2007 - Unit 2 - Paper 1

8/6/2019 2007 - Unit 2 - Paper 1

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"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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8/6/2019 2007 - Unit 2 - Paper 1


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

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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)

IFYOU FINlSH BEFORE ID1E ISCALLED,CIfECKYOIJRWORKONTBIS TEST.

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2007 - Unit 2 - Paper 1