Free CXC Economics Paper 1 May/June 2014 past paper from 2014. 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 2014 - Free CXC Past Paper with Answers
Free CXC Economics Paper 1 May/June 2014 past paper from 2014. 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 rewards accrues to the factor of production called 'capital'?
Rent
Profit
Wage
Interest
An 'economy' is BEST described as a system where
suppliers produce all the goods and services needed by consumers
resources are used by manufacturers to produce goods to 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
Which of the following pairs of activities in a country falls under the tertiary sector?
Banking and tourism
Tourism and agriculture
Banking and construction
Manufacturing and fishing
Which of the following is NOT one of the ways in which governments influence economic decisions of businesses?
Increasing retirement benefits
Passing minimum wage legislation
Regulating the emissions of toxic waste
Identifying areas where businesses should be located
Item 5 refers to the following diagram which shows the relationship between the production of Good X and Good Y by a certain country using all its resources:
What name is given to the curve represented above?
Demand curve
Market supply curve
Individual supply curve
Production possibility curve
Ana is considering the purchase of a new laptop computer. Which of the following factors is LEAST likely to influence her decision?
Her level of income
The price of the laptop computer
The cost of producing the laptop computer
Laptop computer advertisements in the newspapers
Which of the following factors causes money to lose value and become less effective as a medium of exchange?
Inflation
Market failure
Unemployment
Negative externalities
The allocation of resources in a mixed economy is determined by
consumers only
government only
government and producers only
government, consumers and producers
Choice is the MOST important issue in economics because
incomes are not evenly distributed
most countries have a low per capita income
resources are scarce relative to consumers' wants
money is scarce in relation to a country's resources
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
there are higher unemployment levels
demand and supply forces determine prices
In an attempt to increase the efficiency of its staff, management assigns specific tasks to each worker. This is an example of
progress
productivity
specialization
entrepreneurial ability
Which of the following financial instruments are issued by the government?
Treasury bills
Corporate bonds
Equity securities
Shares on the stock exchange
A government reduces tax on carrots. This causes the price of carrots to fall by 50%. Demand then rises by 50%. The price elasticity of demand for carrots in this case is
0
0.4
1
2.5
Sam and Jack started a catering business. They took out a bank loan, acquired a site in a busy city centre and hired two catering assistants. Under which factor of production will the roles of Sam and Jack be classified?
Land
Labour
Capital
Entrepreneurial talent
Which of the following should entrepreneurs consider when deciding which goods to produce? I. Cost of resources II. Availability of resources III. Level of inflation
I and II only
I and III only
II and III only
I, II and III
Which of the following is a reward to a factor of production?
Taxes paid to government
Promotion to a higher grade in the workplace
The managerial skills of the managers of a business
Profits declared by a company in its annual report
Item 17 refers to the following diagram which shows the price and quantity demanded for Good X.
[Diagram of demand curve]
The movement of the demand curve of Good X from D to D, results from an increase in
consumer income
the price of Good X
the price of a complement
the cost of inputs used to produce Good X
According to economic theory, 'second hand' cigarette smoke is an example of a
private good
positive externality
negative externality
merit good
Which of the following diagrams illustrates a perfectly inelastic demand?
Price / D / Quantity
Price / D / Quantity
Price / D / Quantity
Price / D / Quantity
Shinelle spends 0.02% of her monthly income on a particular good. Her demand for this good, in terms of price, can be described as
elastic
inelastic
perfectly elastic
perfectly inelastic
Item 21 refers to the following curves which show the demand for some products.
P
D
D
0 Q I
P D
| /
| /
|/ D
0 Q II
P
| \
| \ D
| \
D----0---Q III
P
|
|
| D
0 Q IV
Which of the curves above indicates that demand for the product is perfectly elastic?
I
II
III
IV
The MAIN objective of a credit union is to
encourage summer spending
encourage thrift among its members
provide credit to government agencies
provide investment funds for companies
Which of the following BEST explains the term 'tariff'?
The amount of goods that can be imported into a country
The tax that is levied on imports entering a country
The common tax levied by countries on member countries within a region
The amount of subsidies received by local exporters
One example of an 'entrepreneur' is
a shop owner
a store keeper
a bank worker
an airline employee
A normal supply curve for farm produce will slope upwards from left to right if farmers
pass on increased costs to customers
are willing to produce more as price increases
are willing to increase supply as demand increases
increase their profit margins as price increases
Items 26-27 refer to the following table which shows production costs of three units of a product.
| Units | Total Fixed Cost $ | Marginal Cost $ | Total Cost $ |
|---|---|---|---|
| 1 | 100 | 25 | 125 |
| 2 | 130 | ||
| 3 | 60 |
What is the marginal cost of the second unit?
$ 5
$ 30
$125
$130
What is the total cost when three units are produced?
$125
$130
$155
$160
Which of the following features is NOT a characteristic of perfect competition?
Freedom of entry and exit
Many buyers and one seller
Buying and selling of homogenous products
Perfect knowledge of market conditions
Money is long-lasting, easy to carry around and can be changed into smaller denominations. Which of the following characteristics of money are being described above?
Durability, portability, liquidity
Durability, scarcity, uniformity
Durability, portability, divisibility
Portability, uniformity, divisibility
Item 30 refers to the following economic measures.
I. Decreasing money supply II. Increasing interest rates III. Reducing the bank rate
Which of the above measures may be used to reduce inflation?
I only
II only
I and III only
II and III only
Which of the following factors has led to the rapid expansion in e-commerce?
The emergence of the internet
The formation of regional groupings
The increase in levels of income
The rise in inflationary pressures
One example of a 'good' is
a bottle of soda water
a loan approved by a bank
an extra lesson by a school
a beauty makeover at a spa
Country A is experiencing a balance of payments deficit. Which of the following measures can it take to reduce the deficit in the short term?
Increase importation of goods
Reduce the volume of exports
Engage in trade with other low-cost producers of goods
Introduce measures to reduce the level of imports
The functions of a central bank do NOT include
issuing of notes and coins
providing loans to the public
managing foreign exchange rates
maintaining the foreign currency accounts of the government
Item 35 refers to the following table.
| Price of Potatoes per Kilo ($) | 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
$8
$12
$16
Which of the following items is considered 'legal tender'?
Gold
Lumber
Cheque
Ten dollar bill (note)
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.
Which of the following is considered a withdrawal from the circular flow of income?
Exports
Savings
Investments
Household income
The type of unemployment which arises because a particular economic activity which creates jobs is available ONLY during a particular period of the year is known as
frictional employment
cyclical unemployment
seasonal unemployment
structural unemployment
The measure that is MOST likely to reduce inflation is
an increase in bank lending
an increase in import duties
a reduction in direct taxation
a reduction in government expenditure
The amount of net exports in an economy is given as -$10m. This indicates that the value of exports is
zero
equal to imports
less than imports
greater than imports
Item 42 refers to the following incomplete equation. GDP = UNKNOWN = Total Expenditure = UNKNOWN
Which of the following options can BEST replace the two UNKNOWNS in the equation?
Output and Employment
Double Counting and Expenditure
Income and Inflation
Total Output and Total Income
Large firms can achieve savings in unit costs as a result of advertising and packaging. These kinds of economies of scale can be classified as
financial
marketing
technical
managerial
Which of the following is NOT used as payment for goods and services?
Currency
Insurance policy
Standing order
Personal cheques
A country has 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 global sales of that commodity than any other country
Item 46 refers to the following table which shows economic data for two countries, P and R, using all their individual resources.
Country Number of Mobile Phones that can be Produced Number of Microwave Ovens that can be Produced P 10 000 5.000 R 8.000 12 000 Total 18 000 17 000
Using the theory of comparative advantage, which of the goods above should Country P produce?
Both goods
Mobile phones only
Microwave ovens only
Some phones and some microwaves
Item 47 refers to the following diagram which shows the relationship between the demand for, and supply of, shirts.
Price Dr S1 D P B Y Z S1 D1 D S Quantity
There is a shift in the demand curve from DD to D,D₁. There is a simultaneous shift in the supply curve from SS to S,S,. What happens to the equilibrium price after these shifts?
It increases from Y to B.
It decreases from P to Z.
It remains unchanged at Y.
W:It remains unchanged at Z.
Item 48 refers to the following information on the production of corn and beans in two countries, Smallville and Bigville.
| Country | Quantity of Corn than can be Produced ('000 tonnes) | Quantity of Beans that can be Produced ('000 tonnes) |
|---|---|---|
| Smallville | 40 | 10 |
| Bigville | 20 | 50 |
Which of the following statements is TRUE?
Bigville has the absolute advantage in producing corn.
Bigville has the comparative advantage in producing corn.
Smallville has the absolute advantage in producing beans.
Smallville has the comparative advantage in producing corn.
With a floating exchange rate system, the exchange rate is determined by
the level of exports only
the level of imports only
government intervention
demand and supply forces
The currency of a country may appreciate in value if
the demand for its imports rises
the demand for its exports rises
its balance of trade deficit rises
its balance of payment deficit rises
When an economy which was once booming suddenly starts to experience low demand for goods and services, leading to companies and businesses closing down, rising unemployment and falling standards of living, the country is said to be experiencing
a revaluation
a recession
an externality
a disequilibrium
The economic system where major economic decisions are made by private individuals and businesses is known as
free market
planned economy
controlled economy
subsistence economy
Which of the following is usually a direct effect of retrenchment in a country?
Increased standard of living
Reduced standard of living
Reduction in crime and violence
Equality in the distribution of wealth
Which of the following organizations has adopted a single currency to facilitate trade and people movement among its member countries?
EU
FTAA
CSME
CARICOM
Which of the following organizations aims to promote the free movement of capital and labour across member states?
CBI
CDB
CSME
CARIBCAN
Which of the following is NOT an example of a primary product?
Bauxite
Furniture
Banana
Petroleum
Item 57 refers to the following table which shows the current account section of a country's balance of payments for the year 2008.
What is this country's balance of merchandise trade?
-$38 M
$20 M
$38 M
$48 M
An outward shift in the production possibility curve can be caused by an
increase in wages
increase in imports
improvement in technology
improvement in the standard of living
Joe Brown sells his produce at the market and saves his money until he has enough to buy a car. Which of the following functions is money performing in this case?
Store of value
Unit of account
Medium of exchange
Standard of deferred payment
Item 60 refers to the following table which shows manufacturing output as a share of Gross Domestic Product for four countries, A, B, C and D.
The table shows that ALL countries experienced
a decline in the Gross Domestic Product
a decline in the sale of manufactured products
an increase in employment in the manufacturing sector
a decline in manufacturing output as a share of Gross Domestic Product