CANDIDATE CODE

Total
Mark 120

Kiribati National Certificate

ECONOMICS
2015
QUESTION and ANSWER BOOKLET
Time allowed: 3 hours (plus 10 minutes reading time)
INSTRUCTIONS
1. Write your Candidate Code in the Candidate Code box provided above and on the last page of this
booklet.
2. This examination is in SIX COMPULSORY Sections. Answer ALL questions.

Suggested time
SECTION A: The Economic System and Economic Problem 12 marks 18 minutes
Part I: Multiple Choice Questions 5 marks
Part II: Short Answer Questions 7 marks
SECTION B: Production and Producer’s Decisions 34 marks 51 minutes
Part I: Multiple Choice Questions 5 marks
Part II: Short Answer Questions 29 marks
SECTION C: Consumption and Consumer’s Decisions 22 marks 33 minutes
Part I: Multiple Choice Questions 5 marks
Part II: Short Answer Questions 17 marks
SECTION D: Business and the Accounting System 14 marks 21 minutes
Part I: Multiple Choice Questions 5 marks
Part II: Short Answer Questions 9 marks
SECTION E: International Trade and Role of Government 14 marks 21 minutes
Part I: Multiple Choice Questions 5 marks
Part II: Short Answer Questions 9 marks
SECTION F: Money, Banking and the Market 24 marks 36 minutes
Part I: Multiple Choice Questions 5 marks
Part II: Short Answer Questions 19 marks
120 marks 180 minutes
======== ==========
3. For Part I, write the letter of your answer in the box alongside each question and for Part II, write
your answers in the spaces provided for each question in this booklet.
4. DO NOT OPEN this booklet until the Examination Supervisor tells you to do so.
5. Check that this booklet contains pages 1 – 27 in the correct order and that pages 25-26 are deliberately
left blank for working out.

HAND THIS BOOKLET TO THE SUPERVISOR AT THE END OF THE EXAMINATION.

 1

SECTION A: ECONOMIC SYSTEM AND ECONOMIC PROBLEM.

(12 MARKS)

Part I: Multiple Choice Questions (5 Marks)

Write the letter of your chosen answer in the box alongside each question.

1. A situation in which people’s wants exceed their resource is called

A. abundance.

B. choice.

C. scarcity.

2. Which of the following is a person’s basic want?

A. Boat.

B. Clothing.

C. Foods.

3. Land as a factor of production refers to

A. human resource.

B. enterprise.

C. natural resource.

4. In a simple circular flow, the interaction between households and business

A. shows how the economy works.

B. shows interdependence.

C. affects the decision of sectors.

5. A command economy is one in which

A. most resources are owned by the state.

B. most resources are owned by individuals.

C. the private enterprise produces goods. 5

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Part II: Short Answer Questions (7 marks)

Attempt all Questions and write your answer on the spaces provided for each
question.

6. Phosphate Mining (3 marks)

Study the picture below and then answer the questions follow.

(www.janeresture.com/banaba/mining.htm)

a). Describe 3 economic benefits of phosphate mining listed below:

(i). Government Revenue

____________________________________________________________________
____________________________________________________________________
(1 mark)

(ii). Employment
___________________________________________________________________
___________________________________________________________________
(1 mark)

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 3

(iii). Gross Domestic Product (GDP)

___________________________________________________________________
___________________________________________________________________
(1 mark)

7. Economic and Non-economic activity (4 marks)

Classify the activities listed in the box below under Economic activity or Non-economic
activity.

Picking flowers to sell Going on a picnic Sleeping

Getting paid for gardening

Economic activity Non-economic activity

(4 marks)

Section A Total
12
 4

SECTION B: PRODUCTION AND PRODUCER’S DECISIONS

(34MARKS)
Part I: Multiple Choice Questions (5 Marks)

Write the letter of your chosen answer in the box alongside each question.

1. Which of the following industries belongs to the primary sector?

A. Fishing.

B. Processing.

C. Refining.

2. Division of labour has the advantage of

A. loss of craftsmanship.

B. reducing job satisfaction.

C. reducing training time.

3. A furniture – making factory decides to buy a retail shop, is an example of

A. backward integration.

B. horizontal integration.

C. forward integration.

4. Profit maximization means that a firm is trying to make

A. greater market share.

B. more sales than others.

C. much excess over costs.

5. One service offered by marketing industry is

A. financial advice.

B. market research.
5
C. security for cash.
 5

Part II: Short Answer Questions (29 marks)

Attempt all Questions and write your answer on the space provided for each
question.

6. Primary sector (5 marks)

Use the picture below to answer the question follows.

(Source: Fishing production)

a). The table below show the factors of production used by the fisherman. Complete the
table by giving one example of each factors listed and state the reward earned.

Factors of Production Example Reward

Land Sea

Labour

Capital

(5 marks)

5
 6

7. Increasing the efficiency of firms (15 marks)

Use the information in the box below to answer the questions follow.

Suppose a small company – Choco Delight that produces chocolates was operating
in the country. Most of the production process at present is labour-intensive and
the owner is considering changing to a more capital-intensive operation to improve
productivity.

a). Describe how can the owner measure productivity in her business?
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(1 mark)

b). (i). Explain to the owner of Choco Delight how specialization could improve
productivity?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
(1 mark)

(ii). One benefit of expanding the operation may be economies of scale. Describe
how Choco Delight could achieve greater economies of scale?
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(1 mark)

(iii). Compare the difference between labour-intensive and capital-intensive

production.
________________________________________________________________
________________________________________________________________
________________________________________________________________
(2 marks)

5
 7

c). The owner of Choco Delight has the goal of improving productivity in order to
maximize profit. She decided to look at investment and economies of scale as the
best options to maximize profits.

(i). Explain how does investment and economies of scale together will increase
productivity and profits?
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(2 marks)

ii). Discuss whether investment and economies of scale are the best options that the
owner could have chosen to improve productivity and maximize profits?

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(1 mark)

iii). Explain the consequences of the owner’s decision on the workers and financial costs
of the business?

____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(2 marks)

d). Complete the table below by calculating the missing values represented by the letters.

Output for Chocolate production

Output Workers Output per worker

81, 000 A 9,000

B 10 9,000

100,000 5 C

90,000 D 15,000

E 10 10,900

(5 marks)

10
 8

8. Factors affecting supply (9 marks)

Use the graphs below to answer the questions follow.

Graph A Graph B

Supply of Packets of Frozen Chips Supply of Packets of Frozen Chips

P($) P($)

S S

Q Q

a). Illustrate and clearly label the effect on:

(i). Graph A of an increase in the price of packets of frozen chips (1 mark)

(ii). Graph B of a decrease in the cost of electricity (1 mark)

b). Explain why a frozen chip producer would react in the way you showed in your answer
to a) (ii) above.
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(1 mark)

c). A disease spreads quickly through the main potato growing that reduces the size of
the potato crop by 60%.

Analyze the impact of the reduction in crop size for each of the following:

Frozen chip producers

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(2 marks)

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 9

Consumers of fish and chips

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(2 marks)

Government’s revenues
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(2 marks)

Section B Total
34
 10

SECTION C: CONSUMPTION AND CONSUMER’S DECISIONS

(22 MARKS)

Part I: Multiple Choice Questions (5 Marks)

Write the letter of your chosen answer in the box alongside each question.

1. After paying all her taxes, Mele has $600 left over. This left – over amount is called

A. disposable income.

B. personal income.

C. personal savings.

2. Caveat emptor means

A. let the buyer beware.

B. let the seller beware.

C. let the company beware.

3. Which of the following will cause an increase in demand?

A. Decrease in indirect tax.

B. Decrease in direct tax.

C. Increase in direct tax.

4. Which of the following factors determine values people may hold?

A. Age and integrity.

B. Honesty and integrity.

C. Upbringing and age.

5. Which of the following are examples of values people may hold?

A. Age and integrity.

B. Honesty and integrity.

5
C. Upbringing and age.
 11

Part II: Short Answer Questions (17 marks)

Attempt all Questions and write your answer on the space provided for each
question.

6. Patterns of Household Spending (7 marks)

Amon’s family has a weekly disposable income of $871. His friend Areta’s family has
a lower weekly disposable income of $480. Each household’s spending pattern is
described in the table below.

% of Weekly Household Expenditure

Items Areta’s family Amon’s family

(Income $480) (Income $871)
Food 17.6 13.2
Housing 12.9 17.8
Household Operations 14.9 12.1
Apparel 2.8 3.0
Transportation 18.7 16.6
Other goods and services 24.7 25.8
Savings 8.4 11.5
Total 100.0 100.0

a). Which items does Areta’s family spend more on each week than Amon’s family?

____________________________________________________________________________
(1 mark)

b). Use the data above to describe how each of the factors below will change as income
increases. Give a reason for each change.

(i). The percentage of income spent

____________________________________________________________________
____________________________________________________________________
(1 mark)

Reason:
____________________________________________________________________
____________________________________________________________________
(1 mark)

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(ii). The percentage of income saved.

____________________________________________________________________
____________________________________________________________________
(1 mark)

Reason:
____________________________________________________________________
____________________________________________________________________
(1 mark)

c). Explain why the percentage of income spent on food fall as income increases?
_____________________________________________________________________
_____________________________________________________________________
(1 mark)

d). Although housing and apparel are considered necessities. Explain why Amon’s family
spends a higher percentage of their income on these items?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(1 mark)

4
 13

7. Personal Budgeting (4 marks)

Use the information below to answer the questions follow.

hhTan’s salary for a year is $20,000, and his total expenses are $16,500. He wants to
buy a house costing $70,000.

a). Calculate Tan’s saving for a year.

(2 marks)

b). If Tan has $7,000 in his bank account, how much more money does he need to buy
the house?

$____________________________________________________________________
(1 mark)

c). How many more years of savings does he need to purchase the house?

_____________________________________________________________________
(1 mark)

4
 14

8. Consumer Demands (6 marks)

Tan and two of his team-mates, Tom and Peter, are always losing tennis balls and they
often have to buy more.

Shown below are the individual demand details for tennis balls for Tan, Tom and Peter.

Tan’s Demand Tom’s Demand Curve for Tennis Peter’s Demand

Schedule for Balls Schedule for
P($)
Tennis Balls Tennis Balls
4
Price Quantity 3 Price Quantity
($) ($)
4 2 4 5
2
3 4 1 3 6
D
0
2 6 1 2 3 4 Q 2 7

1 8 1 9

a). Explain how the market demand curve is derived.

_____________________________________________________________________
_____________________________________________________________________
(2 marks)

b). In the table below, complete the market demand schedule for tennis balls from the
information above. Assume that Tan, Tom and Peter are the only three buyers of
tennis balls.

Market Demand Schedule for Tennis Balls

Price ($) Quantity

(4 marks)

Section C Total 6
22
 15

SECTION D: BUSINESS AND THE ACCOUNTING SYSTEM

(14 MARKS)

Part I: Multiple Choice Questions (5 Marks)

Write the letter of your chosen answer in the box alongside each question.

1. A centralized management structure is where the

A. decision making is delegated to other managers.

B. general manager makes all the final decisions.

C. shareholders control and make final decisions.

2. A decentralized management structure is where the

A. decision making is delegated to other managers.

B. general manager makes all the final decisions.

C. shareholders control and make final decisions.

3. Before starting a business, it is important to make a

A. business goals.

B. feasibility survey.

C. marketing research.

4. Which of the following is an example of fixed asset?

A. Debtors

B. Creditors.

C. Vehicles.

5. An example of the output under the accounting system is

A. balance sheet.

B. cheque butt.

C. transactions.
5
 16

Part II: Short Answer Questions (9 marks)

Attempt all Questions and write your answer on the space provided for each
question.

6. Accounting System of a Business. (9 marks)

Study the pie graph below and then answer the questions follow.

Assets?

Creditors
Capital $1,800
$6,000

a). Write the information in the pie graph in the form of accounting equation and then
calculate the value of the Assets.

(4 marks)

4
 17

b). Prepare the balance sheet using the information in 6 a) above.

(5 marks)

Section D Total
14
 18

SECTION E: INTERNATIONAL TRADE AND ROLE OF

GOVERNMENT (14 MARKS)

Part I: Multiple Choice Questions (5 Marks)

Write the letter of your chosen answer in the box alongside each question.

1. A surplus on the balance of trade means that

A. exports equal imports.

B. exports exceed imports.

C. imports exceed exports.

2. The Balance of trade consist of

A. trade in services.

B. trade in money.

C. trade in goods.

3. Which of the following is an exported product of Kiribati?

A. Fish.

B. Rice.

C. Sugar.

4. Which of the following can be classified as direct tax?

A. Duty.

B. Grant.

C. Rate.

5. A balanced budget means the government expenditure

A. equals the tax revenue.

B. less than tax revenue.

C. exceed the tax revenue.

5
 19

Part II: Short Answer Questions (9 marks)

Attempt all Questions and write your answer on the space provided for each
question.

6. International Trade (4 marks)

Differentiate between the following trade terms.

a). Exports and Imports.

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(2 marks)

b). Positive and Negative balance of trade.

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(2 marks)

4
 20

7. Government Budget (5 marks)

Study the Government Budget below and answer the questions follow.

Multi – Year Budget Framework 2008 to 2012

Actual Revised Budget Budget Forecast Forecast
2008 2009 2010 2011 2012
A). Centralized 63,498 63,053 64,260 65,661 65,861
Government
Revenue
B). Ministries 3,806 9,276 4,341 4,391 4,900
Revenue

TOTAL 67,304 72,329 68,601 70,052 70,761

RECURRENT
REVENUE
C). Recurrent 76,100 75,304 67,136 67,773 68,419
Expenditure

D). Other 22,608 14,997 20,384 20,734 20,384

Commitments

TOTAL 98,708 90,301 87,520 88,507 88,803

EXPENDITURE

BUDGET
SURPLUS/DEFICIT

(Source: MFED, 2010)

a). Calculate the Government Budget for 2008 to 2012. Indicate whether the budget is
surplus or deficit.

2008 =_________________________________________________________________

(1 mark)
2009= __________________________________________________________________

(1 mark)

2010=___________________________________________________________________
(1 mark)

2011=___________________________________________________________________
(1 mark)

2012=___________________________________________________________________
(1 mark)

Section E Total
14 5
 21

SECTION F: MONEY, BANKING AND THE MARKET

(24 MARKS)

Part I: Multiple Choice Questions (5 Marks)

Write the letter of your chosen answer in the box alongside each question.

1. Which function of money relates to the ability to save money?

A. Deferred payment.

B. Standard of value.

C. Store of value.

2. Which function of money relates to the ability to record debts?

A. Deferred payment.

B. Standard of value.

C. Store of value.

3. Which of the following is an example of price competition?

A. Advertising.

B. Branding.

C. Discounting.

4. Which of the following is a correct definition of money market?

A. A place or situation where different currencies are bought and sold.

B. Producers provide goods to consumers in exchange for payment.

C. A place or situation which involves the supply and demand for money.

5. Excess surplus occurs when the

A. price is set above equilibrium price.

B. price is set below equilibrium price.

C. supply of a good exceed demand.

5
 22

Part II: Short Answer Questions (19 marks)

Attempt all Questions and write your answer on the space provided for each
question.

6. Banking system (5 marks)

Use the diagram below to answer the questions follow.

a). Name the Bank that controls the banking system in a country.

____________________________________________________________________

(1 mark)

b). Discuss two important roles of the bank referred to in (a) above.

(I). _________________________________________________________________
(1 mark)

(ii)._________________________________________________________________
(1 mark)

c). Explain why financial institutions charge borrowers higher rate of interest than they
offer to savers?
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(1 mark)
d). Describe interest as used in the above diagram.
_____________________________________________________________________
_____________________________________________________________________
(1 mark)

5
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7. Circular Flow (14 marks)

The diagram below shows the circular flow of economic activity indicating money
flows only.

FINANCIAL Investment A
INSTITUTIONS

(i) (ii)
Saving

Consumer Spending
HOUSEHOLDS PRODUCERS

Income

(iii)
(v)
(iv)

a). Complete the circular flow above by writing the correct missing sectors and money
flows in the table below.

Sectors Money flows

(i).=
A=
(ii).=
B=
(iii)=
(2 marks)
(iv)=

(v)=

(5 marks)

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 24

b). Describe the interdependence between the following sectors:

(i). Households and Producers

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(2 marks)

(ii). Producers and Financial Institution

____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(2 marks)

c). Explain how an increase in interest rates in the financial sector would affect the
producer sector?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(1 mark)

d). Explain how an increase in unemployment benefits by the government may affect the
producer sector?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(2 marks)

Section F Total
24
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Candidate Code

ECONOMICS

2015

(For Marker’s Use Only)

Candidate Total
Section Question
Marks Marks

The Economic System and

A 12
Economic Problem

Production and Producer’s

B 34
Decision

Consumption and
C 22
Consumer’s Decision

Business and the Accounting

D 14
System

International Trade and Role

E 14
of Government

Money, Banking and the

F 24
Market

Total Mark 120