Econ MPC Zimsec Prep 2021

A LEVEL
ECONOMICS
MULTIPLE CHOICE
2021
NEW CURRICULUM
ALL TOPICS COVERED
SIR_KURU
COMPILED BY NYONI T 0773359000
NEW CURRICULUM 2021 A LEVEL ECONOMICS MPC
Business-ethics-Exercise 1 D. environmental protection
6) Which political philosophy is linked

hoose the best possible answer for the to Ubuntu?
following questions. A. UJAMAA
A. Jubane Private Limited company B. Socialism
bases its wage system on the C. Capitalism
supply and demand of labour and D. Democracy
the equilibrium wage rate. What
type of value system does it 7) Ethics promote all of the following
abide by? Economic values values except:
B. Legal values A. Truth
C. Social values B. Ownership
D. Technical values C. Justice
D. Fairness
2) The obligation which a firm has to its
actions and activities is referred to as 8) Who among the following is a
________. company’s internal stakeholder?
A. social responsibility A. Workers committee
B. accountability B. Employer’s association
C. good governance C. Customers
D. value system D. Creditors
3) In considering whether something is 9) Ethics deal with the standards that

ethical or not, we evaluate how the are used to create judgments on all of
action affects the people’s ________. the following except:
A. personality A. What is right and what is wrong.
B. rights B. What is good and what is evil.
C. plans C. What is good and what is bad.
D. life style D. What is normal and what is
abnormal.
4) A socially responsible firm can
benefit from ________. 10) The firm that produces plastic
A. increased political influence pipes has decided to recycle and reuse
B. increased employee loyalty the plastics that are found littered in the
C. reduction of operational community. Which value system does it
D. reduction in corporate tax uphold by doing that?
A. Social values
5) Ubuntu is an African philosophy B. Corporate social responsibility
which deals with ________. C. Ecological values
A. individualism D. Communal values
B. humanness
C. democracy
FOR ANSWERS INBOX 0773359000 SIR-KURU

Equilibrium-price-and-quantity-Exercise 1 equilibrium point if the tax on computers
increase and income falls?
Choose the best possible answer for the
following questions. A. Point A
1) Identify the statement which best B. Point B
explains the movement from Y to B C. Point C
for an inferior good D. Point D
3) If the supply curve shifts from S1 to S2,
which area represents the new consumer
surplus?
A. A rise in income.
B. A rise in the subsidy to producers.
C. Advancement in production
technology.
D. A fall in production. A. Area adf
2) The diagram shows supply and demand B. Area abcf
curves for computers at equilibrium E. C. Area bcd
D. Area cef
4) Study the diagram below and answer the

following question.
Which point A, B, C or D will be the new

A. Reduction in production costs.

B. Increase in price.
C. Government controls.
D. Stable market.
8) From the diagram below, identify the
area which shows the producer surplus.
Which of the following statements could

explain the movement from X to Z?
A. A rise in costs.
B. A rise in the price of substitutes.
C. A rise in the price of complement.
D. An rise in productivity.
5) What condition would be necessary for
consumer surplus to be zero?
A. When demand is perfectly inelastic.

B. When demand is perfectly elastic.
C. When supply is perfectly inelastic.
D. When supply is perfectly elastic. A. Area pcb
B. Area acb
6) Goods A and B are substitutes. What C. Area apb
could happen to the equilibrium price and D. Area opbq
quantity of good A if there is a decrease in
supply of good B. 9) The market equilibrium is established
Combination Price of good A Quantity of good A when:
A FALLS FALLS
B RISE RISE A. Price is equal to demand.
C RISE FALLS B. Demand is equal to supply.
D FALLS RISE C. Quantity is equal to supply.
D. Demand is more than supply.
A. Combination A
B. Combination B
C. Combination C
D. Combination D 10) Assuming that there is a rise in demand
in a market. Which of the following might
7) Which of the following factors does not not occur?
cause market disequilibrium?

A. Deficit in the market. D. A decrease in the equilibrium
B. Increase in price. expenditure.
C. An increase in quantity supplied.
Business-organisations-Exercise 1 D. Limited company
Choose the best possible answer for the 6) A limited company is managed and
following questions. controlled by ________.
A. a management team
1) One of the disadvantage of a B. board of directors
partnership is that: C. the manager
A. The owners have unlimited liability. D. all shareholders
B. The owners face a difficulty in
raising more capital. 7) The form of business in which two or
C. The business is difficulty to dissolve. more owners jointly control a company is
D. There is too much government called a ________.
intervention. A. Sole proprietorship
B. Corporation
2) In which organization does the owner C. Partnership
have complete control of the business and D. Franchise
where unlimited liability exists?
A. Sole trader 8) A partner who has unlimited liability but
B. Public Limited company is actively involved in the day to day running
C. General partnership of the business is called ________.
D. Private limited company A. inactive partner
B. limited partner
3) All of the following are forms of business C. silent partner
except ________. D. dominant partner
A. Partnership
B. Sole proprietorship 9) Identify a disadvantage of sole
C. Cooperative proprietorship from the following.
D. Business venture A. There is unlimited liability.
B. The business is separate from its
4) The document used by shareholders to owner.
advertise shares to potential investors is C. The firm must publish its financial
called ________. accounts.
A. articles of association D. It is difficult to dissolve the business.
B. prospectors
C. partnership deed 10) With limited liability, the owner
D. memorandum of association ________.
A. is not liable to pay for the business
5) Which form of business organization debts
can easily raise more capital for expansion? B. is the only one who can provide the
A. Sole proprietorship capital for expansion
B. Cooperative C. is the only one who manages the
C. Franchise business

D. is the one who uses all the profits B. a positive impact on economic
growth and a negative impact on
economic development
Credit-creation-Exercise 1 C. a negative impact on economic
growth and development
Choose the best possible answer for the D. a negative impact on economic
following questions. development and positive impact on
1) In a single-bank banking system, all economic growth
banks are required to maintain a reserve
ratio of 30%. If the bank receive a new cash 6) During a recession in an economy,
deposit of $15 000, what will be the final net credit creation of money is likely ________.
income bank deposits? A. to increase
A. $5 000 B. to decrease
B. $50 000 C. to be done by the central bank
C. $4 500 D. to boost the economy
D. $45 000
7) Use the following scenario to answer
2) Given a required reserve ratio of 20% questions 7, 8 and 9. A client deposited $3
and a cash deposit of $5 000, what is the 000 into her bank account. The required
credit creation multiplier? reserve ratio set by the central bank is 10%.
A. 5
B. 0,2 How much money is required to be kept in
C. $4 000 the bank in case a client want to make a
D. $25 000 withdrawal?
A. $300
B. $30 000
C. $2 700
D. $27 000
3) If a client deposits $15 000 into his bank
account, how much will a bank lend if the 8) How much money will the bank create
cash reserve ratio is 10%? by giving loans?
A. $1 500 A. $300
B. $13 500 B. $30 000
C. $150 000 C. $2 700
D. $135 000 D. $27 000
4) An increase in required reserve ratio will 9) What is the total amount of loan that the
result in ________. bank will create?
A. an increase in credit creation A. $300
B. an increase in demand for loans B. $30 000
C. a decrease in credit creation C. $2 700
D. a decline in demand for loans D. $27 000
5) Credit creation of money have 10) Credit creation system assumes that _.
________. A. there are leakages of money in the
A. a positive impact on economic banking system
growth and development

B. there are few bad debts in the B. The demand curve to get short.
banking system C. The entire demand curve to shift.
C. money lent will be deposited back D. A change in the price of the good
into the account on offer.
D. clients will not demand their money
from banks 4) Assuming that the government is
giving every individual who is above 20
years extra $1 000 this year. What
Determinants-of-demand-Exercise 1 determinant of demand does this likely
fall under?
following questions. A. Change in consumer income.
B. Change in number of consumers.
1) The table below shows the demand C. Change in consumer tastes and
for tickets for the movie house. preferences.
D. Change in consumer price
expectations.
PRICE OF TICKETS ($) QUANTITY
DEMANDED 5) If there is excess demand in the
20 600 market, there will be ________.
30 500
40 400 A. a fall in price
50 300 B. an increase in price
C. a fall in quantity supplied
D. a fall in quantity demanded
The capacity of the movie house is 600.
What price should be charged to 6) Assuming that many students at
maximise total revenue? college prefer to have takeaway food
than college prepared one, which of the
A. $20 following would not change the demand
B. $30 for takeaway food.
C. $40
D. $50 A. A change in the price of
2) What will cause a shift in the takeaway food.
demand curve for a laptop? B. A change in the income of
students.
A. A change in the cost of C. A change in the quality of college
production. food.
B. The imposition of specific tax on D. A change in the cost of electricity
the laptop. for college use.
C. A change in the price of a laptop.
D. A change in the performance of a 7) When the price of one good
laptop. decreases and cause the quantity
3) A change in one of the determinants demanded for another good to fall. This
of demand will cause: is true in case of ________.
A. The demand curve to get longer.

A. normal goods B. A decrease in the price of
B. inferior goods substitutes.
C. complementary goods C. Increase in the market size.
D. substitute goods D. Increase in consumer tastes.
8) The diagram below shows the
relationship between price of good A
and quantity demanded of good B.
One can conclude that, goods A and B

are ________.
A. jointly supplied
B. jointly demanded
C. competitively used
D. competitively demanded
9) Good A is a substitute of good B

and a compliment to good C. What
would happen after a fall in the price of
good A?
A. Demand for A, B and C will rise.

B. Only demand for A will rise.
C. Demand for B will fall and for C
will rise.
D. Demand for B will rise and for C
will fall.
10) Which one of the following factors Determinants-of-supply-Exercise 1

could cause the demand to decrease?
1) Subsidies paid to producing firms:
A. Increase in income.

A. Shift the demand curve.
B. Shift the supply curve.
C. Lead to expansion of supply.
D. Lead to contraction of supply.
2) Firms in the food production sector

increase their supply after a rise in price
of food stuffs. Why do suppliers’ tend to
increase quantity supplied when the
price of the product increases? It is
_________.
A. because firms are aiming at

maximising quantity
B. because firms are aiming at
maximising profits A. A fall in the cost of maize
C. because firms are aiming to seedlings.
provide quality products B. Rise in VAT of maize.
D. because firms aim for consumer C. Natural disaster.
satisfaction D. The removal of subsidies.
5) Holding other things constant, an
3) Which of the following factors increase in price of a substitute good will
causes a contraction in quantity cause ________.
supplied?
A. quantity supplied to increase
A. Increase in the price of inputs. B. quantity supplied of that product
B. Increase in the price of the to decrease
product. C. supply of related goods to
C. Increase in factor substitute. increase
D. Increase in suppliers. D. supply to decrease
6) Which of the following is likely to
4) The following diagram shows the cause an outward shift of the supply
market condition for maize. Which of the curve?
following factors does cause a shift of
the supply curve from S to S1? A. Advancement in technology.
B. Labour costs rise.
C. Electricity rises.
D. Producers exit the market.

7) Assuming that firms in the industry
decide to hold their stock as they expect A. The quantity that the producers
an increase in prices. What would be want but are not able to offer to
happen to the supply curve? the market.
B. How much consumers are able to
A. The supply curve shifts inwards. buy at a given period of time.
B. The supply curve shifts outwards. C. What producers are able and
C. The quantity supplied falls. willing to offer at each price within
D. The quantity supplied increases. a given time period.
D. The minimum output produced in
8) The diagram below shows the the economy with the available
supply curve for desks. resources.
Economic-integration-Exercise 1

following questions.
1) Trade creation results in a country to
buy from ________.
A. low cost producers outside the
bloc
B. low cost producer within the bloc
C. cheap products in the country
D. cheap products anywhere in the
world
2) Use the diagram below to answer

What could be the cause for a change
from A to B? questions 2 to 4.
A. A change in consumer
preferences.
B. A fall in the price of timber.
C. A rise in the price of desks.
D. A fall in the cost of production.
9) Which combination of the following

products are in joint supply.
A. Bolts and nuts.

B. Tea and coffee.
C. Laptop and desktop.
D. Bus and passengers. From the diagram, there is a loss of
supplier surplus as a result of trade
10) The supply curve shows:

creation. Which area shows the loss of C. Point C
surplus? D. Point D
A. 1
B. 2 6) Trade diversion results in member
C. 3 countries to buy ________.
D. 4 A. high cost domestic products
B. high cost global products
3) Which area shows the loss of C. low cost domestic product
government revenue due to trade D. high cost products from member
creation? states
A. Area 4
B. Area 1 7) All of the following are features of a
C. Area 3 free trade area except:
D. Area 2 A. There is low trade restrictions
among countries.
4) Which section shows the benefit that B. Each member state can use its
the country gets from trade creation, as own trade policies.
a result of integration? C. Each country imposes its own
A. 1 and 2 restrictions.
B. 2 and 3 D. It promotes trade creation.
C. 2 and 4
D. 3 and 1 8) What features of a customs union
separates it from free trade area?
5) The diagram below shows the effect A. It is formed by two or more
of a buffer zone. countries.
B. Countries adopt similar
restrictions in dealing with other
countries.
C. There is adoption of the same
currency.
D. It promotes trade diversions.
9) All of the following are features of an

economic union except that ________.
A. there is free flow of goods and
services
B. the bloc adopts a single currency
C. member states adopt similar
trading policies
If supply increases which one will be the D. all the factors of productions are
equilibrium point? mobile among countries
A. Point A
B. Point B

10) Which is the reason why a country
may choose to have a bilateral trading
agreement over multilateral one?
A. It helps both countries to deal
with environmental problems.
B. There is reduction or elimination
of trade restrictions.
C. It is cheaper to have bilateral
agreements than global ones.
D. It is easier and faster to
implement a bilateral agreement.
11) Most favoured nation principle of

GATT means that ________.
A. developed countries get Economic-systems-Exercise 1
preferential treatment in trade
B. developing countries need more Choose the best possible answer for the
support to promote economic following questions.
growth 1) The means of allocating resources
C. all member states within WTO in a free market economy is by using
must receive fair and equal ________.
treatment A. law of supply and demand
D. preferential terms must be B. prices
mutually adopted C. efficiency and productivity
D. availability of factors of
12) The main aim of GATT was to production
achieve ________.
A. product standardization 2) Which economic question is
B. trade liberalization considered by a firm that chooses to buy
C. reciprocal consumer welfare new machinery to improve its productive
D. global developmental goals efficiency?
A. What to produce?
B. When to produce?
C. How to produce?
D. For whom to produce?
3) In which economic system does

political influence has the greatest
influence on how resources are utilized?
A. Mixed economy
B. Capitalist economy
C. Command economy
D. All the above

B. When the price falls, more of a
4) Both the government and private product is demanded.
firms share the role of making economic C. When the price rises more of a
decisions in a ________ economic product is supplied.
system. D. When the price falls, more of a
A. planned product is supplied.
B. traditional
C. free market 9) Identify the correct definition of an
D. mixed economic system.
5) The economic problem of how to A. It is a system of providing

produce can better be solved by services to meet the needs and
considering ________. wants of people in an economy.
A. the elasticity of demand and B. It is a system of redistributing
supply of goods income and wealth fairly among
B. the relative prices of available consumers and producers in an
resources economy.
C. existing government legislation C. It is a system of identifying needs
D. level of technology in the and wants of the people in an
economy economy.
D. It is a system of allocating
6) The freedom of an individual to resources among alternative
choose whether or not to purchase a uses to meet the needs and
product at a given price is called wants of the people.
________.
A. free will 10) In a free market system, the
B. indifference resources are allocated to various uses
C. consumer sovereignty basing on ________.
D. enterprising A. planning authority
B. consumer preferences
7) Who among the following is involved C. consumer polls
in making decisions in a planned D. household cooperative planning
economy?
A. Householders
B. Provincial administrators
C. Private firm secretariat
D. Auditors in the public sector
8) In reference to the rewarding role of

money, which one of the following is
correct?
A. When the price rises, less of the
product is demanded.

Elasticity-concepts-Exercise 1
Choose the best possible answer for the 4) The following table shows
following questions. combination of A,B,C and D. Which
combination shows a normal good with
1) A product has PED of 1,5. If its price a downward slopping demand curve?
increases from 10 to 12, demand will
________.
A. decrease by 20%
B. decrease by 13.3% Income
Price Elasticity
C. increase by 20% Combination Elasticity of
of Demand
D. increase by 13,3% Demand
A Negative Positive
B Negative Negative
2) Income for a certain economy C Positive Positive
decreases by 5% and the demand for
D Positive Negative
holidays overseas decreases by 20%.
YED for holidays overseas is ________.
A. -4
A. Combination A
B. 4
C. 0,25
B. Combination B
D. -0,25
C. Combination C
3) The essential characteristic of an
D. Combination D
inferior good is that it’s ________.
A. YED is positive
5) Which of the following curves A, B,
B. YED is negative
C or D shows that the relation between
C. PED is positive
two goods Y and Z are compliments.
D. PED is negative

8) Why does demand generally
become more elastic over a long period
A. Curve A of time?
B. Curve B A. Individuals do not change their

shopping behaviour over time.
C. Curve C B. Individuals buy more products
over time.
D. Curve D C. Individuals have enough time to
find substitutes.
6) The table below shows the values of D. Few substitutes of that good
income elasticity of demand for 4 become available.
products.
9) The income elasticity of demand for
PRODUCT Income Elasticity of a product is -3. Which of the following
Demand statements is correct?
A 0,50
B 0,65 A. 60% fall in quantity demanded
C -0,50 caused by a 20% increase in
D -0.57 income.
B. 30% fall in quantity demanded is
From the table, one can conclude that: caused by a 10% increase in
price.
A. The demand for 4 products is C. The product is a normal good.
price inelastic. D. Demand for the product is
B. Cross elasticity of demand income inelastic.
between good A and good B is
positive. 10) If the cross elasticity of demand
C. Rise in income causes demand between two goods is a negative value,
for good C and good D rise by a this means that the two goods are
smaller percentage. ________.
D. Fall in income causes demand for
good C and good D to rise. A. substitutes
B. compliments
7) If the price of Desks increases from C. both inferior
$20 to $32 each and the quantity D. unrelated to each other
demanded decreases from 50 to 45 per
week. Calculate the PED indicating its
degree.
A. 0,5 inelastic
B. 0,5 elastic
C. 5 elastic
D. 5 inelastic

Enterprising-Exercise 1 B. trading certificate
C. certificate of incorporation
Choose the best possible answer for the D. tittle deed
1) The process of creating something 6) All of the following are ways of
new is called ________. generating new business ideas except:
A. authorship A. Investigating the environment.
B. adaptability B. Experiences of other people.
C. innovation C. Copying examples from books.
D. entrepreneurship D. Mind mapping.
2) The public sector includes: 7) A possible source of business failure

A. Government ownership of assets. that exist in the environment in which
B. Private enterprise. the business operates is referred to as a
C. Investors owning companies. ________.
D. Market forces of demand and A. threat
supply. B. weaknesses
C. strength
3) SWOT stand for ________. D. failure
A. strategy, willingness, opportunity,
threats 8) Where can a business license be
B. strengths, weaknesses, obtained from?
opportunities, threats A. Provincial administration office
C. strategy, work ethics, B. Office of the registrar of
opportunities, training companies
D. strengths, weaknesses, C. The deeds office
opportunities, trading D. Local authority
4) Identify a statement which is not true 9) The rules that govern a firm’s
about entrepreneurs? dealings with outside stakeholders is
A. A talented entrepreneur avoids called ________.
business risks. A. articles of association
B. Personal experience and B. memorandum of association
expertise are good sources of C. deed incorporation
business ideas. D. prospectus
C. Most entrepreneurs are people
who want to be independent. 10) All of the following are
D. Capital is the most important characteristics of successful
component in starting a business. entrepreneurs except that they are___.
A. profit oriented
5) The document that a firm gets after B. self-confident
its registration is called a ________. C. innovative and initiative
A. trading license D. high risk takers

Factors-of-production-2-Exercise 1
4) Tait private limited is leasing some
Choose the best possible answer for the of its assets to another firm and they
following questions. expect a minimum of $400 per month.
The company then finds someone
1) The following diagram shows the willing to pay $470. What is the
interaction of demand and supply in the economic rent?
labour market. Use the diagram to A. $70
answer questions 1 to 3. B. $340
C. $400
D. $470
5) Economic rent is an area _______.

A. above the supply curve
B. below the supply curve
C. above the supply curve but below
the equilibrium price
D. below the demand curve but
above the equilibrium price
6) From the diagram below, what area

is represented by the shaded area?
Which area represents economic rent?

A. OAEF
B. OBEF
C. ABE
D. ACE
2) Which area represents total

earnings?
A. OAEF
B. OBEF
C. ABE
D. ACE
3) Which area is the opportunity cost of

labour when the market is at A. Quasi rent
equilibrium? B. Transfer payments
A. OAEF C. Transfer earnings
B. OBEF D. Economic rent
C. ABE
D. ACE 7) Quasi rent is ________.

A. short-run economic rent that will
be transfer earning in the long-
run
B. short-run economic rent that will
be transfer payments in the long-
run
C. long-run economic rent that will
be transfer payments in the short-
run
D. long-run economic rent that will
be transfer earnings in the long-
run
8) Economic rent is income that is

earned from ________.
A. land and labour
B. entrepreneurship
C. land, labour and capital
D. land, labour, capital and
entrepreneurship
9) Wages are the price for ________.

A. land
B. labour
C. capital
D. entrepreneurship
10) From the following types of profits,

which one attracts entrance of new
firms?
A. Supernormal profits
B. Normal profits
C. Negative profits
D. Subnormal profits

Flow-of-national-income-Exercise 1
6) Which one of the following is a factor
Choose the best possible answer for the market?
following questions. A. Market for foreign currency
B. Market for consumer goods
1) Which of the following is not part of a C. Market for entrepreneurship
closed economy? D. Stock market
A. Government investment and
consumption 7) All the following are major flows in the
B. Imports and exports national economy except ________.
C. Income spend on gifts A. Investment
D. Transfer payments B. Production
C. Expenditure
2) The circular flow of income deals with D. Income
________.
A. how investment is turned into output 8) Which one of the following is true about
in the economy the closed economy?
B. the relationship between investment, A. Gross national income equals gross
consumption and output in the domestic product.
economy B. Net national income equals gross
C. the movement of goods, services national income.
and income in the economy C. Leakages equals to injections.
D. the open and closed economies D. Exports equals import values.
3) Which one is the equilibrium point in a 9) Which equation shows the equilibrium
four sector economy? state in the two sector economy?
A. E = C + I + G + X A. E = C + I +G
B. E = C + I + (X-M) B. E = C + I + (X-Z)
C. E= C + I +G + (X-M) C. E = C + I + Z
D. E = C + I + G + (M-X) D. Y = O = E
4) In the circular flow of income, 10) Tanzania has a net export figure of
consumers are assumed to be rational. In $320 million, GNI figure of $980 million and
this regard, being rational means that investment worth $200 million. In which
consumers maximize ________. model of the circular flow of income does
A. return on their investment the country belong?
B. earning from factors of production A. Two sector economy
C. their utility from consuming goods B. Three sector economy
D. injections and reduce leakages in C. Four sector economy
the economy D. Multi-sector economy
5) All the following are leakages except

________.
A. consumer savings
B. corporate tax
C. imports
D. wages and salaries

Free-trade-Exercise 1 5) All of the following are arguments for
free trade except that ________.
Choose the best possible answer for the A. it improves the standard of living
following questions. of many people in the world
B. it increases consumer choices
1) A country that has trade surplus is C. it increases competition leading
called a ________. to lower prices of goods and
A. net importer services
B. net exporter D. it promotes infant industries
C. net producer
D. net seller 6) Under which condition does trade
restrictions can help in correcting
2) Which one is not an argument balance of payments of a country?
against free trade? A. When the price elasticity of
A. Free trade results in depletion of demand of a product is similar in
resources of a country. the two countries.
B. Free trade leads to environmental B. When the price elasticity of
damage. demand of imports is low.
C. Free trade results in increased C. When the price elasticity of
gap between the poor and the demand of a product is different
rich. between the two countries.
D. It can lead to the exploitation of D. When the country is retaliating to
workers. restrictions by the other country.
3) All of the following factors influence 7) Which form of international trade

trade flow between countries except restriction is adopted by a country that
________. aims to increase its revenue?
A. proximity to each other A. Tariff
B. existence of favorable exchange B. Import duty
rate C. Quota
C. when the countries are at D. Subsidy
different level of technology
D. big gap between the cultures of 8) All the following statements are
the two countries correct about dumping except that
________.
4) The measure of balance of exports A. a firm sells a good in a foreign
and imports between two countries is market at a cheaper price than in
referred to as ________. its domestic market
A. international trade B. a firm sells a good at a price that
B. balance of payments is lower than its production cost
C. balance of trade C. dumping usually takes place
D. trade flow when there is excess supply of a
good in the domestic market

D. dumping of goods is a feature of 10) A situation in which a country sells
recession a product in a foreign market at a price
that is below its production cost is
9) Which one of the following is a basis referred to as ________.
of free trade? A. price discrimination
A. Comparative advantage B. price escalation
B. Economies of scale C. subsidizing
C. Decreasing returns D. dumping
D. Size of country
Year Computers Printers Computers Printers

2015 3 2 1 000 2 000 7 000
GDP-deflator-Exercise 1 2016 8 5 1 200 2 100 20 100
2017 10 8 1 500 2 400 34 200
A. $20 000
Choose the best possible answer for the B. $19 100
following questions. C. $20 100
1) Use the data from the table below to D. $18 000
calculate the real GDP for 2014. 4) Study the table and answer the
following question.
Year Nominal GDP in millions ($)
GDP Deflator; 2013 = 100 Quantity produced Price $ Nominal GDP
Year Computers Printers Computers Printers
2014 760,12 $
2015 3 2 1 000 2 000 7 000
11,0 2016 8 5 1 200 2 100 20 100
2015 960,15 2017 10 8 1 500 2 400 34 200
7,5 What is the real GDP for the year 2015?

A. $6 109,10 A. $14 000
B. $12 802 B. $20 100
C. $6 910,18 C. $7 000
D. $1 182,81 D. $10 000
2) Which one of the following is not 5) Nominal GDP is also referred to as
affected by the GDP deflator? ________.
A. Goods produced in the economy. A. Money GDP
B. Goods produced for export B. Real GDP
market. C. Net GDP
C. Services produced in the country. D. Corrected GDP
D. Goods and services imported.
6) Calculate the GDP Deflator using
3) Calculate the real GDP for the year the data in the table below.
2016?
Quantity produced Price

$ Nominal
GDP
Quantity produced Price $ Nominal GDP

Year Computers Printers Computers Printers 10) When a country uses the base
2015 3 2 1 000 2 000 7 000
2016 8 5 1 200 2 100 20 100 year prices to calculate GDP for future
years, it is calculating ________.
A. 111,67 A. real GDP
B. 89,55 B. real GDP per capita
C. 189,55 C. nominal GDP
D. 1,12 D. nominal GDP per capita
7) If the prices of products are
increasing, nominal GDP is converted to
real GDP through ________ prices.
A. constant
B. inflating
C. deflating
D. equating
8) What would have happened to the

standard of living of a country if the real
GDP has increased by 20% and the
population has increased by 19%?
A. There is an increase in the
standard of living.
B. The standard of living remains
constant.
C. The standard of living has
dropped.
D. It is difficult to estimate the
change.
9) All of the following can cause an

increase in nominal GDP except:
A. An increase in quantity of goods
and services calculated at
constant prices.
B. An increase in the quality of
goods and services calculated at
constant prices.
C. An increase in quantity of goods
and services calculated at higher
price level.
D. The quantity remains the same
as prices increase.

International-trade-theories-Exercise 1 B. economies of scale
C. low labour cost
Choose the best possible answer for the D. constant production cost
1) All the following are assumptions of 5) Which one of the following is
the theory of absolute advantage except considered by people to be the main
that: source of comparative advantage?
A. There are only two countries A. Government policy
trade in two goods. B. Factor endowment
B. There is minimal trade C. Economies of scale
restrictions. D. Huge capital investment
C. There exist only labour cost.
D. There is perfect competition. 6) The best gain of trade between
countries occur when ________.
2) Use the table below to answer the A. each country has absolute in a
question. good
B. each country has got its own
TEA APPLES comparative advantage
Zimbabwe 50 20 C. they have similar opportunity cost
Zambia 20 50 for the production of two goods
Total 70 70 D. there is no transport and
Zimbabwe’s opportunity cost of technology costs
producing tea is ________ units of
apples. 7) Which one of the following cannot
A. 0,2 be a source of comparative advantage
B. 1,5 to a developing country?
C. 0,4 A. Strong political ties between the
D. 0,5 two countries.
3) According to the theory of B. High domestic demand for a
comparative advantage, a country product.
should specialize in producing a good in C. Improvement in technology.
which ________. D. Increase in return on scale.
A. it has absolute advantage
B. it has lowest opportunity cost 8) Which is likely to create an artificial
C. it can only use the fewest comparative advantage of a country?
resources possible A. Increase investment and
D. there are no diseconomies of infrastructure.
scale B. Introduction of subsidy by the
government.
4) The law of comparative advantage C. Improved educational system in a
is mainly linked to the concept of country.
________. D. Increased democratic structure in
A. relative cost the economy.

9) Another term for opportunity cost is

_________.
A. relative advantage
B. ricardian advantage
C. productive efficiency
D. low cost advantage
10) Which one is likely to be the main

gain from international trade?
A. A country increases output of a
good for which it has unlimited
suitable resources.
B. A country specializes in
producing goods for which it has
the lower opportunity cost.
C. Balance of trade of the two
countries will remain stable.
D. The countries increase imports
and decrease exports of goods
and services.

Macroeconomic-problem-Exercise 1 D. Individual decision to work or to stay
home.
following questions. 7) Which one of the following causes high
1) What is the effect of overvaluing the rate of unemployment in an economy?
country’s currency? A. Technological advancement
A. Demand of exports decrease. B. Overvalued exchange rate
B. Demand of exports increase. C. High interest rate
C. Demand of both exports and imports D. Negative externalities
increase.
D. Exports become cheaper than 8) The government of Zimbabwe decides
imports. to increase tax to companies operating in
the country. What is the effect of an
2) A decrease in investments is usually increase in tax to the economy?
caused by: A. Increases the demand of consumer
A. High interest rates. goods.
B. Expectation of national income. B. Increases the supply of consumer
C. An increase in injections. goods.
D. A decrease in the marginal C. Increases the cost of production.
propensity to consume. D. Increases employment in an
economy.
3) The following are macroeconomic goals
to be achieved in an economy except: 9) Most economies are facing the problem
A. Full employment of negative externalities due to economic
B. Economic growth growth. Which one from the following is not
C. Stability considered as a negative externality?
D. Negative externalities A. Road congestion
B. Industrial waste
4) Which one of the following is not a C. Air pollution
macroeconomic problem? D. Employment creation
A. Inflation
B. Unemployment 10) A rise in inflation always:
C. Economic growth A. Reduce the cost of living.
D. The wages paid to athlete B. Increase the standard of living.
C. Reduces price of products.
5) Balance of payment deficit is likely leads D. Reduces the purchasing power of
to: money.
A. A slow down economic growth.
B. An increase in imports.
C. A decrease in prices.
D. An increase in price for exports.
6) Which one of the following is a

macroeconomic issue in Zimbabwe?
A. The price of food stuffs.
B. The wage rate for teachers.
C. The level of unemployment.

Market-structures-Exercise 1 5) A monopolistic competition market is
productive inefficient because firms:
Choose the best possible answer for the A. Earn normal profits in the long
following questions. run.
B. Produce output when MC=P.
1) What will happen to the profits of C. Produce output when average
firms in any market structure if new firms total cost is not minimum.
enter the market? D. Are making losses in the short
A. Abnormal profits will decrease to run.
losses.
B. Abnormal profits decrease and 6) A monopolistic competition market is
the existing firm start earning characterized with:
normal profit. A. Few firms selling similar
C. Supply increases which cause products.
profits to increase. B. Many firms selling differentiated
D. Abnormal profits remain constant. products.
C. Many firms selling homogeneous
2) Which of the following market product.
structures is not associated with normal D. Few firms selling homogeneous
profits in the long run? product.
A. Monopoly
B. Oligopoly 7) Which type of demand curve is
C. Perfectly competitive market faced by a firm which is a price taker?
D. Contestable market A. Perfectly elastic
B. Perfectly inelastic
3) In the short run, a perfectly C. Relatively elastic
competitive firm earns: D. Relatively inelastic
A. Negative economic profit.
B. Positive economic profit. 8) Which of the following curves cross
C. Zero economic profit. each other in a monopolistic competition
D. Both negative and positive firm?
economic profit. A. The marginal cost and demand
curves only.
4) A firm in a competitive market B. The marginal revenue and
maximises profit in the short run when: average revenue curves only.
A. Total cost equals to total C. Marginal revenue, average
revenue. revenue and demand curves.
B. Marginal cost equals marginal D. The average revenue and
revenue. demand curves only.
C. Total revenue is at the minimum.
D. Marginal cost is equals to total 9) Price leadership, non-price
revenue. competition and cartels are found in
which market structure?

A. Monopoly
B. Perfectly competition
C. Oligopoly
D. Monopolistic competition
10) Why does a monopoly firm have a

downward sloping demand curve?
A. Because the demand for its
commodities is inelastic.
B. Because the demand curve of the
industry is horizontal.
C. Inputs prices increases as the
output expands.
D. Because the market demand
curve is equal to the firms
demand curve.

Measures-of-central-tendency-Exercise A. 15
1 B. 23
C. 15,4
Choose the best possible answer for the D. 14
following questions. 5) The median of the data is ______.
1) Which one of the following is not a A. J
measure of central tendency? B. 23
A. Mean C. 15
B. Modem D. 14
C. Median
D. Mode 6) What is the mode of the data?
A. H
2) Mean is the ________. B. 23
A. average of all values in the data C. 15,2
set D. J
B. middle value in a given data set
divided by all values in the data 7) Calculate the median of the
set following data.
C. most frequent score in a data set
plus the middle value in the data Data set
set 12 18 14 23 19
D. average of mode and median
A. 18
3) Outliers are ________. B. 23
A. the total amount of the values in C. 17,2
a data set D. 12
B. the last digits in a given data set 8) From the following measures of
C. the values that are completely central tendency, which one is less likely
different from the other values in to be affected by outliers?
a data set A. Mean
D. the first two digits in a data set B. Mode
after arranging the data in C. Median
chronological order D. Mean and mode
4) Use the following data set to answer 9) Mode is the ________.

questions 4-6. A. most frequent value in a data set
B. middle value in a data set
Data set C. most frequent category in a data
Letters H I J K set
L M N O P D. average of values in a data set
Frequency 9 15 23 12
11 21 19 13 16
Calculate the mean of the data.

10) From the three measures of central
tendency, which one takes into account
all the values of the data set?
A. Mean
B. Mode
C. Median
D. Mode and mean

Money-Exercise 1 5) Which characteristic of money is
most essential if it is to serve effectively
Choose the best possible answer for the as a medium of exchange?
following questions. A. Divisibility
1) Barter trade may not be convenient B. Liquidity
in trade because ________. C. Acceptability
A. it requires large amount of money D. Scarcity
to acquire the goods and services
B. goods are bulky and may be 6) All these are functions of money
difficult and expensive to except ________.
transport A. store of value
C. there is a need for double B. medium of exchange
coincidence of wants C. acceptability
D. there is scarcity of resources D. unit of account
2) The primary function of money is 7) From the following functions of

that it is a ________. money, which one encourages people to
A. unit of account save?
B. store of value A. Acceptability
C. standard for deferred payments B. Unit of account
D. medium of exchange C. Medium of exchange
D. Store of value
3) Store of value for money is mainly
affected by ________. 8) Money acts as a unit of account.
A. exchange rates This means that money is ________.
B. hyper inflation A. something that can be circulated
C. interest rates and can provide a standardized
D. bank rates of payment
B. an asset that can be used in the
4) Money acts as a medium of exchange of goods and services
exchange. This means that money is C. something that can be generally
________. accepted in the exchange of
A. something that can be circulated goods and services
and can provide a standardized D. something that can hold its value
means of payments over a long period of time
B. an asset that can be used in the
exchange of goods and services 9) Money acts as store of value. This
C. something that can be generally means that money is ________.
accepted in the exchange of A. something that can be circulated
goods and services and can provide a standardized
D. something that can hold its value means of payment
over a long period of time B. an asset that can be used in the
exchange of goods and services

C. something that can be generally
accepted in the exchange of
goods and services
D. something that can hold its value
over a long period of time
10) The use of money ________.

A. increases risks of trade
B. increases costs of transactions
and facilitates trade
C. allow customers to negotiate
prices on every transaction
reduces costs of transaction and
facilitates trade

Money-market-Exercise 1 A. gain political influence in the
country
Choose the best possible answer for the B. supervise other financial
following questions. institutions
1) Which one of the following banks act C. manage that country’s gold and
as brokers in the stock exchange and foreign currency reserves
purchase and sell shares on behalf of D. ensure uniformity of currency and
clients. to avoid excess supply of money
A. Merchant bank
B. Commercial bank 6) The central bank manages the
C. Central bank monetary policy of a country and
D. Building society through the monetary policy it
________.
2) Central banks act as lender of last A. manages national debts
resort. This is means that ________. B. manages foreign currency
A. the central bank is allowed to reserves
borrow money from other banks C. supervises financial institutions
B. the central bank can lend money D. influences the country’s interest
to other banks rates
C. the central bank is responsible for
managing and regulating other 7) If there is a demand-pull inflation,
banks the central bank can ________.
D. the central bank is the sole lender A. decrease interest rates in order to
in the economy reduce demand for loans
B. increase interest rates in order to
3) If interest rates rise, ________. reduce demand for loans
A. velocity of circulation of money C. decrease interest rates in order to
rises increase demand for loans
B. price of government bonds falls D. increase interest rates in order to
C. price of shares rises increase demand for loans
D. the desire to hold money rises
8) Cash reserve ratio is set by
4) Banks that are expects in ________.
international trade are called ________. A. merchant bank
A. building societies B. commercial bank
B. merchant banks C. central bank
C. central banks D. building society
D. commercial banks
9) Merchant banks are mainly focused
5) The central bank is a monopoly for on ________.
issuing notes and coins so as to A. printing money
________. B. consultancy services

C. receiving cash deposits from
customers
D. banking and consultancy services
10) If there is a depreciation of a

country’s currency against other
currencies the central bank can
________.
A. change the currency of its
country
B. print and issue more money in
the economy
C. purchase its currency in the
market
D. sell its currency in the market

National-income-statistics-Exercise 1 5) The gross domestic product minus
allowance for depreciation is referred to
Choose the best possible answer for the as ________.
following questions. A. net national product
B. gross national product
1) When using the expenditure method C. income per capita
in calculating national income, which D. gross domestic income
one of the following component will be
used? 6) How can the net national product be
A. Wages and salaries converted to gross national product?
B. Investment A. By adding depreciation.
C. Depreciation B. By adding indirect taxes.
D. All the above C. By adjusting for inflation.
D. By subtracting subsidies.
2) The national accountants have
calculated the GDP by adding 7) The national accountants face the
aggregate interest, wages and salaries, problem of double counting when using
rent and royalties and profit. Which which method of computing national
method was used? income?
A. Output method A. Income method
B. Expenditure method B. Value addition method
C. Income method C. Output method
D. Any of the above methods D. Expenditure method
3) How can GDP be adjusted from the 8) From the following, identify an
market price to factor costs? intermediate good or service.
A. By adding indirect taxes and A. Fuel purchased by parents to visit
subtracting subsidies. their child at a boarding school.
B. By subtracting indirect taxes and B. Sugar purchased to be used by a
subsidies. bakery to produce bread.
C. By subtracting indirect taxes and C. A box of soap that a family buys
adding subsidies. to use during the following year.
D. By adding indirect taxes and D. A truck that a fruit grower
subsidies. purchases to deliver farm
produce to the market.
4) What term describes the value of all
goods and services that an economy 9) When the national income has been
produces within a year? computed by adding all the incomes
A. National income earned by residents of the country
B. Net national product irrespective of the country they operate
C. Gross national product in, the figure they get is called
D. National expenditure ________.
A. net national income

B. gross domestic product
C. gross national product
D. gross net income
10) In 2016 a firm produced output

worth $10 000. The depreciation of
machinery and equipment was $1 500.
How are the activities of this firm likely
to affect the Gross Domestic Product?
A. GDP will increase by $11 500.
B. GDP will decrease by $1 500.
C. GDP will increase by $10 000.
D. GDP will increase by $8 500.

Objective-of-the-firm-Exercise 1 6) Which one of the following is not
one of the benefits of business growth?
Choose the best possible answer for the A. Increase in market share.
following questions. B. Increase in sales of the business.
1) ________ is the most and obvious C. Management will have less work
objective of a public sector organisation to do.
in an economy. D. There will be continuity of the
A. Profit maximisation business.
B. Providing a service 7) Jack and Chaps are in business as
C. Loss minimisation car sale partnership. What objectives
D. Loss maximisation would they have for forming their
business?
2) Profit of a firm is maximised when: A. Survival and loss minimisation.
A. AR = AC B. Growth and providing service.
B. MR = MC C. Loss minimization and providing
C. TR = TC a service.
D. MR = AC D. Improving society and growth.
3) Which one of the following is 8) Which one of the following is not a

regarded as a common firm’s objective? common business objective?
A. To increase market share. A. Growth
B. To pay much tax to the B. Survival
government. C. Loss minimisation
C. To provide a service to the D. Paying tax
community.
D. To make profit from the business. 9) A firm might have growth as one of
its objective because:
4) Most firms put survival as their main A. All firms have to grow in order to
objective when: survive.
A. The economy is deteriorating. B. They will be able to benefit from
B. The government plans to raise diseconomies of scale.
subsidies. C. They will be able to benefit from
C. Consumers are increasing their economies of scale.
demand for products. D. The shareholders prefer growth
D. The competition from other to enjoy profits.
businesses decrease.
10) The first and most important
5) A firm’s objective mainly depend on: objective of a small business
A. type of industry is________.
B. type of business A. survival
C. sector of industry B. social responsibility
D. time frame C. growth
D. profit maximization

Price-and-output-determinants-Exercise D. Always equal to total fixed cost.
1
5) Revenue that a firm generated by
Choose the best possible answer for the producing an additional unit of a product
following questions. is called ________.
1) What should be done by the firm A. total revenue
when the marginal cost is more than the B. marginal cost
marginal revenue: C. marginal revenue
A. Increase price of the product. D. average revenue
B. Decrease price of the product.
C. Increase output produced. 6) Which is the most profitable level of
D. Reduce output produced. output for a firm operating in the short
run? Is the level of output at which:
2) What is the impact of imposing A. Marginal revenue exceeds
indirect tax to a firm? marginal cost by the highest
A. It leads to a lower output and a amount.
lower equilibrium price. B. Marginal revenue equals
B. It leads to a high output and high marginal cost.
equilibrium price. C. Price exceeds average cost by
C. It leads to a lower output and the highest amount.
high equilibrium price. D. Price equals marginal cost.
D. It leads to a higher output and
higher equilibrium price. 7) Which approach is used to
determine the price and output level of a
3) From the following, identify the firm in an imperfect competition market?
correct equation which is used to A. Demand and supply approach.
determine price and output level of a B. Total revenue and total cost
firm using total revenue and total cost approach.
approach: C. Marginal revenue and marginal
A. Marginal revenue = marginal cost cost approach.
B. Total cost = total revenue D. Marginal revenue and total cost
C. Total cost =marginal revenue approach.
D. Marginal revenue = total cost
8) In a perfectly competitive market
4) When determining profit price of the product is equal to:
maximization point of a firm in any A. Marginal revenue
market structure, marginal cost should: B. Marginal cost
A. Always cut the average fixed cost C. Average cost
from the bottom. D. Average variable cost
B. Always cut the average total cost
from the bottom. 9) An additional cost incurred when
C. Always cuts the average total producing extra unit of a product is
cost from top. called:

A. Marginal revenue
B. Average total cost
C. Marginal cost
D. Total cost
10) Firms maximise profit and output

when:
A. Marginal cost is equal to marginal
revenue.
B. Marginal cost is equal to average
revenue.
C. Total cost is more than total
revenue.
D. Marginal cost is equal to total
cost.

Price-elasticity-of-supply-Exercise 1 6) Which combination of the following
factors affect elasticity of supply?
Choose the best possible answer for the A. Quantity and price.
following questions. B. Demand and supply.
1) Assuming that the price of a product C. Revenue and cost.
rises from $30 to $50 and the quantity D. Time and number of sellers.
supplied rises from 20 units to 40 units.
Calculate the PES. 7) In which period of time is the supply
A. -0,67 of a product perfectly price inelastic?
B. 0,67 A. Momentary period.
C. -2,0 B. Short run period.
D. 2,0 C. Long run period.
D. Very long run period.
2) Price elasticity of supply is always:
A. Positive due to law of supply. 8) Suppose the price elasticity of
B. Positive due to law of demand. supply of a product is 5 and the
C. Negative due to law of supply. percentage increase in price is 20%.
D. Negative due to law of demand. Calculate the percentage change in
quantity supplied.
3) When a firm is operating at full A. 20%
capacity, it means that all machinery B. 5,0%
and equipment are fully utilized and then C. -5,0%
the supply of the product produced will D. 4,0%
be ________.
A. price elastic 9) Supply is likely to be more price
B. price inelastic elastic:
C. perfectly elastic A. If there are few producers in the
D. unitary market.
B. If there is capacity to produce
4) Price inelasticity of supply is more output.
associated with: C. In the short run than in the long
A. Luxury goods run.
B. Necessity goods D. If there factors of production are
C. Inferior goods immobile.
D. Public goods
10) If the product is said to have price
5) A supply curve that is sloping elastic of supply, its coefficient range:
upward from the origin has: A. Between zero to infinity.
A. PES which is greater than one. B. Between one and less than
B. PES is equal to one. infinity.
C. PES which is less than one. C. Between zero and one.
D. A negative PES. D. Between one and ten.

Production-costs-Exercise 1 A. Because total costs increase as
output increases.
Choose the best possible answer for the B. Because fixed costs are shared
following questions. on the smaller amount of output.
1) Which of the following factors of C. Because fixed costs are shared
production can be changed in the short on a large amount of output.
run period? D. Because variable costs are
shared on a large amount of
A. Land output.
B. Labour 5) If the firm enjoys internal economies
C. Capital of scale:
D. Enterprise
2) In the short run, which one of the A. Total costs decreases.
following always gets smaller as B. Marginal cost should increase.
production rises? C. Average cost decreases.
D. Total revenue falls.
A. Average fixed cost 6) From the following costs, identify the
B. Average variable cost type of cost that cannot be found in the
C. Short run average cost long run period.
D. Short run marginal cost
3) Which one of the following is not an A. Total costs
internal diseconomies of scale: B. Total fixed costs
C. Total variable costs
A. Lack of motivation for workers. D. Average variable costs
B. Financial diseconomies of scale. 7) Average variable cost curve:
C. Managerial diseconomies of
scale. A. Is derived from the average fixed
D. Economies of concentration. cost.
4) The following diagram shows the B. Converges with the average cost
average fixed cost curve. as output rises.
C. Converges with the average cost
as output decreases.
D. Diverges with the average cost
as output rises.
8) What does the average cost
measure:
A. The cost per unit produced.

B. The total cost of production.
C. The cost per labour used.
D. An extra cost of producing a unit
of product.
Why does the average total cost curve 9) When marginal cost is positive and
slope from left to right following an decreasing:
increase in output?
A. Total cost is decreasing.

B. Total cost is rising at a falling Why is the short run total cost curve always
rate. above the long run total cost curve?
C. Total cost is decreasing at a
falling rate. A. Because in the short run the firm
D. Total cost is rising at a rising rate. cannot be able to increase more
labour.
10) The following diagram shows the B. Because in the long run the firm
relationship between short run and long incurs both fixed and variable costs.
run total cost curves. C. Because firms in the long run enjoy
the economies of scale.
D. Because firms can increase the
price of their products.

Protectionism-Exercise 1
5) How can protectionism negatively
Choose the best possible answer for the affect the entire domestic economy?
following questions. A. The aggregate demand for goods
1) From which one of the following and services decrease.
products will the Zimbabwean B. It disturbs the functioning of the
government raise more revenue by market mechanism.
imposing a tariff? C. It reduces accessibility to
A. Rice strategic goods and services.
B. School text books D. It worsens the domestic
C. Soft drinks economy’s terms of trade.
D. Computers
6) The government can provide a
2) The limit of the quantity of a good subsidy in any of the following forms
that can be imported or exported as except:
determined by the domestic country is A. Supplying cheaper raw materials.
called ________. B. Giving cash to producers.
A. an embargo C. Granting lower tax to producers.
B. a quota D. Providing cheap labour to
C. a tariff producers.
D. an administrative burden
7) A ban to import certain products is
3) How can voluntary export restraint called ________.
help the importing country? A. export restraint
A. The price of domestic markets B. embargo
decrease. C. quota
B. It lowers domestic competition. D. buffer
C. In increases the country’s
revenue through increased 8) In which situation can the
customs duties. government get more revenue as a
D. It improves the country’s result of imposing a tariff on import?
exchange rate. A. If the price of the product is
elastic.
4) How does a tariff affect equilibrium B. If the price of the product is
of a good? It causes ________. perfectly inelastic.
A. the supply curve to shift to the C. If the price the product is
right inelastic.
B. the demand curve to shift to the D. If the price of the domestic
left products increase.
C. the shifts of the equilibrium point
up 9) The use of long cumbersome
D. he supply curve to become price procedures by the government as a
elastic

means to reduce the amount of exports
or imports is called ________.
A. content law
B. administrative procedure
C. red tape
D. procedural control
10) A tariff is a tax that is imposed on

________.
A. quotas
B. imports only
C. exports only
D. both imports and exports

Research-techniques-Exercise 1 A. The questions should be easy to
understand.
Choose the best possible answer for the B. The questionnaire should be
following questions. short and precise.
1) What is one advantage of using data C. Technical jargon should be
from digital sources in research? avoided by all means in the
A. Ease of searching. questionnaire.
B. Accuracy of the source. D. The questionnaire should include
C. Reliability of data. the name of the respondent.
D. Equity of access.
7) Which one of the following is not a
2) Which one of the following aspects method used to collect first-hand data
is not necessary on the questionnaire? from consumers?
A. Age of the respondent. A. Questionnaire
B. Qualification of the respondent. B. Observation
C. Name of the respondent. C. Surveys
D. Gender of the respondent. D. Records analyses
3) Which one of the following is not a 8) A method of collecting data which

quantitative method of collecting data? also used to carry out a survey is called
A. Surveys ________.
B. Interviews A. questionnaire
C. Observations B. observation
D. Questionnaire C. experiments
D. tests
4) Which type of sampling technique
where every member of the targeted 9) ________ sampling is a technique
population has a chance to be selected? of gathering representative data from a
A. systematic sampling certain specified group.
B. quota sampling A. Systematic
C. random sampling B. Quota
D. probability sampling C. Random
D. Probability
5) Which type of sampling where the
targeted population is put in different 10) Sample is:
groups with various characteristics? A. The whole population.
A. Stratified sampling B. A small part of that population
B. Systematic sampling used.
C. Non-probability sampling C. A representative of only adults.
D. Convenience sampling D. Infinity set of elements with
common features.
6) Which one of the following is not an
essential of a questionnaire?

Rewards-for-factors-of-production-Exercise 6) Collective bargaining of trade unions is
1 more likely to ________.
A. increase the supply of products
Choose the best possible answer for the B. decrease the demand for labour
following questions. C. increase the demand for labour
A. If there is a single buyer of labour, D. decrease the wage rate
the wage rate is determined by
________. market forces of 7) An increase in demand of a particular
demand and supply product such as clothes is more likely to
B. the government only ________.
C. the monopsonist A. increase the demand for clothes
D. trade unions B. increase the demand for labour
C. decrease the demand for labour
2) An increase in the number of workers D. decrease the supply of clothes
can result in a ________.
A. fall in marginal product 8) An increase in the supply of labour
B. increase in marginal revenue ________.
C. decrease in costs A. shifts the supply curve to the left
D. increase in costs and increase in B. causes a movement along the
marginal product supply curve
C. shifts the supply curve to the right
3) In a perfectly competitive market, wages D. makes the supply curve elastic
can be determined by ________.
A. the government 9) When MRP is greater than MFC
B. trade unions ________.
C. demand and supply A. firms will hire more labour
D. the producers B. firms will cease to hire labour
C. the wage rate will be low
4) If a minimum wage is introduced in a D. the production will decline
market where the demand for labour is
elastic, there will be ________. 10) Minimum wage rate in an economy is
A. an increase in quantity demanded of the ________.
labour A. highest amount of wage rate set by
B. an increase in wages the government
C. a small change in demand B. highest amount of wage rate set by
D. a greater decline in demand for trade unions
labour C. lowest amount of wage rate set by
trade unions
5) The effects of minimum wage mainly D. lowest amount of wage rate set by
depends on ________. the government
A. the amount of the minimum wage
B. the response of the firms
C. the elasticities of demand and
supply
D. the bargaining power of trade unions

Solutions-to-market-failure-Exercise 1 5) An increase in subsidies can result
in ________.
Choose the best possible answer for the A. an increase in government
following questions. spending
B. an increase in government
1) The government can impose a revenue
quota so as to________. C. a decrease in government
A. raise its revenue revenue
B. regulate firms D. a decrease in consumer
C. stabilise the fluctuations of prices spending
D. protect local firms
6) If the demand for a product is
2) Prices of commodities are allowed perfectly inelastic, the burden goes to
to ________. ________.
A. fluctuate between upper and A. the government
lower boundaries B. the consumer
B. be above the lower boundary but C. the producer
they can exceed the upper D. the government and consumer
boundary
C. fluctuate below the boundary 7) An increase in tax ________.
D. go beyond the upper boundary A. have no effect on the price of
only commodities
B. results in an increase in supply
3) If the demand for a product is C. have no effect on supply
perfectly elastic, the burden goes to D. results in a decrease in supply
________.
A. the government 8) If the price of a commodity is within
B. the consumer the given boundaries the government
C. the producer will _______.
D. the government and consumer A. increase demand for the product
B. increase supply of the product in
4) When the government is keeping the market
buffer stock, if the price is below the C. decrease the supply of the
lower boundary the government will product
________. D. do nothing to the market
A. increase demand for the product
B. increase supply of the product in 9) When the government is keeping
the market buffer stock, if the price is above the
C. decrease the supply of the lower boundary the government will
product ________.
D. do nothing to the market A. increase demand for the product
the market

C. decrease the supply of the 4) Which statement is not true about
product debentures?
D. do nothing to the market A. Debentures cannot be converted
into cash.
10) Allocative efficiency is achieved B. Debenture holders have no
where ________. voting rights.
A. social marginal benefit is equal to C. Debentures have a fixed rate of
social marginal cost interest.
B. price is equal to quantity D. A debenture is a long term loan.
produced
C. private marginal cost is equal to 5) Which of the following is an
social marginal benefit advantage of equity as a source of
D. private marginal benefit is equal finance?
to private marginal cost A. Equity has low interest rates.
Sources-of-capital-Exercise 1 B. Equity maintains control of the
business.
Choose the best possible answer for the C. Equity does not have to be repaid
following questions. within a specified time frame.
D. Equity can be listed on a stock
1) Debt capital refers to the ________. exchange.
A. money that is obtained from the
sale of shares to the public 6) A Shareholder benefits from an
B. money that has been borrowed investment by getting a ________.
which must be paid back A. Interest
C. selling debts of a business to a B. Salary
third party C. Dividend
D. purchasing products on credit D. Rental lease
2) From the following, identify a short 7) Which of the following is not a long-
term source of capital. term source of debt finance?
A. Debenture A. Mortgage
B. Share capital B. Debentures
C. Mortgage loan C. Issuing of shares
D. Family and friends D. Debt factoring
3) One of the advantages of using 8) Which one of the following describes

retained earnings as a source of capital the attitude of an entrepreneur on risk
is that, retained earnings ________. taking? Entrepreneurs can tolerate
A. have low interest rate ________.
B. have low opportunity cost A. high risks
C. have no interest B. low risks
D. have no opportunity cost C. full risks
D. moderate risks

3) Price mechanism may fail to
9) What is the most likely source of produce public goods because
finance for a small firm? ________.
A. A bank loan A. they are under consumed
B. A debenture B. they are less demanded
C. Issuing of shares C. they are provided by the
D. Mortgage loan government
D. they have zero market price
10) Which of the following is a way of
obtaining capital by selling part of the 4) Public goods are mainly affected by
business’ ownership? ________.
A. Owner’s equity A. under consumption
B. Debenture B. free rider problem
C. Venture capital C. under production by the private
D. Debt factoring sector
D. overproduction by the
government
Sources-of-market-failure-Exercise 1
5) If there are no external benefits then
social benefits will be equal to
________.
1) Public goods have the following
A. positive externalities
characteristics:
B. negative externalities
A. They are rivalry and excludable.
C. private benefits
B. They are non-rivalry and
D. private costs
depletable.
C. They are non-excludable and
6) In the price mechanism system,
non-rivalry.
firms maximize their profits where
D. They are non depletable and
________.
excludable.
A. marginal social benefits are equal
to marginal social costs
2) Allocative efficiency is achieved
B. marginal social benefits are equal
where ________.
to marginal private costs
A. social benefits are equal to social
C. marginal social benefits are equal
costs
to marginal private benefits
B. social benefits are equal to
D. marginal private benefits are
private costs
equal to marginal private costs
C. marginal social benefits are equal
to marginal social costs
7) The following diagram shows
D. marginal social benefits are equal
________.
to marginal private costs

B. greater than 0
C. less than 0
D. equal to 0
Wage-differentials-Exercise 1

1) Supply for skilled labour is usually
________.
A. high and elastic
B. low and inelastic
C. elastic
A. a positive externality D. inelastic
B. a negative externality
C. external costs 2) Demand for unskilled workers is
D. free rider problem usually _______.
A. high and inelastic
8) Social costs are equal to ________. B. how and inelastic
A. private benefits minus private C. high and elastic
costs D. inelastic
B. private costs plus positive
externalities 3) Wage rate is more likely to be high if
C. private benefits plus private costs ________.
D. private costs plus negative A. demand for labour is high and
externalities elastic and if supply of labour is
low and inelastic
9) Consumption by one party does not B. demand for labour is high and
reduce the consumption available for inelastic and if supply of labour is
the other party. This means that public low and elastic
goods are ________. C. demand for labour is high and
A. non-rivalry elastic and if supply of labour is
B. non-depletable low and inelastic
C. non-rejectable D. demand for labour is high and
D. non-excludable elastic and if supply of labour is
low and elastic
10) Public goods are products where
consumption by an additional individual 4) If an organisation is paying its male
does not reduce the amount consumed workers wages that are less than that of
by existing consumers. This means that female workers then it means that
the marginal cost of production when an ________.
individual is added is ________.
A. equal to 1

A. MRP curve for male workers is C. Semi-sklled labour
above the MRP curve for female D. Professional labour
workers
B. MRP curve for male workers is
below the MRP curve for female
workers
C. MRP curve for male workers is
elastic
D. MRP curve for male workers is
inelastic
5) ________ is the idea that higher

education often results in higher
earnings.
A. Wage determination
B. Negotiated wages
C. Rational wages
D. Signaling theory
6) If the trade union attempts to

prevent the erosion of the value of the
minimum wage, they ________.
A. freeze hiring of workers
B. freeze wages
C. increase minimum wage
D. increase hiring
7) An industrial union is ________.

A. made up of primarily skilled
workers
B. made up of members who
perform the same kind of work
C. organized, support or run by the
employers
D. made up of workers who perform
different kinds of work in the
same industry
8) Workers who have the skills to

operate machines and who require a
minimum amount of training are:
A. Skilled labour
B. Unskilled labour

Aggregate-demand-and-supply- A. a decrease in cost of production
Exercise 1 B. an increase in productivity
C. a depletion of resources
D. an increase in price level
4) All the following lead to an
Choose the best possible improvement in the quality of resources
in a country except:
answer for the following
questions. A. Training of labour force.
B. Adoption of new technology.
1) Which one of the following diagrams C. Removal of incentive to
show the long run aggregate supply employees.
curve? D. Discovery of new energy
sources.
5) Which are the components of
aggregate demand?
A. C + I + G
B. C + I + G – M
C. C + I + G + (X-M)
D. C + I + G + (M-X)
6) What would cause the national
income to move from point A to point B?
A. Diagram A
B. Diagram B
C. Diagram C
D. Diagram D A. Decrease in supply of money.
2) The aggregate demand in the B. A fall in the price level.
economy may fall because of ________. C. Increase in taxes.
D. Increase in interest rate.
A. an increase in consumption 7) At the point where the Philips curve
B. an increase in investment is vertical an increase in the supply of
C. a decrease in imports money will result in an increase in
D. an increase in taxation ________.
3) All the following are causes of
supply shocks except ________. A. unemployment rate
B. inflation rate

C. interest rate A. Diagram A
D. taxation rate B. Diagram B
8) Which one of the following does not C. Diagram C
lead to an increase in aggregate
D. Diagram D
demand?
A. Increase in exports.
B. Increase in investment.
C. Increase in consumption.
D. Increase in import.
9) Identify a factor which does not lead
to a shift in the long run aggregate
supply.
A. Decrease or increase in the

quantity of resources.
B. An increase in the quality of
existing resources.
C. Discovery of new resources in
the economy.
D. An increase in the general price
level.
10) According to Keynesians, which
graph shows the equilibrium point of
AD-AS in the long run?

Balance-of-payment-Exercise 1 C. Debt relief extended to Zimbabwe
by International Monetary Fund
Choose the best possible answer for the (IMF).
following questions. D. The foreign currency reserve hold
1) Short term international commercial by the Reserve Bank of
bills are recorded in which account? Zimbabwe.
A. Capital account
B. Other investment 6) Which one from the following is not
C. Portfolio investment a reason for the government to record
D. Capital transfer the balance of payment transactions?
A. The increase or decrease in
2) If a country purchased tractors and national reserves are monitored.
bulldozers from China, in which balance B. It helps the government to
of payment account is the transaction forecast changes in the business
recorded? environment.
A. Capital account C. It enables the country to eliminate
B. Investment account risks on trade.
C. Current account D. It helps the country to enact
D. Income account suitable fiscal and monetary
policies.
3) Identify a non-financial asset from
the following. 7) Which one of the following leads to
A. Franchise an increase in the national reserves?
B. Bond An
C. Treasury bill A. increase in export.
D. Short term loans B. A repayment of international loan.
C. An increase in balancing item.
4) The balance of payment must D. A decrease on net investment.
balance because of the use of
________. 8) Which one of the following
A. receipts and payments components is recorded in the income
B. offsetting accounts section of the current account?
C. double entry system A. Foreign investment in the
D. reserves country.
B. Income received from the sale of
5) What is recorded as a debit entry in exports.
the financial account? C. Profit of Zimbabwean operating
A. The total amount of investments business in the diaspora.
made to other countries by D. Donations received by Zimbabwe
Zimbabweans. from other governments.
B. The total earnings from exports of
goods and services. 9) Zimbabwean residents invested
$120 million in business in the rest of

the world. A total of $70 million was
invested in the country by foreign 4) A rise in real income result in ________.
investors. What is the net investment A. a decrease in money demand
figure? B. a decrease in money supply
C. an increase in money demand
A. +$70 million
D. an increase in money supply
B. -$70 million
C. +$50 million 5) The availability of Automated Teller
D. +$190 million Machines and credit cards can ________.
A. increase the supply of money
10) The balance of trade in goods for B. increase the demand for money
Zimbabwe is -$70 million. If the value of C. decrease the demand for money
exports is $80 million. What is the value D. decrease the supply of money
of imports?
A. $10 million 6) If interest yield is high, then ________.
B. $150 million A. money demand will increase
B. money demand will decrease
C. $140 million
C. money supply will increase
D. $70 million
D. money supply will decrease
Demand-and-supply-for-money-Exercise 1 7) If individuals anticipate uncertainty in

the future they are likely to ________.
Choose the best possible answer for the A. increase their demand for money
following questions. B. decrease their demand for money
1) An increase of the required reserve ratio C. deposit their money in their bank
is most likely to ________. accounts
A. decrease money demand D. demand more credit cards
B. decrease money supply
C. increase money demand 8) The following factors can directly
D. increase money supply influence the demand for money except:
A. Interest rates
2) The opportunity cost of holding money B. Required reserve ratio
is______. C. Real income
A. the investments done with that D. Financial innovations
money at a given period
B. the investments that would have 9) If discount rates are high, commercial
been done with that money banks are most likely to ________.
C. the rate of interest used by banks in A. create more money
the economy B. create less money
D. the next alternative foregone C. raise more money
D. increase their loans
3) Money supply is mainly determined by
________. 10) An increase in price level leads to:
A. commercial banks A. An increases the demand for money.
B. the central bank B. An increases the purchasing power.
C. merchant banks C. A decreases the demand for money.
D. individuals D. An increases the supply of money.

B. The price of exports rises.
Exchange-rates-Exercise 1 C. The value of exports decrease.
Choose the best possible answer for the D. The value of imports decrease.
1) A system in which the central bank 6) The fall in the value of the currency
of a country is involved in buying and as a result of planned adjustment by the
selling of local currency to stabilize the government is called ________.
exchange rate is called ________. A. Depreciation
A. revalued exchange rate B. Revaluation
B. fixed exchange rate C. Devaluation
C. pure exchange rate D. Deflation
D. managed exchange rate
7) ________ exchange rate system
2) An increase in the quality of goods has the highest level of risks to traders.
and services produced in the country A. Free
can leads to ________. B. Managed
A. constant exchange rate C. Fixed
B. higher exchange rate D. Dirty float
C. lower exchange rate
D. purchasing power parity 8) When the exchange rate changes in
line with inflation of two countries, it is
3) With a fixed exchange rate system, referred to as ________.
what should the government do when A. real value exchange rate
the exchange rate is at the upper limit B. purchasing power parity
point? C. controlled exchange rate
A. It increases the tax rate. D. constant exchange rate
B. It will sell the local currency.
C. It will buy the local currency. 9) The market forces are the
D. It will buy foreign currency. determinants of the exchange rate in
which of the following system?
4) In a free exchange rate system what A. Managed exchange rate system
happens if the demand of the currency B. Fixed exchange rate system
increases? C. Free exchange rate system
A. The exchange rate will fall. D. Controlled exchange rate system
B. The exchange rate will remain
constant. 10) Which one of the following leads to
C. The exchange rate will rise. an appreciation of the currency?
D. There will be a revaluation. A. An increase in demand of
imports.
5) Which of the following is most likely B. An increase in purchasing power.
to happen if the currency of a country C. An increase in demand of
has appreciated? exports.
A. The price of imports rise. D. An increase in inflation.

following questions. 5) Identify two types of business
1) The process where by two firms are growth from the following:
joining together to form one but A. Internal and external growth
operating at different stages of B. Diversification and conglomerate
production is called ________. C. Lateral and internal growth
A. diversification D. Eternal and lateral growth
B. horizontal integration
C. vertical integration 6) Ndlovu is a general dealer who
D. conglomerate merger specializes in selling toiletries. The rent
of the shop increases due to inflation in
2) Use the following scenario to the country and Codza decides to
answer questions 2, 3 and 4. venture into food stuff in order to remain
in the business. From the following
Firm A produces raw materials which identify the type of growth used by
are used to make soap, firm B is soap Codza.
manufacturer and firm C is a retail shop A. Horizontal integration
which sells groceries, due to the B. Vertical integration
recession in an economy all firms C. Lateral integration
decide to merge in order to boosts their D. Diversification
sales.
7) Which one of the following is not a
Firm A and firm B entered into which motive of a business to become big?
type of merger? A. Fight competition
A. Forward vertical merger B. Increase market power
B. Backward vertical merger C. Risk diversification
C. Horizontal merger D. Reducing revenue
D. Diversification
8) The process where by two or more
3) What type of growth occurs when companies in different production
company B buys more shares and has activities join together to form one
total control of firm A? company is called ________.
A. Backward merger A. Conglomerate merger
B. Forward merger B. Lateral integration
C. Takeover C. Diversification
D. Diversification D. Internal growth
4) Firm C decides to merge with firm B. 9) Which one from the following is not
Which type of integration is this? a benefit to the economy of Zimbabwe
A. Forward vertical integration when a multinational company sets up
B. Conglomerate integration in Zimbabwe?
C. Horizontal integration A. Employment creation
D. Backward vertical integration B. Improved standard of living

C. Over exploitation of resources A. the good is inferior
D. Increase government revenue B. the good is normal
C. the good is public
10) What is the difficulty that can be D. the good is private
faced by a multinational company when 5) The following statements help to
setting up their company in a new explain why most indifference curves
country? are curved and sloped to the right,
except that :
A. Consumers only buy two goods.
B. Both products concerned are
Indifference-curves-theory-Exercise 1 desirable.
Choose the best possible answer for the C. Most pairs are not perfect
following questions. substitutes.
1) Why do consumers prefer higher D. Most pairs are perfect
indifference curves than the lower ones? substitutes.
A. Because consumers’ income 6) Which one of the following
decreases. conditions can cause the consumers’
B. Because it yields the highest budget line to shift to the right?
satisfaction to the consumer. A. An increase in the income of the
C. Because it yields the lowest consumer.
satisfaction to the consumer. B. An increase in the real income of
D. Because prices are low on the the consumer.
indifference curve. C. A decrease in the real income of
2) The slope of a budget line shows : the consumer.
A. The marginal rate of substitution. D. A decrease in the income of the
B. The marginal rate of diminishing consumer.
returns. 7) The following factors affect the slope
C. The marginal utility of one good. and position of a consumer’s budget line
D. The marginal rate of between two products X and Y except:
consumption. A. The price of product Y.
3) Good A has a downward sloping B. The price of product X.
demand curve, substitution effect C. The consumer’s income.
outweighs the income effect and the D. Position of the indifference
income effect of the price change works curves.
inversely with the substitution effect. 8) The slope of an indifference curve
This is a description of: shows:
A. A public good. A. Diminishing marginal rate of
B. A merit good. substitution.
C. An inferior good. B. Prices of two goods.
D. A normal good. C. Quantity demanded of two goods.
4) Substitution effect and income effect D. Budget line of the consumer.
on price change strengthen each other
when ________.

9) Why is the substitution effect always 10) A consumer is said to be in
greater than the income effect when equilibrium when:
price increases? A. Budget line is above the
A. Because lower prices encourage indifference curve.
consumers to buy different B. Budget line is below the
goods. indifference curve.
B. Because high prices encourages C. The budget line is tangent to the
consumers to buy related good. indifference curve.
C. Because price increase causes D. The indifference curve is tangent
income to increase. to the budget line.
D. Because price increase causes
real income to increase.
Inflation-Exercise 1 5) If inflation is above 20% and

1) An increase in import prices changing rapidly it is called ________.
_______.
A. have no effect in the country A. creeping inflation
B. increase inflation in the country B. hyperinflation
C. increase shortages in a country C. galloping inflation
D. increase profits for producers D. running inflation
2) A decline in purchasing power of 6) If the government increase interest

money can be referred to as ________. rates and reduce money supply in a bid
A. velocity of money to control inflation they will be using
B. purchasing power parity ________.
C. inflation A. expansionary fiscal policy
D. consumer price index B. contractionary fiscal policy
C. contractionary monetary policy
3) An increase in costs of production D. expansionary monetary policy
can lead to ________.
7) Which one of the following types of
A. an increase in the supply of inflation can be regarded as health
goods inflation in an economy?
B. an increase in demand for goods A. Creeping inflation
C. a decrease in price of goods B. Hyperinflation
D. a decrease in supply of goods C. Galloping inflation
D. Running inflation
4) If the central bank increase interest
rates, ________. 8) A fall in the exchange rate can lead
to ________.
A. demand for money will increase A. a rise in wages
B. the public will increase B. an increase in aggregate demand
investments C. a decrease in aggregate demand
C. inflation rate is likely to increase D. a decrease in imports
D. inflation rate is likely to decline

9) The government can increase tax
and reduce its spending in order to
control inflation. This is ________.
A. expansionary fiscal policy
B. contractionary fiscal policy
C. contractionary monetary policy
D. expansionary monetary policy
10) Which type of inflation is shown by A. Cost push inflation

the following diagram? B. Wage-price inflation
C. Demand pull inflation
inflation. D. Imported inflation
D. Rate of interest will remain
constant and investments will
increase.
Interest-rate-determination-Exercise 1
4) Demand for active balances is
Choose the best possible answer for the ________.
following questions. A. perfectly inelastic
1) The curve of demand for money for B. perfectly elastic
precautionary motive is ________. C. elastic
A. perfectly elastic D. inelastic
B. perfectly inelastic
C. elastic 5) A scenario whereby any change in
D. inelastic money supply will not cause any change
on interest rate is called ________.
2) According to the liquidity preference A. money trap
theory, if there is an increase in B. loanable trap
uncertainty: C. liquidity trap
D. interest rate
A. Risks increases.
B. Demand for money increase. 6) The curve for investments is
C. Demand for money decrease. downward sloping because ________.
D. Individuals will invest. A. if the rate of interest is low the
amount of investments will be low
3) If the investment schedule shift to B. there is a positive relationship
the right: between the rate of interest and
A. Rate of interest will increase and the investment
investments will decrease. C. if the rate of interest is high the
B. Rate of interest will increase and amount of investments will be
investments will increase. high
C. Rate of interest will decrease and D. if the rate of interest is low the
investments will decrease. amount of investments will be
high

A. Because if the rate of interest is
7) What causes a shift to the left of the high people will earn less money
savings schedule? An anticipation of from interest.
an B. Because if interest rates are low
A. increase in unemployment. people will earn more money.
B. An anticipation of political C. Because if the rate of interest
instability. increase investments will also
C. An anticipation of future increase.
shortages of cash. Because if there is a negative
D. An anticipation of hyper-inflation relationship between rate of interest and
in the economy. investments.
8) Precautionary motive of holding

money means that ________.
A. individuals demand money to pay
Macroeconomic-objectives-Exercise 1
for future emergencies
B. individuals demand money for
their day to day expenses
1) What is the effect of an increase in
C. individuals demand money to buy
aggregate demand in an economy?
bonds and securities in the future
A. A rise in prices and output.
D. individuals demand money to pay
B. A fall in prices and output.
for their debts
C. A rise in prices and a fall in
output.
9) The demand for money for
D. A fall in prices and output.
transaction motive is perfectly inelastic.
2) Which one of the following is a
This means that ________.
government macroeconomic objective?
A. a decrease in interest rate will
A. Lower unemployment rate in an
cause an increase in the demand
economy.
for money
B. Recession in an economy.
B. a decrease in interest rate will
C. High inflation rate in an economy.
cause a decrease in the demand
D. Negative economic growth.
for money
3) It is the government’s objective to
C. an increase in interest rate will
ensure full employment in the country.
cause a decrease in the demand
A. The Philips curve states that as:
for money
Unemployment rate increases,
D. an increase in interest rate have
prices will stabilizes.
no effect on the demand for
B. Unemployment rate decreases,
money
prices will stabilizes.
C. Unemployment rate decreases,
10) Why the slope of savings is upward
inflation increases.
sloping?
D. Unemployment rate increases,
inflation increases.

4) Which one of the following C. Improve due to increased
resources needed in production is the government spending.
core centre of full employment in an D. Improve due to increased tax
economy? revenue.
A. Capital 8) Which one of the following is not
B. Labour classified as a macroeconomic issue?
C. Technology A. Economic growth
D. Land B. Wage of chess player
5) Which one of the following C. Full employment
government policies seeks to address D. Price stability
the problem of inequity in an economy? 9) Macroeconomics studies:
A. Price control policy A. The determinants of economic
B. Taxation policy growth of a country.
C. Interest rate policy B. The determinants of prices of a
D. None of the above company.
6) During the period of a boom: C. Hours that an individual wishes to
A. Unemployment is likely to work.
decrease. D. How an individual wishes to
B. Prices are likely to increase. spent his/her income.
C. Imports are likely to decrease. 10) When an economy reaches full
D. Aggregate demand falls. employment:
7) If there is economic growth in an A. Aggregate supply will be price
economy, the government’s budget inelastic.
position will automatically: B. Aggregate supply will be zero.
A. Worsen due to government C. Aggregate supply will be price
spending. elastic.
B. Remains the same. D. It operating below its production
possibility curve.
C. Regulate the consumption of
positive externalities.
D. Regulate the consumption of
negative externalities.
Macroeconomic-policies-Exercise 1
2) A budget deficit in an economy can
Choose the best possible answer for the lead to:
following questions. A. An increase in aggregate
1) The government can use taxation demand.
policy in order to: B. Less government spending.
A. Regulate the consumption of C. A decrease in prices.
public goods. D. A decrease in employment.
B. Regulate the consumption of
merit goods. 3) Assuming that the central bank of
Zimbabwe is concerned with inflation

and wishes to increase the rate of focus of the central bank’s monetary
interest. Which one of the following policy?
instruments would be not appropriate to A. The growth rate of money stock.
use? B. The rate of interest.
A. Qualitative easing of money. C. The current interest rate.
B. Exchange rate control. D. The expected rate of inflation in
C. Open market operation. the next three years.
D. Quantitative easing of money.
9) Expansionary fiscal policy could
4) Main components of monetary deal with:
policy are: A. Decrease in interest rates.
A. Taxation and money supply. B. A rise in lending by banks.
B. Money supply and government C. An increase in government
expenditure. spending.
C. Money supply and interest rate. D. An increase in taxation.
D. Taxation and interest rate.
10) Which one of the following
5) In order for the government to components of macroeconomic policies
reduce money supply in the economy, it can encourage investments in the
could: economy?
A. Buy back government bonds. A. Decrease in money supply.
B. Reduce interest rates. B. Decrease in aggregate demand.
C. Reduce bank deposits. C. Decrease in interest rates.
D. Sell government bonds. D. Increasing bank rates.
6) Quantitative easing is an element of:

A. Trade policy
B. Fiscal policy Macroeconomic-policies-Test 1
C. Monetary policy Choose the best possible answer for the
D. Employment policy following questions.
1) The existence of negative
externalities in the economy implies
7) The government can use Open
that:
Market Operation to control money A. Output produced is below the
supply in an economy by: S optimal level.
A. elling and buying bonds and B. The government must be
securities. involved in the production.
B. Increasing taxation. C. There is a divergence between
C. Increasing the exchange rate. social costs and private costs.
D. Reducing government spending. D. Consumers are not the best
judges of their own well being.
8) Suppose unemployment and
economic growth are at a satisfactory 2) Price discriminating monopoly
level in a country, what would be the ________.

A. cannot offer discount to its 6) A movement of the income and
customers substitution effect to the same direction
B. cannot control the price of its indicates ________.
products
C. sells a larger quantity than it A. an inferior good
would if it were a single monopoly B. a normal good
D. makes a smaller economic profit C. an intermediary good
than it would if it were a single- D. a public good
price monopoly 7) What can be the opportunity cost of
a household that keeps cash for future
3) Tigere has a farm with livestock. use?
She records the number of chickens
hatched every day in a week. A. The interest they could earn.
B. Inflation incurred during the
MON 4 TUE 6 WED 8 THR 8 FR10 period.
STD 6 SUN 12 C. Appreciation of the money.
D. The satisfaction of using the
Calculate the mean number of chicks money foregone.
hatched. 8) Consumers maximise utility or are at
A. 5,5 equilibrium:
B. 6,5
C. 7,7 A. At a point where price is always
D. 12 less than MRS.
B. At any point on the indifference
4) Which one of the following is not a curve and not budget line.
research technique? C. At any point on the budget line
A. Survey but not indifferent curve.
B. Questionnaire D. A point where indifferent curve is
C. Graph tangential to the budget line.
D. Observation 9) Given the importance of the SME
sector for innovation, economic growth
and employment creation, its socio-
economic role is paramount in:
A. African economies.
B. Developing economies.
C. Economies throughout the world.
D. Western economies.
A 10) Which one of the following is an

B example of negative externality during
dam construction?
C
D A. Machines used during dam
construction.
B. Water spill over in to the area.

C. Dam wall constructed.
D. Irrigation facilities at the site.
11) If there is a balance of payment

deficit:
A. Exports and imports are in

equilibrium.
B. Exports and imports are
stagnant.
C. Exports are greater than imports.
D. Imports are greater than exports.
12) The government may increase the If the market price is $15 the firm
supply of maize on the Zimbabwean ________.
market by:
A. is earning an economic profits
A. Raising the sales tax on maize. B. is incurring an economic loss
B. Imposing a price ceiling on C. is earning abnormal profit
maize. D. might shut down its operation
C. Granting subsidies to maize
producers. 16) The loanable funds theory states
D. Levying a specific tax on maize. that the two main determinants of
interest rate are ________.
13) If a government adopts an
expansionary fiscal policy: A. exchange rate and supply of
money
A. It increase the supply of money. B. investment and credit creation
B. It increase borrowing to reduce a C. investments and savings
deficit. D. savings and demand of money
C. It increase exchange rate and
decrease taxation. 17) Balance of payments records:
D. It increase its expenditure and
decrease taxation. A. Inputs and outputs of a country.
B. Imports and exports of a country.
14) Gradient of a budget line shows C. Equilibrium and disequilibrium of
________. a country.
D. Exchange rate and interest rate
A. price of the product of a country.
B. demand of the product
C. opportunity cost by consumers 18) A subsidy provided by the
D. attainable point of consumption government will be of a beneficial to
consumers when demand is ________.
15) The diagram below shows a
perfectly competitive firm. A. unitary elasticity
B. infinity elasticity

C. perfect inelastic A. Consumer should increase the
D. perfect elastic consumption of coffee.
B. Consumer should decrease the
19) CBA of a government investment consumption of coffee.
projects would not involve: C. Consumer should continue
consuming the same amount of
A. Calculation of future demand and coffee.
supply. D. All of the above.
B. The forecast of future flows of
revenue and expenditure of the 3) Point of satiation occurs when:
project. A. MU= Price
C. Assigning monetary values of the B. MU= Zero
social costs and benefits of the C. MU = TU
project. D. MRS= MU
D. Discount method of cash flow for
comparing money flows over a 4) Assume that there are two goods X and
specific period of time. Y. Which of the following indicates the
condition of equi-marginal utility.
20) According to the Philips Curve an A. MUXMUX = PXPY
increase in unemployment leads to B. MUXMUY = PXPY
________. C. MUXMUY = PXP
D. MUXMUY = PXMUX
A. a decrease in inflation rate
B. a fall in exchange rate 5) Which law states that, when the price of
C. a fall in the standard of living a product increases consumers reduce
D. an increase in gross domestic consumption of that product?
product A. Law of diminishing marginal utility
B. Law of marginal utility
C. Law of equi-marginal utility
D. Law of substitution
Marginal-Utility-Exercise 1
6) A consumer is said to be in equilibrium
Choose the best possible answer for the under marginal utility theory when:
following questions. A. Marginal utility is negative.
1) Suppose marginal utility is zero: B. Marginal utility is equal to zero.
A. Consumers maximises total utility. C. Marginal utility is less than the price.
B. Total utility is at zero. D. Marginal utility is greater than zero.
C. An extra unit of consumption will
increase total utility. 7) If a consumer consumes more quantity
D. An extra unit of consumption will of a product, according to the law of
decrease total utility. diminishing marginal utility:
A. The consumer’s total utility will
2) Assuming that the consumer is facing a remain the same.
disequilibrium condition when marginal B. The consumer’s total utility
utility of coffee is greater than the price of decreases.
coffee. What should the consumer should C. The consumer’s marginal utility will
do to return to the equilibrium? decrease.

D. Marginal utility of consumer become
negative.
Choose the best possible
8) Which one of the following statements is answer for the following
true about negative marginal utility?
questions.
A. Negative marginal utility means that
consumers can continue to consume
1) Study the following diagram and
a good until marginal utility is
answer the question that follows.
positive.
B. Negative marginal utility means that
an extra consumption of a good can
cause total utility.
C. Negative marginal utility means that
a consumption of an extra unity will
cause dissatisfaction.
D. Negative marginal utility means that
a consumer is in equilibrium after
consuming all the quantity available.
9) From the table below, calculate

marginal utility after consuming 7 glasses of
drink.
Quantity consumed
On the diagram line AB indicates:
(Glasses) Total utility Marginal
gained utility A. Induced savings
0 0 0 B. Autonomous investment
5 25 5 C. Aggregate demand
7 42 ? D. National income
A. 42 2) The level of consumption that
B. 10 depends on changes in income and
C. 8,5 interest is called ________.
D. 0,85
10) Which one of the following is not an A. autonomous consumption
assumption of the law of diminishing B. aggregate spending
marginal utility? C. net consumption
A. Irrational consumers are considered. D. induced consumption
B. Preferences of consumers remain 3) All of the following determines the
constant. level of national income except:
C. Consumption of goods is
continuous. A. Foreign consumption of local
D. Standard size of goods are involved. products.
B. The level of net exports of the
country.
C. The level of private and public
National-income-determination- investments.
Exercise 1

D. The exchange rate of major A. gross investment
trading partners. B. autonomous investment
4) From the following which one is a C. induced investment
major determinant of national income? D. net investment
10) The ratio of income to savings is
A. Fiscal policy called ________.
B. Exports
C. Taxation A. marginal rate of return
D. Consumption B. marginal propensity to tax
5) If income increases from $80 000 to C. marginal propensity to consume
$90 000 and consumption increases D. average propensity to save
from $55 000 to $60 000, what is the
marginal propensity to consume?
A. 50%
B. 25%
C. 20% Profits-losses-and-economic-efficiency-
D. 10% Exercise 1
6) The level of income is $300 000 and
consumption is $250 000. Calculate the
average propensity to save? Choose the best possible answer for the
A. 0,8 1) Firms in perfectly competitive
B. 1,2 markets maximise profits or minimise
C. 0,17 losses in the short run by producing the
D. 0,2 output level at which:
7) All the following are determinants of
investment in a country except A. Marginal cost equals to marginal
________. revenue.
B. Total cost equals total revenue.
A. exchange rate C. Total revenue is at minimum.
B. interest rate D. Total revenue is at maximum.
C. marginal efficiency of capital
D. level of income 2) A firm maximises profit at the point
8) The level of income is $300 000 and where:
consumption is $250 000. What is the
average propensity to consume? A. Price equals to average cost.
B. Total revenue equals to total
A. 0,8 cost.
B. 0,83 C. Marginal revenue equals to
C. 1,2 average revenue.
D. 1,8 D. Marginal revenue equals to
9) Investment that exists in an marginal cost.
economy when income is zero is called
________. 3) A firm experiences losses in the
short run when:

C. Contestable market in the long
A. Price is equal to average run.
revenue. D. Monopolistic competition in the
B. Price is less than marginal long run.
revenue.
C. Average cost is less than price. 7) In which market structure does a
D. Average cost is greater than firm earn abnormal profits throughout:
price.
A. Monopoly market
4) Monopolies try to minimize losses B. Monopolistic competition
when producing: C. Perfectly competitively market
D. Oligopoly market
A. At the minimum of the average 8) The point where total cost is equal
cost curve. to total revenue is called ________.
B. At the maximum of the average
cost curve. A. break-even point
C. Goods with the low prices. B. loss minimisation point
D. Goods of low quality and of high C. profit maximisation point
prices. D. sales maximisation pont
5) If a firm earns normal profits: 9) The diagram below shows economic

efficiency.
A. It aim to leave the industry.
B. Other firms will enter the market.
C. Other firms will leave the market.
D. The total revenue will be equal to
total costs.
6) To which market structure does the

following diagram apply?
What type of economic efficiency is

illustrated by the movement of cost
curve from AC to AC1.
A. Technical efficiency
B. X-efficiency
C. Productive efficiency
D. Allocative efficiency
10) Which of the following diagrams A,
B, C or D shows a competitive firm in
the long run.
A. Monopoly in the short run.

B. Oligopoly in the short run.

A. Diagram A
B. Diagram B
C. Diagram C
D. Diagram D
C. inflation
D. supply
Schools-of-thought-Exercise 1 4) The number of times that each unit

of currency in the economy is passed
from one person to the other within a
Choose the best possible answer for the period of time is called ________.
1) Keynesian favour the use of A. transaction
________ exchange rate. B. movement
C. transmission
A. fixed D. velocity
B. floating
C. low 5) The monetarists identify ________
D. high as the starting point in the money
transmission mechanism.
2) Monetarists believe that the main
driver of aggregate demand in the A. change in money supply
economy is ________. B. change in interest rates
C. change in inflation
A. increase in investment D. economic growth
B. increase in money supply
C. increase in consumption 6) Which one of the following is not a
D. high expectations fiscal tool?
3) According to Keynesians, there is a A. Government spending

tradeoff between unemployment and B. Borrowing
________. C. Liquidity ratio
D. Budgets
A. interest rate
B. economic growth

7) According to monetarists, which one 10) Which one of the following cause
of the following is a problem of a fixed the crowding out in the economy?
exchange rate?
A. It reduced liquidity in the A. The increase of taxation by the
economy. government.
B. It leads to uncertainty in the B. Increased government spending
economy. that is financed through
C. It fluctuates rapidly in the borrowing.
economy. C. Increased private investment that
D. It is normally accompanied by is financed by loans and
high inflation. debentures.
D. Reduction in consumption as a
8) All of the following are monetary result of an increase in taxation.
instruments except ________.
A. taxation rate
B. exchange rate
C. reserve ratio
D. money supply
Solutions-to-market-failure-Exercise 1
9) Study the following diagram.
1) An increase in tax:
A. Has no effect on the price of
commodities.
B. Results in an increase in supply.
C. Has no effect on supply.
D. Results in a decrease in supply.
2) Regressive taxes mainly affect:

A. All consumers
B. The government
C. Low income earners
D. High income earners
According to Keynesians, at which level
of inflation should the government 3) An increase in subsidies can result
introduce measures to alter the in ________.
exchange rate?
A. an increase in government
spending
A. Point A and B
B. Point B and A B. an increase in government
C. Point C and D revenue
D. Point D and A C. a decrease in government
revenue

D. a decrease in consumer A. the government
spending B. the consumer
C. the producer
4) If the demand and supply of a D. the government and consumers
product is elastic then the burden goes
to ________. 9) When the government is keeping
A. the consumer buffer stock, if the price is above the
B. the producer lower boundary the government will
C. the government ________.
D. the producer and the consumer A. increase demand for the product
5) Allocative efficiency is achieved the market
when ________. C. decrease the supply of the
A. social marginal benefit is equal to product
social marginal cost D. do nothing
B. price is equal to quantity
produced 10) If the demand for a product is
C. private marginal cost is equal to perfectly inelastic, the burden goes to
social marginal benefit ________.
D. private marginal benefit is equal A. the government
to private marginal cost B. the consumer
C. the producer
6) When the government is keeping D. the government and consumers
buffer stock, if the price is below the
lower boundary the government will
________. Terms-of-trade-Exercise 1
A. increase demand for the product
B. increase supply of the product in Choose the best possible answer for the
the market following questions.
C. decrease the supply of the 1) Weighted price index means
product that________.
D. do nothing A. some goods and services are
more expensive than others
7) The government can impose a B. goods are given better values
quota so as to ________. than services
A. raise its revenue C. some products in the basket are
B. regulate firms valued more than others
C. stabilise the fluctuations of prices D. export products in the basket are
D. protect local firms given more value that import
products
8) If the demand for a product is
perfectly elastic, the burden goes to 2) Indexes are used to calculate the
________. terms of trade because ________.

A. some products are more D. If the price of import is inelastic,
important than others the value of imports will increase
B. they are a result of average by a value equal to the margin of
prices of goods and services in a tariffs.
basket
C. prices of goods and services 6) What does the terms of trade of
change at the same magnitude 85,12 indicate?
D. terms of trade are a result of A. Proceeds from the sale of a unit
response to forces of supply and of export will be exchanged for
demand imports 85.12% more than that of
the base year.
3) If the demand for exports is inelastic B. Proceeds from the sale of a unit
in the short run, a decrease in prices will of exports will be exchanged for
result in a ________. 85.12% less than that of the base
A. greater percentage increase in year.
demand for exports C. Proceeds from the sale of a unit
B. greater percentage decrease in of export will be exchanged for
demand for exports imports with a value of 14.88
C. smaller percentage increase in more than that of the base year.
demand for exports D. Proceeds from the sale of a unit
D. smaller percentage decrease in of export will be exchanged for
demand for exports imports with a value less than
that of the base year.
4) Terms of trade which is above 100
shows that terms of trade are ________. 7) Which one of the following defines
A. unitary terms of trade?
B. favorable A. An increase or decrease in the
C. adverse price of import and export
D. the same indexes.
B. The rate at which two goods are
5) How do tariffs affect prices of exchanged.
imports? C. The adjustment in inflation and
A. If prices of imports decrease by a exchange rates of countries.
value equal to the margin of D. The ratio of local currency to
tariffs. foreign currency.
B. If tariffs increase the price of
imports by a value equal to the 8) A value of terms of trade which is
margin of tariffs. lower than 100 shows that ________.
C. If the price of imports is elastic, A. the same unit of exports can now
the value of imports will remain be exchanged for less imports
the same after an imposition of B. the same unit of imports can now
tariffs. be exchanged for less units of
exports

C. the same unit of exports can now A. The value of exports increases
be exchanged for more units of due to subsidy.
imports B. Imports will decrease and exports
D. same units of exports can be increase.
exchanged for lower quality of C. Aggregate demand will increase
imports whereas imports will decrease.
D. Aggregate demand will increase
9) Which factor affect the terms of leading to a rise in export.
trade only in the long run?
A. Increase in productivity
B. Increase in exchange rate 3) Import substitution affect the
C. Increase in inflation balance of payment position due to
D. Change in demand and supply ________.
10) If the export price index is 89 and A. Decrease in volume exports.

the import price index is 90,1, calculate B. Increase in volume of imports.
the terms of trade. C. Increase in productivity of labour.
A. 99,11 D. Decrease in foreign currency
B. 98,78 outflow.
C. 1,22
D. 101,24
4) Under what conditions does
Trade-policies-Exercise 1 devaluation of currency helps to improve
the country’s balance of payment
Choose the best possible answer for the position?
A. When the price elasticity of
1) Which combination of fiscal policy exports is elastic.
will leads to a reduction of the real B. When the supply of exports is
disposable income in the economy? inelastic.
A. Increasing taxes and government C. When there is full employment in
expenditure. the economy.
B. Decreasing taxes and increasing D. When there is fixed exchange
government expenditure. rate.
C. Increasing taxes and reducing
government expenditure.
D. Decreasing taxes and 5) What is the best reason for the
government expenditure. government to introduce expenditure
switching measures?
A. To increase exports and reduce
2) How does expenditure measures imports.
decrease country’s deficit figure? B. To increase imports and reduce
exports.

C. To balance off imports and 9) What promotes the government to
exports. adopt deflationary measures in the
D. To increase the value of the economy?
domestic currency.
A. High export value.
B. High import value.
C. Net export value.
6) All of the following are measures
D. Balance of payment surplus.
which are used in expenditure switching
method except ________.
A. Devaluation of the domestic 10) What action can the government
currency. take to dampen aggregate demand in
B. Introduction of export subsidy. the economy if the economy is at full
C. Use of quotas. employment?
D. Introduction of tariffs.
A. The government will subsidise
export products.
B. The government will introduce
7) Which one of the following describes
import duties.
depreciation of a currency?
C. Government will increase the tax
A. Supply of foreign currency is rate in the economy.
greater than the supply of local D. The government will increase the
currency. price of exports.
B. Supply of local currency is
greater than the demand for local
currency.
C. Interest rate is greater that the
exchange rate.
D. The exchange rate is greater
than interest rate.
8) The increase of hot money in the

economy leads to ________.
A. Low demand for domestic
currency.
B. Low demand for foreign currency.
C. High demand for domestic
currency.
D. High demand for exports.

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A LEVEL

6) Which political philosophy is linked

3) In considering whether something is 9) Ethics deal with the standards that

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4) Study the diagram below and answer the

Which point A, B, C or D will be the new

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A. Reduction in production costs.

Which of the following statements could

A. When demand is perfectly inelastic.

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Business-organisations-Exercise 1 D. Limited company

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A. The demand curve to get longer.

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One can conclude that, goods A and B

9) Good A is a substitute of good B

A. Demand for A, B and C will rise.

10) Which one of the following factors Determinants-of-supply-Exercise 1

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2) Firms in the food production sector

A. because firms are aiming at

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Choose the best possible answer for the

2) Use the diagram below to answer

9) Which combination of the following

A. Bolts and nuts.

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9) All of the following are features of an

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11) Most favoured nation principle of

3) In which economic system does

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5) The economic problem of how to A. It is a system of providing

8) In reference to the rewarding role of

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B. Curve B A. Individuals do not change their

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2) The public sector includes: 7) A possible source of business failure

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5) Economic rent is an area _______.

6) From the diagram below, what area

Which area represents economic rent?

2) Which area represents total

3) Which area is the opportunity cost of

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8) Economic rent is income that is

9) Wages are the price for ________.

10) From the following types of profits,

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5) All the following are leakages except

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3) All of the following factors influence 7) Which form of international trade

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Year Computers Printers Computers Printers

7,5 What is the real GDP for the year 2015?

Quantity produced Price

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8) What would have happened to the

9) All of the following can cause an