Free CXC Economics Paper 1 May/June 2020 past paper from 2020. 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 2020 - Free CXC Past Paper with Answers
Free CXC Economics Paper 1 May/June 2020 past paper from 2020. 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 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
Which of the following is NOT a way in which governments influence the economic decisions of businesses?
Increasing retirement benefits
Passing minimum wage legislation
Regulating the emissions of toxic waste
Identifying areas where businesses should be located
An 'economy' is BEST described as
a system where suppliers produce all the goods and services needed by the consumers
the utilization of resources by manufacturers to produce goods and maximize profits
the utlization of resources to produce goods and services to meet the needs and wants of society
a system whereby all the goods and services used by citizens of a country are provided by the government
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
price of the chicken and chips
satisfaction he gets from the burger
satisfaction he gets from the chicken and chips
Country X allows the foreign exchange market to determine the rate of its domestic currency based on the forces of demand and supply. This type of exchange rate is referred to as
fixed
pegged
floating
managed
Ayarna Ltd grows and harvests coconuts which are sold directly to customers without processing. In which of the following sectors is Ayarna Ltd mainly operating?
Mixed
Tertiary
Primary
Secondary
A pure public good can be described as
excludable
zero-priced
diminishable
complimentary
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
Which of the following is a reward to a factor of production?
Taxes paid to government
Promotion to a higher grade in the workplace
Profits declared by a company in its annual report
The managerial skills of the managers of a business
Which of the following is LEAST likely to affect the efficiency of labour?
Firm's profitability
Worker motivation
Level of technology
Education and training
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
The term 'money supply' refers to the
total stock of money in an economy at any moment
amount of money traded in the foreign exchange market
total amount of gold, silver and other precious metals in reserve
total asset base of the institutions in the financial sector
The restriction of international trade through tariffs, embargoes, quotas and exchange controls is referred to as
structural adjustment
a bilateral agreement
globalization
protectionism
Bargain Supermarket increased the price of its name brand tissue by 65 per cent and sales fell by 115 per cent. How should the price elasticity of demand for Bargain's tissue be described?
Elastic
Inelastic
Perfectly elastic
Perfectly inelastic
A government reduces tax on carrots. This causes the price of carrots to fall by 50 per cent. The quantity demanded then rises by 50 per cent. The price elasticity of demand for carrots in this case is
0
0.4
1
2.5
All things being equal, an increase in the supply of a good will result in
a decrease in the price and quantity traded
an increase in the price and quantity traded
a rise in revenue and a fall in the quantity traded
a fall in price and an increase in the quantity traded
Which of the following statements best describes what the diagram is illustrating?
The firm is making losses.
The firm is making excess profits.
The firm is making normal profits.
The firm is making zero economic profit.
Item 19 refers to the following diagram which shows the relationship between the demand for and supply of shirts.
There is a shift in the demand curve from DD to D₁D₁. There is a simultaneous shift in the supply curve from SS to S₁S₁. What is the effect on the equilibrium price after these shifts?
It increases from Y to B.
It decreases from P to Z.
It remains unchanged at Y.
It remains unchanged at Z.
The supply curve will shift to the left if
incomes fall
costs of production rise
costs of production fall
technology is introduced
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
increase their profit margins as price increases
are willing to increase supply as demand increases
Which of the curves above indicates that demand for the product is perfectly elastic?
I
II
III
IV
The relationship between price and quantity demanded of a normal good is described as
direct
a shift
inverse
non-existent
Item 24 refers to the following table which shows the prices of a product, the quantites demanded (QD) and quantities supplied (QS).
Price ($) QD (Units) QS (Units) 10 8 20 8 12 16 6 14 14 4 16 12 2 29 8
At which of the following prices are there shortages in the market?
$2 and $4
$4 and $6
$6 and $8
$8 and $10
Governments often put measures in place to control monopolies because monopolies
set fair prices
restrict supply
earn normal profit
promote consumer sovereignty
Price elasticity of supply refers to the responsiveness of the quantity supplied to a change in
income
demand
price of the good
prices of substitutes
Item 27 refers to the following information which relates to a manufacturing company.
Total fixed cost $10 000 Total cost $50 000 Output 100 units
The average variable cost is
$ 100
$ 400
$1000
$4000
Which of the following outcomes is usually a direct effect of retrenchment in a country?
Reduced standard of living
Increased standard of living
Reduction in crime and violence
Equality in the distribution of wealth
Which of the following statements BEST defines 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 on countries within a region
The amount of subsidies received by local exporters
Which of the following situations is LEAST likely to occur when there is market failure?
A decline in social welfare
An increase in poverty throughout the economy
An increase in the level of unemployment among skilled and unskilled labour
An adequate amount of goods and services for consumers
Item 31 refers to the following statement. 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 in the statement above?
Durability, portability, liquidity
Durability, scarcity, uniformity
Durability, portability, divisibility
Portability, uniformity, divisibility
Which of the following financial instruments are issued by the central bank on behalf of the government?
Treasury bills
Corporate bonds
Equity securities
Shares on the stock exchange
The central bank has requested an increase in the reserve requirements of commercial banks. What would be the effect on 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.
The MAIN objective of a credit union is to
provide scholarships to students
encourage thrift among its members
provide credit to government agencies
provide investment funds for companies
Which of the following is NOT a characteristic of Caribbean countries?
High debt burden
High levels of unemployment
Low level of capital formation
Major producers of manufactured goods
Item 36 refers to the following diagram.
[Diagram of Financial sector, Savings/deposits, Loanable funds for investment/spending, Firms/households]
The diagram BEST describes the
functions of the central bank
flow of deposits into the financial sector
flow of funds into the household sector
role that the financial sector performs for customers
In seeking to stabilize the economy of a Caribbean territory, the role of the government should be to
increase its taxes, borrow more and forecast revenues
encourage skilled labourers to stay within the territory
review its policies on taxation, borrowing and expenditure
import more consumer goods to satisfy the needs of the people
A group of workers who agree to negotiate with employers as one collective unit rather than individually is referred to as a
trade union
lobby group
credit union
financial group
The term 'recession' refers to a period of
increased economic activity
temporary economic decline
gradual increase in the GDP of a country
national economic prosperity in a country
The type of unemployment which is usually experienced by workers in the hotel industry in the Caribbean is known as
cyclical
seasonal
frictional
structural
The amount of net exports in an economy is given as -$10 M. This indicates that the value of exports is
zero
equal to imports
less than imports
greater than imports
Item 42 refers to the following table which shows manufacturing output as a share of gross domestic product (GDP) for four countries, A, B, C and D.
| Year | Country |
|---|---|
| A | B |
| 2016 | 28% |
| 2017 | 23% |
| 2018 | 19% |
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
Item 43 refers to the following economic measures. I. Reducing bank rates II. Increasing interest rates III. Decreasing money supply
Which of the measures above can be used to reduce inflation?
I and II only
I and III only
II and III only
I, II and III
Which of the following factors cause(s) money to lose value and become less effective as a medium of exchange?
Inflation
Market failure
Unemployment
Negative externalities
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 diagram which illustrates the production possibility frontier for an economy in Year 1 (AA) and Year 2 (BB).
[Diagram of production possibility frontiers]
From the diagram above, it can be deduced that
Point X was unattainable in Year 2
Point X was efficient in Year 1 and Year 2
there was decreasing opportunity cost in Year 2
there was economic growth between Year 1 and Year 2
In theory, open competition on a world scale facilitates
high levels of dependency on tourism
increases in trade unions' negotiating power
government manipulation of market outcomes
the development of a competitive advantage based on price
A transfer as recorded in the balance of payments is
a maternity benefit received at home by the local government agency
an unemployment benefit received by citizens in their country by their government
a subsidy for a local firm to encourage increased production for the export market
a donation by a foreign government of relief supplies to a country following the passage of a hurricane
Item 49 refers to the following diagram which shows the circular flow of income.
[Diagram of circular flow of income]
Line X represents payment
for goods taken on credit
to the factors of production
of taxes to the government
to financial institutions for loans
Which of the following market features is NOT a characteristic of perfect competition?
Freedom of entry and exit
Many buyers and one seller
Knowledge of market conditions
Selling of homogeneous products
Item 51 refers to the following scenario. Between 2008 and 2018, Country X imported 500 000 cars from the United States. This represented an increase of 100 per cent over the previous ten-year period. As a result, the demand for US dollars increased significantly while exports to the US increased by 2 per cent.
The scenario described above is MOST likely to result in
the value of the US dollar falling
the value of the US dollar remaining constant
Country X's dollar appreciating against the US dollar
Country X's dollar depreciating against the US dollar
Item 52 refers to the following table which shows the current account section of a country's balance of payments for the year. 2016. Item (SM) Invisible imports 50 Invisible exports 80 Visible imports 70 Visible exports 32
What is the value of this country's balance of merchandise trade?
-$38 M
$20 M
$38 M
$48 M
The economic system where major economic decisions are made by private individuals and businesses is known as a
free market
planned economy
controlled economy
subsistence economy
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?
Reduce the volume of exports
Increase the importation of goods
Introduce policies to reduce the level of imports
Engage in trade with other low-cost producers of goods
The acronym FDI, in economics, means
foreign direct income
foreign direct investment
fixed domestic investment
floating domestic investment
Which of the following products is NOT considered to be primary?
Bauxite
Banana
Furniture
Petroleum
The term 'e-commerce' refers to
ecotourism
export businesses
economies of scale
electronic businesses
Which of the following is NOT a benefit of economic integration?
Higher cost of living
Increased productivity
Improved competitiveness of products
Mutual benefits among member countries
Which of the following occurrences is NOT a benefit of trade liberalization to consumers?
A decline in the prices of goods and services
An increase in the prices of goods and services
Greater access to a variety of goods and services
A reduction in the cost of providing goods and services
One important objective of CARICOM is to
maximize multinational efficiency through globalization
encourage the economic development of its members
improve standards of living beginning with smaller states
provide strategic guidance to countries to ensure financial stability