Economics difficult multiple choice questions

In which of the following situations will a country's terms of trade worsen? A The prices of its imports rise by more than the prices of its exports. B The total value of external payments rises by more than the total value of external receipts. C The value of its imports rises by more than the value of its exports. D The volume of its imports rises by more than the volume of its exports.

A

The table shows the expected costs and benefits from four government projects. The government can afford only one project. Which project should the government choose? private benefits external benefits $m $m A 40 200 B 60 160 C 100 210 D 150 90 private costs external costs $m $m 60 70 100 20 100 120 120 140

A

The diagram shows the demand and supply curves for a product. X price W Y S D V O Z quantity Which area measures the total amount consumers would be willing to pay for the equilibrium level of output? A OWYZ B OXYZ C OVYZ D XYV

Answer is B

During a certain period, 10 000 units of a normal good are sold at a price of 20 c. During a later period, 12 000 units are sold at a price of 22 c. What could explain this change? A a reduction in consumers' incomes B an increase in the cost of raw materials C an increase in the price of a substitute commodity D an increase in the productivity of factors of production

Answer is C an increase in the price of a substitute commodity

A non-interest bearing asset is index-linked. During a period of inflation, how will its money value and its real value change? money value real value A rises rises B C D rises stays constant stays constant stays constant falls stays constant

B

In the diagram, Q1 is the quantity produced of a good as the result of market forces. What concept is present at output Q1? A a government subsidy B a negative externality C excess supply D price instability

B

The diagram gives details of different aspects of productivity in the US and UK. Which sector in the UK best fits the description 'a sector with a relatively fast growth rate in productivity but which is less productive than its US equivalent'? productivity growth in the UK by sector, 1973-95 (% per annum) productivity by sector in US relative to UK, 1995 (US = UK at 100) agriculture utilities manufacturing construction 50 100 150

B

When will a reduction in unemployment result in an increase in inflation? A when a high percentage of the increase in income is saved B when the economy reaches its production possibility curve C when the jobs created are unskilled D when the newly employed buy mainly imported goods

B

An international oil company announced in 2002 that it would not continue to explore for oil off the coast of Namibia. This was because there was only enough oil to support a local power station for Namibia and not enough to allow exports of oil. What might be a possible advantage and disadvantage to Namibia of this decision? advantage A a saving in costly research paid for by the oil company B a reduction in taxes paid by the oil company to the Namibian government C a reduction in potential external costs of pollution D the exploitation of a natural resource disadvantage a loss of employment opportunities the conservation of a natural resource the loss of cheaper oil the loss of potential exports

C

The diagram shows the market for Japanese Yen. price of Yen in terms of other currencies O S2 S1 D What could have caused the change in the supply of Yen from S1 to S2? A a reduction in the level of international investment into Japan B a reduction in the level of Japanese tariffs C a reduction in the value of foreign goods imported into Japan D a reduction in the value of Japanese goods exported

C

The table gives information about the trade between Singapore and New Zealand during 2001, the first year after they signed a free trade agreement. The values are given both in Singapore dollars (S$) and New Zealand dollars (NZ$). Singapore exports to New Zealand Singapore imports from New Zealand +20 % -17 % S$m NZ$m 508 618 331 403 percentage change from 2000 What can be concluded from the table? A New Zealand gained more than Singapore from the trade agreement. B New Zealand's trade position with Singapore improved in 2001. C Singapore had a trade surplus with New Zealand in 2001. D The exchange rate in 2001 was approximately NZ$ 1 = S$ 1.2.

C

The value of the Swiss franc changes against the US dollar ($) from $0.60 to $0.80. Which statement is consistent with this information? A Swiss visitors to the US will now be worse off. B The cost to the US of maintaining its embassy in Switzerland will decrease. C The dollar has depreciated against the Swiss franc. D US exports to Switzerland will now be more expensive.

C

What is an advantage of using the market mechanism to allocate resources between alternative uses? A It ensures that resources will be allocated efficiently. B It ensures that resources are allocated in accordance with need. C It minimises the time required to make decisions. D It gives all consumers an equal voice in deciding how resources should be allocated.

C it minimizes the time required to make decisions as suplliers simply follow payterns of demand

In an economy, both employment and unemployment rose over a ten year period. What must have risen? A birth rate B life expectancy C unemployment benefits D working population

D

In 2002 it was proposed that car owners should pay a charge to travel into the centre of London. Fares on public transport would also be reduced. It was hoped that more use would be made of public transport and that congestion would decrease. What price elasticities of demand would be necessary for this policy to succeed?

The answer is A