C AR IB BE AN E XA MI NA TI ON S C OU NC IL ADVANCED PROFICIENCY EXAMINATION
SPECIMEN PAPER MULTIPLE CHOICE QUESTIONS FOR FO R ECONOMICS UNIT 2
90 minutes
READ THE FOLLOWING INSTRUCTIONS CAREFULLY.
Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item you are about to answer and decide which choice is best. Sample Item Prime cost is calculated by adding direct factory expenses to the Sample Answer () () (B) (C) (D)
c l leee lehe celue
A
B
C
D
The best answer to this item is “cost of materials used”, so answer space (D) has been shaded.
Copyright © 2008 Caribbean Examinations Council ®. All rights reserved.
02216010/SPEC 2008
-21.
Key K eye e l ly y h he eec ec y y ullelyeheceeee eeuewllle () () ()) ( (C)) (C ()) (
e 4 eehellw hwheelheweeNl ce(N)Sv/vee(S). S.I.
ll ll ec ec c w wh h c ce ee e h he e ce cel lev evel el ll ll ve ve e e e e c ce e e e he hee ec ch h e e e e
S
e 2-3 eehellw hwcuce.
1
n o i t p m u s n o C
10, 000
I
30,, 000 30 000 36 36,, 000 000
.I.
2
4
0
Q2
Sv vee Cu Gvee eeue
Wheleeee? () () (C) ()) (
he 4le Nl ce vee e uu v
hehwhlceh cee$3ll$36 ll.Whheley cue? () () (C) ()
Q Q1 Income
Whucele2eee? () () (C) ()) (
3
I1
0
d
2
10, 600
5.
. .9 .29
c u c cee y y .6 .6% he he chelceheheulle () () (C) ()
.4 .6 .6 2.
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-3e 6eehellw w-eccleecy.
e 8 - 9 eeheelw hwcuucC .
E=Y
E= R e r u t i d n e p x E
B e r u t i d n e p x E
C+I S
C1 D
E
A 0
Y1
Y2
ational income
0
6.
F ational Income
he R RS S eeee () () (B) (C)) (C (D)
ly a deflationary gap e ey y ve ve y y h he e k k inte in tere rest st pa pay yme ment ntss on on inv inves estm tmen entt loans
8
() () ()) ( (C)) (C ()) (
e 7eehellwe ulycuve. AS
P
AD1 AD
Whe
9
DF BF
eee?
uu cu l uce c u M M l l e e y y c c u uee ve ve e e e e y y c c u ue e
WhelceOwhe eee eee? ? () () ()) ( (C)) (C ()
uce cu uu cu Cu u u v ve ve e e e e y y c c u ue e
AD/AS
7
Whchhellwcycue h? () () (C)) (C ()) (
G v e e e cze he h eCe Ce l l k k c ce e e ee e e c ce ee e ve ve e e e ee e ue c ce ee e ec ecul ul h he e cck ke GO ON TO THE NEXT PAGE
02216010/SPEC 2008
-4e10eeheelwhw cuuc.
Item 11 refers to the following diagram showing the consumption function C1 in country X. C
e r u t i d n e p x E
C F D
($bn)
E
C2 C1
0
A
B
ational Income
10
Whchhellweeehe leycue?
() ()
FE AB FE AB
(C)
O -
()
+
Y ($bn)
11.
What causes the consumption function to shift upwards from C1 to C2? () ()) ( (C)
()
c ce ee e e ec c ce ee e ee e e T he he an ant ic ic ip ip at at ed ed in in cr cr ea ea se se in in th the proportion of income saved by households he h ee ee ec c c ce ee e h hee evluee
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-5Items 12 - 15 refer to the diagram below showing equilibrium level of national income. Y F 9600 8400
X
7200 Aggregate Expenditure (AE)
E
6000 4800
$ 3600 2400 G 1200 Full employment 0
1200 2400 3600 4800 6000 7200 8400 9600 Real ational Income $
12
Whheeqululevelce? () () (C) ()
13.
$3 6 $4 $6 $ 4
Which of the following responses correctly identifies the lines labelled Y and X respectively? () () () (C) (D)
14
ce le 4le 4lecuuc I nc nc om om e l in in e a nd nd c on on s um um p ti ti on on function 45o line and aggregate expenditure line
Hwuchuueeue? () () (C) ()
15.
$ 2 $2 4 $3 6 $3
By how much would aggregate desired expenditure have to be increased to close the output gap? () () (C) ()
$ $ 2 $2 4 $6
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-616.
A worker uses money to pay cash for a dress which costs $200.
19
Whchhellwucey eeeeheveee?
heCelkellveeecue uekee ue kee. .Wheec Wheec wll wl l h hhve hve he ee eee e he eyuly? ()
(A) (B) (C) (D)) (D
17.
() (C) ()) (
20 .
Which of the following is a monetary policy measure? () ()) ( (C)) (C ()) (
18
A me medi dium um of ex exch chan ange ge an and d a st stor oree of value A un unit of ac acco coun untt and and a sta stand ndar ard d for for deferred payments A st stan anda dard rd fo forr de defe ferr rred ed pa paym ymen ents ts and a store of value A me medi dium um of ex exch chaange and a unit of account
ll lll l v ve e e e e e Re R e v ve e e e e e c ce e e e he he e ee eve ve
Whchhellwcveueke yheCelkSee‘e kee? (A)
(B)) (B
(C)
(D)
Issu Is sues es lo long ng-t -ter erm m se secu curi riti ties es an and d fewer short-term securities, thereby reducing the banks’ liquid assets Sell Se llss gove govern rnme ment nt sec secur urit itie ies, s, red reduc ucin ing g the banks’ liquid assets and raising interest rates Set etss an an upp upper er li lim mit on th the vol volu ume of bank lending, reducing banks’ liquid assets and rasing interest rates Issu Is sues es co comp mpul ulso sory ry lo loan anss th that at ar aree demanded from the banks thereby reducing their liquid assets
Whch Whc h he he ll llw w c cl le ec c wulKeyeMOSlkelyhvecee lleveuelye? () () (C) ()) (
21 .
(C) ()
Reuce Reu ce l l c cu u y y Prot Pr otec ectt an and d in insu sula late te th thee ec eco ono nomy my from internal shocks Boo oost st an and d de dev vel elo op th thee ec econ onom omy y as it so needs Hel Hel l le e c cu uy y’’ l lce ce ye
v ve e e w w c c e e he he ueecyelleuyllwh helkelyeecheecy? () ()) ( (C)) (C ()) (
23
e ee e ee uly Gvee eeue
Wh Wh h he e le le u u c c l lze ze eccevele? () () (B)
22 .
ee e ll e y u u l l y e. ee e ll e y u u l l y ll. e ee e e e e e e ey yu u ly ly ll ll. . e ee e e e e e ey u ul ly y e.
h h v v e ee ec c ve ve e e ch ch e e e ew wll ll e e ec ec e e Me M ey yu ul ly yw wll ll e e e eee e wl ll lll
he le le wl wll l e u ue e cuy () ()) ( (C)) (C ()
we ee hel ec cu cuecy we w e c c ze ze h he ec cu u y y ec e che heu ule le e e y y l le e e e
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-724
ccheel cueycee () () (C) ()) (
25
(B)
(C)) (C
(D)
26.
e he ey uly ee e e he ec c uc
heevecheelGP ceterus paribus whwuleheeec eyeeeeey uly? (A)) (A
28.
The de dema mand nd fo forr mon money ey fa fall lls, s, in inte tere rest st rates fall, money supply falls. The de dema man nd fo forr mo mone ney y re rem mai ain n th thee same, interest rates fall, money supply rises. The dem deman and d fo for mon money ey ri risses es,, in inte tere rest st rates rise, money supply remains the same. Thee de Th dema mand nd fo forr mo mone ney y ri rise ses, s, in inte tere rest st rates remain the same, money supply remains the same.
If a government wishes to reduce unemployment by increasing demand, what type of monetary policy should it adopt? (A) (B) (C) (D)) (D
29.
The money multiplier is the (A) (B)) (B
(C)
(D)
30.
Using the quatity theory of money, what is the velocity of circulation if the money supply is $50 000, the average price is $200 and the number of transactions in the economy for a given year is 10 000?
(A) (B)
27.
2 4
Which of the following is an example of qualitative controls that a Central Bank may use in executing its monetary policy? (A) (B) (C) (D)) (D
Moral suasion Adjusting the bank rate Open market operations Vari riaati tio on of of the the li liq qui uidi dity ty ra rati tio o
(D)) (D
31.
numb mbeer of of tim timees mo money ch change gess hands in an economy chan ch ange ge in mo mone ney y su supp pply ly mu mult ltip ipli lied ed by the change in deposit that brought it about chan ch ange ge in mo mone ney y su sup ppl ply y di divi vide ded d by the change in deposit that brought it about amou am oun nt by by wh whic ich h a cu curr rren ency cy has to be multiplied to find the value of another currency
Which of the following BEST defines the government’s budget?
(C) () () (C) ()
Lower th the in interest ra rate Sell fewer treasury bills Increase th thee interest rate Sell mo more re gov oveern rnme men nt se secur urti tiees
The sp The spen endi ding ng pl plan anss of go gove vern rnme ment nt in an economy in a year The an annu nual al re repo port rt of th thee all alloc ocat atio ion n of government spending among sectors A yea yearl rly y sta state teme ment nt of go gov ver ernm nmen ent’ t’ss plans for spending and tax revenues Thee am Th amou ount nt of in inco come me go gove vern rnme ment nt has to spend in a year
Which of the following changes changes is the BEST indicator of sustained economic growth in a developing country? () () ()) ( (C) (D)
ec e ce ee e u ue el ly ye e c ce e e e he heu ue e c c ll A mo move vem men entt wit with hin th thee pr prod odu ucti tio on possibility frontier An ou outw twar ard d shi shift ft in th thee pro produ duct ctio ion n possibility frontier
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-8-
32
heleelwhwhelyw cueucewce.
Country
Production of tiles per person
Production of drums per person
Barbados
500
1000
Trinidad
750
1000
34.
Whchhellweececly eeehehele? (A)
(B)) (B
(C)) (C
(D)
B a r ba ba d o s ha ha s a co co m pa pa r at at iv iv e advantage in drums and Trinidad has an absolute advantage in tiles. Barb Ba rbad ados os ha hass an ab abso solu lute te ad adva vant ntag agee in drums and Trinidad has an absolute advantage in tiles. Barb Ba rbad ados os ha hass an ab abso solu lute te ad adva vant ntag agee in drums and Trinidad has a comparative advantage in tiles. B a r ba ba d o s ha ha s a co co m pa pa r at at iv iv e advantage in tiles and Trinidad Trinidad has an absolute advantage in drums.
35
Developing countries may attempt to increase their levels of exports by setting up . . . V.
e e Cu U C Mke ee e e
() () (C) ()) (
ly V ly V ly V l y
heheleelweehe lceyecuy. Item
$ Millions
Import of goods
10,000
Export of goods
8,000
Invisible balance
+600
Investment and other capital flows
+100
WhheCueccu WhheCue cculce? lce? 33.
Which of the following are structural characteristics of Caribbean economies? . . . III. II I. V.. V
cc eeece he h ech ch c ch h e e c c ll The la lack ck of a div diver ersi sifi fieed pro produ duct ctio ion n base he h el lck ck e ee e h he eec ec y y
() () (C) ()
ly V ly ly V ly
() () (C) ()
36
$ 2 $ 2 6 - $ 4 - $ 3
Whchhellweuewul Secyeccuy’ lcePyeccu? () () ()) ( (C)) (C ()) (
Revlu lu he ecu cuecy Lwe e e el e l y y c cl l l lcy cy Rel Re l e ech ch e e c c l l
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-937
Oe MJO MJOR R v v e e l l echeeveeecheye h () () (C) (D)
38
e ee e e e y y he heC Ce e l l k k hel he l e eu uce ce l l c cu u y y can ca n le lead ad to un unst stab able le cu curr rren ency cy va valu luee prov pr ovid ides es cer certa tain inty ty in in inte intern rnat atio iona nall trade
WhheMNucheWl eO?
e 40 eehellw eeethe eee the demand for imports of Good A into Country B. Price
D
S1
P1
P
WS World Supply D
(A) (B) (C) (C) (D)
To pr prom omot otee tr trad adee wi with th th thee la larrge countries of the world To se set ma mari ti ti me me bo bou nd ndar ie ies fo fo r member countries e e le le u ue e e e e e To set set ru rule less for for th thee glo glob bal tr trad adin ing g system
0
40.
Q1
Whchhellwlcey Whchhellw lceyue ue vee’eulewh ecy?
(B)) (B (C)
() ()) ( (C)) (C ()) (
ce c e G Gve ve e e e e Reu Re uc c e ec c e ec c e e c ce e he he e e e ee e c ce e h he e e ey yu ul ly y
(D)) (D
41
Quantity
Assuming a perfectly elastic world supply. What are the effects on price and quantity imported should government impose a quota at S1? (A)) (A
39
Q
Pricee de Pric decr crea ease ses; s; qu quan anti tity ty de dema mand nded ed decreases. Pric Pr icee de decr crea ease ses; s; qu quan anti tity ty de dema mand nded ed increases. Pric Pr icee inc incre reas ases es;; qua quant ntit ity y dem deman ande ded d increases. Pric Pr icee inc incre reas ases es;; qua quant ntit ity y dem deman ande ded d decreases.
WhchhellwSece CuU? (A)
(B)
(C)
()
Membeer co Memb coun untr trie iess ac actt as a si sing ngle le market with free movement of labour and capital. Member co countri riees fa face no no tr trade barriers between themselves while external tariffs and quotas are common. Member co countri riees fa face no no tr trade barriers between themselves and try to implement a common language. M e e c u u e h v v e l eee ehveleu.
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- 10 42
WhchhellwMOSlkely cuelcePyeSulu cuy? ()
()
(C)
()
43
heeechekeeehe kewhch ( ) () () (C)) (C ( )
44
ec e ce ee e h he e e e c c l l eelvehe cue c ce ee e c c e ece ce h he e c cul ul ecy ec y y he e el l cuy c ce ee e h he e e e c c l l eelvehe cue Lck L ck c c e ece ce h he e c cul ul ecy ec y y he e el l cuy
e45eeheelw
A1 A*
A2 A3
45.
* A is a large firm producing cars in Metro
Pole. The managers of A* have set up plants A1, A2 and A3 in three foreign countries. The operations of o f A* can BEST be described as that of () () (C)) (C ()
ll ecc e ull cy e e l l c c l l z z
e c e e e c c h e he he h e e e e ee e e ee e e e uye u ye e ee e e e he he ce ce e c u u e c y c e e e he
WhchhellwSecehe e‘ll’? ( ) () (C)) (C
()) (
he e ee v vee evcecle he eee v vee c c l lucle he cce ee ec c ucvellw ccue he h e eee e e ecce ec c u u e e uceevce eeely
IF YOU FINISH BEFORE TIME IS I S CALLED, CHECK YOUR WORK ON THIS TEST.
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C AR IBB EA N
EX AM IN AT IO NS
C OU NC IL
SECONDARY EDUCATION CERTIFICATE EXAMINATION
ECONOMICS - UNIT 2
SPECIMEN PAPER 2008
Item o. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Key B C A A D C C D A B D C D D C D D B C D B A A
Item o. 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
Key B C B A A C C D A C D C C B D C D B A D C C
