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TESTCODE 01240010
JANUARY 2014

CARIBBEAN EXAMINATIONS COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE®
EXAMINATION

PRINCIPLES OF BUSINESS

Paper 01- General Proficiency

1 hour 15 minutes

(o6 JANUARY 2014 (p.m.D

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1. This test consists of 60 items. You will have 1 hour and 15 minutes to answer them.

2. In addition to this test booklet, you should have an answer sheet.

3. Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item
you are about to answer and decide which choice is best.

4. On your answer sheet, find the number which corresponds to your item and shade the space
having the same letter as the answer you have chosen. Look at the sample item below.

Sample Item
The money that a business receives from the sale
of goods or services is called its Sample Answer

(A) assets
(B) capital
(C) mcome
(D) resources
The best answer to this item is "income", so answer space (C) has been shaded.

5. If you want to change your answer, erase it completely before you fill in your new choice.

6. When you are told to begin, turn the page and work as quickly and as carefully as you can.
If you cannot answer an item, go on to the next one. You may return to this item later. Your
score will be the total number of correct answers.
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DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

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1. Which of the following is NOT considered 5. Which of the following characteristics of

to be 'goods'? the sole trader form of business is NOT
advantageous to the owner?
(A) Stocks of soft-drinks for resale •
(B) Cars in a car-mart waiting to be (A) Unlimited liability
sold (B) Low operational cost
(C) Stationery used in the accounts (C) Ownership of all profits
department (D) Rapport with customers
(D) Bottled water on the shelves of
supermarkets
6. The PRIMARY role of the human resource
department of an organization is to
2. Labour is BEST defined as the
(A) assist employees in understanding
(A) ability to carry out management industrial relations
functions effectively (B) produce magazines highlighting
(B) physical and mental capabilities outstanding workers
used to perform tasks (C) promote recreational activities for
(C) level of training received by workers
individuals who are working (D) hire, recruit, train and motivate
(D) total number of persons who hold workers
jobs in government ministries

7. Under which of the following categories

3. In a public limited company, the losses are would subsidized meals for employees fall?
borne by the
(A) Fringe benefits
(A) staff (B) Duty allowance
(B) directors (C) Wages and salaries
(C) community (D) Workmen's compensation
(D) shareholders

8. Which of the following organizations

4. A firm that disposes of waste in an incinerator is LEAST likely to use a Management
is said to be demonstrating its responsibility Information System?
to
(A) A bank
(A) society (B) A variety store
(B) employees (C) A shoeshine shop
(C) customers (D) A beauty supplies outlet
(D) government

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9. Tom invests his savmgs by purchasing 14. The MOST important use of collateral
shares in a company. From this investment security to the lender is that it
Tom expects to receive
(A) give~ the borrower a sense of
(A) profit security
(B) interest (B) can be sold if the borrower fails to
(C) revenue pay
(D) dividend (C) establishes the borrower's
financial position
(D) improves the borrower's chance
10. Which ofthe following is LEAST likely of getting a loan
to result from growth in an organization?

(A) Greater productivity 15. The condensation of the business plan is

(B) More division of labour contained in the
(C) Increased communication
(D) Increased capital investment (A) feasibility plan
(B) marketing plan
(C) keynote summary
11. One advantage ofa Management Information (D) executive summary
System is that it tends to improve

(A) product quality 16. Which of the following is NOT a feature of

(B) employee relationships a business plan?
(C) contractual negotiations
(D) database maintenance and (A) Provides clear and realistic
monitoring projection
(B) Identifies potential sources of
funding
12. Entrepreneurs may reduce their risk ofloss (C) Demonstrates a clear compelling
by VISIOn
(D) Gives information about the target
(A) savmg market
(B) planning ahead
(C) securing bank loans
(D) purchasing additional fixed assets 17. A post-dated cheque is one which is dated

(A) for payment at a future date

13. An entrepreneur who wants to maintain control (B) no longer than six months ago
of the business would be advised to establish (C) to agree with the date of the
the business as a document requesting payment
(D) by the bank on the day the cheque
(A) sole trader is presented for payment
(B) partnership
(C) limited company
(D) private limited company

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18. The monthly payments collected by an 23. The term 'economies of scale' means the
insurance company from its policy holders
are known as (A) purchase of goods at low prices
(B) increhse in the size of the business
(A) deposits (C) reduction in the size of the business
(B) premiUms (D) reduction in costs as output increases
(C) instalments
(D) endowments
24. Which of the following businesses can be
classified as a cottage industry?
19. A MAJOR role of a trade union is to
encourage (A) Mary's Craft Supplies, located at
h6me
(A) staff to become members of a (B) JMN Superstore, located in the
group rural area
(B) advancement of the welfare of its (C) Peter and John's Company, located
members in Jamaica
(C) staff to strike whenever they have (D) People's Cooperative Bank,
problems at work located in Trinidad
(D) managementto pay higher salaries
and give longer vacations to
staff 25. Subsistence production is BEST described as
producing goods for

20. A 'purchase order' is a (A) profit

(B) export
(A) request for additional goods (C) local trade
(B) notification of goods received (D) personal use
(C) statement of debts outstanding
(D) document offering to buy goods
26. Primary production is concerned with the

21. The movement of educated, skilled people (A) distribution of goods

to settle in another country is known as (B) manufacture of goods
(C) provision of raw materials
(A) migration (D) provision of goods to meet
(B) brain drain essential needs
(C) unemployment
(D) underemployment
27. Product, price, promotion and place are
components of the
22. Which of the following is NOT classified
as a natural resource? (A) market study
(B) marketing mix
(A) Sugar (C) market research
(B) Sunlight (D) sales promotion
(C) Crude oil
(D) Solar power

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28. Which of the following can be described as 33. Which of the following actions is LEAST
a marketing activity? likely to be described as good public relations
for a company?
(A) Issuing bulletins on staff matters
(B) Publicising advertisements for (A) Sponsorship of a steel band
new staff (B) The offering of scholarships
(C) Distributing the commodities to (C) Hosting of annual sport events
outlets (D) Reduction in price to retailers
(D) Ensuring that workers are given
fringe benefits
34. The PRIMARY function of advertising is
to
29. Which of the following gives identity to a
specific producer's goods? (A) promote brand loyalty
(B) promote public relations
(A) Label (C) communicate information
(B) Brand (D) ensure wider distribution of goods
(C) Patent
(D) Copyright
35. One ofthe MAJOR functions of a Central
Bank is to
30. The term 'loss leader' is BEST described
as a product which (A) issue notes and coins
(B) issue stocks and shares
(A) has no real market value (C) accept deposit accounts
(B) the retailer is unable to locate (D) make loans and advances
(C) is sold cheaply to attract customers
(D) the retailer gives away to customers
36. Mr Jones has several bills of fixed amounts
to pay each month. His bank manager
31. Which ofthe following is necessary for the agrees to pay them monthly from Mr Jones'
existence of a market? account. This service, provided by the bank,
refers to
(A) A face-to-face exchange
(B) Government regulation (A) overdrafts
(C) A fixed location for trading (B) acting trustees
(D) Buyers and sellers interacting (C) letters of credit
(D) standing orders

32. The price of an article is usually high when

the quantity for sale is 37. Investment can be defined as

(A) large and few people wanting to (A) additions to capital

buy (B) the stock of goods in a country
(B) small and few people wanting to (C) the amount of money available at
buy a given time
(C) small and many people wanting to (D) the amount of capital owned by
buy the government
(D) large and many people wanting to
buy

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38. Which ofthe following situations may cause 42. A price control may be defined as a
the bank to dishonour a cheque?
(A) tax on goods and services
I. Cheque is crossed (B) government ban on imports
II. Signature is irregular (C) grant given to producers to reduce
Ill. Cheque is post-dated their prices
(D) government limit on the price of a
(A) I and II only good or service
(B) I and III only
(C) II and III only
(D) I, II and III 43. Which of the following measures are used by
government to redistribute income?
;

39. Which ofthe following services are provided (A) Customs duties and levies
by commercial banks? (B) Consumption tax and tariffs
(C) PAYE and National Insurance
I. Controlling the supply of money (D) Excise duties and value added tax
II. Offering loans to small businesses
III. Accepting deposits from customers
44. Which of the following forms of taxation
(A) I and II only could be classified as 'direct'?
(B) I and III only
(C) II and III only (A) Income tax
(D) I, II and III (B) Excise duty
(C) Purchase tax
(D) Customs duty
40. Which of the following entities can have
their shares traded on the stock exchange?
45. Which ofthe following actions by Government
(A) Partnerships is MOST likely to lead to an improvement in
(B) Public companies the standard of living?
(C) Private companies
(D) Cooperative societies (A) Printing more money
(B) Increasing the income tax rate
(C) Abolishing taxes on low incomes
41 . Governments can encourage business (D) Giving tax incentives to businesses
activity by

(A) reducing taxes 46. Tax paid on goods entering the country is
(B) reducing grants referred to as
(C) reducing spending
(D) budgeting for a surplus (A) Income tax
(B) Excise duty
(C) Customs duty
(D) Corporation tax

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47. Governments offer subsidies to businesses 52. Which of the following is NOT a benefit
to of international trade?

(A) force them to pay corporation tax (A) Import restrictions on foreign
(B) reduce costs and ultimately prices items
(C) mcrease costs and ultimately (B) Importation of a greater variety of
prices goods
(D) mcrease the price of imported (C) Increase in the market size by
goods local producers
(D) The development ofpoliticallinks
with other countries
48. Which of the following factors is LEAST
likely to contribute to unemployment?
53. Export licences are issued mainly to
(A) Increased immigration
(B) Increased mechanization (A) encourage local businesses to
(C) Increased tourism activity produce more goods for export
(D) High rate of population increase (B) enable the government to control
the flow of goods being exported
(C) indicate to the importing country
49. The TOTAL value ofall the goods and services that the goods are of a high
produced in a country during a particular year standard
defines the country's (D) indicate to the importing country
the price at which the goods are
(A) gross domestic product to be sold
(B) gross national product
(C) balance of payments
(D) balance of trade 54. Which of the following items will NOT be
included in a country's balance of payments?

50. A quota can BEST be described as (A) Earnings from tourists' spending
(B) Repayment ofloans to government
(A) a ban on the sale of goods (C) Earnings from previous years'
(B) a licence given to import goods export
(C) an external tariff among countries (D) Payments for the importation of
(D) a restriction on the quantity of goods
goods imported

55. The MAJOR aim of the European Union

51. A country has a favourable balance of trade (E.U.) is free movement of
when
(A) goods
(A) it buys more than it sells (B) people
(B) it sells more than it buys (C) capital
(C) imported goods are cheaper (D) services
(D) there are no restrictions to trade

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56. Which of the follo wing agreements is 59. A government can correct an adverse foreign
Barbados promoting when it sells furniture exchange problem by
to Jamaica?
(A) increasing customs duties
(A) OECS (B) implementing price floors
(B) GATT (C) reducing severance payments
(C) NAFTA (D) increasing the rate of inflation
(D) CARl COM

60. Which of the following organizations would

57. Economic dualism refers to settle a dispute among banana-producing
countries ofthe Caribbean and Central
(A) uneven sectoral growth America over preferential agreement in the
(B) advancement in technology European Community?
(C) increased foreign investment
(D) growth in the agricultural sector (A) World Trade Organization
(B) Caribbean Development Bank
(C) CARICOM Single Market and
58. Which of the following methods can a Economy
government use to reduce unemployment? (D) Organization of Petroleum
Exporting Countries
(A) Increase in income tax
(B) Deflation ofthe economy
(C) Employment levy on firms
(D) Increase interest rates on borrowers

END OF TEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

01240010/JANUARY/F 2014