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1

To overcome the problem of scarcity, countries with few natural resources need to concentrate on the quality of human resources. Which set of policies would be most appropriate?

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

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

Open

2

A government decides to subsidise farms producing milk in its country. Which question about this decision is a normative question rather than a positive question?

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

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

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

Open

3

Economy X uses its resources in the labour-intensive production of wheat and wooden furniture as shown...

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

Open

4

What is most likely to severely affect the ability of money to act as a medium of exchange?

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

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

Open

5

What would not affect the position of the demand curve for wigs?

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

6

In which situation is the demand for a product said to be 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

7

In the diagram D1D1 is a straight line demand curve and D2D2 is a rectangular hyperbola curve. M N D1 D1 D2 D2 O quantity price Which statement is correct?

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

Over a four year period, as the price of new houses increases, the price elasticity of supply for new houses falls, as shown...

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

9

Prices of gold, silver and copper fell considerably in 2011 and again in 2015. The fall in 2011 was said to be because miners increased production. The fall in 2015 was because demand, especially from China, decreased. Assuming that the equilibrium before 2011 was X, how would these movements in 2011 and subsequently in 2015 be shown...

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

Consumer X is the largest of five consumers and buys 50% of sales. The table shows the quantity of the good demanded by consumer X and the market supply of the good. price $ demand from consumer X market supply What would be the market equilibrium price?

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)  →  2.5. Consumer and producer surplus

Open

11

What does not happen when price acts as a means to allocate resources?

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)  →  2.3. Price elasticity of supply

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

Open

12

What is meant by consumer surplus?

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

Open

13

In the diagram, S1 is the original supply curve and D is the original demand curve. S2 S1 D W T P O M N Q V R quantity price If supply shifts to S2, which area represents the change in consumer 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

After a series of poor harvests, a government imposes an effective maximum price on cereals. What would be a consequence of this policy?

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

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

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

Open

15

The diagram shows the demand and supply curves of a commodity before and after a specific tax is removed. price quantity D S S What is the tax per unit of output and what is the price after the removal of the tax?

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

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

Open

16

The diagram shows the market for heating oil. price quantity O S D If the government introduces a production subsidy, how will the financial benefit be shared between consumers and producers?

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

Open

17

The diagrams show UK Government total spending and welfare spending in £ billions between 2005 and 2014. £ billion total spending United Kingdom £ billion welfare spending United Kingdom What can be concluded from the diagrams about UK Government spending during the period 2005 to 2014?

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

Open

18

Health services in an economy are provided by private clinics that charge high fees. The government decides health services should be provided for everyone, not based on ability to pay. Which direct action should it take?

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

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

Open

19

In its recent budget a government reduced total expenditure while increasing the amount spent on training to increase the productivity of the workforce. The initial equilibrium point is shown...

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

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

Open

20

The table shows the retail prices index for four countries for years 2 and 3. (Year 1 index = 100 for all countries.) Which country had a higher rate of inflation in year 2 than year 3?

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

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

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

Open

21

What does the current account of the balance of payments include?

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

Open

22

Assume the Chinese monetary authorities are committed to maintaining the exchange rate of China’s currency, the Yuan, against the US$ between P1 and P2 on the diagram. price of Yuan (in US$) quantity of Yuan D S1 S2 P2 P1 O What might they do if supply changed from S1 to S2?

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

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

Open

23

In the UK in July 2014, £1 = US $1.71. By the end of August 2014, £1 = US $1.65. What is most likely to explain this?

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

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

Open

24

Which formula is used to calculate a country’s terms of trade?

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

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

Open

25

Country X forms a customs union with country Y. X then ceases to produce its own cars and instead imports cars from Y. Country Y diverts some of its car exports to X from country Z. How is this likely to affect car prices in X and Z?

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

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

Open

26

The table shows the ability of two countries to produce two commodities when they use all of their resources for that product. country maximum output of rice maximum output of wheat X Y Which statement is correct?

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

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

Open

27

In 2014, Poland was the world’s largest exporter of apples. 55% of the crop went to Russia. Then Russia banned the imports. What would not have prevented the revenue of the Polish apple farmers falling dramatically?

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

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

Open

28

Monetary policy can be used to increase the level of business activity. Which action illustrates this?

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

Open

29

When will a country’s balance of payments current account deficit be reduced?

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

30

The diagram shows four possible aggregate supply curves and an equilibrium point X. A government employs deflationary fiscal policy in order to reduce the rate of inflation in its economy. This shifts aggregate demand to AD2. With which AS curve would this policy be most effective?

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

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

Open