I TEST CODE 012160321

FORM TP 2016061 MAY/JUNE 2016

CARIBBEAN
r EXAMINATIONS COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE ®

EXAMINATION

ECONOMICS

Paper 032 - General Proficiency

1 hour 30 minutes

READ THE FOLLOWING INSTRUCTIONS CAREFULLY .

I. This paper consists of a case study and FIVE questions.

2. Answer ALL questions.

3. Write your answers in the spaces provided in this booklet.

4. Do NOT write in the margins.

5. You may use a silent, non-programmable calculator to answer questions, but ALL
necessary working should be clearly shown.

6. If you need to rewrite any answer and there is not enough space to do so on the
original page, you must use the extra lined page(s) provided at the back of this
booklet. Remember to draw a line through your original answer.

7. If you use the extra page(s) you MUST write the question number clearly in
the box provided at the top of the extra page(s) and, where relevant, include
the question part beside the answer.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

Copyright © 2015 Caribbean Examinations Council

All rights reserved.

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IINSTRUCTION: Read the case study and answer ALL the questions.
, CASE STUDY

The Caribbean's Petroleum Dilemma

The price of oil increased from approximately $56 a barrel in 2007 to $103 a barrel in 2009 with gradual
fluctuations over the remaining years. This has caused concern among the Caribbean territories. Oil is an
important input for firms and thus has serious implications for businesses and the stability of economies
of the non-oil producing member states of CARICOM. The global consumption of oil has dropped
marginally from approximately 20 mi llion barrels per day to 18 million barrels. Governments have tried
to tackle the probl em but the phenomenon of inflation, coupled with worldwide recession, has made it
increasingly difficul t. Governments will, therefore, have to find ways to reduce their dependence on oil
as an energy source.

1. (a) What does the abbreviation CARICOM represent?

(1 mark)

(b) Define EACH of the fol lowing terms:

(i) Inflation

(2 marks)

(ii) Recession

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(2 marks)
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(c) Identify the type of inflation that

(i) ' rising oil prices would create for non-oil producing countries

(1 mark)

(ii) oil producing countries of the Caribbean would create from their increased revenues.

(1 mark)

(d) Identify the factor of production under which oil is classified.

(1 mark)

(e) State TWO alternative sources of energy.

(2 marks)

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2. Explain TWO ways in which rising oil prices would affect the balance of payment s of non-oil

,
producing countries.

(6 marks)

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3. (a) Explain why inflation coupled with recession is described as a phenomenon in line 6 of
the case.
,

(4 marks)

(b) Explain TWO ways in which fiscal policy can be used to address the problem of inflation
caused by rising oil prices.

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(4 marks)

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