4 UT FORM TP 2009055! 4 armxszavueee MAY/TUNE 2009 CARIBBEAN EXAMINATIONS COUNCIL SECONDARY EDUCATIONCERTIFICATE EXAMINATION ECONOMICS: Paper 01 —General Proficiency 75 minutes 03 TONE 708 (eam) READ THE FOLLOWING INSTRUCTIONS CAREFULLY. ‘This test consists of 60items, You will have 75 minutes to answer them. Inaddition to this test booklet, you should have an answer sheet. Donotbeconcemed that the answer sheet provides spaces for more answers than there are items inthistest, 5 Each item in this test has four suggested answers lettered (A), (B), (C),(D). Afterlistening to or seading each item you ate about to answer, decide which choice is best. Onyouranswer sheet, find the number which correspondsto youritem andblacken the spacehaving, the same letter as the answer youhave chosen, Look at how itis done in the sample item below. Sampleltem Economics may be described as a ‘social soience” Sample Answer since itdeals with (4) tseavironment ©®@O@® ®) —theeconomy (©) humanbehaviour (D) _productionandconsumption ‘The best answer to this tem is “human behaviour” , so answer space (C) has been shaded. Ifyou wantto change youranswer, besure tocraseitcompletely before you fill ‘in yournew choice. ‘When you are told to begin, turn the page and work as quickly and as carefully as youcan. Ifyou cannotansweran item, omititand goontothenextone. Your score willbe the total number ofcorrect answers. ‘Theuse of silentelectronic calculators is allowed. DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO. Copyright© 2009 Caribbean Examinations Council ®. Alltrights reserved. 01216010/F 2009 fasxtaay 4% mune-2- Why do consumers have to make choices among the goods and services that they purchase? (A). Their wants are scarce and their resources are limited. ®) Their resources are insufficient to satisfy all their wants. (©) Their resources increase more rapidly than their wants. ©) — Theyreceivemostof their goods and services at no cost. 7 An ‘economy’ is BEST described as (A) asystem where suppliers produce all the goods and services needed by the consumers {B) _asystem whereby all the goods and services used by citizens of a country are provided by’ the government * (©) __theutilization ofresourcesto produce ‘goods and services to meet the needs and wants of society (©) the utilization of resources by manufacturers to produce goods and maximize profits Items.3 = 4 refer to the following diagram ‘which illustrates the flow of goods and services, factors of production and money earned and spent. s U HH FIRM ™~ : v If U refers to goods and services, then S refers to (A) expenditmre B) wages © rent ©) profit If V includes interest and profit, then T represents the flow of (A) factors of production (B) _goodsand money (C) services andmoney ) services andinvestmentse ‘Which of the following combinations gives a ‘similar measirement of the national income? Income method Central bank method Output method Expendituremethod Zhan (A) Land Tonly (B) Wand only (C) 1 Mand IV only ©) 1, Mand IV only An economy produces two goods, namely sugar and bauxite. What name is given to the curve which shows the maximum amount of bauxite that can be produced for every given amount of suger? (A) Miket supply enrve (B) Demand curve (© Production pastibility omve (©) _ Individual supply curve A student has a daily allowance of $20 with which he can purchase chicken and chips or aburger, but NOT both. Ifhe purchases the chicken and chips, the opportunity cost of his decision will be (A) theburgerhe gave up (B) _theprice of the chicken and chips (© theprice of the burger (D) the satisfaction ho gets from the chicken and chips Shoes Item 8 refers to the diagram below which ‘shows the production possibility curve fortwo goods: shirts and shoes. 4 ox oZ a Shirts At what point in the diagram are resources ‘underemployed? wo w ®) xX ieee @O) Z ‘Which of the following factors may cause an. contwand shiftin aproduction possibility curve? (A) Anincrease in wages (B)_ Anincrease in prices (© — Aninerease in trade () —Anincrease in theuse of technology10. M. 22. Item 10 refers to the diagram below. Sis the supply curve before a subsidy is given ‘and Ssis the supply curve after the subsidy is given, S_ Supply before subsidy Ss ‘Supply atter subsidy i D = Quantity As result ofthe granting of the subsidy itis expected that A) supply willincrease @) supply will decrease (© demand will decrease ©) price will increase Which of the following is MOST likely to ‘immediately affect the supply of labour? (A) _ Improving worker productivity () Increasing the demand for labour (©) Improving he efficiency of workers @) Increasing the length of the work week Jnacommercial bank, wages and salaries are Paid to ALL of the: following EXCEPT (A) _ banktellers and ‘supervisors (B) shareholders of the bank ©) investment managers in the bank @) maintenance workers employed by the bank 13. 14. 15. 16. InWhich of the following economic systems does the state own ALL the factors of production EXCEPT labour? (A) Amixedeconomy ®) — Amarketeconomy © Aplanned economy @) A subsistence economy Which of the following will enable (Caribbean investors to have access to larger capital imports? (A) The International Monetary Fund B) Specialisation (©) The World Bank (D) Globalisation ‘Sam and Jack started a catering business. ‘They organized the factors of production and Pooled their financial resources to produce the goods and services. What factors of production should Sam and ack be classified ‘as? (A) Workers ®) _ Investors (© — Bntepreneurs @) — Managers Joeuses one plot of land and 65 seedings to dohis farming. Each seedling costs $8 and hhe rents the land for $200. ‘The cost of the and represents his (A) averagecost ®) — fixedcost (© marginal cost @) variable cost17. Whichofthefollowingis NOT anexample 20. Which of the following features are of a factor of production in a commercial characteristic of a fully planned economy? ‘bank? 1. Allwages are equal. (A) Shareholders of the bank I. Goods do nothave prices. (B) The building TL ‘There areno private shareholders. (©) Special savings account for students TV. ‘Theprofit motive does notexist. @) — Thebank’s vault (A) Mhonly ®) Wooly Ttem 18 refers tq the table below which (© Mand Mionly provides information on three similar goods, (DP) Wand IVonly X, YandZ. Gooa | Fuses @) 24, Apublic good can be described as x 10 (A) diminishable : Pate (8) excludable (©) xxo-priced z= a ©) sivalrous Consumers buy more of Good Z because of itslowerprice. 22. ‘The type of unemployment which is USUALLY experienced by workers in the 38. Which of the following factors wilt cause hotel industry is known as consumers to buy less of Good Z? ~ (A) Sectional (A) Aninerease in the supply of good Z ®) seasonal B) — Animposition of a 100 per cent tax © — suotural ongoodZ @) cyclical (© The placement of a 100 per cent subsidy on good Z (D) Theadvertisement of good Zasan 23. -—_Allof'the following features are characteristic inopressional good ‘of perfect competition EXCEPT (A) many buyers and one seller (B) freedom of entry and exit 19. Which ofthe following is NOT considered a (©) __sellingof homogeneous products {ctor of production in the bauxite industry? (D) perfect knowledge of market conditions (A) Thelandonwhich the sine islocaied (B) Workers employed to work on the mine (©) Companies thai use bavxite ©) Persons who invest their capital to cary out mining operations21. -6- Which of the following isan example of fixed capital? rc) ®) © ©) Bankbalance Cash Machinery Rawmaterial In which of the following situations will a normal supply curve for farm produce slope upwards from left to right? (A) Farmers" profit margins increase as price increases. () Farmers are willing to increase supply as demand increases. (© _ Farmers pass on increased cost to consumers. (D) Farmers are willing to produce more ‘as price increases. According to economic theory, second-hand cigarette smoke is an example of a (A) private good (®) __positiveexternality (© negativeextemality (D) merit good Allthings being equal, anincrease in tho supply of a good will result in (A) am increase in price and quantity traded (B) a fall inprice and an increase in the quantity traded (© a decrease in price and quantity traded (D) _ariseinsevenueanda fall in quantity aded 28. 32. ‘Which of the following will NOT occur when there is market failure? - no (A) Aceclinein social welfare. (B) An inorease in poverty throughout a (@) entrepreneurial ability the economy (© __ Increasing levels of unemployment among skilled andunskilled labour > (D) Adequate amounts of all goodsand | services for consumers : i Samat tet stie | staff, management assigns specific tasks to 5 each worker. This is an example of ; i (A) specialisation { (B) progress i © productivity | : Choice is the MOST important issue in ‘economics because i (A) money is scarce in relation to 2 country's resources (B) most countries havea low per capita income (© resources are scarce relative to consumers’ wants @) __ incomes are notevenly distributed £ Joe Brown sells his produce at the market ‘and saves his money until he has enough to ‘buy atractor. Which of the following fonctions ismoney performing in this case? (A) Unitof account @®) — Storeofvalue (© Standard of deferred payment () Medium ofexchange ‘Which of the following is NOT a financial institution in an economy? 4 (A) Sharemarket B) Development Bank ©. Geditanion ©) Tiadeunion| 34. 36. ‘Which of thé following is regarded as an invisible import on the Balance of Payments of Country X? (A) AcitizenofCountry X visits a foreign country and spends money in that country. ®) A citizen of a foreign country receives dividends from his investmentina company in Country x (©) A citizen’ of Country X receives interest payments from investment ina bankin a foreign country. @) — Acitizenof Country X purchases a vehicle from a foreign country. Country B had an increase of $300 000 000 in foreign direct investment. Inwhich section of the Balance of Payments will this transaction be recorded? (A) Visible trade account @) Balance of trade account (©) _ Invisible trade account @) — Capital account ‘The ability 0 turn an asset into cash without Joss or delay is known as (A) Tuiity @) durability © portability ©) divisiity Country A is experiencing a balance of payments deficit. Which of the following neasures should it take to reduce the deficit inthe short-term? (A) Tpose restrictions on goods ‘imported from other countries, (B) Engage in trade with other low-cost producess of goods (© _ Increase the importation of goods from other countries. @) Reduce the volume of exports to other countries. 37. 38. 39. ‘ems 37-38 refer to the table below, which provides data on costs of production at different levels of output. ‘Output Total Cost (Units per day) s 0 1500.00 1 1700.00 2 1800.00 3 1950.00 ‘What is the total fixed cost? (A) $ 200 @) — $1500 (©) $1950 @) — $6950 ‘The marginal cost (MC) of production at output level of 3 units is @ $50 @) $150 ©) $ 650 @) $1950 Which of the following factors will MOST likely cause afallina country’ sexchangerate undera flexibleexchangerate regime? “A Anincreased demand forits imports (B) _Anincreased demand oritsexports (© Anincreasedinflow of capital (@) — Areducedrate ofdomesticinflationItem 40 refers to the table below wl shows the rate of inflation and the average percentage increase in wages over a four- year period. 40. 41. Year | Rateof Wage Inflation a (%)_| 2004 5 2005 10 20 2006 10 2007 15 In which year was the increase in real wages GREATEST? (A) 2004 @) 2005 © 2006 @) 2007 Which of the following measures is MOST 1ikely to reduce inflation? : (A) Increasing bank lending (B) Increasing import duties (©) _ Reducing government expenditure, @) Reducing direct taxation 43, 44. ‘Some developing countries try to achieve economic growth with less governmental participation. This is MOST likely to be achieved through increased. (A) privateinvestment @) __publicespenditure (© state planning ©) trade barriers Which of the following items would NOT appear in the current account of the Balance of Payments account? (A) The export of goods to another country (B) These oflocal banking services by aforeign company © Payment of dividends by a foreign company (D) Establishment ofa stee! industry by aforeign company Bargain Supermarket increased the price of its name brand tissue by 65% and sales fell by 115%. How should the price elasticity of demand ‘for Bargain’s tissue be categorised? (A) Unitary elastic ®) Elastic © “Inelastic @) — Crosselastic i z i-9- ‘Hom 45 refers to diagrams I, 11, IT and TV below which show the circular flow of income in an economy. avestment saving Howaicias |] a. | Pl] LL consign thom Consumption Income ——Frousetsids |__| Saving ims vestmeat Firms| : ——> [ease consumption smcome eee Eri 45. Which of the diagrams BEST illustrates the circular low of incomein an ‘economy consisting of households, firms and financial institations? “wm oL ee Q © wv - 47, Which of the following features is NOT characteristic of Caribbean economies? Tow incomes --—————> No savings | ou ene’ om _ (A) Highlevels of unemployment @®) Major: ‘production of manufactured = 5 soe ; 5 No ereation of capital No finance (© Lowlevels of capital formation |_and wealth -_ for investment (D) — Abighdebt burden 46. — ThisdiagramBESTrepresents 48. Trade liberalization should result in several benefits to consumers. Which of the following does NOT represent a benefit to ‘tem 46 xefers to the diagram below. (A) the ‘poverty trap” { @) _diseconomies of scale a consumers? I (© foreigndirectinvestment i (@) _aproblem faced by all CARICOM (A) There will be greater access to a | countries: variety of goods and services. | — (B) _- Costof providing goods and services bs will belower. . (©) _ Prices of goods and services will be seduced. (D) Prices of goods and’ services will increase.49, st. 10) Which of the following situations willzesult_ 50. Which of the following is MOST likely to in a surplus on the balance of trade of a ‘occurif there is an increase in the demand country? for cameras? (A) Volume of exports is greater than the (A) Theprice of cameras will fall. volume of imports. (B) — Theprice of cameras will rise. (B) Volume ofimportsis greater than the (©) Thesupply of cameras will fall. volume of exports. ©) — Thepriceand supply of cameras will (©) Value of exports is greater than the remain the same. value of imports (P) Value of imports is greater than the value of exports Item 5i refers to the table below which shows manufacturing output as a share of Gross Domestic Product for four countries. Year] CounmyA [Coury Counrayc | CouniryD i 196 28% = 40% 29% 29% i 1980 23% 34% 26% 28% ; 1990 19% 31% 21% | 23% i ‘What trend is common to ALL countries shown in the table? entre (A) There was an increase in employment in the manufacturing sector. (B) There was a decline in the Gross Domestic Product. (©) There was a decline in the sale of mamufactured products. @) There was a decline in manufecturing output as.a share of Gross Domestic Product.to nd a 52. 53, 54. -u- 12007, Country X imported 20% more than itdid in the previous year. This resulted in arrears in its Balance of Payments (BOP) account. As a result, Country X had to borrow from the International Money Fund. In addition, its Gross Domestic Product declined because the currency had been devalued, ‘The increase in imports depicted above resulted in, (A) reduction in borrowing by ‘commercial banks @) consequences of aBOP deficit (©) increased spending in an economy (®) factors causing a BOP deficit ‘The restriction of international trade through tariffs, embargoes, quotas and exchange controls is referred to as (A) stmetural adjustment () globalisation (© _ bilateral agreement @) __protetionism Which of the following statements BEST describes globalisation? (A) International trade of goods and services including skilled workers (8) Movementintecthnologyandfinancial markets worldwide © ‘The integration of financial services, technology and commodities markets worldwide (D) — Movermentof tangible aud intangible goods enhanced by growth in the computer industry 55. 87. ‘The issue of a treasury bond represents a (A) short-termloanto the government (B) long-term oan to the government (©) long-term loanto the Central Bank @) short-term loanby the Central Bank ‘The Central Bank calls for an increase in the reserve requirements of commercial banks. How will this affect the operations of commercial banks? ‘Their liquid assets will be reduced. ‘Their ability to create credit will increase. (C) Theirloans to money markets will w 8 increase. ‘They will attract less deposits from thepublic. @) ‘Stem 5Z refers to the diagram bolow which shows the production possibility curve for a country eunrently producing at point R. ‘Good y At which point will production be MOST eficien'? (A) ® © @) “mow58. “12 Items $8 - 59 refer to the following table. Price of ‘Market demand | Market supply potatoes ($)_| (000 kg) (000 kg) 4 100 8 7 200 12 aan os eee 16 330. 20 700 What is the equilibrium price? 59.” Ifsupply increased by 300 000 kg what would be the NEW equilibrium price? fA) $4 ®) $8 @ $B © siz @ sz ©). S16 © 6 @) 0 60, Large firms achieve savings in unit costs from advertising or packaging. ‘This is a result of which of the following economies of scale? (A) Financial (®B) Marketing (© Manageriat ©) Technical If YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST. i i i g