of policies is most likely to achieve this?
A lower taxes and decrease government spending
B lower taxes and increase government spending
C raise taxes and decrease government spending
D raise taxes and increase government spending Q27/J/11
25) The central bank of Mexico set its rate of interest to try to keep the rise in the price level to only 3 %.
Which government aim was it directly trying to achieve?
A balance of payments equilibrium
m
B economic growth
co
C full employment
ya N
D low inflation Q28/J/11
o.
SA
ho
26) Which government policy would most likely lead to a redistribution of income?
6@ S
A a change in the rate of exchange
24 HA
B control of commercial bank lending

C control of interest rates
an R
D expenditure on unemployment benefits Q26/N/10

SI
27) A government achieves a high rate of economic growth.

How may this conflict with other government aims?
A It may increase government income.
ss
B It may increase incomes for the lower paid.

C It may increase the supply of exports.
ha
D It may increase the volume of imports. Q26/J/10
28) One way in which a government may seek to increase geographical mobility of labour is by
A controlling firms locating in areas of low employment.
B giving grants to firms moving into areas of high unemployment.
C providing relocation expenses for workers.
D subsidising declining industries. Q29/J/10

29) A government could be successful in achieving one of its economic aims. However, this could cause a
subsequent result which might be undesirable.
Which case would the government think undesirable?
successful aim subsequent result

improved balance of
A fewer people out of work
payments
B faster economic growth higher living standards
C steadier prices lower trade deficit
D reduced unemployment higher rate of inflation

Q28/N/08
m
30) What is not a main economic government objective?
co
A a balance of payments deficit
ya N
B economic growth
o.
C full employment
SA
ho
D price stability Q25/J/08
6@ S
24 HA
31) What is likely to be the main aim of a government policy that increases both progressive taxes and welfare
payments?
A economic growth
an R
B full employment
SI
C price stability
D redistribution of income Q25/N/05
32) What is most likely to conflict with a government's aim of price stability?
ss
A higher direct tax rates

B higher government spending
ha
C higher interest rates

D higher unemployment Q25/J/05
33) Which aim of government policy is most likely to be achieved by a decrease in government spending?
A economic growth
B equality of income
C full employment

34) When is the budget described as balanced?
A when direct taxes and indirect taxes are equal
B when exports and imports are equal
C when government spending and government revenue are equal
D when the demand for money and the supply of money are equal Q27/J/04
35) 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.
m
C Achieving full employment may prevent stable prices. Q18/N/V14
D Achieving steady prices may prevent a current account surplus on the balance of payments.
co
ya N
o.
SA
36) To raise economic growth, a government reduces the rate of interest, lowers the exchange rate, cuts sales tax
and increases the national minimum wage.
ho
Which change is a fiscal policy measure?
6@ S
A the cut in sales tax
24 HA
B the increase in the national minimum wage

C the lowering of the country’s exchange rate
an R
D the reduction in the rate of interest Q26/N/V13

SI
37) A government wishes to use a fiscal policy measure.

What could it do?
A increase the money in circulation
ss
B put a quota on imports

C raise direct taxes
ha
D raise interest rates Q23/J/V13
38) In 2010, the Greek Government proposed the introduction of a restrictive fiscal policy to reduce its budget
deficit.
What does this mean the government was most likely to do?
A increase exports
B increase interest rates
C increase its spending
D increase taxes Q24/N/V12

39) What is not usually an aim of a government?
A economic growth
B full employment
C inequality of incomes
D price stability Q29/J/V10
40) 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
m
D an increase in the standard rate of income tax Q17/J/V16
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

47-51. MACRO-ECONOMIC OBJECTIVES
&
MONETARY AND FISCAL POLICY
1) B 2) A 3) A 4) B
5) C 6) B
7) A 8) A 9) C 10) B
11) D 12) A 13) B 14) A
15) D 16) D 17) A 18) D
19) B 20) B 21) D 22) C
m
23) C 24) B 25) D 26) D
co
27) D 28) C 29) D 30) A
ya N
31) D 32) B 33) D 34) C
o.
35) C
SA
36) A 37) C 38) D
ho
39) C 40) A
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
52. INFLATION &
o.
SA
ho
THE RETAIL PRICE INDEX
6@ S
24 HA
an R
ss SI
ha

1) 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 Q21/J/17
2) In a developing country real incomes have risen.

Which situation would definitely have caused this?
price level money incomes
A fell fell
m
B fell rose
co
C rose unchanged
ya N
D rose fell
o.
SA Q23/J/V17
ho
6@ S
3) What is involved in the construction of a Retail Price Index?
24 HA
A a base year
B incomes
C price elasticity of products
an R
D quantity supplied Q20/N/16

SI
4) 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
ss
B by giving a weight to the goods

ha
C by taking an average of price fluctuations during a year

D by using the price elasticity of demand for the goods Q23/N/16

5) The table gives information about three economic indicators in four countries.
inflation % interest rates % unemployment %
country W 1.4 3.4 10.2
country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2

country Z 2.1 6.0 7.7

A Countries with higher inflation have higher interest rates.
B Countries with higher interest rates have lower unemployment.
m
C The country with the lowest inflation had the highest unemployment.
co
ya N
D The country with the lowest unemployment had the lowest inflation. Q22/J/16
o.
SA
6) The weight for a product in the consumer price index was increased.
ho
What is most likely to have caused this adjustment?
6@ S
A The product has become more expensive to produce.
24 HA
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. Q23/J/16
an R
SI
7) In 2009, a country had an inflation rate of 2%. The table shows the inflation rate in the following years.
year inflation rate (%)

2010 2
ss
2011 1
2012 0
ha
2013 –1
In which year did deflation start? Q22/N/15

A 2010 B 2011 C 2012 D 2013
8) 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 Q16/J/15
9) 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 Q20/J/15
10) 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
m
D when there is a substantial increase in expenditure on imports Q23/J/15
co
ya N
11) When might rapid inflation together with low interest rates be a source of concern for a consumer?
o.
A
B
SA
when a consumer lives on a pension linked to the consumer price index
when a consumer needs to use savings for regular expenditure
ho
6@ S
C when a consumer pays a fixed rent for their accommodation
D when a consumer wishes to buy a good on credit Q10/N/14
24 HA
12) A government aims to keep domestic prices stable in a fully employed economy.
an R
Which policy should it use?

SI
A increase expenditure on defence

B increase indirect taxes
C increase the rate of interest
D increase the wages of government workers Q16/N/14
ss
13) What must be a consequence of deflation in a country?

ha
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 Q20/N/14

14) 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?
benefit lose
A borrowers savers
B consumers on fixed incomes firms wishing to invest
C credit card companies sellers of luxury goods
D exporters banks
Q22/J/14
15) What is deflation?
m
A a falling general price level
co
B a falling wage level
ya N
C a rising output level
o.
D a rising profit level
SA Q33/N/13
ho
6@ S
16) In the United States (US) Consumer Price Index (CPI), food has a weighting of 13.7%. In the Indian CPI, food’s
24 HA
weighting is 46.2%.
A Consumers in India spend more on food than US consumers.
an R
B Food is a bigger proportion of consumer spending in India than in the US.

SI
C The farming sector’s output of food is higher in India than in the US.
D The price of food is rising more rapidly in India than in the US. Q31/J/13
17) In July 2011 the monthly rate of inflation decreased to 2%. At that time it was expected that it would be 1% in
August but would not continue to decline in September.
ss
If this occurred, what happened to prices in July, August and September?

ha
July August September
A fell fell uncertain
B fell rose rose
C rose fell uncertain
D rose rose rose

Q32/J/13

18) Which is most likely to lead to a fall in the rate of inflation?
A a decrease in import prices
B a decrease in income tax
C an increase in consumer spending
D an increase in unemployment benefits Q33/J/13
19) What is not involved in the construction of a retail price index?

A a base year
B a basket of goods
C incomes
m
D weighting of products Q29/N/12
co
ya N
20) In the measurement of the UK’s Retail Prices Index, a greater weight was given to bottled water in 2010 than
2009.
o.
SA
What does this change indicate?
ho
A Government statisticians checked the price change of a greater range of bottled water in 2010 than in 2009.
6@ S
B People spent a higher proportion of their total spending on bottled water in 2010 than in 2009.
24 HA
C The price of bottled water increased more in 2010 than in 2009. Q33/N/12
D There was an improvement in the quality of bottled water in 2010 compared with 2009.
an R
21) What would be most likely to reduce the rate of inflation?

SI
A an increase in direct taxes

B an increase in government expenditure
C an increase in indirect taxes
ss
D an increase in the budget deficit Q23/J/12

22) What must have happened in a country when it experienced an annual rate of inflation of 100 %?
ha
A The money supply doubled.

B The price level halved.
C The purchasing power of money halved.
D The real value of money doubled. Q32/J/12

23) The diagram shows a country’s inflation rate in four successive years.
m
In which year was the country’s general price level lowest and highest?
co
ya N
lowest general highest general
price level year price level year
o.
A
SA1 3
ho
B 3 2
6@ S
C 3 4
24 HA
D 4 2
Q33/J/12
an R
24) What is the most obvious sign of inflation?

SI
A an increase in imports
B an increase in productivity
C an increase in retail prices
D an increase in total expenditure Q32/N/11
ss
ha
25) Which people are most likely to gain at a time of inflation?

A companies who sell abroad
B foreign tourists visiting the country
C those living on their savings
D those who are repaying borrowed money Q31/J/11
26) Which policy would be most likely to reduce the rate of inflation in Malaysia?
A an increase in income tax
B an increase in sales tax (GST)
C an increase in the budget deficit
D an increase in the money supply Q25/N/10

27) In Germany’s 2007 retail price index, transport received a higher weighting than clothing and footwear.
What does this difference indicate?
A Households spent more on transport than on clothing and footwear.
B The price of transport rose by more than the price of clothing and footwear.
C Transport is more of a luxury good than clothing and footwear. Q32/N/10
D Wage rises in the transport industry were higher than wage rises in the clothing and footwear industry.
28) The retail price index of a country rose during a year from 200 to 240.
What was the annual rate of inflation? Q31/J/10
A 20 % B 40 % C 240 % D 440 %
m
29) What is likely to happen in an economy that experiences uncontrolled hyperinflation?
co
ya N
A Economic activity will cease.
o.
B
C
SA
Inequality of income and wealth will cease.
Internal trade will cease.
ho
6@ S
D Trust in money will cease. Q34/J/10
24 HA
30) Why might a family increase the proportion of its income it spends on food?
A Some of the children start work.
an R
B The government increases the benefits it pays to families.

SI
C The number of children in the family increases.

D The second parent becomes employed. Q14/N/09
31) What is not an important step in the construction of an accurate Retail Price Index?
ss
A choosing a base year with normal economic conditions

B comparing price rises with those of international competitors
ha
C sampling prices from a wide range of retail outlets

D selecting a typical basket of goods consumed by the average citizen Q27/J/09

32) The table shows the percentage changes in earnings and consumer prices for four countries for one year.
Which country is likely to have experienced the greatest increase in real income during the year?
country earnings consumer prices

A France +12.5 +9.5
B Japan +4.0 +2.0
C UK +8.5 +5.0
D Germany +4.0 +4.0

Q28/J/09
33) The graph shows changes in house prices in a developed country.
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
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
ss

ha
34) What would not be required in the construction of an index of consumer prices (retail price index)?
A the selection of a base year
B the selection of a representative range of items
C the calculation of average wage levels
D the weighting of each item in the index Q28/N/07

35) The citizens most likely to benefit in a period of rapid inflation are those who
A are receiving fixed state benefits.
B earn fixed incomes.
C have lent money at a fixed rate of interest.
D have borrowed money at a fixed rate of interest. Q27/J/07
36) The table shows unemployment and inflation statistics for the US, Japan and Sweden for year 1 and year 2.
unemployment (%) inflation (% pa)

country
year 1 year 2 year 1 year 2
US 4.8 4.4 5.6 3.4
m
Japan 2.7 2.7 1.7 0.7
co
ya N
Sweden 2.7 3.2 8.3 6.6
o.
SA
Which conclusion can be made from the table?
ho
A In year 1, the same number of people were unemployed in Sweden and Japan.
6@ S
B In year 1, the cost of living rose in the US.
24 HA
C The number of unemployed people decreased in all three countries.

D Unemployment and inflation moved in the same direction in Japan. Q30/J/07
an R
SI
37) Governments are often concerned about inflation and unemployment. The table shows price changes and
unemployment rates in four countries.
Which country improved its economic performance on both these measures between 2003 and 2004?
% price change % price change unemployment % unemployment %

country
2003 2004 2003 2004
ss
A Austria 1.1 2.3 4.4 4.2

ha
B Canada 2.6 2.5 7.7 7.3

C France 2.0 2.4 9.7 9.8
D Sweden 1.8 0.5 4.2 5.3
Q23/N/06

38) The table shows some data about an economy.
Year 1 Year 2
rate of inflation 2% 3.5 %
personal incomes +2 % +2.5 %
What happened between Year 1 and Year 2?

A Both prices and real incomes fell.
B Both prices and real incomes rose.
C Prices rose but real incomes fell.
D Prices fell but real incomes rose. Q29/J/06
m
co
39) What is most likely to lead to inflation?
ya N
A a decrease in consumer spending
o.
B
SA
a decrease in employment in the public sector
ho
C an increase in the cost of factor inputs
6@ S
D an increase in income tax Q32/J/06
24 HA
40) The table shows changes in the Retail Price Index (Index of Consumer Prices) and percentage changes in money
wages, after trade union bargaining, between 2001 and 2004.
an R
annual % change
SI
Retail Price Index

in money wages
2001 100 10
2002 110 10
2003 120 10
ss
2004 130 10
ha
From this we can conclude that between 2001 and 2004 trade union members experienced
A a fall in average earnings.
B a fall in real wages.
C a rise in disposable income.
D a rise in purchasing power. Q7/N/05

41) During 2004 the price of crude oil rose to record levels.
How would this be likely to affect the balance of payments and the rate of inflation of an oil importing country in
the short run?
balance of payments rate of inflation
A improve fall
B improve rise
C worsen fall
D worsen rise
Q26/N/05
m
42) Which group is most likely to benefit from inflation?
co
A debtors
ya N
B retirement pensioners
o.
C salaried officials
SA
ho
D unemployed persons Q32/N/05
6@ S
24 HA
43) The graph shows the changes in retail prices for a country from July 2002 to May 2003.
an R
ss SI
ha
According to the graph,

A retail prices fell from October 2002 to January 2003.
B retail prices remained constant between September and October 2002.
C the rate of inflation fell each month throughout the period.
D the rate of inflation fell over the period. Q34/N/05

44) Which citizens are most likely to become worse off in a period of falling prices?
A those earning fixed incomes
B those saving at a fixed rate of interest
C those who have borrowed money at a fixed rate of interest
D those who have lent money at a fixed rate of interest Q33/J/05
45) A newspaper reports that there has been economic growth in an economy.
What does this mean to an economist?
A Population has increased.
B Production has increased.
m
C Saving has increased.
D Taxation has increased. Q33/N/04
co
ya N
o.
SA
46) ‘Between 1988 and 1998 the real income of the poorest 5 % of the world’s people fell by almost 25 %, while the
real income of the richest 5 % increased by 12 %.’
ho
6@ S
A Rich and poor people were equally affected.
24 HA
B The poor lost 25 % of their money.

C The poor lost about twice as much money as the rich gained.
an R
D The poor were relatively worse off in 1998 than 1988. Q19/J/04
ss SI
ha

47) The diagram shows the annual rate of inflation for a country between 2000 and 2003.
m
co
ya N
o.
A The cost of living fell.
SA
Which statement is true of the period 2000 to 2003?
ho
6@ S
B The price level rose.
C The retail price index fell.
24 HA
D The value of money rose. Q29/J/04

an R
48) The table shows units of output, value of output and number of people employed in an industry over three
years.
SI
output output value number

(units, millions) ($ millions) employed (000)
year 1 10 10 5
ss
year 2 21 25 7
year 3 32 40 8
ha
What could be concluded from the table above?

A Inflation has increased.
B Productivity has increased.
C Profit has increased.
D Working population has increased. Q31/J/04

49) The graph shows annual changes in the prices of goods and services in a country between 1996 and 2001.
m
co
ya N
A Goods were cheaper in 2001 than 1996.
o.
B
SA
Goods were cheaper than services from 1997.
ho
C The price of goods fell at the start of 2000.
6@ S
D The price of services fell in 2000. Q32/J/04
24 HA
50) Why are weights used in the construction of a price index?

A Some prices tend to change according to the season.
an R
B Some prices change more than others.

SI
C Some goods are more expensive than others.

D Some goods take a greater proportion of total spending than others. Q34/J/04
ss
51) In 2008, economic conditions in the UK were uncertain and the rate of inflation increased. It was reported that
consumers had increased their purchases of rare stamps which continued to rise in value.
ha
What is not a reason for such purchases?

A to avoid risk
B to diversify their investments
C to overcome the effects of inflation
D to switch from spending to borrowing Q10/N/V14

52) Which combination of changes could cause a fall in the purchasing power of workers in a country?
% change in wages % change in the price

rates level
A –2 –4
B 0 –2
C 4 4
D 4 6
Q20/N/V14
53) What will increase when there is a period of deflation during which the general price level continues to fall?
m
A confidence of investors
B consumer demand
co
ya N
C unemployment
o.
D wage rates SA Q21/N/V14
ho
6@ S
54) The information below relates to selected countries in 2012.
24 HA
consumer prices unemployment

(annual % change) rate (%)
India +10.0 9.8
an R
Sweden +1.4 8.8

SI
Switzerland –0.4 2.9

Venezuela +22.8 7.4

ss
A Inflation is a possible cause of unemployment.

B Inflation is the only cause of unemployment.
ha
C Low unemployment is linked to high inflation.

D There is a uniform link between the rate of inflation and unemployment. Q22/N/V14
55) Which cause of inflation is most likely to result in an increase in unemployment?

A an increase in consumer expenditure
C an increase in the costs of production
D an increase in the money supply Q32/N/V13

56) What is a result rather than a cause of inflation?
A a fall in purchasing power of those on fixed incomes
B easier credit facilities to purchase consumer goods
C increases in costs of oil supplies worldwide
D increases in international competitiveness Q33/N/V13
57) What is most likely to cause a reduction in the rate of inflation?

A an increase in consumer demand
B an increase in productivity
C an increase in the supply of money
m
D an increase in wage demands Q33/J/V13
co
ya N
58) What does not necessarily change with inflation?
o.
A
B
distribution of income SA
employment income received as a salary
ho
6@ S
C revenue from exports
D the value of money Q29/N/V12
24 HA
59) An economy is experiencing rising prices.

an R
Which government policy will help reduce aggregate expenditure?

SI
A introducing compulsory savings for income earners

B investing more on building infrastructure
C issuing more banknotes and coins
D reducing indirect taxes Q32/N/V12
ss
60) An increase in which of the following is least likely to cause inflation?

ha
A consumer spending
B government spending
C income tax
D wages Q29/J/V12

61) A government has a target of keeping inflation between 2 % and 3 %.
The diagram shows the rate of inflation over a four year period.
m
co
What can be deduced from the diagram?
ya N
A The government target was missed in two years.
o.
B SA
The price level fell in two years.
ho
C The price level was at its highest in the first year.
6@ S
D The real value of money fell in three years. Q33/J/V12
24 HA
62) Who is made worse off during a period of deflation?

A cash holders
an R
B creditors
SI
C debtors
D fixed income earners Q21/J/V16
ss
ha

52. INFLATION & THE RETAIL PRICE INDEX
1) A 2) B
3) A 4) B 5) A 6) D
7) D 8) C 9) B 10) C
11) B 12) C 13) D 14) A
15) A 16) B 17) D 18) A
19) C 20) B 21) A 22) C
23) A 24) C 25) D 26) A
m
27) A 28) A 29) D 30) C
co
ya N
31) B 32) C 33) B 34) C
o.
35) D
39) C
SA 36) B
40) D
37) D
41) D
38) C
42) A
ho
6@ S
43) D 44) C 45) D 46) D
24 HA
47) B 48) B 49) C 50) D

51) D 52) D 53) C 54) A
55) C 56) A 57) B 58) B
an R
59) A 60) C 61) D 62) C

ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
53. UNEMPLOYMENT /
ho
6@ S
FULL EMPLOYMENT
24 HA
an R
ss SI
ha

1) 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. Q17/N/16
2) 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? Q29/J/16
A The balance of payments on current account of countries exporting weapons would immediately improve.
B The price of existing weapons would fall.
m
C There would be a risk of structural unemployment in countries that are major producers of weapons.
co
D There would be no overall effect on the balance of payments as countries would produce their own weapons.
ya N
o.
SA
3) Which type of unemployment occurs when the total demand for goods and services in the economy falls?
ho
A cyclical
6@ S
B frictional
24 HA
C seasonal
D structural Q20/J/14
an R
4) The table shows the change in the labour force in Bangladesh between 2006 and 2009.
SI
group 2006 (millions) 2009 (millions)

urban male labour force 8.9 9.7
urban female labour force 2.8 3.1
ss
total urban labour force 11.7 12.8

ha
rural male labour force 28.5 30.5

rural female labour force 9.3 10.4
total rural labour force 37.8 40.9
Which statement is most likely to be consistent with these statistics?

A Farming is the major employer in the economy.
B Male workers are more mobile than female workers.
C The absolute increase in the labour force is greater in urban areas than rural areas.
D The supply of female workers has fallen. Q30/N/13

5) In an economic recession, which policy might be adopted to reduce unemployment?
A an increase in foreign exchange rates
C a reduction in import duty
D a reduction in tax rates Q29/J/13
6) The government pays a subsidy for each worker employed by a firm in an area of high unemployment.
When would this policy be most successful in reducing unemployment?
A when the firm is capital-intensive
B when the firm is labour-intensive, requiring mainly unskilled labour
m
C when the firm provides goods to the domestic market
D when the firm requires mainly specialist, skilled labour Q28/N/12
co
ya N
o.
SA
7) Each year, extra cleaning staff were employed by a hotel on a temporary basis during the busy holiday period.
They were not employed when the hotel was not busy.
ho
What type of unemployment occurred when the hotel was not busy?
6@ S
A cyclical
24 HA
B frictional
C seasonal
an R
D technological Q31/N/12
SI
8) A country experiences a significant fall in unemployment.

What is a possible advantage and a possible disadvantage of such a fall?
possible advantage possible disadvantage

ss
fall in government spending

A fall in labour disputes
on unemployment benefits
ha
B fall in tax revenue fall in poverty

C rise in living standards rise in inflation rate
D rise in output rise in labour mobility

Q30/J/12

9) The table shows how employment in selected industries changed in a country between 2000 and 2010.
year 2000 year 2010

(thousands (thousands
employed) employed)
extraction of minerals 1278 794
manufacturing 3102 2128

banking and finance 1336 1881
distribution and catering 3678 4323
Which statement about these industries during this period is correct?

A Employment in the primary industries decreased.
m
B Employment in the secondary industries increased.
co
C Employment in the tertiary industries decreased.
ya N
D Employment in the tertiary industries was less than the secondary industries. Q3/J/11
o.
SA
ho
10) Which type of unemployment is generally regarded by economists as the least serious for the economy?
6@ S
A cyclical
24 HA
B frictional
C regional
an R
SI
11) The table shows the percentage change in employment over a period for a country with three economic sectors.
percentage (%)
economic sector
change in employment
ss
agriculture –6
manufacturing +2
ha
services +4
Which statement must be correct?

A Agricultural output fell.
B The country became more developed.
C The working population stayed constant.
D Total employment remained the same. Q33/J/11

12) The number of people unemployed in an economy fell by 600 000 and the number employed rose by 400 000.
Which change could explain this difference?
A Some of the unemployed have entered full-time education.
B Some of the unemployed have experienced a loss of skills.
C The length of the working week has declined.
D The size of the labour force has increased. Q31/N/10
13) What name is given to the type of unemployment that occurs while people search for new jobs?
A cyclical
B frictional
m
C residual
co
ya N
o.
A
SA
14) What is an example of occupational mobility of labour?
A Japanese car manufacturer locates in England.
ho
6@ S
B A nurse returns to work after her children have grown up.
C A student takes an evening job in a restaurant.
24 HA
D Farm workers retrain as call-centre workers. Q16/J/V10

an R
15) Between 2002 and 2007, approximately 18 million Latin American households moved out of poverty.
SI
Which change in the region is most likely to have caused this fall in poverty?
B an increase in inflation
C a reduction in employment
ss
D a reduction in exports Q28/J/10

ha

16) The graph shows the labour force of a country from 2003-2015.
m
co
ya N
What may be concluded from the graph?
o.
A SA
Between 2003 and 2015, women will become a higher percentage of the labour force.
ho
B It is estimated that more girls than boys will be born between 2003 and 2005.
6@ S
C The labour force will remain relatively unchanged after 2006 at approximately 16 million.
24 HA
D The total population of the country in 2010-2011 will be approximately 28 million. Q28/N/09
17) As a result of a decrease in the demand for coal, several coal mines were closed.
an R
What type of unemployment would this cause?

SI
A cyclical
B frictional
C seasonal
D structural Q31/N/09
ss
ha
18) Which type of unemployment is likely to lead to the most serious regional problems in a country?
A cyclical
B frictional
C residual
D structural Q30/N/08

19) What is likely to lead to a decrease in structural unemployment?
A reducing the interest rate
B increasing the rate of unemployment benefit
C reducing the rate of income tax
D increasing labour mobility Q30/N/07
20) What is likely if the proportion of retired people in a country increases?

A a reduction in income from direct taxation
B a reduction in the dependency ratio
C an increase in the total number of jobs available
m
D a reduction in spending on medical treatment Q32/J/07
co
ya N
21) What else is likely to rise when the rate of unemployment in a country rises?
o.
A
B
business confidence
consumer spending
SA
ho
6@ S
C government revenue
D government spending Q32/N/06
24 HA
22) What is an advantage for a worker in part-time rather than full-time employment?
an R
A a higher wage
SI
B greater employment protection

C more opportunity for other activities
D greater chance of promotion Q15/J/06
23) Which policy would be most likely to increase the number of people in employment?
ss
A introducing a minimum wage

B introducing a sales tax
ha
C reducing income tax

D reducing tariffs on imports Q24/N/05
24) Many fishermen are unemployed owing to long-term legislation to conserve fish stocks in the North Sea.
What type of unemployment is this?
A demand-deficient
B frictional
C seasonal

25) What is most likely to happen as unemployment falls?
A Economic growth falls.
B Inflation falls.
C Spending on welfare benefits rises.
D Tax revenue rises. Q25/N/04
26) The following extract appeared in an international newspaper.
China’s unemployed peasants flock to cities

Hundreds of thousands of peasants, fleeing rural poverty and drudgery, have flocked
into China’s cities seeking work.
m
What would be the most likely result for the Chinese economy?
co
A a reduction in productivity
ya N
B a rise in unemployment in the city areas
o.
C SA
a rise in the amount of unemployment in rural areas
ho
D a rise in the proportion of skilled labour in cities Q34/N/04
6@ S
24 HA
27) The table shows the unemployment rate in three developed economies in June 2013.
%
an R
United States 7.6

SI
Sweden 8.2
France 10.9
What is the main cause of high rates of unemployment in developed economies in periods of recession?
ss
A decreases in total demand

B movement of labour between countries
ha
C reduced levels of technological change

D regional inequalities of wealth Q22/J/V15
28) Government advisers have suggested the following policies to reduce youth unemployment.
Which would not increase public expenditure?
A a cut in the minimum wage paid to young people
B a rise in the school-leaving age
C a subsidy to employers to recruit young people
D national military service for all Q28/N/V13

29) An increase in online banking by customers using home computers has reduced the level of employment in the
banking sector of developed countries.
What describes this kind of unemployment?
A frictional
B regional
C seasonal
D technological Q31/N/V12
30) Changes in demand mean that the government of Bangladesh hopes to switch some production from clothes
made by low-paid, unskilled workers to medicines produced by highly-trained technicians.
Which policies would enable Bangladesh to achieve this switch in employment and production?
m
A close clothes factories and decrease imports
co
B encourage immigration of foreign labour and introduce tariffs on clothing
ya N
C invest in education and purchase new machines Q26/J/V12
o.
D SA
substitute labour for machines and encourage emigration of workers from Bangladesh
ho
6@ S
31) Why might an increase in employment reduce a country’s productivity?
24 HA
A The cost of employing workers may increase.

B The new workers employed may be less skilled.
C The new workers employed may work with more advanced technology.
an R
D The price of goods produced may fall. Q30/J/V12

SI
32) A country experienced its usual yearly increase in the rate of unemployment. Unfortunately this was followed by
the loss of jobs resulting from the regular downturn in global economic activity.
Which types of unemployment occurred?
ss
first type of second type of

unemployment unemployment
ha
A cyclical structural
B frictional seasonal
C seasonal cyclical
D structural frictional
Q32/J/V12

33) There was a fall in investment spending by businesses in the third quarter of 2008.
What would be the likely result of this?
C an increase in incomes
D an increase in unemployment Q30/N/V11
34) One way in which a government may seek to increase geographical mobility of labour is by
A controlling firms locating in areas of low employment.
B giving grants to firms moving into areas of high unemployment.
m
C providing relocation expenses for workers.
D subsidising declining industries. Q28/J/V10
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

53. UNEMPLOYMENT / FULL EMPLOYMENT
1) C
2) A 3) A 4) D 5) B
6) C 7) C 8) A 9) B
10) B 11) A 12) B 13) D
14) A 15) A 16) D 17) D
18) D 19) A 20) D 21) C
22) C 23) D 24) D 25) B
m
26) A 27) A 28) D 29) C
co
ya N
30) B 31) C 32) D 33) C
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
54-55. GROSS DOMESTIC
co
ya N
PRODUCT /
o.
SA
ho
GROSS NATIONAL PRODUCT
6@ S
24 HA
& THE TRADE CYCLES

an R
ss SI
ha

1) 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. Q21/N/16
2) 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
m
D steadily falling price levels Q20/J/16
co
ya N
3) Which item does the Human Development Index (HDI) of a country include, in addition to real GDP per head and
o.
life expectancy at birth?
A
SA
expenditure on law and order
ho
6@ S
B literacy rate among adults
24 HA
C number of doctors
D retirement age Q24/N/15
an R
4) In 2013, subsistence farming, which involved a large percentage of the population, was a significant activity in
the Philippines and Indonesia.
SI
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
ss
D there was no need to import food because the population was self-sufficient Q24/J/15
ha
5) 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?
unemployment GDP consumer prices

rate (%) (% change) (% change)
A Greece 22.5 –7.1 +0.2
B Hungary 10.9 –0.8 +5.5

C Italy 10.8 –2.1 +3.2
D Spain 24.8 –1.6 +2.0
Q22/N/14
6) Which would best indicate the start of an economic recession?
A falling interest rates
B fluctuating levels of employment
C negative growth of GDP
D steadily increasing price levels Q29/N/13
7) In some developing countries a large percentage of the population is involved in subsistence farming.
A Each family will be able to produce enough to live on.
B Production is unlikely to be capital intensive.
m
C Production will be efficient.
D There will be a high level of trade. Q35/N/13
co
ya N
o.
SA
8) A country’s Gross Domestic Product (GDP) falls, while its population falls.
What happens to GDP per head?
ho
6@ S
A It falls.
B It is uncertain.
24 HA
C It remains constant.
D It rises. Q32/N/12
an R
SI
9) Why is it difficult for a government to measure economic growth in an economy based on subsistence farming?
A Farmers’ families consume most of their own produce.
B Farmers have low rates of saving.
C The size of harvest is dependent on the weather.
ss
D The surplus produce is sold to the government. Q29/J/12

ha
10) What is typical of a recession (economic downturn)?

A falling Gross Domestic Product
B falling unemployment
C rising living standards
D rising retail price index Q30/N/11

11) The table shows the contribution to Gross Domestic Product made by different sectors for four countries.
country services % industry % agriculture %
Bangladesh 40 13 47
China 18 45 37
Philippines 42 36 22
US 66 32 2

A Most production in Bangladesh was in the tertiary sector.
B Most production in China was in the primary sector.
m
C Most production in the Philippines was in the secondary sector.
co
D Most production in the US was in the tertiary sector. Q2/N/10
ya N
o.
SA
12) Gross Domestic Product (GDP) per capita is commonly used as an indicator of the comparative level of
ho
development in different countries.
6@ S
What does not lead to difficulties when using this as a comparison between countries?
24 HA
A different climatic conditions

B different international exchange rates
C different population growth rates
an R
D different rates of inflation Q35/J/10

SI
13) A closed economy has both a private sector and a public sector.
Gross Domestic Product (GDP) consists of total consumer expenditure plus gross investment plus
A the value of exports.
ss
B the value of exports minus the value of imports.

ha
C total government expenditure.

D total government expenditure minus total taxation. Q30/J/09

14) The graph shows the level of imports and exports as a percentage (%) of GDP for a number of countries.
m
co
ya N
A Botswana has a deficit on its balance of payments current account.
o.
B Swaziland is the country most heavily dependent on imports.
C
SA
The value of imports for Lesotho is greater than the value of imports for Malawi.
D
ho
The volume of imports for Zambia is less than its volume of exports. Q39/J/09
6@ S
24 HA
15) The Gross Domestic Product (GDP) of Hong Kong rose more slowly than the rest of South East Asia between
1997 and 2002.
What is the most likely reason?
an R
A a fall in competitiveness in Hong Kong

SI
B a fall in production costs in Hong Kong

C an economic recession throughout South East Asia
D a rise in productivity in Hong Kong Q31/N/08
ss
16) The table shows the index numbers for Gross Domestic Product (GDP) for four countries between 2001 and
ha
2005.
Which country experienced the greatest economic growth over the period 2001 to 2005?
country 2001 2002 2003 2004 2005
A 96.7 98.6 100 103.7 106.1
B 85.3 98.5 100 102.6 105.0
C 94.4 99.0 100 106.6 108.1

D 92.8 94.5 100 105.8 110.0
Q32/N/08

17) Real Gross Domestic Product per head is often used as a measure of the change in average living standards.
What reduces its effectiveness in representing this change?
A It omits increases in the cost of living.
B It omits increases in the general price level.
C It omits increases in the hours people work.
D It omits increases in the size of the population. Q34/N/08
18) The diagram gives data for an economy from 1990 to 1999.
m
co
ya N
o.
SA
ho
6@ S
24 HA
What can be deduced about the state of the economy in 1991 and 1995?
1991 1995
an R
A budget surplus budget deficit

SI
B inflation deflation
C recession boom
D trade deficit trade surplus
Q31/N/05
ss
19) In March 2000 the Ministry of Trade and Industry in Singapore stated that Gross Domestic Product grew by 5.4
ha
% in the previous year. This produced higher revenues from taxation and resulted in a budget surplus.
What may be concluded from this statement?
A The change in Gross Domestic Product was caused by a change in taxation.
B The government had increased the rate of taxation and the expenditure on its services.
C The national income of the country had increased and so more was paid in taxes.
D There had been economic growth because the government had reduced its expenditure and budgeted
for a surplus. Q29/J/05

20) Instead of cleaning their own homes, a large number of households decide to clean each other’s homes and
charge for their services. They all declare their income to the tax authority.
What will increase as a result of this?
A Gross Domestic Product
B imports
C investment
D unemployment Q31/J/05
21) The table shows units of output, value of output and number of people employed in an industry over three
years.
output output value number
m
(units, millions) ($ millions) employed (000)
co
year 1 10 10 5
ya N
year 2 21 25 7
o.
year 3
SA 32 40 8
ho
6@ S
What could be concluded from the table above?
24 HA
A Inflation has increased.

B Productivity has increased.
C Profit has increased.
an R
D Working population has increased. Q31/J/04

SI
22) 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.
ss
B Saving will decrease.

C Taxation will decrease.
ha
D The population will decrease. Q20/N/V16
23) In rural areas in developing countries, farmers grow food for their own consumption.
Why might this mean that the GDP is a weak measure of the standard of living in those countries?
A The food grown is not exported.
B The GDP does not include agricultural production.
C The GDP only refers to the public sector.
D The value of the food is unknown. Q26/J/V15

24) The table shows the percentage share of GDP held by the richest 20% and poorest 20% of the population in each
country.
Which country had the greatest extremes of income and poverty?
country richest 20% poorest 20%
A Ghana 41.7% 8.4%
B Nigeria 55.7% 4.4%

C Senegal 48.2% 6.4%
D South Africa 64.8% 2.9%

Q35/J/V13
m
25) China has become South Africa’s largest trading partner. In 2009, 16 % of South Africa’s imports came from
co
China while 11 % of its exports went to China.
ya N
China is also investing in infrastructure designed to help increase production in South Africa.
o.
SA
ho
A China is investing more in South Africa than in other countries.
6@ S
B China’s GDP will grow more slowly than South Africa’s GDP.
24 HA
C GDP in South Africa is likely to rise. Q33/N/V12

D South Africa imported a greater number of goods and services from China than it exported to China.
an R
26) What is Gross Domestic Product (GDP) divided by to calculate GDP per head?
SI
A net migration
B the birth rate
C the total population
D the working population Q20/J/V16
ss
ha
27) 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. Q24/J/V16

54-55. GROSS DOMESTIC PRODUCT / GROSS NATIONAL PRODUCT
&
THE TRADE CYCLES
1) A 2) C
3) D 4) C 5) A 6) C
7) B 8) B 9) A 10) A
11) D 12) C 13) C 14) B
15) A 16) B 17) C 18) C
19) C 20) A 21) B 22) A
m
23) D
co
24) D 25) C 26) C 27) C
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
56. STANDARD OF LIVING /
ho
6@ S
HUMAN DEVELOPMENT INDEX

24 HA
an R
ss SI
ha

1) A country has a low GDP and a large population but ranks relatively highly on the HDI.
Which combination may exist in the country?
provision of education and

income per head
healthcare (merit goods)
A high high
B high low
C low low
D low high
Q21/J/V17
m
2) The table gives information about four countries.
co
Which country is likely to have the highest standard of living?
ya N
o.
SA
life expectancy GDP per head (US $)
% of labour force
in service industries
ho
A 51 250 48
6@ S
B 51 400 52
24 HA
C 61 450 52
D 61 400 40
an R
Q26/J/V17
SI
3) 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.
ss
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.
ha
D There is equality of income distribution and a low provision of merit goods. Q21/J/16
4) Which country is likely to have the highest standard of living?
infant mortality
birth rate death rate life expectancy
rate
A 41 20 31 49
B 32 14 29 59
C 25 6 25 79
D 25 5 22 79
Q26/J/16
5) 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 Q23/N/15
6) The Human Development Index (HDI) measures more than just average incomes.
What are two additional measures it includes?
A life expectancy years of schooling
m
B percentage unemployed number of hospitals
C poverty rate years of schooling
co
ya N
D years of schooling access to clean water
o.
SA
7) Which combination of changes is most likely to result in a fall in living standards in a country?
Q21/J/15
ho
6@ S
GDP inflation population
24 HA
A fall fall rise
B fall rise rise

an R
C rise fall fall

SI
D rise rise fall

Q27/J/15
8) The table shows statistics for four countries in southern Africa.

ss
From the information given, which country has the lowest standard of living?
ha
average annual population

real GDP per
growth rate of density per life expectancy
capita (US$)
population (%) square kilometre
A 1.9 19 46 190
B 2.7 2 58 1700
C 3.7 45 59 210
D 4.2 89 44 190
Q27/N/14

9) Why is the Human Development Index (HDI) often considered to be better than 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. Q21/J/14

Which country has the lowest standard of living?
% of labour force
life expectancy GDP per head (US $)
m
in agriculture
A 48 120 80
co
ya N
B 48 250 70
o.
C 54 SA 350 75
ho
D 60 380 60
6@ S
Q27/J/14
24 HA
11) A government wishes to raise the general standard of living in its country.
In the short run, which policy would be the most likely to achieve this aim?
an R
A preventing the merger of two companies into a monopoly

SI
B raising taxation to repay government debts

C reducing the rate of income tax while maintaining the services it provides
D spending more on roads in rural areas rather than in city centres Q27/N/13
ss
12) Which combination of changes is most likely to result in a rise in the average living standard in a country?
ha
Gross Domestic
population general price level
Product
A falls falls rises
B falls rises falls
C rises falls falls
D rises rises rises

Q36/J/13

13) In the short-run, which investment is likely to be the most successful in improving living standards?
A investment in capital intensive production
B investment in education
C investment in labour intensive production
D investment in research and development Q37/J/13
14) The Human Development Index (HDI) measures more than just average incomes.
What are two additional measures it includes?
A access to clean water number of doctors

B life expectancy years of schooling
m
C number of doctors poverty rate
co
D years of schooling poverty rate
ya N
Q30/N/12
o.
SA
15) The table shows the percentages of consumer spending on different items in four countries, which have similar
ho
geographical conditions and climate.
6@ S
24 HA
percentage of consumer spending on each item

country food housing transport
an R
A 20 30 30
SI
B 40 25 15
C 50 20 10
D 45 20 15
ss
Q37/N/12
ha

Which country is likely to have the lowest standard of living?
life expectancy
country GNP per head ($) adult literacy (%)
at birth (years)
A Ethiopia 43 110 66
B India 59 350 43
C Nigeria 51 290 43
D Mozambique 45 80 39
Q36/N/11

17) A musician has a choice of playing for an orchestra in either England or Germany.
Which combination of incomes and cost of living is most likely to cause her to choose the German orchestra?
Incomes and cost of living in Germany compared

with those in England
pre-tax (gross) after-tax (net)
cost of living
income income
A higher higher higher
B higher lower lower
C lower higher higher
D lower higher lower

Q16/J/11
m
co
18) Why may GDP not be a good measure to compare the standard of living of two countries?
ya N
A It does not include government expenditure.
o.
B
SA
It does not take account of population size.
ho
C It is based on a sample ‘basket of goods’.
6@ S
D It only compares export prices with import prices. Q32/J/11
24 HA
19) In 2008, the US had a higher GDP per head than Iceland, but a lower Human Development Index ranking than
Iceland.
an R
What could explain this difference?

SI
A Average family size is higher in Iceland.

B Life expectancy is higher in Iceland.
C School enrolments are higher in the US.
D The population of the US is larger. Q30/N/10
ss
20) The table shows four countries in 2007.

ha
Which country is most likely to have the lowest standard of living?
country GDP (US$ billion) population (million)
A Bangladesh 206.7 153.5
B India 2989.1 1147.9

C Nigeria 292.7 138.3
D South Africa 467.1 43.8

Q36/N/10

21) 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. Q33/J/10
22) The table shows the percentages (%) of consumer spending on different items in four countries which have
similar geographical conditions and climate.
m
consumer spending on each item (%)
Food housing entertainment
co
ya N
A 20 30 25
o.
B 30 SA 25 15
ho
C 40 20 10
6@ S
D 40 25 10
24 HA
Q39/J/10
23) What is the best measure of a country’s standard of living?

an R
A money national income per head

SI
B national income
C national income per head
D real national income per head Q31/J/09
ss
24) Which of the following is most likely to be used as a measure of living standards?
ha
A the balance of trade

B the consumer price index
C the government’s budget position
D the real GDP per head Q33/J/08

25) In rural areas in developing countries women often do unpaid work on traditional activities.
Why might this mean that the GDP is not a good measure of the standard of living in those countries?
A The GDP does not include international trade.
B The GDP only refers to companies in urban areas.
C The work is not counted in GDP statistics.
D The work is not economically important. Q29/J/07
26) Which country is likely to have the lowest standard of living?
life infant
birth rate death rate
expectancy mortality
m
A 25 10 57 24
B 43 31 40 42
co
ya N
C 25 5 72 22
o.
D 36 SA 14 48 56
Q33/J/07
ho
6@ S
24 HA
27) The table shows the Gross Domestic Product (GDP) and population of four countries.
Which country is likely to have the lowest standard of living?
an R
GDP ($ millions) population (millions)

SI
A 2 000 1
B 10 000 10
C 80 000 20
ss
D 90 000 30
Q33/N/06
ha

28) The table gives information on standards of living in four countries.
life expectancy % labour force

adult literacy rate %
at birth (years) in agriculture
Brazil 66.5 82.4 23
India 60.7 50.6 64
Rwanda 47.2 58.0 92
Uganda 44.7 59.7 85
On the basis of this information which country has the highest standard of living?
A Brazil
m
B India
C Rwanda
co
ya N
D Uganda Q34/J/06
o.
SA
29) The table shows the percentages of consumer spending on different items in four countries, which have similar
ho
geographical conditions and climate.
6@ S
24 HA
percentage of consumer spending on each item
country food housing transport

an R
A 20 30 25
SI
B 30 25 15
C 40 25 10
D 40 20 10
Q17/N/05
ss
ha
30) The table shows some economic indicators.

Which increase in the first indicator is most likely to lead to an increase in the second indicator?
first indicator second indicator
A budget surplus consumer saving
B consumer spending unemployment
C Inflation trade surplus

D Productivity living standards
Q23/N/V16

31) What is not likely to be used to measure the difference in the standard of living between countries?
A Gross Domestic Product per head
B Human Development Index
C the rate of poverty
D the rate of interest Q37/N/V13
32) In some developing countries the agricultural sector employs the majority of the working population. However,
the countries cannot produce enough food themselves and still need food imports.
What would be the most likely cause of an improvement in the standard of living of those countries?
A a change in production techniques which replaces labour with machines
B a decrease in world food prices
m
C a fall in the country’s foreign exchange rate
co
D a period of low rainfall Q34/J/V13
ya N
o.
SA
33) What is GDP divided by to calculate Gross Domestic Product (GDP) per head?
ho
A the adult population
6@ S
B the non-dependent population
24 HA
C the total population

D the working population Q30/N/V12
an R
ss SI
ha

56. STANDARD OF LIVING / HUMAN DEVELOPMENT INDEX
1) D 2) C 3) B 4) D
5) B 6) A 7) B 8) D
9) C 10) A 11) C 12) C
13) C 14) B 15) A 16) D
17) D 18) B 19) B 20) A
21) B 22) A 23) D 24) D
25) C 26) B 27) B 28) A
m
29) A 30) D 31) D 32) B
co
ya N
33) C
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
57-59. THE DEVELOPED
o.
SA
V/S ho
6@ S
24 HA
DEVELOPING COUNTRIES
an R
ss SI
ha

1) Which statement about the poorest families in developing economies is not likely to be correct?
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. Q24/J/17
2) The diagram shows population projections until the year 2075 for selected areas.
m
co
ya N
o.
SA
Assuming no migration, which situation must exist if the population is to change in the manner shown in the
ho
diagram?
6@ S
A birth rate falling and death rate falling
24 HA
B birth rate greater than death rate

C death rate greater than birth rate
D death rate rising and birth rate falling Q25/J/17
an R
SI
3) The table shows information about four countries.

Which country is likely to be least developed?
% of labour force GDP per head

life expectancy
in service industries ($)
ss
A 20 49 380
B 35 49 350
ha
C 40 53 350
D 45 63 450
Q26/J/17
4) 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 Q24/J/V17

5) Which outcome is least likely to be found with greater economic development?
A A greater percentage of the population is highly educated.
B A greater percentage of the population is homeowners.
C A greater percentage of the population is old.
D A greater percentage of the population is very poor. Q24/N/16
6) The chart shows total world carbon emissions in 1995 and predicted emissions by 2035.
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
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.
ss
B Between 1995 and 2035, the Middle East will have increased its industrialisation by as much as Latin
America.
ha
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. Q26/N/16

7) 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 Q24/J/16
8) 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?
m
A International banks might be less willing to give loans to poor countries.
B Interest payments to the lenders would fall.
co
ya N
C The standard of living of people in the poorest countries would fall.
o.
D SA
Trade between the poorest countries and the rest of the world would increase. Q25/J/16
ho
6@ S
9) The proportion of workers employed varies between different industries and between developing and
developed economies.
24 HA
Which combination in the table is likely to have the highest percentage of workers employed?
developing developed
an R
A agriculture manufacturing
SI
B agriculture services
C construction manufacturing
D construction services
ss
Q21/N/15
ha
10) 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?
absolute poverty relative poverty
A increased increased
B increased remained constant
C remained constant increased

D remained constant remained constant
Q25/N/15

11) 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. Q30/N/15
12) 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
m
C rising costs of factor inputs in the steel industry Q13/J/15
co
D considerable skill shortages as school-leavers prefer to work in the service sector
ya N
o.
SA
13) The table shows some economic indicators for four countries.
country
ho inflation unemployment GDP growth
6@ S
P 3.0% 11.3% 3.5%
24 HA
Q 4.2% 7.6% 1.0%

R 1.3% 12.2% 3.0%
an R
S 3.5% 10.1% 2.3%

SI

A high GDP growth occurred with low unemployment
B high inflation occurred with high GDP growth
ss
C low GDP growth occurred with low inflation

D low inflation occurred with high unemployment Q22/J/15
ha
14) 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 Q25/J/15

15) The table shows the percentage change (%) in employment over a period for a country with three economic
sectors.
economic sector (%) change in employment
agriculture –6
manufacturing +2
services +4
What could be concluded from this information?

A Agricultural output fell.
B The country became more developed.
m
C The working population stayed constant.
co
D Total employment remained the same. Q23/N/14
ya N
o.
SA
16) What is most likely to be found in a developed country?
ho
A a small amount of income spent on leisure and entertainment
6@ S
B a small average family size
24 HA
C a small number of old people

D a small number of professional people Q24/N/14
an R
17) Developing countries have, relatively, far more poor people than developed countries.
SI
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.
ss
D There is an ageing population in all developing countries. Q26/N/14

ha
18) 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 Q10/J/14

19) 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 Q25/J/14
20) Increasing numbers of qualified medical workers from developing economies migrate to developed economies.
What explains this migration?
m
A There are better working conditions in hospitals and clinics in developed economies.
B There are fewer patients requiring medical treatment in developing countries.
co
ya N
C There is a lack of training opportunities for medical staff in developed economies.
o.
D SA
There is an oversupply of qualified medical workers in developing countries. Q26/J/14
ho
6@ S
21) The gap in incomes between rich and poor continues to widen in many countries.
Who would be in absolute poverty?
24 HA
A those in the population without any formal employment income

B those on very low incomes compared with the rest of the population
an R
C those who live without financial assistance from the government

SI
D those with just the minimum level of resources needed to sustain life Q37/N/13
22) The table shows data for four countries in 2006.
percentage of labour
ss
life expectancy computers per

force employed in crude birth rate
(years) 100 population
agriculture
ha
Bangladesh 64.1 1.2 66 24.8
Egypt 71.3 3.7 27 24.2
India 64.8 1.5 60 23.0

Pakistan 65.6 1.6 42 27.2
On the basis of the information given, what is the likely ranking order of the four countries in terms of
development, starting from the most developed to the least developed?
A Bangladesh → India → Pakistan → Egypt
B Egypt → Pakistan → India → Bangladesh
C India → Egypt → Bangladesh → Pakistan
D Pakistan → Bangladesh → Egypt → India Q35/J/13
23) An Economics student described a typical developing country as having a large population, a low GDP per head,
a relatively large primary sector and an uneven income distribution.
Which of these features is not necessarily accurate?
A a large population
B a low GDP per head
C an uneven income distribution
D a relatively large primary sector Q34/N/12
24) In the developing economies of southern Africa, both infant mortality and life expectancy have fallen. Life
expectancy now averages only 41 years.
What is the result of these changes?
m
A Current labour supply has fallen.
B Fewer primary schools are needed.
co
ya N
C Governments will pay for more retirement pensions.
o.
D SA
Less will need to be spent on health care. Q35/N/12
ho
6@ S
25) Which feature is a typical characteristic of a developed country?
A a high death rate
24 HA
B a high literacy rate

C a low number of doctors per head
an R
D a small elderly population Q36/N/12

SI
26) What level of unemployment and what distribution of income are often found in developing economies?
level of unemployment distribution of income

ss
A high evenly distributed

B high unequal
ha
C low evenly distributed
D low unequal
Q34/J/12
27) Why is the size of the average family higher in developing countries than in developed countries?
A In developing countries babies are more likely to survive at birth.
B In developing countries parents start families at a later age.
C In developing countries there is often a shortage of family planning advice.
D In developing countries the government provides a higher level of child support. Q35/J/12

28) Which combination of factors might cause a country to be classified as developing rather than developed?
A a government budget deficit and a low death rate
B a high birth rate and a low death rate
C a large population and a current account deficit
D a poor education system and a low standard of living Q36/J/12
year 2000 year 2010

(thousands employed) (thousands employed)
m
farming 2278 1594
co
ya N
o.
SA
According to the table, which type of employment has increased?
ho
6@ S
A primary
B secondary
24 HA
C tertiary
D total Q2/N/11
an R
SI
30) Developing countries are sometimes given aid by charities and foreign governments.
Which aid programme would be least likely to lead to long-term economic growth?
A the building of an irrigation system
B the construction of a new airport
ss
C the distribution of gifts of food

D the training of technical staff Q37/N/11
ha
31) What is likely to happen as a developing country becomes more developed?

A A higher percentage of children will attend school.
B Infant mortality will rise.
C Life expectancy will fall.
D The agricultural sector will increase in importance. Q37/J/11

32) How is the pattern of employment likely to change when a country becomes more developed?
A from rural employment to urban employment
B from skilled employment to primary employment
C from technical employment to manual employment
D from tertiary employment to secondary employment Q33/N/10
33) What is most likely to indicate that an economy is developed rather than developing?
A a high birth rate and a low death rate
B a large primary sector and a high population growth
C a large service sector and capital intensive production
m
D a low level of investment and a high rate of savings Q34/N/10
co
ya N
34) ‘The tertiary sector of the economy is increasing in importance’.
o.
A
SA
This statement is most likely to mean that a high proportion of the labour force is
employed in agriculture.
ho
6@ S
B employed in manufacturing.
C employed in the production of services.
24 HA
D unemployed but looking for work. Q3/J/10

an R
35) What is an example of occupational mobility of labour?

SI
A A Japanese car manufacturer locates in England.

B A nurse returns to work after her children have grown up.
C A student takes an evening job in a restaurant.
D Farm workers retrain as call-centre workers. Q13/J/10
ss
36) India has a more evenly distributed income than China but a greater proportion of its population living on less
ha
than $1 a day.
What can be concluded from this statement?
A China has a smaller proportion of very rich people.
B India has a greater proportion of poor people.
C Most of the population of India live on $1 a day.
D The average income in China is higher than that in India. Q32/J/10

37) What is likely to happen in a developing country as it becomes more developed?
A A lower percentage of people will go to university.
B Average life expectancy will rise.
C The rate of population growth will increase.
D The tertiary sector will decline in importance. Q38/J/10
38) The table shows the value of output for some parts of an economy.
$ billion
fishing 25.0
mining 23.0
m
manufacturing 130.5
co
ya N
financial services 100.3
o.
SA other services 170.0
ho
Which conclusion may be drawn from these statistics?
6@ S
A The tertiary sector was the most valuable.
24 HA
B The value of the primary sector was $ 25.0 billion.

C The value of the secondary sector was $ 153.5 billion. Q4/N/09
an R
D The value of the secondary sector was worth less than the value of the primary sector.
SI
39) What is most likely to be found in a typical developing country?

A a good education sector
B a small average family size
ss
C a small percentage of very old people

D high spending on entertainment Q33/N/09
ha
40) Who is definitely employed in the primary sector?

A a person in a firm producing goods for other firms to use
B a person in a firm engaged in agricultural production
C a person in an organisation which first deals with any imports into the country
D a person in the head office of a company Q4/J/09

41) What is least likely to be found in a typical developing country?
A Ill-health affects many of the population.
B Many workers are highly skilled.
C Production is labour-intensive.
D There is an unequal distribution of income and wealth. Q33/J/09
42) Which statement about economic development is correct?

A A country needs more than a high GDP to be considered developed.
B A country which has rich reserves of raw materials is classed as developed.
C A country will have no people living in poverty when it is developed.
m
D A country with a trade surplus is considered to be developed. Q34/J/09
co
ya N
43) Which combination is most likely to be found in a developing country compared with a more developed
country?
o.
SA
population
ho
death rate
growth rate
6@ S
A higher higher
24 HA
B higher lower
C lower higher
an R
D lower lower
Q33/N/08
SI
44) What will be found in a typical developed country?

A a dominant primary sector
ss
B a large percentage of employment in the informal (unofficial) sector

C a population with a rising average age
ha
D labour intensive production methods in manufacturing industry Q35/N/08
45) Which commercial activity will not destroy the natural environment?
A intensive fishing in coastal waters using modern fishing boats
B large-scale farming using chemical fertilisers
C picking apples from trees using local labour
D tree felling by timber companies in tropical forests Q36/N/08

46) World-wide campaigns to reduce smoking will affect Malawi, which has relied on tobacco for its main export
earnings.
What is likely to happen if Malawi is successful in replacing its earnings from tobacco by developing its tourist
trade?
A The number of jobs required in the service sector will decrease.
B The primary sector will become more significant in the economy.
C There will be greater expenditure on new roads and infrastructure.
D Visible earnings will increase while invisible earnings will decrease. Q37/N/08
47) What would an individual be doing to be described as a worker in the secondary sector?
A working in a firm that grows fruit trees and plants
m
B working in a firm that produces machines for other firms
co
C working in a government passport office
ya N
D working in the reception area of a hospital Q15/J/08
o.
SA
48) The table gives information on Gross Domestic Product (GDP) growth rates, inflation and the unemployment
ho
rates for a number of countries in 2006.
6@ S
24 HA
unemployment
country GDP growth % inflation %
rate %
Brazil 3.5 4.0 10.4
an R
China 11.3 1.5 4.2

SI
France 1.5 1.9 9.0
India 9.3 7.9 7.3
UK 2.6 2.5 3.0

ss
What can be concluded from the table about 2006?

A Any particular product would cost most in India.
ha
B Economic growth was highest when unemployment was lowest.

C Low inflation always causes low unemployment. Q32/J/08
D On average, the Chinese people were likely to have had an increase in real income.

49) What combination of events is most likely to cause an ageing population?
birth rate death rate
A fall fall
B fall rise
C rise rise
D rise fall
Q34/J/08
50) Zambia is sometimes spoken of as a developing country.

What would be most likely to confirm that a country is developing rather than developed?
m
A a balance of payments deficit
co
ya N
B a high proportion of the population in subsistence agriculture
o.
C a lack of natural resources
D a large population
SA Q35/J/08
ho
6@ S
51) There are more people in developing countries who cannot read or write than in developed countries.
24 HA

A Developed countries will use more labour than capital as it is skilled.
an R
B In developing countries, factors of production are not used to their maximum potential.
SI
C Less money needs to be spent on education in developed countries than in developing countries.
D Production in developing countries is likely to rely more on capital than labour. Q3/N/07
52) The table shows data on selected European nations for the year 2001.
ss
GDP % change unemployment % inflation %

ha
Ireland 5.9 3.8 4.9
Belgium 1.0 6.7 2.5

Greece 4.1 10.5 3.4
Poland 1.1 16.2 5.5

A A small change in GDP always leads to high unemployment.
B Belgium had the lowest growth rate and the lowest rise in prices.
C Low unemployment leads to low levels of inflation.
D Poland had a low growth rate and a rise in purchasing power. Q29/N/07
53) Turkey’s agricultural sector employs 48 % of the country’s workforce compared with 17 % in the 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. Q33/N/07
54) Botswana has achieved high rates of economic growth.

What is most likely to have fallen as a result of this economic growth?
A employment
m
B income per head
co
C infant mortality rate
ya N
D literacy rates Q34/N/07
o.
SA
ho
55) As a country develops, what is most likely to happen?
6@ S
A A greater proportion of the workforce will be employed in the service sector.
24 HA
B The average age will decrease.

C The birth rate will increase.
an R
D There will be reduced occupational mobility of labour. Q35/N/07

SI
56) The table shows the proportion of the working population in different sectors in three countries.
country agriculture % manufacturing % services %
Iran 38 33 29
ss
Nepal 93 2 5
ha
UK 2 42 56

A Iran has fewer people working in manufacturing than the UK.
B Nepal is a developed economy.
C Services are more developed in Iran than Nepal.
D The UK is dependent on the primary sector. Q28/J/07

57) At the G8 Economic Summit in 2005, it was decided to cancel much of the debt which African countries owed to
European and North American countries.
This will have the same effect as a transfer of resources from
A developed countries to developing countries.
B developing countries to developed countries.
C market economies to planned economies.
D planned economies to market economies. Q35/J/07
58) Which of the following is usually found in a developed economy?
low high
m
A birth rate adult literacy rate
co
B access to safe water infant mortality rate
ya N
C gross domestic product per head access to safe water
o.
D
SA
infant mortality rate death rate
ho
Q35/N/06
6@ S
24 HA
59) What is most likely to be found in a developing country?

A a large proportion of professional people
B a large proportion of income spent on entertainment
an R
C a small proportion of very old people

SI
D a small average family size Q36/J/06

ss
ha

60) The table shows some changes in the output of Namibia between 1998 and 1999.
agriculture +11.7
fishing +1.3
diamond mining +9.4

manufacturing –0.8
construction –18.3
fish processing –9.6
m
What can be concluded from this information about the Namibian economy between 1998 and 1999?
A Exports of fish increased.
co
ya N
B Namibia’s primary sector production became more important.
o.
C
D
SA
Stocks of fish increased.
Unemployment rose by 0.8 % in manufacturing. Q29/N/05
ho
6@ S
24 HA
61) The table shows information about four countries.

Which country is likely to be the least developed?
% population % population % population

an R
country birth rate death rate

in urban areas under 15 over 60
SI
A 86 16 8 25 10
B 76 13 6 23 9
C 69 30 8 37 5
D 75 13 10 21 14
ss
Q35/N/05
ha

62) The charts show the distribution of employment between the three sectors in Countries X and Y.
m
Which statement is true about Country X compared with Country Y?
co
ya N
A Country X employs more people in the service industries.
o.
B SA
Country X enjoys lower living standards.
ho
C Country X has a higher proportion of workers in manufacturing.
6@ S
D Country X produces more agricultural products. Q36/N/05
24 HA
63) The table shows the main source of export earnings by product for selected countries.
an R
country product % of export earnings

SI
W diamonds 80 %
X sugar 90 %
Y cars 55 %
Z oil 80 %
ss
From this table we can conclude that

ha
A all these countries specialise in the production of primary products.

B W and X specialise in the production of tertiary products.
C the largest % of export earnings from Y is from the sale of secondary products.
D export earnings of W and Z are identical. Q39/N/05

64) The table shows the working population and value of production in four areas of a country.
The government wants to encourage industrial development in the area with the lowest productivity.
Which area will it select?
area working production

population (millions) ($ millions)
A 6 700
B 16 1000
C 12 1200
D 12 1100
Q27/J/05
m
65) The government of Kenya wishes to help people with very low incomes.
co
ya N
Which policy would achieve this?
o.
A
B
SA
increasing housing subsidies
increasing income tax
ho
6@ S
C increasing indirect taxation
24 HA
D increasing inheritance tax Q28/J/05
66) In producing a table of economic statistics about a developed country (Italy) and a developing country (Ethiopia)
an R
one pair of statistics has been placed in the wrong columns.

Which is it most likely to be?
SI
Italy Ethiopia
A adult literacy % 97.1 25.3
B birth rate (per 1000) 9.6 45.7
ss
C death rate (per 1000) 16.4 9.9

ha
D life expectancy 78.3 50.2

Q35/J/05
67) A survey of employment in a particular economy shows that the primary sector was diminishing in importance
and more people were being employed in the tertiary sector.
A Fewer people were employed by central government.
B Fewer people were employed in manufacturing industries.
C More people were employed in the service industries.
D More people were employed in agriculture. Q31/N/04

68) 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 Q36/N/04
69) Which company operates in the primary sector?
company description
Hong Kong holding company with property
A Century City
and hotel interests
m
B Compass East Industries Thai ceiling fan manufacturer
rapidly expanding Australian gold and
co
C Delta Gold
platinum mining company
ya N
D First Bangkok City Bank medium-sized commercial Thai bank
o.
SA Q9/J/04
ho
6@ S
70) What is usually found in a developing country?
24 HA
A Primary products are important exports.

B The agricultural industry has high productivity.
C There is a high level of investment in education.
an R
D There is a low birth rate. Q37/J/04

SI
71) 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.
ss
B More facilities will be needed to retrain workers.

ha
C There will be a rise in the economic growth rate.

D The total savings in the economy will increase. Q25/N/V16

72) The chart shows total world carbon emissions in 1995 and predicted emissions by 2035.
m
co
ya N
o.
SA
ho
6@ S
If the chart proves to be correct, what will have happened by 2035?
24 HA
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.
an R
D The US will have decreased its carbon emissions by a smaller percentage than Western
SI
Europe. Q26/N/V16
73) From 2012 to 2013, European economies experienced weak economic growth.
ss
Based on the information on GDP, industrial production and unemployment in the table, which economy
performed worst?
ha
Percentage change 2012-2013

industrial
GDP unemployment
production
A UK +1.0 –2.3 –0.1
B Germany +0.3 –1.1 0.0
C Italy –1.8 –4.2 +1.5
D Spain –1.7 –1.3 +1.3

Q23/J/V15

74) What is not a reason why the average size of families is likely to be greater in developing countries than in
developed countries?
A Children offer the prospect of security in old age.
B Government child care support is widely available.
C Means of birth control are less available and more expensive.
D Women are less likely to be part of the workforce. Q24/J/V15
75) The table shows the proportion of GDP produced by each sector of production in three fictitious countries.
Farland (% of GDP) Highland (% of GDP) Lowland (% of GDP)
primary sector 30 10 35
m
secondary sector 20 60 25
co
tertiary sector 50 30 40
ya N
o.
SA
ho
A Farland is the least developed economy.
6@ S
B Highland is the most developed economy.
24 HA
C It is uncertain which is the most developed economy.

D Lowland is the least developed economy. Q25/J/V15
an R
76) As a country develops, what is most likely to happen?

SI
A There will be an increase in productivity.

B There will be an increase in the birth rate.
C There will be an increase in the death rate.
D There will be reduced occupational mobility. Q24/N/V14
ss
ha
77) As a country develops, its provision of medical care for babies and old people improves.
Why might this cause a problem in raising living standards?
A Gross Domestic Product will fall.
B The dependency ratio will become higher.
C The number of workers will fall.
D The size of families in the short run will be smaller. Q26/N/V14

78) The diagram shows percentage employment in different sectors in two countries.
m
co
Which statement is correct when comparing country X and country Y?
ya N
A Country X produces more primary output than country Y.
o.
B
SA
Country X employs more workers in secondary industry than country Y.
ho
C Country Y produces more secondary output than country X.
6@ S
D Country Y is more developed than country X. Q30/N/V13
24 HA
79) Which changes usually result when a country develops and is able to provide free health care and good living
conditions?
an R
SI
birth rate death rate worker productivity
A falls falls rises

B falls rises falls
C rises falls falls
ss
D rises rises rises

ha
Q36/N/V13
80) In developed economies there are changing patterns of employment.

What explains why fewer work in agriculture but food production has increased?
A increased incomes and more leisure
B mechanisation and the use of scientific methods
C movement to factory jobs in manufacturing
D shift to office work using computers Q30/J/V13

81) The table gives information about some economic indicators in a number of countries.
inflation % interest rates % unemployment %
country W 1.4 3.4 10.2
country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2

country Z 2.1 6.0 7.7

A Countries with higher inflation have higher interest rates.
B Countries with higher interest rates have lower inflation.
m
C The country with the lowest inflation had the highest unemployment.
co
ya N
D The country with the lowest unemployment had the highest inflation. Q31/J/V13
o.
SA
82) What is most likely to be an indicator that a country is a developed economy rather than a developing economy?
ho
A a dominant service sector
6@ S
B a high birth rate
24 HA
C a lack of capital-intensive production

D a low level of adult literacy Q37/J/V13
an R
SI
83) What work is in the primary sector?

A delivering milk
B designing gardens
C growing fruit trees
ss
D selling agricultural fertiliser Q11/N/V12

ha
84) The Ivory Coast is sometimes referred to as a developing country.

What would be likely to support the opinion that a country is a developing country?
A a balance of trade surplus
B a high birth rate
C a highly mechanised farming sector
D a large population Q36/N/V12

85) After more than 70 years of production, a German car manufacturer, Volkswagen, has decided to locate the
production of its biggest selling car in developing countries, rather than Germany.
What is the main advantage of this policy?
A to access new management techniques
B to make use of better infrastructure
C to sell the car only to customers in developing countries
D to train and employ labour at a lower cost Q34/J/V12
86) What is usually a characteristic of a developed country?

A a dependency on primary product exports
B high rates of economic growth
m
C low levels of productivity
co
D low rates of population growth Q35/J/V12
ya N
o.
SA
87) What is most likely to be found in both developed and developing economies?
ho
A Adult literacy rates are more than 90 %.
6@ S
B A high proportion of wealth is owned by a few people.
24 HA
C Earnings from agriculture and mining contribute most to GDP.

D Those who live in rural areas have access to proper sanitation. Q36/J/V12
an R
SI
the population.
objective?
ss

ha
D a lower life expectancy Q37/N/V11

year 2000 year 2010

(thousands employed) (thousands employed)
extraction of minerals 1278 794
Which statement about these industries during this period is correct?

A Employment in the primary industries decreased.
m
B Employment in the secondary industries increased.
C Employment in the tertiary industries decreased.
co
ya N
D Employment in the tertiary industries was less than the secondary industries. Q4/J/V11
o.
SA
90) The table shows the contribution to Gross Domestic Product made by different sectors for four countries.
ho
6@ S
country services % industry % agriculture %
24 HA
Bangladesh 40 13 47
China 18 45 37
Philippines 42 36 22
an R
US 66 32 2
SI

A Most production in Bangladesh was in the tertiary sector.
B Most production in China was in the primary sector.
ss
C Most production in the Philippines was in the secondary sector.

ha
D Most production in the US was in the tertiary sector. Q5/N/V10
91) The table gives information on four countries.

Which country is likely to be most developed?
population Gross Domestic Product life expectancy

(m) ($ billion) (years)
A 100 800 51
B 200 6000 62
C 300 600 48
D 1000 1600 63
Q25/J/V16
57-59. DEVELOPED VS DEVELOPING
1) B 2) B 3) A 4) A
5) D 6) C 7) A 8) A
9) B 10) C 11) D 12) B
13) D 14) A 15) B 16) B
17) A 18) C 19) D 20) A
21) D 22) B 23) A 24) A
25) B 26) B 27) C 28) D
m
29) C 30) C 31) A 32) A
co
ya N
33) C 34) C 35) D 36) B
o.
37) B
41) B
SA
38) A
42) A
39) C
43) A
40) B
44) C
ho
6@ S
45) C 46) C 47) B 48) D
24 HA
49) A 50) B 51) B 52) B

53) D 54) C 55) A 56) C
57) A 58) A 59) C 60) B
an R
61) C 62) C 63) C 64) B

SI
65) A 66) C 67) C 68) C

69) C 70) A 71) A 72) B
73) C 74) B
ss
75) C 76) A 77) B 78) D

79) A 80) B 81) A 82) A
ha
83) C 84) B 85) D 86) D

87) B 88) B 89) A 90) D
91) B

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
60-62. POPULATION
6@ S
24 HA
an R
ss SI
ha

1) The table shows the growth rate of output (%) in four sectors of an economy.
construction energy manufacturing services

sector % sector % sector % sector %
first quarter of 2014 0.9 0.1 –0.7 –3.4
second quarter of 2014 0.5 1.6 –0.5 0.5
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
m
D services and manufacturing Q15/N/16
co
2) According to the United Nations, the share of world population living in developing countries will increase from
ya N
83% in 2003 to 88% in 2050.
o.
SA
What is likely to be the major cause of this predicted change?
ho
A Climate change will lead to lower food output and starvation.
6@ S
B Improved education for girls will lead to a small decline in birth rates.
24 HA
C Increasing numbers of people will migrate to developed countries.

D Modern medicine and sanitation will lead to a rapid decline in death rates. Q26/N/15
an R
ss SI
ha

3) The charts show the population structure of a country in 1960 and 2010.
m
co
ya N
o.
SA
ho
6@ S
24 HA
During this period, how did birth and death rates change?
an R
SI
birth rates death rates
A fell Fell
B fell no change
C rose Fell
ss
D rose no change
ha
Q26/J/15
4) 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 Q21/N/14

5) Which combination of influences must have occurred for a population to be falling when there is no migration?
birth rate death rate fertility rate
A falling falling falling
B falling rising falling
C falling rising rising

D rising falling falling
Q24/J/14
6) A country has a falling birth rate and a rising death rate while an increasing number of its working age adults (16-
60 years) are seeking employment abroad.
m
How will this probably affect the numbers in the different age groups in the country?
co
ya N
under 16 years 16-60 years over 60 years
o.
A fall SA fall fall
ho
B fall rise rise
6@ S
C rise fall rise
24 HA
D rise rise fall

Q36/N/13
an R
7) In 2010 there was an increase in net emigration from Ireland.

SI
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
ss
D an increase in unemployment in Ireland Q30/J/13

ha
8) In Botswana, better health care has meant that birth rates have been falling faster than death rates. Also the
number of children born, on average, to each woman has declined. In 1981, women had 6.4 children on
average; by 2006, the average was 3.2
A Government spending on education will need to increase.
B Medical improvements have resulted in falling child mortality rates.
C There will be a decline in income for each person working. Q34/J/13
D There will, in future, be an increase in the proportion of working population compared with non-working
population.

9) The charts show the population structure of a country in 1950 and 2010.
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
SI
What decreased between 1950 and 2010?

A average age
B number of people below 15
C number of people over 60
ss
D total population Q37/J/12

ha
10) What is most likely to happen if there is a fall in the death rate while the birth rate and migration remain
unchanged?
A The population structure will remain the same.
B The population will increase.
C There will be a change in the proportion of men to women.
D The standard of living will increase. Q38/N/11

the population.
objective?
D a lower life expectancy Q40/N/11
12) Many developed countries are faced with an ageing population.

What is the likely result of this?
m
A a reduced dependency ratio
co
B increased mobility of labour
ya N
C increased spending on medical care
o.
D reduced tax levels SA Q34/J/11
ho
6@ S
13) Net migration is the difference in a particular year between
24 HA
A the birth rate and the death rate.

B the number of people entering and leaving a country looking for temporary work.
C the number of people entering and leaving a country on a permanent basis.
an R
D the number of tourists coming to and going from a country. Q36/J/11

SI
14) What will be the likely effect on the remaining population of a developing country when newly trained, skilled
workers migrate to developed countries?
A Its average age will increase.
ss
B Its mobility will increase.

C Its productivity will increase.
ha
D Its total size will increase. Q37/N/10

15) The table shows some of Japan’s expenditure on social services (actual and projected) as a percentage of Gross
Domestic Product.
actual projections
expenditure 2000 2010 2025
medical care 6.2 7.2 8.4
pensions 10.4 14.3 15.3
education 4.0 4.3 3.8

unemployment 0.3 0.3 0.3
family benefits 1.0 1.0 1.0
m
total 21.9 27.1 28.8
co
ya N
Which population group will benefit most from the projected changes?
A children below school age
o.
B children of school age
SA
ho
C people over retirement age
6@ S
D unemployed workers Q27/N/09
24 HA
16) Which factor is most likely to reduce the average age of a population in a developed country?
an R
A a lower birth rate

SI
B a lower death rate

C emigration
D immigration Q32/N/09
ss
17) The Chinese Government is concerned about two population problems – overpopulation and a gender
imbalance, with males outnumbering females.
ha
In 2007 it reduced the number of babies that foreigners are allowed to adopt; almost all of the babies are girls.
What effect might this have on the size of China’s population and gender imbalance in the short run?
size of population gender imbalance
A increase increase
B increase reduce
C reduce increase
D reduce reduce
Q34/N/09

18) The expansion of the European Union has caused net migration into the UK.
What is the most likely effect in the UK in the short run?
A an ageing population
B a rising birth rate
C reduced pressure on public services
D reduced pressure on the labour supply Q35/N/09
19) What is most likely to cause an immediate decrease in the size of the working population?
A a fall in the average size of families
B a fall in the birth rate
m
C a reduction in the age of retirement
D an increase in net immigration Q32/J/09
co
ya N
o.
SA
20) Japan has an ageing and declining population. Fewer workers have to support more retired people.
Which government policy is most likely to reduce the support that has to be given by the working population?
ho
6@ S
A lowering state pensions
B lowering the retirement age
24 HA
C raising income tax

D subsidising the emigration of workers Q35/J/09
an R
SI
21) What might explain the high population growth in some developing countries?
A high birth rates and falling death rates
B high immigration and low emigration
C falling birth rates and rising death rates
ss
D falling life expectancy Q32/N/07

ha
22) In 2005, world population had grown to 6.5 billion with an increase of more than 4 billion since 1950.
What is most likely to have been the cause of this?
A an increase in the death rate in developed countries
B an increase in the birth rate in developing countries
C an increase in migration from developing to developed countries
D an increase in the death rate in developing countries Q34/J/07

23) In a country the birth rate increased but the population decreased.
What could have happened to other factors to cause this?
A no change in migration but the death rate fell
B a fall in infant mortality but no change in the death rate
C no change in migration but the death rate rose
D a rise in net immigration but no change in the death rate Q34/N/06
24) Which situation must produce an ageing population?

A a falling birth rate and a falling death rate
B a rising birth rate and a rising death rate
m
C a rising fertility rate and a falling death rate
D a rising marriage rate and a rising death rate Q36/N/06
co
ya N
o.
A an ageing population
SA
25) What is the most likely cause of population migration to cities in developing countries?
ho
6@ S
B higher unemployment rates in cities
C higher wages in cities
24 HA
D higher land values in cities Q33/J/06

an R
26) What is the most likely cause of a fall in the population growth of a developing country?
SI
A a decrease in the birth rate

B a decrease in emigration
C a decrease in immigration
D a decrease in the standard of living Q35/J/06
ss
27) A UK government minister stated that increased immigration would benefit the UK.
ha
What might be the immediate advantage of increased immigration to the UK?

A greater availability of skilled people
B greater demand on the UK’s resources
C greater dependent population
D greater pressure for wage increases Q33/N/05

28) The table shows birth and death rates per thousand people.
birth rate death rate birth rate death rate

1980 1980 1997 1997
Argentina 24 9 20 8
Brazil 31 9 21 7
Uruguay 19 10 18 10
Venezuela 33 6 25 5
Assuming there was no migration, what does the table show?

A Between 1980 and 1997 all countries reduced their death rates.
m
B In 1980 Brazil’s population had the lowest rate of growth.
C In 1997 Venezuela’s population had the highest rate of growth.
co
ya N
D Uruguay’s population fell between 1980 and 1997. Q37/N/05
o.
SA
29) Which aspect of population will be most likely to change when the importance of the tertiary sector increases?
ho
6@ S
A the dependency ratio
B the geographical distribution
24 HA
C the occupational distribution

D the total size Q36/J/05
an R
SI
30) When must there be a rise in a country's population?

A when the birth rate is greater than death rate and there is net emigration
B when the birth rate is greater than death rate and there is no migration
C when the death rate is greater than birth rate and there is net immigration
ss
D when the death rate is greater than birth rate and there is no migration Q37/J/05
ha
31) There is a decrease in a country’s birth rate.

What can lead to an increase in the country’s population at the same time?
A Zero net migration and a fall in the fertility rate.
B Zero net migration and a fall in infant mortality.
C Positive net migration and a fall in the death rate.
D Positive net migration and a fall in the fertility rate. Q35/N/04

32) The table gives certain information about the population of three countries in 1995.
birth rate death rate infant mortality rate % of population

per 1000 per 1000 per 1000 under 16
Singapore 12 4 5 18
Hong Kong 15 6 8 20
China 20 9 28 38
Which conclusion can be drawn about the countries in the table in 1995?
A China had the highest percentage of children who died in infancy.
B People in Hong Kong lived the longest.
m
C Singapore had the largest number of people aged over 16.
D The population of Singapore was expected to fall in the next five years. Q37/N/04
co
ya N
o.
A a fall in the birth rate
SA
33) Other things being equal, what will cause a population both to increase and to age?
ho
6@ S
B a rise in both the birth rate and the death rate
C a rise in the death rate and a fall in the birth rate
24 HA
D a fall in the death rate Q36/J/04

an R
34) What would be most likely to cause the population to decrease if other things remain constant?
SI
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 Q24/N/V16
ss
35) The diagrams show the approximate age distributions of four economies.
ha
Which diagram resembles the age distribution of a developed economy?
Q25/N/V14

36) On 17 October 2006, the US population reached 300 million and was predicted to increase to 400 million by
2043.
Which change would mean that the US population moves in the opposite direction to that predicted?
A a change from net immigration to net emigration
B the birth rate falling more slowly than the death rate
C the death rate falling below the net immigration rate Q36/J/V13
D the infant mortality rate decreasing more rapidly than the increase in life expectancy
37) In 2010, Nigeria had a birth rate of 36 and an infant mortality rate of 94.
A Nigeria experienced a natural decrease in population.
m
B Nigeria’s population increased.
co
C 36 children were born per hundred of the population. Q35/N/V12
ya N
D 94 babies died before their first birthday out of every thousand babies born.
o.
SA
ho
38) It has been predicted that by 2050 China will have 53 million fewer children under 14, 100 million fewer workers
6@ S
and 234 million more people aged over 60.
24 HA
What will be the likely effect in China of these changes?

A The dependency ratio will fall.
B The Government’s expenditure will fall.
an R
C The Government’s income will fall.

SI
D The total population will fall. Q26/J/V16

ss
ha

60-62. POPULATION
1) A
2) D 3) A 4) B 5) B
6) A 7) D 8) B 9) B
10) B 11) B 12) C 13) C
14) A 15) C 16) D 17) B
18) D 19) C 20) A 21) A
22) B 23) C 24) A 25) C
m
26) A 27) A 28) C 29) C
co
ya N
30) B 31) C 32) A 33) D
o.
34) A
35) B
SA
36) A 37) D 38) C
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
63-64. BALANCE OF PAYMENTS
ho
6@ S
24 HA
an R
ss SI
ha

1) Which government policy is most likely to increase the volume of exports?
A devaluation
B embargoes
C quotas
D tariffs Q27/J/17

A free trade
C labour immobility
m
D tariffs Q28/J/17
co
ya N
3) In 2010, Vietnam experienced a deficit in the value of its trade in goods (visible) despite exporting a greater
o.
SA
number of goods than it imported.
ho
6@ S
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.
24 HA
C The country had a deficit on its trade in services.

D The country’s government imposed tariffs on imports. Q30/J/17
an R
ss SI
ha

4) The table shows components of Japan’s current account balance in trillion Yen for 2011 and 2012.
balance of balance of balance of

balance of goods
Year services current transfers income
¥ trillion
¥ trillion ¥ trillion ¥ trillion
2011 –1.61 –1.76 –1.11 14.04
2012 –5.23 –2.33 –1.02 13.55
Which balance improved between 2011 and 2012?

A balance of current transfers
m
B balance of goods
C balance of income
co
ya N
D balance of services Q30/N/16
o.
SA
5) The diagram shows China’s trade with Brazil for 1999 and 2003 in billions of dollars.
ho
6@ S
24 HA
an R
SI
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.
ss
C It moved from deficit to surplus.

D It moved from surplus to deficit. Q27/N/15
ha
6) 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 Q29/N/15

7) The table shows information on the trading position of four major economies in 2013.
Which country had the strongest trading position?
current account currency unit

country % of GDP
balance (US $ billion) per US $
A China +211.7 +1.9 6.12
B Germany +246.0 +6.4 0.75
C Japan +54.1 +1.0 79.4
D UK –96.7 –2.8 0.64

Q29/J/15
8) The table shows the trade in goods balance and the current account balance of the balance of payments for four
m
countries during a year.
co
Which country had the largest surplus on its trade in services, assuming no other transfers or income flows?
ya N
trade in goods current account
o.
country SA balance ($ billion) balance ($ billion)
ho
A Hong Kong 6.2 6.2
6@ S
B Indonesia 4.4 4.3
24 HA
C Mexico 7.8 7.6

D Singapore 5.3 5.4
Q30/J/15
an R
SI
9) Which change will increase the demand for imports?

A Consumer credit becomes more expensive.
B Income tax rates increase.
C The exchange rate appreciates.
ss
D The government increases tariffs. Q29/N/14

ha
10) 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 Q30/N/14

11) The table shows the values of the items in a country’s current account in two years.
Item year 1 ($m) year 2 ($m)
balance of goods and services –30 0
net income –30 –20
net transfers ? ?
balance of current account –50 +10
How did the value of the net transfers change between year 1 and year 2?
A decreased by $10m
B decreased by $20m
m
C increased by $20m
co
ya N
D increased by $30m Q30/J/14
o.
SA
12) Which of the following is an export of Jamaica?
ho
A a loan to Jamaica by the International Monetary Fund
6@ S
B Jamaican holidays taken by American tourists
24 HA
C dividends paid by a company in Jamaica to its American shareholders

D sales of Japanese cars in Jamaica Q40/N/13
an R
SI
13) A government wants to reduce basic food prices without making the current account of the balance of payments
worse.
What should it do?
A ban food exports
B put duties on food imports
ss
C ration basic foods

ha
D subsidise local food producers Q28/J/13
14) The recent world recession has resulted in fewer tourists from other countries visiting the United States (US).
How would this be recorded in the current account of the US balance of payments?
A a decrease in services exported
B a decrease in services imported
C an increase in services exported
D an increase in services imported Q39/J/13

15) A government agreed to provide $20 million to a developing country to help supply emergency aid.
In which part of the current account of the balance of payments was this payment recorded?
A current transfer flows
B income flows
C trade in goods
D trade in services Q38/N/12
16) In some Asian countries the cost of labour is lower than in developed countries. As a result they manufacture
and export clothes to Europe, where the demand for clothes is high.
The quality of these clothes, however, is not as good as some of the clothes produced in Europe.
What is likely to happen in the Asian countries and to the total expenditure on clothes in Europe?
m
co
impact in Asian countries change in expenditure in Europe
ya N
A capital account will improve increase
o.
B SA
current account will improve uncertain
ho
C exchange rate will fall uncertain
6@ S
D terms of trade will fall decrease
24 HA
Q39/N/12
17) Many sportsmen and sportswomen from developing countries go to the United States (US) to earn money, most
an R
of which they send back to their own countries.

SI
What impact would this have on the Balance of Payments?

A The current account balance of the developing countries would improve.
B The current account balance of the US would improve.
C The trade balance of the developing countries would improve.
ss
D The trade balance of the US would improve. Q34/N/11

ha
18) Which item would appear as a credit item in Pakistan’s current account of the balance of payments?
A the purchase by a Pakistani firm of oil from Nigeria
B the sale by a Pakistani firm of cotton jackets to a UK firm
C the setting up by the Chinese of a clothing factory in Pakistan
D the spending by Pakistani tourists in Abu Dhabi Q39/J/11

19) The diagrams show the composition of exports and imports of a country.
m
co
ya N
o.
A
SA
What is true for this country?
There was a deficit in the balance of trade in goods.
ho
6@ S
B There was a deficit in the balance of trade in services.
C There was a surplus in the balance of trade in goods.
24 HA
D There was a surplus in the balance of trade in services. Q40/J/11

an R
20) In September 2008, the Chinese government increased the sales tax on cars with large engines whilst it reduced
the sales tax on cars with small engines. Most cars in China with large engines are imported whilst most cars
SI
with small engines are home produced.

Which effects would the changes in sales tax be expected to have on China’s trade surplus and the demand for
home produced cars?
demand for home

ss
trade surplus
produced cars
A increase increase
ha
B increase reduce
C reduce increase
D reduce reduce
Q24/N/10

21) 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 Portuguese ships
C increased spending by Mauritians on holidays in Goa
D increased spending by tourists in Mauritian hotels Q38/N/10
22) Vietnamese companies buy insurance from companies in the United States (US).
How will this transaction be recorded in the Vietnamese balance of payments?
section credit / debit
A trade in goods credit
m
B trade in services credit
co
ya N
C trade in services debit
o.
SA D current transfers debit
Q37/J/10
ho
6@ S
23) Which two items, as well as trade in goods and services, are included in the current account of the balance of
24 HA
payments?
A foreign reserves and international investment
B government spending and international borrowing
an R
C incomes and current transfers

SI
D taxation and foreign aid Q37/N/09
24) Which is an invisible export in France’s balance of payments?

A aid to foreign disaster areas
ss
B contributions to the European Union

ha
C fee-paying patients from abroad in French hospitals

D maintenance of French embassies in other countries Q39/N/09
25) The United States is the most important destination of India’s exports. In 2006, 29 % of India’s exports went to
the United States.
Which change in economic policy in the United States is most likely to increase employment in India?
A a cut in government spending
B a cut in income tax
C a rise in interest rates
D an increase in tariffs Q40/N/09

26) A government decreased the tax on all goods produced in a country.
What is the most likely result of this?
A a decrease in imports
B a decrease in industrial production
C a decrease in real incomes
D a deterioration in the balance of trade in goods Q30/J/08
27) A country imports oil which is used in the production and distribution of goods. The country has also
experienced a rise in incomes which has resulted in a large increase in the demand for goods, some of which it
imports.
What is likely to happen to the country’s balance of trade in goods and to the price of oil?
m
balance of trade in goods price of oil
co
ya N
A worsens falls
o.
B SA improves falls
ho
C worsens rises
6@ S
D improves rises
24 HA
Q13/N/07
28) The introduction of a tariff on imported goods is likely to

an R
A ensure that the domestic industry becomes more efficient.

SI
B increase the demand for domestically produced goods.

C reduce the price of domestically produced goods.
D reduce the price of imported goods into a country. Q40/N/07
ss
29) What would not be recorded in the current account of Argentina’s balance of payments?
ha
A An Argentine company builds a factory in Kenya.

B An Argentine insurance company insures an American ship.
C Argentine beef is sold to South Africa.
D A large group of Italians visit Argentina. Q28/N/06

30) A country has a surplus on its trade in goods and services of $20 m and a deficit on its current account of $10 m.
What position on its current income balance and current transfer balance is consistent with this?
current income current transfer

balance ($m) balance ($m)
A +20 +10
B +10 –30
C –10 –20
D –20 +10
Q29/N/06
m
31) Many people in Zimbabwe want to buy foreign cars, which would be shipped by foreign companies.
What happens if the Zimbabwe government removes the quota on the import of motor cars?
co
ya N
balance on balance on
o.
SA A
trade in goods
improves
trade in services
no change
ho
6@ S
B improves worsens
24 HA
C worsens no change
D worsens worsens
Q38/N/06
an R
SI
32) During 2004 the price of crude oil rose to record levels.
How would this be likely to affect the balance of payments and the rate of inflation of an oil importing country in
ss
the short run?

ha
balance of payments rate of inflation
A improve fall
B improve rise
C worsen fall
D worsen rise
Q26/N/05

33) 90 % of Zambia’s foreign exchange used to come from copper exports. In the late 1980s, world copper prices
collapsed, putting a severe strain on the economy.
What does this information suggest?
A The national income of Zambia increased.
B The Zambian balance of payments worsened.
C Zambia could become dependent on service industries.
D Zambia could afford more imports. Q30/N/05
34) The table gives selected details of the UK trade in goods in 1998 and 1999 in £ billion.
year exports of goods imports of goods
m
1998 164.1 184.9
co
1999 165.0 191.2
ya N
o.
SA
What happened to the balance of trade in goods between 1998 and 1999?
ho
A The deficit decreased.
6@ S
B The deficit increased.
24 HA
C The surplus decreased.

D The surplus increased. Q30/J/05
an R
35) In Indonesia the opportunity cost of producing timber is lower than in any other country.
SI
To protect the environment, the Indonesian government decides to conserve its timber and ban timber exports.
What would happen in Indonesia to the balance of trade and external costs?
balance of trade external costs

ss
A worsens fall
B worsens unchanged
ha
C improves rise
D unchanged rise
Q38/J/05

36) The US trades with Uruguay. In 2002 the US approved a loan of US$ 1.5 billion to Uruguay to help boost
Uruguay's economy.
What would be the most likely effect of this loan?
A It would encourage Uruguay to import from the US.
B It would make Uruguay less competitive.
C It would result in imported inflation.
D It would stop US citizens investing in Uruguay. Q26/N/04
37) Which of the following would cause a favourable change in the UK trade in services (invisible) account?
A A Malaysian company increases its exports to the UK.
B A Japanese company invests in a subsidiary in the UK.
m
C A large UK company increases its exports of goods.
co
D A UK company wins a contract to transport South African exports. Q30/J/04
ya N
o.
SA
38) A country experienced a deficit on its trade in goods, income and current transfers. Overall, it had a surplus on
ho
the current account of its balance of payments.
6@ S
What must this mean?
24 HA
A It had a floating exchange rate.

B It had a surplus on its trade in services.
C It had a surplus on the government’s budget.
an R
D It was a developing country. Q38/J/V13

SI
39) A country imports oil, which has risen in price and which is used for production and for distribution. There has
also been an increase in unemployment in the country. Businesses have closed and total consumer demand has
fallen.
ss
What is likely to happen to the balance of trade and economic growth?

ha
balance of trade economic growth
A improve likely to increase
B uncertain likely to decrease
C worsen likely to decrease
D worsen likely to increase

Q39/N/V12

40) The diagram shows the value of exports and imports of goods of a country in five years.
m
co
Between which two years did the country have an increase in the value of imports and an improvement in its
ya N
trade balance? Q39/J/V12
o.
A 1 and 2 SA
B 2 and 3 C 3 and 4 D 4 and 5
ho
6@ S
41) It has been suggested that all countries producing arms should ban the export of weapons and cut production in
24 HA
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.
an R
B The price of existing weapons would fall. Q29/J/V16

SI
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.
ss
42) 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.
ha
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 Q30/J/V16

63-64. BALANCE OF PAYMENTS
1) A 2) A 3) A 4) A
5) D 6) B 7) B 8) D
9) C 10) D 11) C 12) B
13) D 14) A 15) A 16) B
17) A 18) B 19) D 20) A
21) D 22) C 23) C 24) C
25) B 26) A 27) C 28) B
m
29) A 30) C 31) D 32) D
co
ya N
33) B 34) B 35) A 36) A
o.
37) D
41) C
SA
38) B
42) B
39) B 40) C
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
o.
SA
65. EXCHANGE RATE
ho
6@ S
24 HA
an R
ss SI
ha

1) 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?
m
co
ya N
o.
SA Q30/J/16
ho
6@ S
2) The table shows information on the trading position of four major economies in 2013.
24 HA
Which country had the strongest trading position?
current account currency unit

country % of GDP
an R
balance (US $ billion) per US $

A China +211.7 +1.9 6.12
SI
B Germany +246.0 +6.4 0.75

C Japan +54.1 +1.0 79.4
D UK –96.7 –2.8 0.64

ss
Q29/J/15
ha
3) 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. Q28/N/14

4) A developing country’s two major sources of income from international trade are fishing and tourism.
If the country’s exchange rate depreciated, what is likely to happen?
A Imported goods would become cheaper for local people.
B The country would definitely become poorer.
C The price of fish sold as exports would become cheaper.
D Tourists to the country would be discouraged by higher prices. Q34/N/13
5) A country’s foreign exchange rate appreciates significantly.

Which group in the country will directly benefit from this change?
A a government department which only buys locally made goods
B retailers who get all their supplies from foreign producers
m
C workers in local companies that compete with foreign firms in the local market
co
ya N
D workers in local companies that sell only in foreign countries Q38/N/13
o.
SA
6) The table gives the retail price of a product in four countries in 2012.
ho
(New Zealand
6@ S
New Zealand $20.00
dollars)
24 HA
Pakistan 1500 Rupees
South Africa 125 Rand
United Kingdom £10.00 Pounds

an R
SI
What is needed to make a clear comparison of the price in the four countries?
A direct tax rates
B exchange rates
C import tariff rates
ss
D transport costs Q40/J/13

ha
7) The value of the Pakistani rupee changes, from 60 rupees to US$1, to 50 rupees to US$1.
What effect will this have on the price of Pakistani products sold in the US and the price of US products sold in
Pakistan?
price of Pakistani products price of US products

sold in the US sold in Pakistan
A increase increase
B increase reduce
C reduce increase
D reduce reduce
Q40/N/12
8) What is likely to cause a rise in a country’s foreign exchange rate?
A a fall in its exports of goods and services
B a fall in its imports of goods and services
C a fall in its inflow of income
D a rise in its outflow of transfers Q38/J/12
9) The table shows the exchange rate of the pound (£) in US dollars ($) and the UK Balance of Payments on current
account from 1998 to 2001.
number of UK current account

year
US $ for each £ £m
1998 1.65 –4 814
m
1999 1.61 –19 729
co
ya N
2000 1.51 –19 208
o.
SA 2001 1.44 –20 453
ho
Which of the following correctly describes these trends between 1998 and 2001?
6@ S
value of £
24 HA
current account
in terms of US $
A appreciating improving
B appreciating worsening
an R
C depreciating improving
SI
D depreciating worsening
Q40/J/12
10) The table gives the retail price of a paperback book as printed on its back cover.
ss
United Kingdom £6.99 (Pounds)

ha
Canada $11.99 (Canadian dollars)
Australia $14.99 (Australian dollars)
New Zealand $20.95 (New Zealand dollars)
What is needed to make a clear comparison of the price in the four countries?
A exchange rates
B indirect tax rates
C inflation rates
D retail price indices Q35/N/11

11) There was an increase in the value of the United States (US) dollar against the South African Rand.
What is a result of this?
A an increase in the number of exports from the US to South Africa
B an increase in the number of imports to the US from South Africa
C fewer people from the US spend holidays in South Africa
D more people from South Africa spend holidays in the US Q40/J/10
12) Two industries in Namibia are fishing and tourism. The value of the currency of Namibia fell in 2001.
If there were no other changes, what resulted from the fall?
A Imported goods in Namibian shops became cheaper.
m
B The price of Namibia’s fish sold in foreign markets became cheaper.
C The volume of Namibia’s exports decreased.
co
ya N
D Tourists were discouraged by higher prices in Namibia. Q31/J/07
o.
SA
13) The UK pound depreciates against the US dollar from £1 = $1.80 to £1 = $1.50.
ho
6@ S
A UK imports from the US will cost less.
24 HA
B US imports from the UK will cost more.

C UK pounds will be dearer in terms of US dollars.
an R
D US dollars will be dearer in terms of UK pounds. Q30/N/06

SI
14) What would contribute to a fall in the value of the UK pound (£)?
A a fall in interest rates in other countries
B a rise in the number of foreign tourists visiting the UK
ss
C the removal of import tariffs by the USA

D the value of UK imports increasing more than the value of UK exports Q30/J/06
ha
15) What is meant by the depreciation of a currency?

A a fall in its external value
B a fall in its internal value
C a rise in its external value
D a rise in its internal value Q31/J/06

16) ‘The pound sterling made a dramatic recovery in the world's currency markets yesterday.’
To what does this statement refer?
A exchange rate
B growth rate
C interest rate
D tax rate Q28/N/04
17) 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?
m
prices paid by Singapore prices paid to Singapore
co
for imports for exports
ya N
o.
A decrease decrease
B
SA
decrease increase
ho
6@ S
C increase decrease
24 HA
D increase increase
Q30/N/V16
an R
18) Which change would be most likely to cause an increase in the demand for the Turkish Lira?
SI
A increased investments by Turkish firms in Italy

B increased profits sent to France by French companies in Turkey
C increased purchases of German chemicals by Turkish firms Q28/N/V14
D increased speculation that the value of the Turkish Lira will rise in the future
ss
19) The table shows how the South African Rand’s exchange rates against the US Dollar and the Euro changed
ha
during a year.
In which quarter was it cheapest for an importer in the US to pay for goods bought from South Africa, and most
expensive for an importer in Europe to do the same?
exchange rate exchange rate

quarter
(Rands to 1 Dollar) (Rands to 1 Euro)
A first R7.499 R9.692
B second R7.485 R9.710
C third R7.510 R9.684
D fourth R7.459 R9.702

Q40/N/V12
20) Which factor would cause a country’s exchange rate to fall?
A demand for imports increase
B domestic interest rates rise
C domestic savings increase
D more tourists visit the country Q40/J/V12
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

65. THE EXCHANGE RATE
1) B
2) B 3) A 4) C 5) B
6) B 7) B 8) B 9) D
10) A 11) B 12) B 13) D
14) D 15) A 16) A 17) B
18) D 19) C 20) A
m
co
ya N
o.
SA
ho
6@ S
24 HA
an R
ss SI
ha

m
co
ya N
66-67. FREE TRADE
o.
SA
ho &
6@ S
24 HA
PROTECTIONISM
an R
ss SI
ha

1) 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?
milk market in Europe price of milk in Russia profits of EU farmers

A excess demand fall rise
B excess demand rise rise
C excess supply fall fall
D excess supply rise fall

Q29/J/17
2) What is necessarily involved in international free trade?
m
A the absence of transport costs
co
ya N
B the gift of foreign aid from charities
o.
C the supply of zero interest rate government loans
SA
D the unrestricted exchange of goods and services Q28/J/V17
ho
6@ S
3) In 2015, China was the world’s largest exporter of manufactured goods and a major importer of oil and minerals.
24 HA
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.
an R
B China reduced its demand for oil and minerals.

SI
C China’s exports became less competitive.

D China’s trading partners improved their balance of trade with China. Q30/J/V17
ss
ha

4) What encourages international specialisation?
A a foreign exchange shortage
B diseconomies of scale
C free trade
D quotas Q27/N/16
5) A country imposes tariffs and quotas on imported goods.

What will citizens of that country experience?
A higher prices
B higher welfare
m
C higher unemployment
D wider consumer choice Q28/N/15
co
ya N
o.
SA
6) 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.
ho
What was the most likely outcome of the government’s action?
6@ S
A prices were fixed by the wheat producers
24 HA
B the amount produced was determined by the government

C the price of wheat abroad fell
an R
D there was a redistribution of domestic production Q18/J/15

SI
7) The citizens of a country which avoids international trade may benefit from
A an increase in specialisation.
B better political and cultural ties.
ss
C competitive pressure to improve the quality of goods.

D more employment in their industries. Q28/J/14
ha
8) 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. Q29/J/14

9) Which of the following could not be a reason for imposing tariffs on imported goods?
A to encourage self sufficiency
B to lower the general price level within the economy
C to protect a growing domestic industry
D to reduce a balance of trade deficit Q39/N/13
10) 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 the encouragement of multinational companies
m
C increased self sufficiency and barriers to trade
D price controls and increased regulations on domestic monopoly industries Q38/J/13
co
ya N
o.
SA
11) A government removed the quota on goods imported into the country.
ho
6@ S
A a decrease in demand for domestic production
B a decrease in domestic unemployment
24 HA
C a decrease in exports
D a decrease in the balance of trade deficit Q39/J/12
an R
SI
ss

D to reduce the rise in domestic food prices Q25/J/11
ha
13) A government may use customs barriers to restrict free trade.

What is an economic reason for doing this?
A to discourage the production of strategic goods
B to improve the balance of trade
C to increase a balance of payments deficit
D to make imports cheaper Q38/J/11

14) One argument for protectionism is to prevent dumping.
What is meant by dumping?
A countries paying low wages to their workers to gain price advantage
B countries providing poor working conditions for their employees to keep costs low
C countries selling products abroad at less than the cost of production
D countries selling products abroad that do not meet health and safety standards Q40/N/10
15) Drinks producers in India are resisting plans to remove tariffs on imported drinks. They claim that a reduction in
tariffs would destroy the emerging drinks industry with large-scale imports of cheap drinks.
Which argument for protectionism are they putting forward?
A the declining industry argument
m
B the infant industry argument
co
C the strategic industry argument
ya N
D the sunset industry argument Q38/N/09
o.
SA
ho
16) A government decreased the tax on all goods imported into the country.
6@ S
24 HA
A a decrease in domestic production

B an increase in economic growth
an R
C an increase in exports
D an improvement in the balance of trade in goods Q24/J/09
SI
17) What would be least likely to limit international trade?

A border restrictions on movement
ss
B common regulations in different countries

C complicated customs procedures
ha
D poor information on international markets Q38/J/09
18) When does free trade occur?

A when goods are exported with government subsidies
B when goods are given as part of an aid programme
C when goods are traded using barter
D when goods face no import barriers Q40/J/09

19) What is not likely to be a barrier to international trade?
A distance
B exchange rates
C language
D specialisation Q37/J/08
20) A government decides to reduce the size of the quota on a good.

What is likely to happen?
A The balance of trade will worsen.
B The good will become cheaper.
m
C The government’s revenue will decline.
D There will be less of the good imported. Q36/J/07
co
ya N
o.
A
SA
21) What will result if Europe reduces trade barriers to increase imports of clothing and food from Asia and Africa?
greater choice for European consumers
ho
6@ S
B increased income for European producers
C lower unemployment in the European clothing industry
24 HA
D slower economic growth in Asia and Africa Q40/J/07

an R
22) A developing country finds it difficult to export goods to a developed country.

SI

A The developing country’s exchange rate has depreciated.
B There are no tariffs on goods bought from the developing country.
C There are quotas on goods bought from this developing country.
ss
D There is cheap labour in the developing country. Q37/N/06

ha
23) Assuming nothing else is changed, what will be the effect if a country imposes tariffs?
A increased import prices
B increased export prices
C reduced government revenue
D reduced home production Q37/J/06

24) Which economic argument is in favour of free trade?
A It allows countries to benefit from comparative advantage.
B It encourages the protection of domestic industries.
C It helps declining industries by slowing the rate of decline.
D It results in the expansion of all industries in a country. Q38/N/05
25) If a country places a tax on imports of food, which group in the country is most likely to benefit?
A consumers
B farmers
C food importers
m
D supermarkets Q40/J/05
co
ya N
26) What is an effect of trade protection?
o.
A
B
SA
It encourages home industries to be more efficient.
It increases the demand for home-produced goods.
ho
6@ S
C It reduces the price of home-produced goods.
D It reduces the price of imports. Q38/J/04
24 HA
27) Russia exports wheat. In 2010, a bad harvest led the Russian government to prevent the export of wheat, to
an R
ensure enough supplies were kept for domestic use.

What was the most likely outcome of the government’s action?
SI
A prices were fixed by the wheat producers

B the amount produced was determined by the government
C the price of wheat abroad fell
ss
D there was a redistribution of domestic production Q18/J/V15

ha
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 Q28/J/V15

29) Skin creams preventing sunburn made in the European Union (EU) are more effective than those made in the
United States (US). US tourists stock up on the creams when visiting Europe. Such creams are banned from
production in the US because of the chemicals in them. In 2013, negotiations began to remove this ban in order
to allow production in the US.
How is this freer trade likely to affect manufacturers of skin creams in the US and the EU?
manufacturers manufacturers
in the US in the EU
A gain gain
B gain lose
C lose gain
D lose lose
m
Q29/J/V15
co
ya N
30) Which change will increase the quantity of a country’s exports?
o.
A
B
SA
Foreign governments raise tariff rates.
The country’s exchange rate depreciates.
ho
6@ S
C The level of world income falls.
24 HA
D Transport costs become more expensive. Q29/N/V14
31) In September 2011 the Brazilian Government increased its tariff on imported Chinese cars.
an R
Which change might have increased the number of cars Brazil imported from China in October 2011?
SI
A a decrease in the quality of cars produced in Brazil

B a decrease in the sales tax on cars produced in Brazil
C an increase in the costs of producing cars in China
D an increase in the value of China’s currency Q30/N/V14
ss
32) Low income countries make up 34% of the total world population but account for just 2.4% of the value of total
ha
world exports.
What is the likely reason for this low figure?
A High income countries have no demand for low income countries’ exports.
B Low income countries export relatively cheap primary products.
C Low income countries’ terms of trade are very high.
D Modern technology has made low income countries self-sufficient. Q31/N/V13

33) How does a tariff differ from a quota?
A A tariff is on exports, a quota is on imports.
B A tariff is on the quantity of an import, a quota is on the price of an import.
C A tariff raises government revenue, a quota raises no government revenue.
D A tariff raises the price at which imports sell, a quota does not. Q38/N/V13
34) In February 2010, the Vietnamese Central Bank devalued the country’s currency.
What effect would this devaluation have on the price of Vietnamese exports and imports?
price of price of
Vietnamese exports Vietnamese imports
m
A decrease decrease
B decrease increase
co
ya N
C increase decrease
o.
D SA
increase increase
Q39/N/V13
ho
6@ S
24 HA
35) Which of the following is an export of Jamaica?

A a loan to Jamaica by the International Monetary Fund
B Jamaican holidays taken by American tourists
an R
C dividends paid by a company in Jamaica to its American shareholders

SI
D sales of Japanese cars in Jamaica Q40/N/V13
36) What is thought to be a benefit of global free trade?

A It increases the opportunity for domestic producers to specialise.
ss
B It increases the protection for domestic producers.

C It reduces a country’s reliance on other countries.
ha
D It reduces the transport costs involved in trading. Q39/J/V13
37) What is an advantage to a country of free trade?

A greater international diversification of production
B greater range of domestically produced goods
C greater reliance on other countries
D greater specialisation in the use of resources Q38/J/V12

A free trade
C labour immobility
D tariffs Q40/N/V11
39) A government may use customs barriers to restrict free trade.

What is an economic reason for doing this?
A to discourage the production of strategic goods
B to improve the balance of trade
m
C to increase a balance of payments deficit
D to make imports cheaper Q40/J/V11
co
ya N
o.
SA
40) One argument for protectionism is to prevent dumping.
What is meant by dumping?
ho
6@ S
A countries paying low wages to their workers to gain price advantage
B countries providing poor working conditions for their employees to keep costs low
24 HA
C countries selling products abroad at less than the cost of production

D countries selling products abroad that do not meet health and safety standards Q38/N/V10
an R
ss SI
ha

66-67. FREE TRADE AND PROTECTIONISM
1) D 2) D 3) B 4) C
5) A 6) D 7) C 8) D
9) D 10) B 11) C 12) A
13) D 14) B 15) C 16) B
17) A 18) B 19) D 20) D
21) D 22) A 23) C 24) A
25) A 26) B 27) B 28) D
m
29) C 30) B 31) B 32) A
co
ya N
33) B 34) C 35) B 36) B
o.
37) A
41) C
SA 38) D 39) A 40) B
ho
6@ S
24 HA
an R
ss SI
ha


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TABLE OF CONTENTS

TOPICS Page No.

BASIC ECONOMIC PROBLEM

1 The Basic Economic Problem & The 3 Economic Questions 3 - 10

Equilibrium Price & Factors for Demand and Supply for a

10 Price Elasiticity of Demand & Price Elasiticity of Supply 97 - 110

11-12 Market Failure 111 - 124

PRODUCER, CONSUMER AND BORROWER

13-16 Money 125 - 130

Compiled by Sir Hassan Copyright of 1

31-34 Types of Business Organisations & Multinationals 181 - 190

52 Inflation & The Retail Price Index 277 - 296

53 Unemployment / Full Employement 297 - 308

Gross Domestic Product / Gross National Product & The

DEVELOPED AND DEVELOPING

57-59 The Developed V/S Developing Countries 331 - 358

63-64 Balance of Payments 373 - 386

Compiled by Sir Hassan Copyright of 3

4 Compiled by Sir Hassan Copyright of

D infinite resources and unlimited wants Q1/J/15

A It affects all economies and individuals.

B It is the most urgent target of government economic policy.

6) What is the cause of economic scarcity?

A limited wants with limited resources

7) Why will the economic problem never be solved?

Compiled by Sir Hassan Copyright of 5

9) Economics is primarily concerned with

11) What is meant by the economic problem?

D how to decide which methods to use to exploit all resources Q5/J/11

6 Compiled by Sir Hassan Copyright of

14) Which economic change would increase the problem of scarcity?

A adequate water supplies expensive electricity

C expensive electricity scarce water supplies

D scarce water supplies cheap electricity

16) What is not one of the basic questions in Economics?

B How will goods be produced?

C How will goods be transported?

17) What is the basic economic problem facing all societies?

Compiled by Sir Hassan Copyright of 7

19) Which economic question is least likely to arise as a result of scarcity?

D shortages of skilled labour Q1/N/05

21) Which statement best explains why drought is an economic problem?

A Drought cannot be controlled.

8 Compiled by Sir Hassan Copyright of

What is the reason why wants are not fully satisfied?

C There is an over-production of goods and services by business organisations.

26) What is meant by the economic problem?

B how to allocate resources between public and private sectors

C how to balance unlimited wants against finite resources

Compiled by Sir Hassan Copyright of 9

10 Compiled by Sir Hassan Copyright of

Compiled by Sir Hassan Copyright of 11

12 Compiled by Sir Hassan Copyright of

5) New oil reserves are discovered.

What has increased in supply?

6) Which statement about the factors of production is correct?

Compiled by Sir Hassan Copyright of 13

first factor second factor

A capital and enterprise