FEcB

Why cannot the private sector provide public goods such as street lighting? a. Free rider problem b. They will exploit consumers c. Governments are more efficient producers of such goods d. There will be significant external costs in such production A countrys currency depreciates (falls) on the foreign exchange market. All of the following would be the effects of this on business with in the country except which one? Businesses would more easily compete with imported substitutes for their products Businesses would face higher costs as price of imported goods rose Businesses would lose income from each export as their export prices would fall. Businesses could keep the foreign exchange price of their exports constant and expand their profit margins Which of the following industries would be expected to have the largest number of businesses operating them? Commercial Airlines Automobiles Agriculture Banking and insurance Which a. b. c. d. Which a. b. c. d. of the following would not be a source of finance for a business? Bank loan Certificate of Deposits Retained profits New share issue of the following about inflation is not true? It shift wealth from debtors to creditors It makes business planning difficult It distorts the price system in an economy It decreases the international competitiveness of the countries firms

a. b. c. d. 3 a. b. c. d. 4

Which of the following industries will achieve the largest fall in sales, output and employment if an economy moves into a recession? a. Food processing b. Automobile manufacture c. Retail supermarkets d. Petrol retailing A country is an oil exporter and the price for its oil is inelastic. Which of the following is correct about a substantial increase in oil prices? a. Will make the terms of trade to deteriorate b. Improves the countries balance of payments in the current account c. Improves the price competitiveness of manufacturing firms d. Increases GDP but not the GNP of the country

Which of the following might cause the demand for chicken meat to shift to the right a. A fall in the price of beef b. An outbreak of bird flu in chicken c. A health report favouring white meat d. A fall in the price of chicken meat All if the following are examples of extremities except which one?

a. Pollution resulting from a production process b. Road congestion caused by rush hour traffic on the roads c. Some consumers being unable to afford goods because prices have been driven up by the demand from other consumers d. Firms training workers who then move to other employers. 10 Other things remaining equal, which of the following is likely to increase as a result of the sale by the Bank of England of a large quantity of guilt edged stock? a. b. c. d. The The The The liquid reserves of banks price of gilt edged stock quantity of money yield of gilt edged stock

11 If the price elasticity of supply for a good over a certain price range is 0.8, the increase in the quantity supplied of that good, following a 10% increase in its price, will be a. b. c. d. 8.0% 0.8% 18% 80%

12 Economies of scale can result from all the following except one. Which is the exception? a. b. c. d. A bus company replacing smaller busses with larger busses A factory employing two shifts of workers rather than one shift per day An increase in the size of a firms capacity and plant Increased firm size allowing the firm to employ specialist managers

13 Which of the following pairings of policy instruments and policy objective is correct? A B C D a. b. c. d. A B C D Policy Instrument Tax cut Increased government spending Interest rate cut Interest rate increase Policy Objective Control of inflation Improved balance of payments Faster economic growth Lower exchange rate

14 The following are some statements about building societies which is incorrect ? a. They are mutually owned organisations b. They do not contribute to the national output c. They can raise capital by selling shares in the stock exchange d. Some banks used to be building societies

15 Which of the statements about a firms costs are not true ? a. Average variable cost first increases and then decreases as output rises
b. Marginal cost is equal to average cost when average cost is the lowest c. Total fixed cost is a constant d. Average fixed cost decreases as output increases 16 Which of the following is an example of fiscal policy? a. b. c. d. The Bank of England imposing controls on bank lending The creation of tax exempt Individual Savings Account (ISAs) The removal of regulations which restrict Sunday trading The removal of foreign exchange controls which restrict the transfer of currencies between countries

17 Which of the following would be a basic criteria for an item to be regarded as scarce? a. It should not be available in shops b. It should command a price c. It should provide consumers with welfare d. It should exist in smaller quantities 18 Choice is a central to the economic problem because a. b. c. d. Peoples wants are limited Resources tend to be scarce in relation to demand Resources are generally have alternative uses Peoples tastes and preferences are stable.

Which of the above statements are correct? a. b. c. d. (i), (ii) and (iv) only (ii), (iii) and (iv) only (i) and (iv) only (ii) and (iii) only

19 When Tax is imposed up on a commodity which the producers must pay to the government, this will cause commoditys a. b. c. d. a. b. c. d. Demand curve to shift right Supply curve to shift to the right Demand curve to shift to the left Supply curve to shift to the left

20 Which of the following is not a normal profit? A reward for risk taking The price of capital A source of investment funds Cost of production

21 Real GDP per capita in an economy is directly affected by a. b. c. d. a. b. c. d. The quantity of resources located in the economy How efficiency the economy uses resources when producing goods and services The size of the working population The flow of investment income from abroad (i), (ii) and (iii) only (i) and (iv) only (ii), (iii) and (iv) only (i) and (ii) only

22 All of the following would lead to fall in the circular flow of national income except which one? a. A reduction in the level of government expenditure b. A rise in personal savings rates c. A fall in business investment d. A rise in the average propensity to consume 23 If, when the price of a good increases, the total revenue received by the supplier decreases then; a. b. c. d. The The The The demand for the good must have unitary elastic demand for the good must be price elastic demand for the good must be price inelastic supply of the good must be price inelastic

24 On an aggregate demand and aggregate supply diagram, costs push inflation shown by a. A rightward shift of the aggregate demand curve b. A leftward shift of the short run aggregate supply curve c. A rightward shift of the long run aggregate supply curve d. A leftward shift of the aggregate demand curve 25 The Phillips curve shows that the government a. can only use expansionary policy to reduce the level of unemployment if it is prepared to accept a higher rate of inflation b. Cannot use monetary policy reduce the level of unemployment without causing a rise in the interest rates. c. In the long run expansionary fiscal and monetary policy can only lead to higher inflation and higher unemployment d. Can only use fiscal policy to reduce the rate of unemployment in the short run but not in the long run 26 In a particular market, there are larger number of buyers and sellers a downward sloping market demand curve, and no entry barriers in the long run. The market structure could be a. b. c. d. Perfect competition Imperfect competition Monopolistic Competition Oligopoly

a. (i) and (iv) only b. (i) only

c. (ii) and (iii) only d. (i), (ii) and (iii) only 27 If a country were to join a currency union (for example, the European single currency, The Euro), its businesses would experience all of the following except which one? a. Exchange rate certainty b. Reduced transactions costs on overseas transactions c. A common monitary policy d. Reduced price transparency 28 All of the following are features of the process of globalization except which one? a. b. c. d. Higher levels of trade in components and semi finished goods Increasing interdependent between economies Higher international disparities in rates of return on capital Increased flows of factors of production between economies

29 Which of the following statements must be true when a firms average total cost and average variable cost are identical? a. b. c. d. The firm is producing zero output Total fixed costs are zero Marginal costs are zero Average total costs of production are minimized

30 Monetarist economists believe all of the following except which one? a. Supply side measures are the only effective means of reducing the natural rate of unemployment b. There is a stable relationship between the growth of money supply and the rate of inflation c. In the long run only fiscal policy is effective in reducing unemployment d. Budget deficit should be avoided since they are a significant source of growth in the money supply 31 A retail price index is a direct measure of changes in a. b. c. d. The price of all consumer goods and services Average standards of living Average input prices paid by producers The average cost of living

32 Other things being equal and assuming that the UK is a net oil exporter and that the demand for UK oil overseas is price inelastic, a substantial increase in the world price of oil would tend to; a. Improve the UKs balance of payments on current account b. Improve the price competitiveness of manufacturing firms in the Uk c. Cause the UKs terms of trade to deteriorate d. Increase GDP but not GNP in the UK

33 The International Monetary Fund uses the funds at its disposal to a. b. c. d. Assist national governments to repay their national debts Finance specific development project in third world countries Assist national governments with a budget deficit Help member countries with temporary balance of payments deficits

34 Which one of the following will not decrease the transactions demand for money? a. b. c. d. Credit Cards becoming the preferred method of payments A fall in real output in a recession A fall in the price level An increase in interest rates

35 If a country has an absolute advantage in the production of all goods then a. Trade will take place and all the participating countries will gain from it b. No trade will occur because it has a comparative advantage in all goods c. Trade may take place, but this country will make no gains from it d. Trade may take place, but this country will be the only one which gains from it 36 If consumers find that their total utility from consuming glasses of lemonade diminishes as they drink more glasses, the utility derived from the marginal glass must be a. b. c. d. Greater than the opportunity cost in consumption Negative Equal to zero Positive but falling

37 Which of the following make effective control of the money supply difficult? a. Most forms of money are liabilities of the private sector rather than liabilities of the Central Bank b. The government refusing to grant full operational independence of the Central Bank c. Financial assets previously functioning as near money may become money d. At times the demand for money may be unresponsive to interest rate changes a b c d (ii), (iii) and (iv) only (ii) and (iv) only (i) and (iv) only (i), (ii) and (iv) only

38 Which of the following is a characteristic of imperfect competition but not perfect competition a. b. c. d. Large number of firms in the industry Profit maximizing behaviour Ease to entry into the industry Product differentiation

39 The business sector will be affected by a contraction in the money supply because a. b. c. d. Interest rates will tend to fall, thus reducing business costs Consumers credit will contract thus reducing consumers demand The exchange rate will fall making business more internationally competitive Inflation will fall and thus demand in the economy will expand

40 The real rates of interest are positive and rising then; a. b. c. d. The rate of inflation must be increasing The desire to hold cash balances will be increasing Lenders are gaining at the expense of borrowers The average level of savings will be decreasing

41 Whenever demand for a good is price elastic, an increase in price will a. Increase monopoly power b. Decrease total consumer expenditure on the good c. Increase consumer expenditure on a good in joint demand d. Increase in consumer expenditure on the good 42 Which of the following would be an example of price discrimination? a. b. c. d. British Telecom charging less for telephone calls made after 6:00 p.m. Economy class air fare being lower than first class air fares Women charged less than men to enter a night club Petrol stations charging less for diesel fuel than for petrol

43 If a firm increases employment of all its factors of production by 50% and as a result output increases by 60%, it has experienced a. Increasing Marginal productivity of labour b. The benefits of the division of labour c. Increasing returns to scale d. External Economies of scale 44 The Production Possibility Curve (PPC) foe country will shift outwards (to the right) if a. investment increases the capital stock b. The economy moves towards full employment c. Consumer demand increase d. The general level of process fall 45 The distinguishing feature of a translational (multinational) company is that a. b. c. d. it exports its products to more than one country Its production process uses inputs from more than one country It has shareholders in more than one country It has production facilities in more than one country

46 All of the following are true under a system of floating (flexible) exchange rates except which one? a. Balance of payments deficits and surpluses are automatically corrected b. There is no danger of long term undervaluation or overvaluation of the currency c. The prices of imports and exports change as the supply and demand for the currency change d. Balance of Payments adjustment occurs without any effect on the domestic economy

47 All of the following statements relate to an increase in investment when the economy is producing on its production possibility frontier. Which statement is not correct? a. b. c. d. An increase in savings may be required to finance the investment The economys production possibility frontier is likely to shift outwards over time The increase in investment immediately reduces demand deficient unemployment The opportunity cost of increased investment includes the production of consumer goods that is sacrificed

48 Goods A and B are complimentary goods because the cross elasticity of demand for A with respect to B is a. -0.5 b. 1.0 c. 0 d. Infinity 49 Which a. b. c. d. one of the following is not a source of economic growth? Investment in additional capital equipment The development of new technology Investments in stocks and shares Investment in human capital

50 Which one of the following is not a method for measuring national income? a. b. c. d. The The The The income method transactions method output method expenditure method

51 The short-run shut down price for a firm in perfect competition occurs where price equals a. b. c. d. Average fixed cost Average variable cost Sunk Costs Average total cost

52 In a customs union member countries a. Meet to agree tariff increases affecting internal trade between themselves b. Trade freely with each other and accept a common external tariff for trade with the rest of the world c. Trade freely with each other impose their own national restrictions on trade with the rest of the world d. Replace national currencies with a common currency such as the Euro 53 Select the definition of marginal cost form the list below: a. b. c. d. The The The The addition to total costs when output rises by one unit average variable cost when fixed costs are zero average variable cost at any given level of output average total cost at any given level of output.

54 Which of the following is most likely to increase rather then to reduce market imperfections? a. b. c. d. A lowering of entry barriers separating markets Informative advertising giving way to persuasive advertising Employers making grater use of the internet to advertise job vacancies An increase in the number of buyers and sellers in a market

55 If a firm operating in an oligopolistic market believes that its demand curve is kinked a. b. c. d. Its marginal cost curve must show a discontinuity It is unable to secure economies of large scale production It will tend to avoid price changes It cannot maximize profits where marginal cost and marginal revenue are equal

56 In a system of freely floating exchange rates the central bank and government will a. b. c. d. Not need to engage in exchange equalization Have to intervene in foreign exchange markets in order to maintain the system Allow market forces to determine the exchange rate within a strictly limited band Have less ability to control the money supply than in a fixed exchange rate system

57 Which of the following statements must be true when a firms average total costs and average variable cost are identical? a. b. c. d. Total FC = 0 MC = 0 ATC of production are minimized The firm produces zero output.

58 It is necessary to include a balancing item in the BOP to a. b. c. d. Compensate for mistakes made when recording current and capital flows Balance the capital and current accounts ensure that balance of payment is in equilibrium record accurately changes of official reserves

59 Which of the following is not a consequence of a country suffering a high rate of inflation? a. impoverishment of households on fixed income b. A high nominal rate of interest c. A depreciation of its exchange rate compared to currencies from countries with lower inflation rates d. Excess aggregate demand for goods and services 60 A profit-maximising firm in imperfect competition must cut the products price is a. b. c. d. Demand is elastic Marginal revenue is greater than marginal cost Average total costs fall The demand curve shifts rightwards

61 Which of the following statements is always true for a merit good?

a. b. c. d. Zero negative externalities result from the consumption of a merit good It is characterized by non-excludability and non-rivalry When consumed, the social benefits exceed the private benefits It is provided by the government

62 Identify which of the following features does not distinguish redeemable debt apart
from equity: a. b. c. d. It It It It will pay a regular set sum of interest will never be traded on an investment market will have a maturity date when it will mature has a face value which shows its value at redemption

63 The development of the Indian economy in recent years has led to it becoming wellknown as a place for the telephone call centres, IT programming and the conducting of transactions processing (e.g. invoice processing and sales order handling) for UK firms. Which of the following terms best describes this sort of economic development? a. b. c. d. Balanced economic growth Growth is the tertiary sector Growth is the primary sector Growth is the secondary sector

64 Monetarist economists believe all of the following except which one? a. Budget deficits should be avoided since they are significant cource of growth in the money supply b. There is a stable relationship between the growth of the money supply and the rate of inflation c. In the long run only fiscal policy is effective in reducing unemployment d. Supply side measures are the only effective means of reducing the natural rate of unemployment 65 Economic Rent is a. b. c. d. The price paid for the use of land Income above the level required to induce a given quantity of a factor to be supplied The transfer earnings of a factor of production The income required to induce a given quantity of a factor to be supplied 66 At the point at which diminishing returns set in a. b. c. d. marginal cost rises above average cost total variable costs begin rise The total cost curve begins to rise at an increasing rate Total variable costs begin to rise at an increasing rate

67 If a firm increases employment of all of its factors of production 50% and as result output increases by 60%, it has experienced; a. b. c. d. The benefits of the division of labour Increasing returns to scale External economies of scale Increasing marginal productivity of labour

a. b. c. d. a. b. c. d.

68 Identify the source of funds most appropriate for a growing company to use which wishes to borrow funds long term to pay for initial marketing research and promotion A debenture Overdraft A commercial Bill Ordinary shares 69 Which of the following statements that refer to the price mechanism is not true? Trading can only take place at equilibrium prices in a market economy Imperfect market information may prevent the market working efficiently In a market economy consumer sovereignty is seldom complete. A fall in the relative price of a good tends to attract consumers to buy that good instead of other goods 70 As a result of a period of paid economic growth, an economy is likely to experience all of the following except which one? An improving overseas trade balance Falling levels of unemployment Increased inflationary pressure Rising government tax receipts 71 A typical supply curve of a good shows a. b. c. d. The quantities of the good firms are prepared to supply at different possible prices Different possible equilibrium prices Quantity supplied varying inversely with price The quantities of the good firms actually sell at different possible prices

a. b. c. d.

72 According to the purchasing power parity theory, if a countrys inflation rate rate is 5%
higher than the inflation rates of the countrys competitors in the world economy a. b. c. d. a. b. c. d. The The The The countrys firms must reduce their export prices to remain competitive overseas demand for the countrys exports will be price elastic countrys exchange rate will fall by 5% to restore the terms of trade domestic purchasing power of the currency must fall

73 When the government intervenes in the market economy to correct a market failure The intervention has no opportunity cost Economic welfare always increases The problem of government failure may result In all cases the market mechanism ceases to function

74 $ 100 of new cash is issued, which is then deposited in a bank which is part of a banking system operating a cash ratio of 10%. The maximum possible increase in the money supply which can follow from this transaction, additional to the initial deposit, is a. b. c. d. $90 $190 $1000 $900 75 Successful policy of price discrimination requires all of the following except which one? a. b. c. d. The ability to separate markets The ability to prevent the resale in one market of goods bought in another Different cost of production in each mark Different demand elasticities among different group of buyers