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1

PPC is the production possibility curve in country T. good Y good X O PPC Which changes take place in country T’s opportunity costs of producing X as it increases production of X?

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

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2

What is considered the essential requirement for all entrepreneurs?

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

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

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3

A new section of a road is provided toll-free by the government. What best describes this good?

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

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4

Eastern European nations have changed from planned to market economies. Which policy was least likely to have been adopted?

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

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

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

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5

Rice and pasta are both basic foods in a country. How would a health scare concerning rice affect the market for pasta?

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

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6

Some goods are over-consumed in a market economy. What is likely to be the cause of this?

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

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

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7

A family is willing to pay a maximum of $600, $500 and $400 for air tickets for the mother, father and daughter to attend a wedding in another city. The airline announces a promotional air fare of $450 per ticket, provided at least three tickets are purchased. What will be the consumer surplus gained by the family if they use the promotional offer?

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

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8

After a 10% decrease in a consumer’s income, the consumer’s demand for a good rises from 100 to 105. What is the value of the consumer’s income elasticity of demand for this good?

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

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9

In 2010, poor harvests reduced fruit crops and furniture producers gave big discounts on furniture products. How might these changes have affected the position of the supply curve for the products?

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

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

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10

In the diagram, D and S represent the demand for and supply of smartphones. Many components used in the production of smartphones are imported. The initial equilibrium is at point X. The exchange rate has depreciated at the same time as the price of a complementary good decreased. Which point in the diagram could represent the new 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

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

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11

The diagrams show the demand for and the supply of houses. In the short run, the stock of houses for sale, S1, is fixed. A government decides to allow some agricultural land to be used for building houses and subsidises lower-income buyers of the new houses. Which diagram shows the long-run situation?

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

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12

The equation for the quantity demanded, QD, for a product is QD = 400 – 20P where P = price in $. The quantity supplied, QS, is given by QS = 100 + 40P. Which change will occur if the price rises from $5 to $6?

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

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13

What is the most likely cause of the continuous increase in prices of famous paintings by now dead artists?

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

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

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14

What is most likely to be regressive?

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

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

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

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15

What is necessary for an action to be classed as a transfer payment?

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

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16

The government imposes a specific indirect tax of $1 on each unit of a good sold. How does the imposition of the tax shift the demand or supply curve of the good?

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

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17

Which term relates to a fall in the domestic real value of a currency?

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

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

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18

What must be the result for a country of a rise in its export prices relative to its import prices?

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

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

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

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19

Country X can produce a product at a lower opportunity cost than country Y. Which term best describes this statement?

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

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20

For a given year, economy X publishes the following. $bn Gross Domestic Product (GDP) factor income earned by residents of economy X working in foreign countries factor income earned in economy X by non-residents What is the size of the Gross National Income (GNfor country X?

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

4. The Macroeconomy (AS Level)  →  4.2. Introduction to the circular flow of income

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21

Which combination is possible for an economy experiencing zero inflation?

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

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

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22

The graph shows the rate of inflation in Japan from April 2020 to February 2021. 0.4 0.2 –0.2 –0.4 –0.6 –0.8 –1 –1.2 0.1 0.1 0.1 0.3 0.2 Sept –0.4 –0.9 –1.2 –0.6 –0.4 Apr May June July Aug Oct Nov Dec Jan Feb inflation rate Over which period did disinflation occur in Japan?

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

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23

The diagram shows three production possibility curves (PPC) for a country, labelled 3, 2 and 1. The original PPC for the country is 2. This country experiences a fall in its working population and then this is followed by a long period of recession. consumer goods O capital goods r s t u If an increase in GDP then takes place, what is the increase in production?

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

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24

A government increases the rate of income tax. What is the effect, in the short run, on the aggregate demand curve or the aggregate supply curve?

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

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25

A country’s current account deficit is larger this year than last. What is the most likely reason for this increase?

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

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26

Which supply-side measure is most likely to produce short-run growth in a country’s aggregate supply?

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

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

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27

Which tax may a government use to reduce inequality?

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

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

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28

A foreign government pays a UK university to educate its students. How would this be recorded on the balance of payments current account of the UK?

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

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29

A government wants to reduce inflation. It has decided to cut government spending by $1bn. The diagram shows different starting positions for the country’s aggregate demand (AD) curve. price level O real GDP AD4 AS AD3 AD2 AD1 Which starting position for the aggregate demand curve would make this policy least effective?

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

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30

A government reduces the rate of tax firms are charged on their land and buildings. How is this likely to affect the economy’s price level and real output?

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

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

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

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