School Stamp

ECONOMICS
0455/12/22 1 TERM 2023
2 Hours
Grade
Name of the Student: ________________________________

10
Sec A Sec B
Q2 Q3 _____________________________________
Date: Sub-Total Total
MCQs Q1
30 20 20 10 _____________________________________
Class:
Signature of the Invigilator: _____________________
80 100
Examiner: InvigilatorSign:
Remarks: ___________________________
Date:

_______________________ ________________________ ________________________

INSTRUCTIONS

Write in blue/black pen. Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces
provided unless this has been done for you. DO NOT WRITE IN ANY BARCODES.

Answer all questions. Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark for MCQs. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Electronic calculators may be used.

This document consists of 18 printed

pages.
Page 2 of 19
0455/12
1 Which policy is an example of an expansionary monetary policy?
A lower interest rates
B lower money supply growth
C lower public sector spending
D lower taxation

2 What is not a public sector expenditure?

A claims paid on travel insurance for cancelled flights
B collections of rubbish by a local council to meet regulations on recycling waste
C grants from central funds to compensate people whose property has been damaged by
storms
D the establishment of a national database to assist the police in finding criminals

3 Which pair of government actions combines a fiscal policy with a supply-side policy?
A changing government spending with changing interest rates
B cutting tax rates with providing information on job vacancies
C limiting bank lending with the privatisation of industry
D restricting credit with less control over labour markets

4 A government collects the following revenue in a year.

What is the amount of indirect tax revenue?

A $30 m
B $70 m
C $100 m
D $500 m

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5 In 2013 there was a period of low interest rates and high inflation in an economy.
Who would be most likely to benefit and who most likely to lose during such a period?

6 In which case is success for the government in achieving the first aim likely to cause
problems in achieving the second?

7 A government aims to keep domestic prices stable in a fully employed economy.

Which policy should it use?
A increase expenditure on defence
B increase indirect taxes
C increase the rate of interest
D increase the wages of government workers

8 What describes a regressive tax?

A It is paid by a higher proportion of high-income earners.
B It is paid by a higher proportion of low-income earners.
C It takes a higher proportion from high incomes.
D It takes a higher proportion from low incomes.

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9 In 2011 the Egyptian Government increased the top rate of income tax.
What is likely to have been the main aim of this policy measure?
A a reallocation of resources from producing necessities to producing luxury products
B a redistribution of income from the rich to the poor
C a reduction in the deficit on the current account of the balance of payments
D a reduction in the level of cost-push inflation

10 What is most likely to cause a fall in the rate of inflation?

A an increase in consumer spending
B an increase in import prices
C an increase in income tax
D an increase in wage rates

11. Which type of unemployment occurs when the total demand for goods and services in
the economy falls?

A cyclical
B frictional
C seasonal
D structural

12 Why is the Human Development Index (HDI) often considered to be better than GDP
per head as a measure of living standards?
A GDP per head excludes economic growth.
B GDP per head ignores population growth.
C HDI includes more than the production of goods and services.
D HDI is calculated by the national government.

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13 Which combination of influences must have occurred for a population to be falling when
there is no migration?

14 Developing countries often wish to prevent the population in rural areas moving to the
towns. Investment grants are given to companies if they set up their businesses in rural
areas.

What is this policy intended to achieve?

A decreased transport costs
B decreased external cost
C increased economies of scale
D increased use of labour

15 Which country has the lowest standard of living?

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16 World population increased from 5.26 billion in 1990 to just over 7.00 billion in 2012. It is
predicted to rise to 8.00 billion by 2025.
What is most likely to explain this?
A an increase in migration from developing to developed countries
B an increase in the birth rate in developing countries
C an increase in the death rate in developed countries
D an increase in the death rate in developing countries

17 The table shows the rate of unemployment and the annual rates of change of gross
domestic product (GDP) and consumer prices for four countries in 2012.
Which country was experiencing the worst economic recession?

18 The table shows the percentage change (%) in employment over a period for a country
with three economic sectors.

What could be concluded from this information?

A Agricultural output fell.
B The country became more developed.
C The working population stayed constant.
D Total employment remained the same.

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19 What will increase the level of economic development in a country?
A a higher infant mortality rate
B a higher inflation rate
C a higher interest rate
D a higher literacy rate

20 The citizens of a country which avoids international trade may benefit from
A an increase in specialisation.
B better political and cultural ties.
C competitive pressure to improve the quality of goods.
D more employment in their industries.

21 In 2012, Nokia, a mobile phone manufacturer, produced 18% of Finland’s exports.

Why might this be undesirable for Finland?
A Foreign demand for mobile phone firms may grow continuously.
B Nokia may introduce new technology which raises total costs by less than output.
C There may be a reduction in trade restrictions on mobile phones.
D There may be an industrial dispute at Nokia.

22 The table shows the values of the items in a country’s current account in two years.

How did the value of the net transfers change between year 1 and year 2?
A decreased by $10m
B decreased by $20m
C increased by $20m
D increased by $30m

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23 When the US$ exchange rate falls it will usually
A help to reduce a US trade deficit.
B increase the foreign price of US exports.
C reduce the price of US imports.
D reduce US inflation

24 Which changes will increase the demand for imports?

A Consumer credit becomes more expensive.
B Income tax rates increase.
C The exchange rate appreciates.
D The government increases tariffs

25 In recent years, the US has experienced a deficit on its overall current account of the
balance of payments.
What could have led to an increase in the size of the deficit?
A increased competitiveness of goods made in the US
B increased earnings by US investors in foreign companies
C increased numbers of overseas visitors to the US
D increased spending on US military bases abroad

26 What is an advantage of international specialisation?

A choice is limited
B countries become overdependent on each other
C resources are used more efficiently
D transport costs are decreased

27 The table shows information on the trading position of four major economies in 2013.
Which country had the strongest trading position?

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28 The table shows the trade in goods balance and the current account balance of the
balance of payments for four countries during a year.
Which country had the largest surplus on its trade in services, assuming no other
transfers or income flows?

29 The diagram shows China’s trade with Brazil for 1999 and 2003 in billions of dollars.

With reference to the diagram, what happened to China’s trade balance with Brazil
between 1999 and 2003?
A It experienced a falling surplus.
B It experienced a rising deficit.
C It moved from deficit to surplus.
D It moved from surplus to deficit.

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30 A country imposes tariffs and quotas on imported goods.
What will citizens of that country experience?
A higher price
B higher welfare
C higher unemployment
D wider consumer choice
[30 X 1 = 30]

Section B
1 A number of countries, including France, Finland, Hungary, Ireland, Mexico and the UK,
have introduced indirect taxes on fizzy drinks with a high sugar content. The world health
organisation has said that taxes are needed to help reverse the rise in obesity across the
globe and to reduce the significant external costs associated with excess consumption,
including increased public medical expenditures. In contrast, global producers of fizzy
drinks argue that taxes do little to reduce consumption and instead risk many thousand
jobs in the drinks industry being moved to other countries.

a. Define an indirect tax. [2]

b. Explain the difference between private costs and external costs. [4]
c. Analyse the effect of imposing an indirect tax on cans of fizzy drink. [6]
d. Discuss what might happen in an economy if a government increased
income tax rates. [8]

2 Due to strong economic growth, Albania grew from the poorest nation in Europe in the
early 1990s to middle-income status in 2008, with poverty declining by half during that
period. The unemployment rate in the country has fallen sharply since a peak of over
22% in 1995, but remains relatively high at 13.6% (January 2018). Over the same period
real GDP per head increased from US $1500 to over $ 4600.

a. Define real GDP per head. [2]

b. Explain two reasons why a country may experience a decline in living standards at the
same time as an increase in its real GDP per head. [4]
c. Analyse the reasons why a government might be concerned to maintain a low rate of
unemployment. [6]
d. Discuss the changes you might expect to observe over time in the structure and

Page 11 of 19
 occupational distribution of the population of a developing country as it becomes more
developed. [8]
3. Fluctuations in a country’s foreign exchange rate can have a significant impact on its
economy and balance of payments.

a. Explain two reasons why a country’s export revenue might increase when export prices
rise. [4]
b. Analyse the effects a fall in a country’s foreign exchange rate could have on its total
output. [6]

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