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1

An economist knows the current point at which an economy is operating within its production possibility curve. What can the economist judge from this knowledge about the economy?

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

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

9. The macroeconomy (A Level)  →  9.2. Economic growth and sustainability

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2

Abdul earns $50 000 a year working as a teacher. He owns a house valued at $250 000 and has shares worth $20 000. He has a current bank account with a balance of $1500 and $200 in his wallet. In his house there is a jar containing $100, which he has saved to spend on his forthcoming holiday. What is the value of Abdul’s liquid assets?

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

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3

Which type of good is healthcare?

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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4

Which is a normative statement?

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

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

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

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5

In a free market there is a surplus of a good. Which change would cause the market to come to an equilibrium?

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

6

What is most likely to increase the quantity of houses supplied?

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

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

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

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7

The diagram shows two demand curves and two supply curves for a product. Which equilibrium point is most likely to represent the long-run equilibrium in the market?

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

8

The equilibrium price of a product is $10. The government introduces an effective minimum price of $12 for the product. Under which condition will the value of the producer surplus increase the most?

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

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

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9

Diesel engines are a major cause of air pollution in cities. A city authority placed a charge on diesel taxis entering the city. What would be the most likely effects on the demand and supply of taxi journeys into the city?

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

10

Which combination of the classification of a good and market change will cause the demand curve for the good to shift right?

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

7. The price system and the microeconomy (A Level)  →  7.2. Indifference curves and budget lines

Open

11

The supply (S) of a product is determined by the equation S = 10 + 10P when P is the price of the product in $. What is the product’s price elasticity of supply when its price rises from $1 to $2?

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

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

Open

12

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

13

Which combination is most likely to result in the demand for a product being highly price-elastic?

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

14

What is most likely to occur when the government privatises public sector organisations?

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

Open

15

The diagram shows the market for bus services before and after a government subsidy. supply before subsidy supply after subsidy P1 P3 Q1 Q2 P2 J L K H I price O number of bus journeys demand G Which area on the diagram shows the incidence of the subsidy for the consumer?

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

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

Open

16

The diagram shows the market for eye tests. price of eye tests ($) quantity of eye tests O P3 P2 P1 Q1 Q2 S D Which policy would enable the government to increase the number of eye tests from OQ1 to OQ2?

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

Open

17

In November 2017, the Scottish government introduced a minimum price for alcohol because of the detrimental health effects of alcohol consumption. Which combination of actions is most likely to lead to a failure with respect to reducing the detrimental effects of the consumption of alcohol?

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

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

Open

18

What is an example of direct provision by a government?

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

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

Open

19

The graph shows the annual percentage change in the prices of services and in the prices of goods between 2007 and 2012. –2 –4 % annual price change services goods What can be deduced from the graph?

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

20

A government decides to devalue the country’s currency 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

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

Open

21

What will increase if aggregate demand rises when aggregate supply is perfectly elastic?

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

Open

22

A country operates a floating exchange rate. What will cause the demand curve for the country’s currency to shift left in the foreign exchange market?

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

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

Open

23

The table shows the relative price of exports compared with imports expressed as an index number for an economy (2013 = 100). date index Which statement about the period 2013–2015 is correct?

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

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

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

Open

24

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

Open

25

The real national income of a country fell by 3%. What could have caused this?

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

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

Open

26

An economy with a long history of extensive barriers to trade decides to switch to totally free trade. What is most likely to increase in the short term?

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

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

Open

27

Why is a balance of payments deficit a potential problem for an economy with a fixed exchange rate?

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

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

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

Open

28

What would be a positive effect on the growth of an economy in the short run, if the government reduced a direct tax on individual earnings?

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

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

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

Open

29

Which combination of fiscal and monetary policies is most likely to be effective in the short run for tackling deflation in a closed economy?

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

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

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

Open

30

Which policy measure is an expenditure-switching measure designed to reduce a current account surplus?

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