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1

Why is choice central to the economic problem?

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

Open

2

Which change in economic system is likely to result in the greatest rise in unemployment combined with the greatest fall in economic regulation?

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

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

Open

3

The diagram shows a production possibility curve for an economy. O goods for domestic use goods for export X Y What might cause the movement from X to Y?

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

4

During a period of deflation an economy’s aggregate monetary demand falls. Which function of money explains this fall?

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

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

Open

5

What ensures that demand for a product is effective?

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

6

What will happen to an industry’s supply curve if firms leave the industry?

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

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

Open

7

The diagram shows a demand curve for pineapples. 1.5 0.5 quantity (000s) price ($) D X Y What happens to the value of price elasticity of demand (PED) when there is a movement from point X to point Y and what describes the value at point 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)  →  2.1. Demand and supply curves

7. The price system and the microeconomy (A Level)  →  7.8. Differing objectives and policies of firms

Open

8

A product is an inferior good with no close substitutes. It is also a complement to good X. Which product matches the above description?

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

Open

9

The table shows the quantities demanded (Q) of goods X and Y corresponding to different prices (P) of the two goods. PX = $8 PX = $10 PY = $3 QX = 16 QY = 20 QX = 12 QY = 30 PY = $4 QX = 20 QY = 16 QX = 16 QY = 24 What is the range of the value of the cross-elasticity of demand for good Y with respect to the price of good X?

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

Open

10

A firm estimates that the price elasticity of supply of its product is 0.4. Should the firm be concerned by this figure?

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

11

The diagram shows a country’s domestic supply of, and demand for, a commodity that it both consumes and exports. WP2 WP1 O W Y X Z quantity D S price The world price changes from WP1 to WP2. What are the resulting changes in domestic consumption and quantity of exports?

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

12

The diagram shows demand and supply for bread made from wheat and X is the original equilibrium point. What will the new equilibrium position be following removal of subsidies to the wheat industry and successful advertising about the benefits of a wheat-free diet?

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

Open

13

The diagram shows an increase in the demand for a good from D1 to D2. S D1 P1 P2 D2 O price quantity V W Y What effect does the change in demand have on 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)  →  2.1. Demand and supply curves

Open

14

The diagram shows the market demand and supply curves for rice. S D price ($) Q1 Q2 quantity Q3 O What would happen if a government imposed a maximum price of $10?

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

15

A government decides to reform the tax system with a view to achieving greater equity. Which change will it make?

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

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

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

Open

16

What will cause the payment of a subsidy to firms to result in the greatest increase in sales?

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

7. The price system and the microeconomy (A Level)  →  7.8. Differing objectives and policies of firms

Open

17

Which goods will be provided only by the government?

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

18

Privatisation can be achieved by the sale of shares to the general public (public offers, PO) or by the direct sale to a private company (private sales, PS). The diagram shows privatisation transactions and revenue for the European Union between 1981 and 2012. 90 000 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 revenues (current EUR mil) transactions revenues from PS revenues from PO transactions key year What can be concluded from the diagram?

7. The price system and the microeconomy (A Level)  →  7.6. Different market structures

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

8. Government microeconomic intervention (A Level)  →  8.1. Government policies to achieve efficient resource allocation and correct market failure

Open

19

The diagram shows the original aggregate demand AD1 and aggregate supply LRAS1 for an economy. O real GDP price level LRAS1 AD1 AD2 LRAS2 What could explain the shifts in aggregate demand to AD2 and aggregate supply to LRAS2?

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

Open

20

An increase in a country’s consumer price index implies an increase in A the cost of living. B the rate of inflation. C the standard of living. D the value of money.

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

Open

21

The figures in the table were taken from the consumer price indices of retail prices for three countries. Country X Y Z Between 2014 and 2015, what is correct?

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

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

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

Open

22

What might increase a surplus on the current account of New Zealand’s 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 diagram shows the market for £ sterling, which is in equilibrium. 2.5 2.0 D S price of £ in US$ quantity of £s What must the UK government do to achieve an exchange rate of £1 = US$2.50?

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

Open

24

Country X trades with only two countries, Nigeria and Malaysia. 80% of Country X’s trade is with Nigeria and 20% is with Malaysia. The original value of the trade-weighted exchange rate index is 100. The value of Country X’s currency against the Nigerian Naira rises by 10%. The value of Country X’s currency against the Malaysian Ringgit rises by 50%. What will be the value of Country X’s new trade-weighted exchange rate index?

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

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

Open

25

How is the terms of trade index calculated?

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

26

The table shows different possible outputs of apples and bananas for Country X and Country Y assuming only two goods are produced and all resources are used to their maximum. apples bananas Country X or Country Y or Country Y decides to specialise in the production of the good in which it has a comparative advantage. Country X decides to use 75% of its resources to produce the good in which it has a comparative advantage and 25% of its resources to produce the other good. What will be the total output?

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

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

Open

27

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

28

Which action might be part of an expansionary economic policy?

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

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

Open

29

What is the most effective policy to correct 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

30

Which combination of policies is most likely to reduce inflation when an economy is close to full employment?

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

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

Open