Free CXC Economics Paper 1 May/June 2007 past paper from 2007. Includes a worked answer key. Open the PDF, take a timed test, and study with AI on Caribbean AI.
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CSEC Economics Paper 1 May/June 2007 - Free CXC Past Paper with Answers
Free CXC Economics Paper 1 May/June 2007 past paper from 2007. Includes a worked answer key. Open the PDF, take a timed test, and study with AI on Caribbean AI.
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Every question from this paper as text. See the answers and worked solutions. Questions are the property of the Caribbean Examinations Council; Caribbean AI is not affiliated with CXC.
Why do consumers have to make choices among the goods and services that they purchase?
Their wants are scarce and their resources are limited.
Their resources are insufficient to satisfy all their wants.
Their resources increase more rapidly than their wants.
They receive most of their goods and services at no cost.
Which of the following statements BEST describes an "economy"?
A system where suppliers produce all the goods and services needed by the consumers
A system whereby all the goods and services used by citizens of a country are provided by the government
The utilization of resources to produce goods and services to meet the needs and wants of society
The utilization of resources by manufacturers to produce goods and maximise profits
The restriction of international trade through tariffs, embargoes, quotas and exchange controls is referred to as
structural adjustment
globalisation
bi-lateral agreements
protectionism
The Government of Country X decides to switch resources from investment goods to crop production. The opportunity cost of this decision is the
profit earned by farmers:
rent of the land on which crops are grown
reduction in investment goods
wages earned by farm workers
In an attempt to increase the efficiency of its staff, management assigns specific tasks to each worker. This is an example of
specialisation
progress
productivity
entrepreneurial ability
An economy produces two goods, namely sugar and bauxite. What name is given to the curve which shows the maximum amount of bauxite that can be produced for every given amount of sugar?
Market supply curve
Demand curve:
Production possibility frontier curve
Individual supply curve
Item 7 refers to the diagram below.
In the diagram above, S is the supply curve before a subsidy is given and Ss is the supply curve after the subsidy is given. As a result of the granting of the subsidy, it is expected that.
supply will increase.
supply will decrease
demand will decrease
price will increase
Which of the following determines the allocation of resources in a mixed economy?
Consumers only
Government only
Government and producers only
Government, producers and consumers
Which of the following is an advantage of a market economic system?
There is equality of income.
Price control measures can be effected.
It gives an incentive to produce.
It reduces pollution and congestion.
Prices of goods in market economies fluctuate while prices of goods in planned economies tend to be fixed. The MOST likely reason for this difference is that in the market economy
buyers and sellers determine prices
producers are never efficient
profits are lower
there are higher unemployment levels
A MAJOR disadvantage of a planned economy is that it
causes inequality in the distribution of income.
discourages individual initiative and enterprise.
results in widespread unemployment
causes high rates of inflation
In a commercial bank, wages and salaries are paid to ALL of the following EXCEPT
bank tellers and supervisors
shareholders of the bank
investment managers in the bank
maintenance workers employed by the bank
In which of the following economic systems does the state own ALL the factors of production EXCEPT labour?
A mixed economy
A market economy
A planned economy
A subsistence economy
Many developing countries have changed their economies from a command economy to a market-based economy in order to increase
government control
efficiency
subsidies
price control
Sam and Jack started a catering business. They organised the factors of production and pooled their financial resources to produce the goods and services. In which factor of production will you classify Sam and Jack?
Worker
Investor
Entrepreneur
Manager
The sugar industry in New Island uses a high ratio of labourers to capital as inputs in the production of sugar. Which of the following economic questions is being answered in this production arrangement?
How much to produce
For whom to produce
What to produce
How to produce
Which of the following is NOT an example of a factor of production in a commercial bank?
Shareholders of the bank
The building
Special savings account for students
The bank's vault
An increase in the price of flour is MOST likely to be followed by an immediate
rise in the quantity demand for bread
fall in the quantity supply of flour
rise in the quantity supply of flour
fall in the quantity demand for flour
According to economic theory, 'second hand' cigarette smoke is an example of a
private good
positive externality
negative externality
merit good
A shift in the demand curve for a commodity could result from a change in
price
supply
conditions of supply
conditions of demand
Item 21 refers to the following diagrams.
Which diagram above indicates that demand is perfectly elastic?
R
S
T
U
Hybrid electric cars are more expensive than cars which use gasolene. However, a major feature of electric cars is that they are pollution free. Which costs will fall as consumers start using electric cars?
Total fixed cost
Marginal cost
Private cost
External cost
All of the following are features of perfect competition EXCEPT
selling of homogeneous products
freedom of entry and exit
many buyers and one seller
perfect knowledge of market conditions
Item 24 refers to the diagram below which shows the market for soft drinks in Country Y
Which of the following is MOST likely to be responsible for the shift in the supply curve from S, to Sâ‚‚?
An increase in advertising of soft drinks
A fall in the price of sugar
Increased wages for workers in the soft drink industry
An increase in income
In which of the following situations will a normal supply curve for farm produce slope upwards from left to right?
Farmers' profit margins increase as price increases.
Farmers are willing to increase supply as demand increases.
Farmers pass on increased cost to consumers.
Farmers are willing to produce more as price increases.
Which of the following is NOT TRUE of perfect competition?
Firms are price takers.
Products are homogenous.
Firms engage in price discrimination.
There are no barriers to entry.
All things being equal, an increase in the supply of a good will result in
an increase in price and quantity traded
a fall in price and an increase in the quantity traded
a decrease in price and quantity traded
arise in revenue and a fall in quantity traded
Which of the following will NOT occur when there is market failure?
A decline in social welfare
An increase in poverty throughout the economy
Increasing levels of unemployment among skilled and unskilled labour
Adequate amounts of all goods and services for consumers
A treasury bill is an instrument for short-term borrowing by
public companies
governments
insurance companies
importers
The MAIN objective of a credit union is to
encourage consumer spending
provide investment funds for companies
develop the habit of thrift among its members
provide credit to government agencies
Joe Brown sells his produce at the market and saves his money until he has enough to buy a tractor. Which of the following functions is money performing in this case?
Unit of account
Store of value
Standard of deferred payment
Medium of exchange
Which of the following is NOT a financial institution in an economy?
Share market
Development Bank
Credit union
Trade union
Which of the following financial instruments is issued by the Government?
Treasury bonds
Corporate bonds
Equity security
Shares on the stock exchange
One of the functions of a commercial bank is
issuing notes and coins
making loans
determining the foreign exchange rate
keeping the accounts of government departments
The ability to turn an asset into cash without loss or delay is known as
durability
liquidity
portability
divisibility
Country A is experiencing a balance of payments deficit. Which of the following measures should it take to reduce the deficit in the short-term?
Engage in trade with other low cost producers of goods.
Impose restrictions on goods imported from other countries.
Increase the importation of goods.
Reduce the volume of exports to other countries.
Which of the following will be included in the capital account of the balance of payments of a country?
Items bought from a foreign supplier through the internet
Outstanding loan repayments made to a bank in a foreign country
Investment in a local manufacturing industry by a foreign company
The value of goods exported during the year
Which of the following factors will MOST likely cause a fall in a country's exchange rate under a flexible change rate required?
An increased demand for its imports
An increased demand for its exports
An increased inflow of capital
A reduced rate of domestic inflation
Item 39 refers to the table below which shows the rate of inflation and the average percentage increase in wages over a four-year period.
| YEAR | RATE OF INFLATION | WAGE INCREASES (%) |
|---|---|---|
| 2003 | 5 | 20 |
| 2004 | 10 | 20 |
| 2005 | 10 | 5 |
| 2006 | 15 | 5 |
In which year was the increase in real wages GREATEST?
2003
2004
2005
2006
Which of the following measures is MOST likely to reduce inflation?
An increase in bank lending
An increase in import duties
A reduction in government expenditure
A reduction in direct taxation
Item 41 refers to the following table.
| Item | Amount ($M) |
|---|---|
| Consumption | 100 |
| Net income from abroad | 20 |
| Investment | 80 |
| Government spending | 60 |
Using the data provided in the table above calculate the Gross Domestic Product.
$200M
$220M
$240M
$260M
Some developing countries are trying to achieve economic growth with less governmental participation. This is MOST likely to be achieved through increased
private investment
public expenditure
state planning
trade barriers
Large firms achieve savings in unit costs from advertising or packaging. This is a result of which of the following economies of scale?
Financial
Marketing
Managerial
Technical
With reference to the diagram above, state which of the following is TRUE.
Country P has an absolute advantage in Good Y only.
Country P has an absolute advantage in Good Y and Good X.
Country Q has an absolute advantage in Good Y only.
Country Q has an absolute advantage in Good Y and Good X.
A country is said to have a comparative advantage in the production of a commodity when it
can produce more of that commodity than any other country
has a larger share of the market for that commodity than any other country
can produce that commodity at a lower opportunity cost than any other country
accounts for a greater percentage of total world sales of that commodity than any other commodity
Country X decides to protect its agricultural sector from foreign competition by restricting the amount of agricultural goods imported into the country. This measure is referred to as a
trade barrier
trade bloc
quota trading
trade embargo
Which of the following is NOT a characteristic of Caribbean economies?
High levels of unemployment
Major producers of manufactured goods
Low levels of capital formation
A high debt burden
Country B had an increase of $300 000 000 in foreign direct investment. In which section of the balance of payments will this transaction be recorded?
Visible trade account
Balance of trade account
Invisible trade account
Capital account
Which of the following events will result in a surplus on the balance of trade of a country?
Volume of exports is greater than the volume of imports.
Volume of imports is greater than the volume of exports.
Value of exports is greater than the value of imports.
Value of imports is greater than the value of exports.
Item 50 refers to the table below which shows figures taken from the balance of payments records for Country X in the year 2006.
| $M | |
|---|---|
| Export of goods | 500 |
| Import of goods | 400 |
| Current balance | 300 |
What is the invisible balance for Country X?
$ 100M
$ 200M
$ 300M
$1200M
Which of the following measures is MOST likely to reduce inflation?
An increase in bank lending
An increase in import duties
A reduction in government expenditure
A reduction in direct taxation
Chasa Cosmetics seeks to market its products in the United States. Such a move is made MOST likely through
the establishment of the Caribbean Single Market and Economy
direct foreign investment in the United States
effective marketing strategies
trade liberalization
Which of the following benefits will consumers derive as a result of trade liberalisation?
They will enjoy greater access to a variety of goods.
Goods and services will be provided at lower costs.
Prices of all goods and services will be reduced.
Prices of goods and services will be more stable.
Which of the following are characteristic of MOST Caribbean economies?
I. High per capita incomes II. A diversified manufacturing sector III. Equitable distribution of incomes IV. Dependency on primary product exports
IV only
I and II only
I and III only
II and IV only
All of the following are examples of primary products EXCEPT
bauxite
furniture
bananas
petroleum
What is its balance of merchandise trade?
-$38 M
$20 M
$38 M
$48 M
Country A and Country B are trading partners. How will their trading relations be affected if the value of the currency of Country A increases against the value of the currency of Country B?
Exports from Country B to Country A will be cheaper.
The volume of exports from Country A to Country B will be cheaper.
Exports from Country B to Country A will decrease.
The volume of exports from Country A to Country B will decrease.
What were the terms of trade for Country X in 2006?
0.98
1.2
120
What trend is common to ALL countries shown in the table?
Employment in the manufacturing sector increased.
There was a decline in the Gross Domestic Product.
There was a decline in the sale of manufactured products.
There was a decline in manufacturing output as a share of Gross Domestic Product.