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1

In 2007 there was a worldwide shortage of oil. The diagram shows the consumption and production of oil (billion tonnes) in 2007 for selected countries. United States Japan Russia Britain 0.2 0.4 bn tonnes 0.6 0.8 1.0 consumption production What can be concluded from the diagram?

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

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

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

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2

What is necessary for effective specialisation?

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

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

Open

3

The change from WX to YZ in a country’s production possibility curve is shown...

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

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

Open

4

Recently, thousands of ancient Roman coins were discovered buried in a field in the UK. Funds were raised by a museum to buy them. What function of money did the coins retain?

9. The macroeconomy (A Level)  →  9.4. Money and banking

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5

What describes a market supply curve?

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

Open

6

The demand curve for new cars in a country shifted to the left. Which change could have caused such a shift?

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

7

The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. service elasticity with respect to the price of bus travel rail travel bus travel –0.37 +0.13 rail travel +0.16 –0.43 What would be the change in the volume of rail travel resulting from a 1% increase in bus fares?

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

Open

8

It has been estimated that bread has an income elasticity of –0.04. What can be concluded about bread from this information?

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

Open

9

SX, SY and SZ are the supply curves of goods X, Y and Z. price ($) 2.5 quantity supplied SX SY SZ If the price of all three goods rises from $5 to $10, what are their price elasticity of supply values?

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

10

A US study, published in July 2014, warned teenagers to reduce the amount of fizzy drink they consume. One can of fizzy drink contains an adult’s entire daily sugar allowance. If the advice were accepted, how might the effect be illustrated on demand and supply diagrams for fizzy drinks and for sugar?

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

Open

11

In the diagram, the supply curve shows the number of spaces in a car park and the demand curves show the demand for spaces on four different days (D1, D2, D3 and D4). S D4 P4 P3 P2 P1 D3 D2 D1 O quantity price The owner wishes to charge a parking fee on each of these days to allocate the spaces according to the market mechanism. Which pricing policy should the owner use?

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

Open

12

The diagram shows the demand curve and supply curve for a good on which the government imposes a specific tax. O quantity price S S D D What will be the result of this tax?

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

Open

13

The diagram shows a consumer’s demand curve for a product. quantity D price ($) How does consumer surplus change as the price of the product rises in $5 steps between $5 and $20?

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

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

Open

14

A government imposes a maximum rent in order to make rented housing more affordable. What is likely to be a long-run consequence if the maximum is set below the current free market level?

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

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

Open

15

The diagram shows demand and supply curves for a good. S1 is the original supply curve, S2 is supply after a tax is added. S2 S1 D quantity price ($) How much tax revenue is earned by the government?

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

16

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, although some essential goods are exempt. 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

8. Government microeconomic intervention (A Level)  →  8.2. Equity and redistribution of income and wealth

Open

17

In the diagram, DD is the demand curve for an agricultural commodity, S1 is the supply curve in period 1 and S2 is the supply curve in period 2. The broken curve is a rectangular hyperbola. D D S2 S1 P1 P2 price quantity O The government operates a buffer stock scheme fixing the price at OP1 in period 1 and OP2 in period 2. How do output and farm revenue in period 2 compare with period 1?

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

18

A government decides to privatise a nationalised company by transferring ownership directly to its managers and workers. What is its most likely motive for this decision?

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

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)  →  7.7. Growth and survival of firms

Open

19

In 2012, high street shops reported a fall in sales as domestic demand in an economy fell. However, the impact on the overall economy was not as unfavourable as was first feared. What might have lessened the impact on the economy?

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

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

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

Open

20

An economy is initially in equilibrium at point X in the diagram. O P Y P1 Y1 X Z AD1 AS1 AS1 AS AS AD1 AD AD real GDP price level The government then introduces a supply-side policy measure which causes the economy to move to point Z. Which supply-side policy and reaction could explain this change?

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

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

Open

21

A country experienced an annual deflation rate of 2% for four successive years. Which statement is correct for the four-year period?

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

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

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

Open

22

In July 2013, orders for durable US manufactured goods from computers to aircraft fell 7.3%, the biggest fall for a year. What might explain this change in trade and how would it have affected the US balance of payments?

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

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

Open

23

The following exchange rates were recorded in the foreign exchange market. £1 = €1.208 $1 = €0.727 €1 = $1.375 Within which range of values should £1 exchange for $?

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

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

Open

24

Between 2005 and 2010, a country’s import prices rose by 25% and its terms of trade rose to 120 (2005 = 100). Which change has there been in the country’s export prices?

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

4. The Macroeconomy (AS Level)  →  4.1. National income statistics

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

Open

25

The diagram shows production possibility curves for two countries, X and Y. O good L good M country Y country X What can be deduced from the diagram?

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

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

Open

26

What is not associated with greater economic integration between countries?

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

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

Open

27

Which statement is not a valid justification for an import tariff?

6. International economic issues (AS Level)  →  6.2. Protectionism

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

Open

28

An increase in interest rates is an example of which type of policy?

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

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

10. Government macroeconomic intervention (A Level)  →  10.3. Effectiveness of policy options to meet all macroeconomic objectives

Open

29

Possible policies a government might use to reduce a deficit on the current account of the balance of payments include devaluation, government spending cuts, interest rate rises and tariffs. Which two policies would be classified as expenditure-reducing ?

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

30

Which policy, adopted by a government with the intention of reducing the rate of inflation, might cause a greater deficit on 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