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1

Why does a production possibility curve exist for every economy?

1. Basic economic ideas and resource allocation (AS Level)  →  1.5. Production possibility curves

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2

Which statement is a normative statement?

4. The Macroeconomy (AS Level)  →  4.4. Economic growth

1. Basic economic ideas and resource allocation (AS Level)  →  1.2. Economic methodology

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3

Which combination best describes the basic economic problem?

1. Basic economic ideas and resource allocation (AS Level)  →  1.1. Scarcity, choice and opportunity cost

1. Basic economic ideas and resource allocation (AS Level)  →  1.4. Resource allocation in different economic systems

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4

What is the main reason an economy is unlikely to rely completely on market forces to allocate resources?

3. Government microeconomic intervention (AS Level)  →  3.1. Reasons for government intervention in markets

1. Basic economic ideas and resource allocation (AS Level)  →  1.6. Classification of goods and services

1. Basic economic ideas and resource allocation (AS Level)  →  1.1. Scarcity, choice and opportunity cost

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5

What is the opportunity cost to a person of spending $20 on a new pair of sports shoes?

1. Basic economic ideas and resource allocation (AS Level)  →  1.1. Scarcity, choice and opportunity cost

7. The price system and the microeconomy (A Level)  →  7.4. Private costs and benefits, externalities and social costs and benefits

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6

What is the definition of effective demand?

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

4. The Macroeconomy (AS Level)  →  4.3. Aggregate Demand and Aggregate Supply analysis

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

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7

The price elasticity of demand for good X is –2.4, its income elasticity of demand is –0.4 and the cross elasticity of demand for good X with respect to good Y is +0.8. What is the correct description of good X?

2. The price system and the microeconomy (AS Level)  →  2.2. Price elasticity, income elasticity and cross elasticity of demand

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8

The diagram shows two straight line demand curves, X and Y. O price quantity X Y What is correct about curves X and Y?

2. The price system and the microeconomy (AS Level)  →  2.2. Price elasticity, income elasticity and cross elasticity of demand

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

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9

The price elasticity of the supply of yoghurt is estimated to be +1.5. If the demand for yoghurt rises and price rises by 20%, how much more will be supplied to the market?

2. The price system and the microeconomy (AS Level)  →  2.2. Price elasticity, income elasticity and cross elasticity of demand

2. The price system and the microeconomy (AS Level)  →  2.3. Price elasticity of supply

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10

Butter is a normal good. It is in joint demand with bread and in joint supply with buttermilk. The demand for butter increases because of a rise in consumer incomes. What are the effects of this increase on the prices of bread and buttermilk?

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

2. The price system and the microeconomy (AS Level)  →  2.2. Price elasticity, income elasticity and cross elasticity of demand

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11

The diagram shows a competitive market in equilibrium with price P and quantity Q sold. V U O Q P W S D quantity price Which area represents the producer surplus?

2. The price system and the microeconomy (AS Level)  →  2.5. Consumer and producer surplus

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

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12

A policy that aims to reduce the degree of inequality of income will also reduce the level of employment in a country. What is most likely to be such a policy?

3. Government microeconomic intervention (AS Level)  →  3.3. Addressing income and wealth inequality

5. Government macroeconomic intervention (AS Level)  →  5.4. Supply-side policy

5. Government macroeconomic intervention (AS Level)  →  5.2. Fiscal policy

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13

What explains the underconsumption of merit goods?

1. Basic economic ideas and resource allocation (AS Level)  →  1.6. Classification of goods and services

3. Government microeconomic intervention (AS Level)  →  3.1. Reasons for government intervention in markets

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14

A country uses an income tax under which the first $10 000 of income is tax-free, the next $20 000 is taxed at 20% and any income over $30 000 is taxed at a top rate of 40%. It also levies a sales tax of 10% on most products. Which combination of tax changes is most likely to create a more equal distribution of income in the country?

3. Government microeconomic intervention (AS Level)  →  3.3. Addressing income and wealth inequality

9. The macroeconomy (A Level)  →  9.1. The circular flow of income

3. Government microeconomic intervention (AS Level)  →  3.2. Methods and effects of government intervention in markets

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15

The table shows real GDP expressed as an index number in each quarter of 2021. index of GDP in real terms (2020 = 100) Q1 99.4 Q2 99.3 Q3 100.1 Q4 100.4 What can be concluded from the table?

4. The Macroeconomy (AS Level)  →  4.4. Economic growth

5. Government macroeconomic intervention (AS Level)  →  5.3. Monetary policy

6. International economic issues (AS Level)  →  6.4. Exchange rates

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16

What is least likely to cause a simultaneous increase in demand-pull and cost-push inflation?

4. The Macroeconomy (AS Level)  →  4.6. Price stability

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

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17

According to the circular flow of income, what would be the immediate result of an increase in the value of a country’s exports?

4. The Macroeconomy (AS Level)  →  4.2. Introduction to the circular flow of income

9. The macroeconomy (A Level)  →  9.1. The circular flow of income

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18

To calculate the unemployment rate, the number unemployed is related to A the total adult population aged 18–65. B the number of unemployed who are seeking work. C the total number in full-time employment. D the total population in the labour force.

9. The macroeconomy (A Level)  →  9.3. Employment/unemployment

4. The Macroeconomy (AS Level)  →  4.5. Unemployment

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19

Aggregate demand in an economy may decrease as a result of an increase in A consumption expenditure. B government expenditure. C import expenditure. D investment expenditure.

4. The Macroeconomy (AS Level)  →  4.3. Aggregate Demand and Aggregate Supply analysis

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20

A government has a balanced budget. It decides to increase its spending by 10%. Which increase in government revenue would produce a budget surplus?

5. Government macroeconomic intervention (AS Level)  →  5.2. Fiscal policy

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21

An economy has an unemployment rate of 8%, an increase of 2% from the previous year. At the same time, the current account deficit rose from 3% of GDP to 4% of GDP. What would be most likely to reduce both unemployment and the current account deficit?

6. International economic issues (AS Level)  →  6.5. Policies to correct imbalances in the current account of the balance of payments

9. The macroeconomy (A Level)  →  9.3. Employment/unemployment

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22

The diagram shows aggregate demand (AD) curves for an economy. price level real output O AD2 AD1 Which combination is most likely to have caused the shift from AD1 to AD2?

4. The Macroeconomy (AS Level)  →  4.3. Aggregate Demand and Aggregate Supply analysis

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

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23

What can be considered an expansionary supply-side policy?

5. Government macroeconomic intervention (AS Level)  →  5.4. Supply-side policy

5. Government macroeconomic intervention (AS Level)  →  5.2. Fiscal policy

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24

The table indicates the factor inputs required to produce wheat and cars in countries X and Y. units of factor inputs to produce one tonne of wheat units of factor inputs to produce one car country X country Y What makes it possible for both countries to benefit from trade?

6. International economic issues (AS Level)  →  6.1. The reasons for international trade

11. International economic issues (A Level)  →  11.5. Relationship between countries at different levels of development

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25

A government decides to allow the country’s currency to depreciate to remove the deficit on its current account of the balance of payments. What is the most likely reason why this would not work?

6. International economic issues (AS Level)  →  6.5. Policies to correct imbalances in the current account of the balance of payments

11. International economic issues (A Level)  →  11.1. Policies to correct disequilibrium in the balance of payments

6. International economic issues (AS Level)  →  6.3. Current account of the balance of payments

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26

When must the terms of trade of a country change?

6. International economic issues (AS Level)  →  6.1. The reasons for international trade

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27

The table shows an extract from a country’s balance of payments. exports $ billion imports $ billion trade in goods trade in services primary income secondary income What is the current account balance?

6. International economic issues (AS Level)  →  6.3. Current account of the balance of payments

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28

The table shows the goods balance and services balance for a country in selected years. year goods balance $ billion services balance $ billion +120 –30 +110 –30 +50 –10 +130 –60 +140 –50 Between which years did the overall goods and services balance change the most?

6. International economic issues (AS Level)  →  6.3. Current account of the balance of payments

10. Government macroeconomic intervention (A Level)  →  10.2. Links between macroeconomic problems and their interrelatedness

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29

The diagram shows the market for both domestic and imported computers for an economy. The world price is p1. price O quantity Sdom S2 p2 p1 q1 q2 Sdom + imp D Which government policy would lead to a price of p2?

5. Government macroeconomic intervention (AS Level)  →  5.4. Supply-side policy

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

6. International economic issues (AS Level)  →  6.4. Exchange rates

Open

30

What is not a likely cause of a deficit in the current account of the balance of payments?

6. International economic issues (AS Level)  →  6.3. Current account of the balance of payments

6. International economic issues (AS Level)  →  6.5. Policies to correct imbalances in the current account of the balance of payments

Open