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1

By 2030, as the human population grows, the world will need at least 50% more food, 45% more energy and 30% more water from the same resources. What does this statement directly indicate?

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

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

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2

A country was at point P on its production possibility curve. Following the threat of invasion it prepared for war. The war then reduced the country’s infrastructure. P Q R S O military goods consumer goods What are the most likely changes on the production possibility curve diagram that are consistent with these events?

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

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3

Which is a normative statement?

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

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

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4

Meera has just finished a course at art college and has decided to set up a business on her own producing clay figures of famous people. Which factors of production is she likely to have to purchase from other businesses?

1. Basic economic ideas and resource allocation (AS Level)  →  1.3. Factors of production

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5

The demand curve in the diagram shows the relationship between the number of car journeys and the cost of a car journey. D O number of car journeys cost of a car journey What would cause the demand curve to shift to the left?

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

Open

6

The diagram shows the market for milk. Two conditions change. The cost of cattle feed rises sharply and this is followed by the government raising the tax on cheese which uses milk in its production. O D D D Y Z W X price quantity Which changes in position on the diagram of demand curves for milk are consistent with these events?

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

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

Open

7

If the elasticity of demand for a commodity is unity, an increase in its price will A decrease the quantity purchased. B have no effect on consumer surplus. C increase total expenditure on the commodity. D leave the quantity purchased unchanged.

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)  →  2.5. Consumer and producer surplus

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

Open

8

The table shows a consumer’s expenditure on a range of goods at different levels of income. For which good does the consumer have an income elasticity of demand greater than zero, but less than one?

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

Open

9

What might cause a market supply curve to shift to the right?

8. Government microeconomic intervention (A Level)  →  8.3. Labour market forces and government intervention

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

Open

10

The diagram shows four different straight line supply curves. S1 price quantity O S2 S3 S4 What can be concluded from the diagram?

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

Open

11

The diagram illustrates the effects of placing a specific tax equal to JM on a good. price quantity O J L M K D S1 S2 X Y Z Which area represents total tax receipts?

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

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

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

Open

12

What is consumer surplus?

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

Open

13

In a market for a good both demand and supply change at the same time. Which combination of changes would enable an economist to predict with confidence that more resources will be needed in its production but not the direction of the associated price change?

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)  →  2.1. Demand and supply curves

Open

14

The existence of a positive externality is possible when A consumers are not the best judges of the future benefits from consuming a product. B groups of consumers act together to negotiate a discount on the sale of a product. C producers use a government scheme to clear waste from their offices at no cost to themselves. D social costs of production exceed private costs of production.

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

Open

15

A firm opens a new factory on derelict ground on the outskirts of a town. What will be included among the externalities arising from the opening of the new factory?

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

Open

16

A firm owns a bridge and charges all vehicle users who cross it. How might the charge be classified?

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

Open

17

The table shows the results of a cost-benefit analysis into the building of a new runway at an airport. costs US$m benefits US$m private external Which statement about the new runway is correct?

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

Open

18

In the diagram, the initial quantity traded was Q and the price was P. price O quantity Q Q1 S1 S1 P1 S S D P D The price then rose to P1 and the quantity traded rose to Q1. Which combination of government policy measures could explain this change?

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

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

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

Open

19

The table shows the output of cars and televisions per worker per week before trade and specialisation. country X country Y cars televisions Each country specialises in the product where it has a comparative advantage and trades on the basis of an exchange rate which lies between their opportunity cost ratios. Which change would stop the countries specialising and trading?

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

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

Open

20

A country produces washing machines. The government lowered both the tax on washing machines produced in its country and the quota on imports of foreign washing machines. What is the likely result?

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

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

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

Open

21

The diagram shows the effect on the quantity of an import to the domestic market of the removal of a tariff that reduces the import’s price to P1. 40 48 S D S (world with tariff) S (world no tariff) P P1 quantity (000s) O price By how much will the quantity of imports increase?

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

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

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

Open

22

A group of countries join together to form a single market with a single common currency. Which term best describes the resulting organisation?

11. International economic issues (A Level)  →  11.6. Globalisation

11. International economic issues (A Level)  →  11.3. Economic development

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

Open

23

The table shows the unemployment rate and the size of the labour force in four countries in 2012. Which country had the highest number of people in employment in 2012?

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

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

Open

24

The diagram shows an economy’s aggregate demand curve and two short-run aggregate supply curves. Y1 SRAS1 SRAS2 Y2 O price level real output AD What could cause the change in real output from Y1 to Y2?

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

Open

25

The table shows a country’s rate of inflation for four years. year rate of inflation % 4.0 3.0 2.5 2.0 What fell between 2009 and 2012?

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

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

Open

26

What is not a possible cause of cost-push inflation?

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

8. Government microeconomic intervention (A Level)  →  8.3. Labour market forces and government intervention

Open

27

What would lead a country to move from a surplus to a deficit on the 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

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

Open

28

What determines the purchasing power parity of a currency?

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

11. International economic issues (A Level)  →  11.2. Exchange rates

Open

29

With an exchange rate of 5 Egyptian pounds (EGP) = 1 US dollar ($), an American product sells in Egypt for EGP 100. Assuming that the dollar price remains unchanged, what will be the price of the product in Egypt if the Egyptian pound appreciates to 4 EGP = 1 US$?

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

11. International economic issues (A Level)  →  11.2. Exchange rates

Open

30

The US Central Bank raises its interest rate to improve its balance of payments position. The diagram shows the resulting changes in the demand for and supply of US$ in the foreign exchange market. O quantity of US$ exchange rate of US$ W X Y Z What should curves W, X, Y and Z be labelled to show the effect of the interest rate rise on the exchange rate?

11. International economic issues (A Level)  →  11.2. Exchange rates

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

Open