Free CXC Economics Paper 1 May/June 2011 past paper from 2011. 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 2011 - Free CXC Past Paper with Answers
Free CXC Economics Paper 1 May/June 2011 past paper from 2011. 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.
Which of the following is the MAJOR problem facing all economies?
Allocating scarce resources among competing users
Achieving an equal distribution of income
Preventing the depletion of natural resources
Achieving a fair distribution of wealth
An 'economy' is BEST described as a system where
suppliers produce all the goods and services needed by the consumers
resources are used by manufacturers to produce goods and maximize profits
all the goods and services used by citizens of a country are provided by the government
resources are used to produce goods and services to meet the needs and wants of society
Sita and Peter are planning to buy a new house. Which of the following factors should NOT affect the couple's decision?
Their joint monthly income
The possibility of a job promotion for Peter
The high cost of renting their current home
The acquisition of a new home by Sita's best friend
A student has a daily allowance of $20 with which he can purchase chicken and chips or a burger, but NOT both. If he purchases the chicken and chips, the opportunity cost of his decision will be
the burger he gave up
the satisfaction he gets from burgers
the price of the chicken and chips
the satisfaction he gets from the chicken and chips
A 'free good' is BEST described as a good
that is given away by a retailer to promote the sale of another good
which gives no satisfaction to consumers
which has an infinite elasticity of supply
whose opportunity cost is zero
Which of the following is NOT a primary product?
Bauxite
Banana
Furniture
Petroleum
Item 7 refers to the diagram below which shows the production possibility curve for an economy that produces bananas (X) and oranges (Y).
If OX is the amount of bananas produced, what is the greatest amount of oranges that can be produced?
OY
OY₁
OY₂
OY₃
Item 8 refers to the diagram below which shows the production possibility curve for two goods: shirts and shoes.
At what point in the diagram are resources underemployed?
W
X
Y
Z
An outward shift in a production possibility curve can be caused by an
increase in wages
increase in prices
increase in imports
improvement in technology
Unemployment that results from a change in technology and the resulting re-training and re-hiring of staff is an example of
structural unemployment
cyclical unemployment
frictional unemployment
seasonal unemployment
Item 11 refers to the diagram below. Ss is the supply curve before a subsidy is given.
As a result of the granting of the subsidy it is expected that
supply will increase
supply will decrease
demand will decrease
price will increase
Item 12 refers to the table below which provides information on three similar goods, X, Y and Z. Consumers buy more of Good Z because of its lower price.
| Good | Price ($) |
|---|---|
| X | 10 |
| Y | 8 |
| Z | 3 |
Which of the following factors will cause consumers to buy less of Good Z?
An increase in the supply of Good Z
An imposition of a 100 per cent tax on Good Z
The placement of a 100 per cent subsidy on Good Z
The advertisement of Good Z as an impressional good
In an attempt to increase the efficiency of its staff, management assigns specific tasks to each worker. This is an example of
progress
productivity
specialisation
entrepreneurial ability
In a commercial bank, wages and salaries are NOT paid to
shareholders of the bank
bank tellers and supervisors
investment managers of the bank
maintenance workers employed by the bank
Which of the following is an advantage of a market economy?
There is equality of income.
It provides an incentive to produce.
It reduces pollution and congestion.
Price control measures can be ef- fected.
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,
profits are lower
producers are never efficient
buyers and sellers determine prices
there are higher unemployment levels
Which of the following are NOT considered factors of production in the bauxite industry?
Companies that use bauxite
Lands on which mines are located
Workers employed to work on the mines
Persons who invest their capital to carry out mining operations
Sam and Su started a catering business. They organised the factors of production and pooled their financial resources to produce the goods and services. Which factors of production should Sam and Su be classified as?
Workers
Investors
Managers
Entrepreneurs
Which of the following is NOT an example of a factor of production in a commercial bank?
The building
The bank's vault
Shareholders of the bank
Special savings accounts for students
Many developing countries have changed from command economies to market-based economies in order to increase
subsidies
efficiency
price control
government control
An economy in which ALL of the resources EXCEPT labour are owned by the state can be described as a
free economy
mixed economy
capitalist economy
command economy
In which of the following situations will a normal supply curve for farm produce slope upwards from left to right?
Farmers pass on increased cost to consumers.
Farmers' profit margins increase as price increases.
Farmers are willing to produce more as price increases.
Farmers are willing to increase supply as demand increases.
Which of the following features is NOT a characteristic of perfect competition?.
Freedom of entry and exit
Selling of homogeneous products
Many buyers and one seller
Knowledge of market conditions
According to economic theory, second-hand cigarette smoke is an example of a
merit good
private good
positive externality
negative externality
Which of the following is MOST likely to occur if there is an increase in the demand for cameras?
The price of cameras will fall.
The price of cameras will rise.
The supply of cameras will fall.
The price and supply of cameras will remain the same.
Item 26 refers to the following table.
| Price of potatoes ($) | Market demand (000 kg) | Market supply (000 kg) |
|---|---|---|
| 4 | 700 | 100 |
| 8 | 500 | 200 |
| 12 | 350 | 350 |
| 16 | 200 | 530 |
| 20 | 100 | 700 |
What is the equilibrium price?
$ 4
$S
$12
$16
An increase in the price of flour is MOST likely to be followed by an immediate
rise in the quantity demanded for bread
fall in the quantity supplied of flour
rise in the quantity supplied of flour
rise in the quantity demanded for flour
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
Which of the following is an example of fixed capital?
Cash
Machinery
Bank balance
Raw material
Which of the following is NOT TRUE of perfect competition?
Firms are price takers.
Products are homogenous.
There are no barriers to entry.
Firms engage in price discrimination.
Item 31 refers to the following diagrams, I, II, III and IV.
Which diagram above indicates that demand is perfectly elastic?
I
II
III
IV
Large firms achieve savings in unit costs from advertising or packaging. This is a result of which of the following economies of scale?
Financial
Technical
Marketing
Managerial
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?
Store of value
Unit of account
Medium of exchange
Standard of deferred payment
Divisibility is an important function of money because it
encourages the process of speciali- sation
removes the problems associated with barter
enables small transactions to take place
assists individuals to allocate wealth in a profitable manner
To which of the following does the term 'legal tender' refer?
Money that has no direct backing of gold
Money that government declares must be accepted if offered as settlement of debt
Assets that perform only the function of a store of wealth
Assets that can be converted immediately into a known amount of money
Which of the following is NOT a financial institution in an economy?
Development Bank
Share market
Credit union
Trade union
Which of the following financial instruments are issued by the Government?
Treasury bonds
Corporate bonds
Equity securities
Shares on the stock exchange
Which of the following is referred to as the banker's bank?
The World Bank
The Central Bank
A commercial bank
An investment bank
One of the functions of a commercial bank is to
issue notes and coins
provide loans to the public
determine the foreign exchange rate
keep the accounts of government departments
The Central Bank calls for an increase in the reserve requirements of commercial banks. How will this affect the operations of commercial banks?
Their liquid assets will be reduced.
Their ability to create credit will increase.
Their loans to money markets will increase.
They will attract less deposits from the public.
A treasury bill is an instrument for short-term borrowing by
importers
governments
public companies
insurance companies
Item 42 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 (%) 2006 5 20 2007 10 20 2008 10 5 2009 15 5
In which year was the increase in real wages GREATEST?
2006
2007
2008
2009
Items 43-44 refer to the following table which shows Government revenue and Government expenditure for four countries, A, B, C and D.
Country Government Revenue $ (Million) Government Expenditure $ (Million) (A) 3.2 3.2 (B) 3.2 2.2 (C) 2.2 3.2 (D) 0 0
Which country has a fiscal deficit?
A
B
C
D
Which country has a budget surplus?
A
B
C
D
Which of the following is usually a direct effect of retrenchment in a country?
Increased standards of living
Reduced standards of living
Reduction in crime and violence
Equality in the distribution of wealth
Which of the following measures is MOST likely to reduce inflation?
Increasing bank lending
Increasing import duties
Reducing direct taxation
Reducing government expenditure
Item 47 refers to the table below which shows manufacturing output as a share of Gross Domestic Product for four countries A, B, C and D.
YEAR COUNTRY A COUNTRY B COUNTRY C COUNTRY D 1970 28% 40% 29% 29% 1990 23% 34% 26% 28% 2000 19% 31% 21% 23%
What trend is common to ALL countries shown in the table?
There was a decline in the Gross Domestic Product.
There was a decline in the sale of manufactured products.
There was an increase in employment in the manufacturing sector.
There was a decline in manufacturing output as a share of Gross Domestic Product.
Which of the following is LEAST likely to be used as a measure to control inflation?
Increase in taxation
Reduction in government expenditure
Reduction in the rate of interest on loans
Restrictions on lending by commercial banks
Some developing countries try to achieve economic growth with less governmental participation. This is MOST likely to be achieved through increased
trade barriers
state planning
private investment
public expenditure
Which of the following BEST explains the term 'tariff'?
The amount of subsidies received by local exporters
The level of tax that is levied on imports entering a country
The amount of goods that can be imported into a country
The common tax levied by countries on member countries within a region
Which of the following will result in a surplus on the balance of trade of a country?
Value of imports is greater than the value of exports.
Value of exports is greater than the value of imports.
Volume of exports is greater than the volume of imports.
Volume of imports is greater than the volume of exports.
Item 52 refers to the following information, which provides data on two countries P and Q, and two goods, X and Y.
[Diagram of a Production Possibility Frontier for two countries] Good Y. Country P Country Q O P Q Good X
With reference to the diagram above, 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.
Items 53 - 54 refer to the following table which illustrates the Balance of Payments of Caribe Island.
| $ (billion) | |
|---|---|
| Merchandise exports | 500 |
| Merchandise imports | -555 |
| Balance of Trade | |
| Export of Services | 100 |
| Imports of Services | -200 |
| Balance of goods and services | |
| Net investment income | 4 |
| Net transfers | 12 |
| Balance on current account | |
| Capital inflows | 100 |
| Capital outflows | -20 |
| Balance of capital account | |
| Current and Capital account balance | -59 |
| Official Reserves | 0 |
The balance of trade in $ (billion) is
55
-55
1355
-1355
The capital account in $ (billion) is
80
-80
120
-120
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?
Reduce the volume of exports to other countries.
Engage in trade with other low-cost producers of goods.
Increase the importation of goods from other countries.
Impose restrictions on goods imported from other countries.
Which of the following is LIKELY to lead to greater international investment flows to the Caribbean region?
Globalisation
Specialisation
The World Bank
The International Monetary Fund
Which of the following statements BEST describes globalisation?
International trade of goods and services including skilled workers
Movement in technology and financial markets worldwide
The integration of financial services, technology and commodities markets worldwide
Movement of tangible and intangible goods enhanced by growth in the computer industry
Which of the following BEST defines the term 'protectionism'?
Restriction of imports into a country
Dependency on a primary product for export
Free movement of goods and services among countries
Establishment of a trading bloc among a group of countries
Country X has a very low unemployment rate as most of its citizens work overseas for 6-8 months during the year. This type of unemployment can be classified as
cyclical
real wage
seasonal
structural
Trade liberalisation should result in several benefits to consumers. Which of the following is NOT a benefit to consumers?
Prices of goods and services will increase.
Prices of goods and services will be reduced.
Cost of providing goods and services will be lower.
There will be greater access to a variety of goods and services.