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8/6/2019 2007 - Unit 2 - Paper 1
http://slidepdf.com/reader/full/2007-unit-2-paper-1 1/9
"An individual has a two-week period
between leaving one job and starting another
job." Which of the following types of
unemployment is BEST explained by the
above statement?
CA ) Seasonal unemployment
@ ) Voluntary unemployment
(C) Frictional unemployment
(D) Structural unemployment
Which of the following are macro-economic
variables?
L
II .
UI.
IV .
Interest rates
Economies of scale
Balance of payments
Price discrimination
"~ I and II only
(3) II and r r r only(C) I and illonly
(D) III and rv only
3. The Central Bank of your country requires
special deposits from the commercial banks.
The aim of this requirement is to .
.l(A)
( : ; _
increase the commercial banks' liquid
assets
reduce the commercial banks' liquid8)
- -- -_ - - - . _ . -. -- - -_ . ~ _-- --cash . .---- ··-_"-·_'_·_o __ ~ .__ . .~ __,_
(C)
C D )
cause interest rates to increase
cause interest rates to decrease
4. 'Price increases are the result of increases
in th e m on ey supply'. This statement refers
to the
(A) loanable funds theory@., money demand function
(C) quantity theory of money
(D) money multiplier
5 _ Which of the following defines 'Real National
Income'?
(~.,(B)j
(C )
(D)
The actual GDP in any given year
National income ad jUS1 ;ed fO_f inflation
The money va lue of National Income- "'-
GDP minus net property mcome u omabroad
Items 6 - 7 refer to the following table.
Item $ (m).
_Exports and net property80
income from abroad
Imports and property income65
paid abroad
Taxes 25
Subsidies 18
Total domestic expenditure a t260
ma rke t p ri ce s C -+ :1 . + - c-,
6. Calculate the Gross National Product at factor
cost,
(A) $253m
(B) $267m
'--_ (C )- _ _-- $268m_ ..
C D ) $275m- _ - - _ . - - - - .. . - - - _ --- - _ -- ---- -_ -
7. Calculate the Gross National Product at
market prices.
(A) $245m
(B) $268m
(C) $275m
C D ) $448m
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Price
level
8 .
9.
- 3 -
Item 8 refers to the following graph which
shows aggregate demand curves for an
economy.
Items 10 - 11 refer to the following table.
National Income Consumption
(Sbn) ($bu)
0 10
10 18"
20 ' 2 6 ,
. ,
, 30}4"
40 42
50 50
6 6 58
70 66
80 74
.90',I .
82
100 90
Anj
National income
The movement from ADI to AD] is MOST
LIKELY caused by a rise in 10. Calculate the marginal propensity to consume
(MPe).
(A)
(B)
(C)
C D )
interest rates
Government spending
inflation
taxation
(A)
(8)
(C)
C D )
0.1
0.8
g . O
10
Why is National Income NOT a reliable
indicator of living standards? u. Calculate the average propensity to consume
(APe) at income level $1OObn.
I. It is unable to show incomedistribution. (A) 0.8
II. It can be adjusted to acquire a per (B) 0.9
capita figure. (C) 8.0
f l J . Income from the 'hidden' economy (D) 9.0
-~---------- - - _. ,-- --is difficult tocalculate-v= ------------------.-. -_------- - ------_ ..._-- -'--'- - --- - - -- ---.-_.---.-------
IV Itis sometimes adjusted for inflation.
12. When National Income increases in Country
X, 10% is spent on imports, 10% is paid i ntaxes, 20% is saved and the rest is spent on
domestically produced goods. Calculate the
v alu e o f th e m ultip lie r.
(A) I and III only
(B) I and IV only
(C) II and III only
(D) l III and IV only
(A) 1.61 0-1
.'~--
(B) 2.5 rilf:'- V"'/
(C) 4 . 0
C D ) 10
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·_.-._.-_.-~_._--p-- ----;--_._.~-----
·4-
Item 13 refers to the following diagram which
shows the savings function.
+
s
Expenditure
and
saYings
E-v- £
INJ
I
I
I
I
II
I[,I
1MII
I,I
!
. T
National Income
13. Which of the following represents the
marginal propensity to save?
Mf
VT
VT
M T
MT
OT
NT(D) -
---.---.----.-----.- .- --- .OT _._. . ,_ .. .. _
CA)L,~--...
(B)
n"lT
(C) , ,-fj
'/ ,
14. The present level ofNational Income is $75m
but the full employment level of National
Income is $85m. If the multiplier is 2.5, by
how much should government spending be
increased in an attempt to raise nationalincome to the desired level?
(A)
(B)
(C)
(D)
$1.6m
$2_5m
$ 4rn
$ lOm
15. When deciding whether or not to invest in a
particular venture, Firm X will be interested
in the rate of return on its investment
Firm X will M OST LIKELY need to consider
th e
(A) investment climate(B) volatility ofinvestroent
(C) marginal propensity to invest
C D ) marginal efficiency of capital
E ; . ' : r s, --: ,::.-~.~ .~(;
16. 'Which diagram below shows the relationship
between the transactions demand for money
(rn) and the interest rate (r)?
(A)I
r
D
(B)
D
r
(C)r D
- . - - _ - - - - , _ _ ,_ -
(D) r
I------D
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21. What is the MOST LIKELY outcome of the
Central Bank directing financial institutions
to increase the rate of interest?
(A )
(8)
(C)
C D )
Savings will be encouraged
Spending will be encouraged
Investment leveIswill rise
The demand for a firm's product willrise
22. What is the MOST LIKELY effect of a rise
in interest rates?
(A) An increase in bank lending
(B) A fall in the savings rate
(C) An increase in the external value of
a currency
An increase in investmentD)
23. Which ofthe following BEST defines 'fiscal
policy'?
(A) A n instrument to change tax laws
(B) A means of changing government
spending
(C ) Government making decisions in the
economy
(D) Changes in taxation and government
spending
- 6 -
25. When a government spends more than it
collects from tax revenues, this results in a
C A )
(B)
(C)
C D )
trade surplus
budget surplus
trade deficit
budget deficit
20. Which of the following is an automatic fiscal
stabilizer?
State required pension
Fixed cost of living allowance
Contribution to National Income
Unemployment benefits
27. Which of th e following i s t he correct def ini t ion
of 'national.debt'?
(A) The amount borrowed by a ll citizens
of a country
The total amount of government
borrowing
The total amount borrowed by the
private sector
The total amount borrowed by the
private and public sector
(A)
(B)
(C)
- - C D )
(B)
(C)
C D )
28. Which of the following isNOT recommended
to reduce a country's national debt?
The government places a tax on gasoline in
._Country.X; This.is anexampleof _ .... ... __.. ._. (A).~ __Protectionism.
(B) Rescheduling of debt
(C) Debt for equity swap
(D) Debt write offs
24.
(A) expansionary fiscal policy
(B) ex.pansionary monetary policy
(C) contractionary monetary policy
(D ) contractionary fiscal policy
0221 60 1OJCAPE2007
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-I-
Items 29 - 30 refer to the following table which gives data on a country's national debt
Years Value of Vaiue of Interest per Amount
Exports Imports annum borrowed
1995 $500 million $250 million $40 million $350 million
2005 $350 million $100 million $ 60 million $130 million
29. What was the debt service ratio in 1995? 30. Which of the following statements BEST
summarises the situation of the national debt
duri...g the period 1995 to 2005?A ) 7 percent
(B) g per cent
(C) 11 per cent
(D) 16 per cent
(n+.('.....c~+ _._--. _.............-.~ . _ - - -
~::·l-f~·; ... e!~'.·:-.! i-
C' :
(A) The debt service ratio has increased.
(B) Debt service ratio is constant.
(C) The debt service ratio has declined.
(D) The debt has been repaid.
31. Which of th e following defines 'economic
growth'?Item 32 refers to the following diagram
representing the production possibility
boundary for Country 'Z'.(A) The increase in real per capita output
(B)Capital
goods
. . E
overtime
An increase inthe standard of living
overtime
A representation of the m ax im u rn
recovery of exis t ing resources over
t ime(D) The meeting of two production
possibility boundaries
(C)
D8
•A
Consumption goods
32. Which of the po ints identified on the diagram
r ep re se nts a n i nv es tmen t i n . f ut ur e g r owth?
(A) A
(B) B
(C) C
CD) D
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33. To which of the following do "equity,
susta inabi l i ty , productivity and empowerment"
apply?
(i\) G r o V Y t h
(B) Economic integration
(C) LiberalizationC D ) Development
Item 34 refers to the following table which
relates to the ability of two countries to
produce two commodities,
Country Production of Production of sugar
bauxite per person per person
Guyland 2000 units 3000 units
Jarnco 3000 units 4000 units
34. Which of the following statements BEST
represents th e situation presented?
(A) ,', Guyland has a comparative
advantage in sugar and Jameo has
a comparative advantage in bauxite.
(B) Guyland has a comparative
advantage inbauxite and Jamco has
an absolute advantage in sugar.
(C) Jamco has a comparative advantage
in sugar and Guyland has an
absolute advantage in bauxite.
(D) Ja rnco ha s an absolute advantage in
bauxiteandGuylandhas an absolute
. __a~vant~g~,ir:_~~~-" __. ... __ ,_.__. _. ._',_. ._..__ , ,__ . .... __
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Price D
35. Developing economies may resort to
protectionist measures to
1 . prevent the collapse of export
eammgs
e xp l ai n th e irn por ta n ce o f e xpo rts a n d
importsaccurately calculate the balance of
payments
respond to controls imposed by other
[1.
III.
IV .
countries
(A)
(B)
(C)
(D)
I and II only
Ind III only
I and IV only
II and II I only
Item 36 refers to the following diagram
showing the demand for imports of a
particular good into Country B (assuming a
perfectly elastic world supply).
DO~------~------~------7
Q{ Q Qnty
36. What are the effects on price and quantity
imported should government impose a quota
at S,?
Price Quantity
(A) Decreases Decreases
(B) Decreases Increases
(C) Increases Increases
·CD) Increases Decreases
-9-
....
..JG.
39.
37. Which of the following transactions will
appear in the Capital Account section of
Trinidad and Tobago's Balance of Payments?
(A ) Purchase by a Grenadian investor of
an oil refinery in Trinidad and
Tobago(B) Purchase of petroleum products from
T rin id ad a nd Tobago by foreigners
(C) Purchase of cement by aTrinidadian
importer from a foreign country
C D ) The money spent by foreign tourists
inTrinidad and Tobago
If a country has a surplus in its balance of
payments, th en , a ll else being equal, it s money
supply is likely to
(A) increase because the foreign
currency received froni exports will
be exchanged for domestic
currency
remain unchanged, because its
imports were obtained at world
prices
fall because the domestic currency
will depreciate
remain unchanged, because its
exports are bought with foreigncurrency
(B)
(C)
C D )
Which of the following policies can be used
to eliminate a current account surplus?
(A)
(B)
Devaluation of the currency
Introduction of deflationary fiscal
policy
Imposition of import controls
Revaluation of the currency
(C)
(D)
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Items 40 - 41 refer to the diagram below
which shows the market for US$.
P \'$
J: 1.0r---.--2:...~--I---_. . 0.8r-------~+_--
0 .6 j-----:tI-l--+:""---
£ 0 .4 r-----+-+-+-+--~0.2 r--------4
40. Which of the following BEST describes the
situation if the exchange rate were at
$1= £.4?
(A)
(B)
(C)
C D )
The dollar would be undervalued.
The dollar would be over valued.
Demand would be lessthan supply.
The market would be in equilibrium.
41. What would be the equilibrium quantity of
dollars ($)?
(A) QI
(B) Q2
(C ) Q3
c D ) Q4
42. Which of the following BEST explains the
. .. .. rq le_o f_ tbe YV9~I .dT ra d e O r g a n iz a ti on ?• _ r" _ _ ~ _ __ _ _ _ _
(~) Setting th e g e og ra ph ic b ou nd a ri es for
the conduct of world trade
(B) Executing the taxes and tariffs for
world trade
(C) Providing protection for less
developed countriesC D ) Setting the rules and regulat ions for
th e conduct of world trade
- 10- r :
43.
45.
Which of the following statements BEST
describes a multinational corporation?
(A) A firm where the owners come from
many different countries
A firm that ha s production un its in a t
least two countries
A finn whose product is a household
name and is sold across the globe
A monop ol y firm with so le p roduc t ion
rights in at least two countries
(B)
(C)
(D)
Which of the following factors are MAINLY
responsible for driving g!obalisation? .
1 . Reduction in tariff a nd non-tariff
barriers
II. Accelerating technologicalinnovation
Advances in transportation
Increasing cost of product
development
Ill.
IV .
(A) I, II and illonly
(B) II, illandNonly
(C) I, illand IV only
CD) I, II and IV only
Which of the following isNOT consideredan effect of globalisation?
(A) A store featuring African clothing
being opened in India
Jamaican jerk seasoning being
..-'exported to Europe and .North
America
Americans choosing to buy more
Coca Cola instead ofPepsi Cola
Foreig n firm s entering the
telecommunications indus t ry in the
Caribbean region
(B)
(C)
(D)
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