CSEC Economics P1 Booklet

CARIBBEAN E XAM I NATI O N S COUNCIL
SECONDARY EDUCATION CERTIFICATE

EXAMINATION
SPECIMEN
MULTIPLE CHOICE QUESTIONS
FOR
ECONOMICS
READ THE FOLLOWING DIRECTIONS CAREFULLY
Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item you are
about to answer and decide which choice is best.
Sample Item
Economics may be described as a “social

science” since it deals with
Sample Answer
(A) the environment
(B) human behaviour A B C D
(C) the economy
(D) production and consumption
The best answer to this item is “human behaviour”, so answer space (B) has been shaded.
Copyright © 2008 Caribbean Examinations Council.

All rights reserved.
01216010/SPEC 2008
-2-
1. Economics may be described as a “social 4. Which of the following describes the

science” since it deals with opportunity cost to an economy of building a
new airport?
(A) the environment
(B) human behaviour (A) The extra cost of providing
(C) the economy equipment and managers to
(D) production and consumption operate the airport efficiently.
(B) The closure of the airport it replaces.
(C) The increase in taxation to the
2. All of the following will cause an outward citizens to pay for the new airport.
shift of the production possibility curve (D) The goods and services that could
EXCEPT have been produced instead of the
airport.
(A) an advantage of technology
(B) the use of unemployed resources
(C) an increase in population 5. A major distinction between a good and a
(D) the discovery of a new natural service is that a service must be
resource
(A) tangible in character
(B) sold in a retail store
3. Which one of the following would account (C) bought only by the consumer
for the production possibility curve of a (D) intangible in character
country shifting from AA to BB, as shown in
the diagram below?
6. Under which factor of production will you
classify marine resources?
(A) Capital
(B) Land
(C) Labour
(D) Enterprise
7. In a mixed economy, resources are allocated

by
(A) the government alone

(B) the firms alone
(C) consumers alone
(D) the government, firms and consumers
(A) Technological advances in the
industries of the country
(B) The introduction of subsidies for the
industries
(C) A decrease in taxes in the country
(D) A reduction in unemployment in the
country
GO ON TO THE NEXT PAGE

01216010/SPEC 2008
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8. In the production process of a firm, capital 9. Which of the following statements about the
can be substituted for labour. If government factors of production is correct?
introduces a subsidy on capital investment
how will this affect the quantities of each of (A) Land is always freely available.
these factors employed? (B) Labour is rewarded with profit.
(C) All natural resources are known as
(A) Less capital and less labour will be enterprise.
employed. (D) Capital is produced by factors of
(B) Less capital and more labour will be production.
employed.
(C) More capital and more labour will be
employed.
(D) More capital and less labour will be
employed.
Item 10 refers to the circular flow of factor incomes, as shown in the diagram below.
10. What is the MOST appropriate label for Y?
(A) Money supply

(B) Rent, wages, interest profit
(C) Value of imports
(D) Government expenditure

01216010/SPEC 2008
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11. Which of the following is considered a good? Item 16 refers to the graph below.
(A) A visit to the doctor P

(B) A commercial bank paying your
utility bill on your behalf
(C) An operator-assisted telephone call
(D) A softdrink purchased at the school
cafeteria
12. What type of economic system exists in

D1
MOST CARICOM countries?
D
(A) Capitalist O Q
(B) Mixed
(C) Socialist
(D) Centrally planned 16. Which of the following factors will cause the
demand curve to shift from D to D1?
13. When a country changes from a planned
economy to a market economy, there will (A) A rise in price
neccessarily be an increase in (B) A fall in income
(C) A rise in the price of a substitute
(A) rationing of basic foodstuff (D) A fall in the price of a substitute
(B) government subsidies for industry
(C) price control of luxury items
(D) choice for consumers 17. The table below shows consumer behaviour
with respect to tins of sardines.
14. An essential fixture of a capital good is that it
Price ($) Quantity of Tins
(A) is consumed directly by the consumer
(B) is used to produce other goods 2 6
(C) must be purchased through a loan 3 8
(D) must be replaced frequently
The price elasticity of demand for sardines
15. The following extract appeared in the daily as the price increases is
newspaper of a country:
(A) – .75
“Government has decided to increase
(B) – .66
funding to help promote trade in rural
areas by helping small independent retail (C) – 1.5
outlets.” (D) – 1.3
Which sector will benefit MOST as a result

of this policy?
(A) The primary industry in the private

sector
(B) The primary industry in the public
sector
(C) The secondary industry in the public
sector
(D) The tertiary industry in the private
sector

01216010/SPEC 2008
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Item 18 refers to the diagram below.
Producer
Costs borne by third party

due to producer and/or
consumer decisions
Consumer
18. Which of the following economic concepts does the diagram represent?
(A) Scarcity
(B) Positive externality
(C) Imperfect information
(D) Negative externality
19. Kemcal PLC operates on Sunny Island. The following are newspaper captions from a current
dispute.
Rare birds are no Local councillor

longer nesting Fishermen to concerned over
press charges protests
against Kemcal
Bather rushed to Playgroup mothers

hospital with mystery concerned over Kemcal
stomach pains smoke chimneys
What type of market failure does the above situation represent?
(A) Monopoly
(B) Imperfect information
(C) Negative externality
(D) Positive externality

01216010/SPEC 2008
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20. A movement along the demand curve results 24. A situtation where quantity demand exceeds
from a change in quantity supplied at a given price indicates
(A) taste (A) surplus

(B) supply (B) shortage
(C) income (C) equilibrium
(D) price (D) excess supply
21. A market structure in which there are many

buyers and many sellers and where the Item 25 refers to the following demand and
products are identified by their brandname is supply schedule.
known as
(A) a monopoly Price ($) QD QS

(B) a perfect competition
(C) a monopolistic competition 5 10 2
(D) an oligopoly 6 8 4
7 6 6
22. Which of the following could increase the 8 4 8
price elasticity of supply of a product? 9 2 10
(A) A change in consumer preferences

(B) An increase in the price of 25. At what price will equilibrium in the market
complements occur?
(C) An increase in income
(D) An increase in the time period under (A) $5
consideration (B) $7
(C) $8
23. The diagram below shows the market for soft (D) $9
drinks. The supply curve shifts from S1 to
S 2.
S2 26. If the price of good X rises and as a result
$ S there is a fall in the demand for good Y, then
1
Price (A) goods X and Y are substitutes

(B) the demand for good Y is price
inelastic
(C) the demand for good Y is price elastic
(D) goods X and Y are complements
0 Quantity of soft drinks
What can explain this change?
(A) An increase in the advertising of soft

drinks
(B) A fall in the price of sugar
(C) A rise in the wages of workers in the
soft drink industry
(D) An increase in incomes

01216010/SPEC 2008
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27. Which of the following groups makes loanable 29. Justin takes half of his salary every month
funds available from savers to spenders for and purchases shares in the credit union in
consumption and investment? order to later purchase a sports car.
(A) The foreign trade sector Which function of money is this half of his
(B) The government salary performing?
(C) The chamber of commerce
(D) The financial sector (A) A medium of exchange
(B) A standard of deferred payment
(C) A store of value
Item 28 refers to the following graph. (D) A standard of deferred exchange
30. Rob and Steele joined an underground group

who were printing counterfeit money.
Which quality of money is the group eroding?
(A) Durability
(B) Portability
(C) Authenticity
(D) Acceptability
28. The graph above shows the amount of money 31. Which of the following must remain stable if
spent in an economy during the period 1960 - money is to successfully function as a store
2000, using cash, cheque or credit card. of value?
From this graph, it may be concluded that (A) Prices

during the period 1960 - 2000 (B) Employment
(C) The exchange rate
(A) there was an decrease in money (D) The rate of interest
spent using cash
(B) cheques had become inconvenient as
a means of making payment 32. Individuals who speculate on rising share
(C) fewer people were accepting prices at the stock exchange are referred to
cheques as
(D) credit cards were being used more
and more (A) stags
(B) bulls
(C) bears
(D) brokers

01216010/SPEC 2008
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33. “Its most significant function is that of credit 34. The Governor of the Central Bank of Trinidad
creation.” and Tobago is concerned with the level of
inflation in the country caused by excessive
To which of the following does this statement consumer spending. He therefore increases
refer? the rate of interest on borrowing. This is an
example of
(A) A central bank
(B) The International Monetary Fund (A) deflation
(C) A commnerial bank (B) monetary policy
(D) The World Bank (C) public finance
(D) fixed policy
Item 35 refers to the data below on Sea Island.
Year Annual Percentage Annual Decline

Increase in GDP in Inflation Rate
2000 1.4 3.5

2001 2.3 3.2
2002 0.5 2.0
2003 0.3 1.8
2004 0.1 1.4
35. Given that other factors do not change, what can be concluded about
the standard of living of the citizens of Sea Island?
(A) It has declined.

(B) It has remained steady.
(C) It has improved.
(D) It has not improved.
36. Henry Money has been unemployed for three 37. How is economic growth measured?
months even though the economy is in a boom.
Recently, he turned down a job which paid a (A) By changes in real national income
salary that is slightly above the unemployment (B) By change in gross domestic product
benefits he receives. This is an example of (C) By accumulation of capital goods
(D) By infrastructural changes
(A) real unemployment
(B) structured umeployment
(C) real-wage unemployment
(D) cyclical unemployment

01216010/SPEC 2008
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38. There was no significant change in the value Item 42 refers to the following diagram.
of exports minus imports in the country over
the last year.
Which government objective was achieved?
(A) Price stability

(B) Balance of payment stability
(C) Full employment
(D) Economic growth
Item 39 refers to the following diagram.
42. In a floating exchange rate system, what

conclusion can be drawn about the Jamaica
dollar in the above graph where the demand
curve has shifted from DJ$1 to DJ$2?
(A) Appreciated
(B) Depreciated
(C) Revalued
(D) Devalued
43. The following statement represents a part of

39. What component is missing from the the Balance of Payments of a country.
economic model shown in the diagram above?
Current account – $200 million
(A) Government Visible balance + $196 million
(B) Tourists Invisible balance – $4 million
(C) Households
(D) Schools What must be included in order to complete
this country’s Balance of Payments?
40. Which of the following is a monetary measure (A) The government balance
that could be used to increase employment? (B) The investment balance
(C) The labour balance
(A) Increasing interest rates (D) The capital balance
(B) Reducing interest rates
(C) Reducing government expenditure 44. Which of the following BEST defines a
(D) Increasing government expenditure country’s balance of trade?
41. A monetary record of all international (A) The difference between the value of
transactions between one country and the rest goods and services imported and
of the world is known as the exported
(B) The difference between the value of
(A) balance of trade goods imported and exported
(B) balance of payments (C) The monetary transactions a country
(C) international trade has with the rest of the world
(D) balance on the current account (D) The difference between total inflows
and total outflows in foreign trade

01216010/SPEC 2008
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Item 45 refers to the following diagram which 46. Under a freely floating exchange rate system,
shows the demand and supply curves of the an appreciation of the Trinidad and Tobago
market for the Trinidad and Tobago dollar (T&T) dollar is likely to be caused by
priced in US dollars.
(A) a rise in Guyana’s interest rates
D (B) an increase in Germany’s tourist
Price of S expenditure in Tobago
$ T&T (C) an increase in the speculative rates
in U.S. of Trinidad and Tobago’s currency
(D) the purchase by a Trinidad and
Tobago company of a controlling
S interest in a company in Germany
D
0 Item 47 refers to the following statement.
45. If there is an increase in demand for imports “Expenditure-reducing measures may be

from the USA by Trinidad and Tobago, how implemented to improve a country’s current
will this affect the curves in the diagram account balance.”
above?
47. Which of the following is an example of an
(A) The demand curve will shift to the expenditure-reducing policy?
right.
(A) Devaluation
(B) The supply curve will shift to the left.
(B) A credit squeeze
(C) The supply curve will shift to the
(C) Granting of export subsidies
right.
(D) Imposition of import controls
(D) The demand curve will shift to the
left.
Item 48 refers to the diagram below, which illustrates the current balance of payments position of
country Y over a period of time.
48. Which of the following has happened to the country’s current balance of payments position during the
period shown?
(A) There was a surplus throughout the period.

(B) It was in deficit throughout the period.
(C) It moved from being in surplus to a deficit.
(D) It moved from being in deficit to a surplus.
01216010/SPEC 2008
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49. The balance on visible items is +$200 million. 53. Which of the following factors account for
This is a surplus on the some CARICOM countries having a large
debt burden?
(A) balance of payments
(B) current account I. Their export base is too narrow.
(C) capital account II. The price of oil as a form of energy
(D) balance of trade is increasing.
III. Interest payments are larger than
export earnings.
50. Which of the following is a benefit from
globalization to consumers? (A) I and II only
(B) I and III only
(A) Increased competition leading to (C) II and III only
closure of firms (D) I, II and III
(B) Lower prices due to increased
comeptition
(C) Access to new and improved 54. Globalization has increased the opportunity for
technology Caribbean firms to expand their operations
(D) Economies of scale from increased and enjoy economies of scale. This means
production that firms can now
(A) produce a greater variety of goods

51. Which of the following is an economic/trade (B) incur lower unity costs of production
agreeement of only Caribbean members? (C) employ more workers
(D) earn more foreign exchange
(A) ACP
(B) CSME
(C) CARIBCAN 55. Although multinational corporations have
(D) FTAA generally been welcomed in the Caribbean,
they have been severly criticized for
52. Which of the following is a feature of (A) increasing levels of employment

Caribbean economies? (B) introducing the latest technology
(C) increasing levels of foreign direct
(A) High levels of unemployment investment
(B) Negative growth rates (D) repatriating a sizeable proportion of
(C) Mixed economies with large private their profits
sectors
(D) High dependency on primary
products 56. Caribbean countries today are reducing
government intervention and allowing greater
use of market forces in their economies. This
strategy is known as
(A) economic integration

(B) protectionism
(C) privatization
(D) globalization

01216010/SPEC 2008
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57. A large American firm is encouraged to start Item 59 refers to the following diagram.
up a business in Barbados. This is an example
of
(A) Caribbean Basin Initiative

(B) economic integration
(C) foreign direct investment
(D) free trade area
Item 58 refers to the following table.

59. Firm X of Jamaica has been influenced by
Total Output Average Cost Total Cost the Caribbean Basin Initiative and the FTAA.
As a result, it has moved from point R to point
$ $
A on its long run average cost curve as shown
500 200.00 1000.00 in the diagram. The movement from R to S
is MOST LIKELY the result of
1000 150.00 1500.00
1500 125.00 1875.00 (A) reduced levels of productivity due to
‘brain drain’
Output and cost table for firm A (B) extension demand for raw materials
from the USA
(C) economies of scale as output is
58. The table above indicates that firm A is increased to serve a larger market
experiencing (D) the law of diminishing returns as
output increases
(A) economic growth
(B) increasing cost
(C) economies of scale 60. A major limitation on the ability of Caribbean
(D) increasing demand producers to take advantage of the benefits
of a larger international market through
globalization is
(A) economies of scale

(B) greater efficiency due to new
technology
(C) easier access to new technology
(D) protectionist policies in developed
countries
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.
01216010/SPEC 2008
CAR I BB EAN E XAM I NAT I O N S COUNCIL
SECONDARY EDUCATION CERTIFICATE

EXAMINATION
ECONOMICS
SPECIMEN PAPER 2008
Item Key Syllabus Profile Item Key Syllabus Profile

No. Reference No. Reference
1 B 1.1 1 31 A 4.5 2
2 B 1.5 1 32 B 4.9 1
3 A 1.5 2 33 C 4.8 1, 2
4 D 1.4 3 34 B 5.1 2
5 D 1.5 3 35 C 5.4 3
6 B 2.2 1 36 C 5.10 3
7 D 2.8 1 37 A 5.3, 5.10 1
8 D 2.4 3 38 B 5.1 2
9 D 2.4 2 39 C 5.2, 5.3 1, 2
10 B 2.3 2 40 D 5.10 1
11 D 2.5 1 41 B 6.1 1
12 B 2.7 1 42 A 6.8 1, 2
13 D 2.8 1 43 D 6.11 1, 2, 3
14 B 2.5 2 44 B 6.1 2
15 D 2.6 3 45 C 6.6 2
16 C 3.5 2 46 B 6.8 2
17 B 3.9 3 77 B 6.16 1, 2
18 B 3.16 2 48 C 6.15 1
19 C 3.16 3 49 D 6.10 1
20 D 3.5 1 50 B 7.13 2
21 C 3.14 1 51 B 7.1 1
22 D 3.11 2 52 C 7.2 2
23 C 3.5 3 53 D 7.3 2
24 B 3.6 2 54 B 7.9 1, 2
25 B 3.6 3 55 D 7.2, 7.14 3
26 D 3.8 2 56 C 7.1 3
27 D 4.1 1 57 C 7.1 1
28 D 4.3,4.4 3 58 C 7.9 3
29 C 4.5 3 59 C 7.10, 7.12 2, 3
30 C 4.6 3 60 D 7.12 3
Profile 1 – Knowledge and Comprehension

Profile 2 – Interpretation and Analysis
Profile 3 – Application
• • "C.
•
TEST CODE 01216010

IVI4. 001\ FE 2007
CARIBBJ1LA N '.EXAMItN.A.TIONS cOUNCIL
SECONPARY EDUCA. ION CIA C1-11CATE
EXAI~`i TA ZION
ECONOMICS
Paper01 —General Proficien cy
75 minutes
( 06 JUNE 2007 (p.
• .READ THE FOLLOWING DIRECTIONS CAR FULLY-

1. In addition to this test booklet, you should have an answer sheet,
2. Each item in this testh asfoursuggested answers lettered (A), (B), (C), (D); Afterlisteningto orreading
each item you are about to answer, decide which choice is best
3. On youranswer sheet, find the number which corresponds to your item and blacken the space having
the same letter as the answer you have chosen. Look at how it is done in the sample item below.
•
Sample Item .
Economics may be described as a 'Social Science' Sample Answer
since it deals with
(A) the environment
(B) the economy
(C) human behaviour
The best answer to this item is "human behaviour" , so answer space (C) has been blackened
Ifyou want to change your answer, be sure to erase your old answer completely and fill in yournew
choice.
When you are told to begin, turn thepage and work as quickly and as carefully asyou can. Ifyou cannot
answer an item, omit it and go on to the next one. You can come back to the harder item later. Your
score will be the total number ofcorrect answers.
This test consists of60 items. You will have 75 minutes to ansvver them.
7. Do not be concerned that the answer sheet provides spaces for more answers than there are items in
this test.
8. The use ofsilent electronic calculators is allowed.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO `SO

Copyright 2006 Caribbean Examinations Council CD.
01216010/F2007
Why do consumers have tO make choices _'..The' GoYeri-iment of Country X decides to
among the goods and: services that they ii:viteh resources from in-vestmeargoods to
purchase? crop production. The opportuniP&eestofthis
decision is the .
(A) Their wants are scarce and their
resources are limited. - profit earned by farmers
(B) Their resources are insufficient to: rent of the land on which crops are
satisfy all their wants. grown
,
(C) Theirresources increasemore rapidly (C) reauction in investment goods
than their wants. (D) Wages earned by farm workers
(D) They receive most oftheirgoods and
services at no cost.
In an attempt to in the efficiency °fits
Staff, Management assigns specific tasks to
2. Which ofthe following statements BEST 'each worker. This is an example of
describes an 'economy'?
.:( ).. .::: specialisation
(A) A system where suppliers produce (B) progress
all the goods arid services needed (C) : ,productivity
by the consumers (D) entrepreneurial ability
(B) A system whereby all the goods
and services used by citizens of a
country are provided by the . An economy produces two goodS, namely
government - sugar andbauxite. Whatriame is given to the
(C) The utilization of resources to curve which shows the maximum arnount of
produce goods and services to bauxite that can be produced for every given
meet the needs and wants of amount ofsugar?
society
(D) The utilization of resources by Market supply curve
manufacturers to produce goods Demand curve
and maximiseprofits Productionpossibility frontiercurve
Individual supply curve
3. Sita and Peter are planning to buy a new

house. All of the following factors should
• affect their decisions EXCEPT
theirjointmonthly income
the possibility ofa jobpromotion for
Peter
Sita's best friend also has a, new
home
the high cost of renting where they
now live
GO. ON TO THE NEXT PAGE

01216010/F2007
Item 7 refers to the diagram below. Prices ofgoodain market economiesfluctu-
ate whileprices of goods in planned econo-
- mies tendjo be fixed., The .1\4977 likely
reason for this difference isthatinthe market
S Supply before subsidy
economy •
Ss
rice
Supply after subsidy
(A) buyers and sellers determineprices
(B) producers are never efficient
(C) • profits are lower
(D) there are high erunemplOyment levels
7. In the diagram above, S is the supply curve A MAJOR disadyrantage of a planned

before a subsidy is given and Ssis the supply economy is that it
curve after th e subsidy is given. As a result
ofthe granting ofthe subsidy, it is expected. (A) causes inequality in the distributiori cf
that income.
(B) discourages, individual initiative and
(A) • supply will increase. enterprise,
(B) supply will decrease (C) results in widespread unernpl cryment •
(C) demand will decrease: (b) causes high rates of inflation
(D) pricewill increase
In a commercial bank, wages and salaries

Which ofthe following determines the alloca- are paid to ALL ofthe following EXCEPT
tion ofresources in a m ixed economy?
(A) bank tellers and superviSors
(A) Consumers only (B) Shareholders o f the bank
(B) Governmentonly (C) investnient managers iri the bank
(C) Government and producers only (D) maintenance workers employed by
(D) Government, producers and the bank
consumers
13 In which ofthe following economic systems

. Which ofthe following is an advantage of a does the state own ALL the factors of
marketeconomic system? production EXCEPT labour?
(A) There is equality of income. (A) A mixed economy

(B) Price control measures can be (B) A market economy
effected. (C) A planned economy
(C) It gives an incentive to produce. (D) A:subsistence economy
(D)' It reduces pollution and congestion.

- 010/F2007
14. Many developing co
untries have-ohanged.
their economies froma • .19. - .- .ACcording
coinmandeconoznyto toeconomietheery; se
amarket-baSedecono cigarette smoke Is an cond hand'
rily Sri orderto increa eiatripleil".
se
(A) goveminerrt control private good
(B) efficiency (B) positive externality
(C) subsidies negative externality'
(D) price control* .(D) meritgood.
15. Sam and Jack starte 2

d a catering busines A shift in the demand
They organised the fac s. curve fora commodity
tors ofproduction and could result from'a ch
pooled their financia ange in •
l resources to produc
the goods and service e
s. In which factor of price • . •
production willyou cla
ssify Sam and Jack? ::supply •
(C).: .conditions.ofsu
(A) Worker pply •
(D) •• conditions of
(B) demand
Investor
(C) Entrepreneur
(D). Manager
olioWing diagrams.
•
16. The sugar industry in P D
Ne*Island uses ahigh
ratio of labourers to
capital as inputs in th
production ofsu gar. e
Which ofthe following
economic questions is
being answered in thi
production arrangeme s
nt?
D
flow much to produc
e (S)
F or whom to produce
What to produce
How to produce
17. Which ofthe following

is NOTarleiampl e of
a factor ofproduction
in a commercial bank
?
(A) Shareholders of the ba
nk
(B) The building
(C) Special savings acco
unt for students
(D) The bank' s vau it 21. Which diagram above
indicates that demand
is perfectly elastic?
18. An increase in the pr
ice of flour is MOS (A) R
likely to be followed T (B)
by an immediate S.
(C) T
(A) rise in the quantity de (D) • U
rnand for bread
(B) fall in the quantity su
(C) pp ly offlour
rise in the quantity su
pply offlour
(D) fall in the quantity de
mand for flour
1216010/F2007
GO ON TO THE NE
XT PAGE
Hybrid electric cars are more expensive than 25. In which of the following situ ons will a
22.
cars which use gasolene,I-Towever, a major normal supply curve for farm produce slope
feature of el ectri c cars is that they are pollia- upwards from left to right?
0 l.
ti on free. Which costs will fall as consumers
(A) Farmers' profit margins increase as
start using electric cars?
price increases.
(A) Total fixed cost (B) Farmers are willing to increase supply
(B) Marginal cost as demand increases.
(C) Private cost (C) Fai mers pass on increased cost to
(D) External cost consumers.
Farmers are willing to produce more
as price increases.
23. All of the folloWing are features Of perfect. •
•coMpetition EXCEPT
Which of the f011e•Wirig is NOT TRUE of
(A)' selling of homogeneousproducts perfect competition? •
(B) freedom ofentry and exit
(C) many buyers and one seller Firms are price takers.
perfect knowledge of market Products are homogenous.
(D) .
conditions Firms engage inprice discrimination.
There are no barriers to entry.
heft), 24 refers to the diagram below which

shows the market for soft drinks in Country 27.. All things being equal, an increase in the
Y. supply of a good willresult in
an increase in price and quantity

traded
a fall in price and an increase in the
quantity traled
a decrease in price and quantitytraded
arise in revenue and a fall in quantity
traded
0 Q
Which ofthe following will NOT occur when
24.. Which ofthe following is MOST likely to be there is market failure? .
responsible fOr the shift in the supply curve
from S to S,? (A) A decline iri social welfare
(B) An 'increase in poverty throughout
An increase in advertising of soft the economy
drinks (C) Increasing levels ofunemployment
A fall in the price o f sugar • among skilled and unskilled labour
Increased wages for workers in the (D) Adequate amounts of all goods and
soft drink industry services for consumers
An increase in income

-6-
29. A treasury bill is an instrument for
short-term 34. One ofthe functions ofa commercia
borrowing by l bank is
(A) public corripaniv.. (A) igsuingn.otes andcoiri7

03) governments: (B)' . making loanS
insurance companies (C) determining the foreign exchange
(C) rate
(D) importers': keeping the accounts ofgovemm
ent
:i.eparttnents
30. The MAIN.objeetiyeOfabredit

i on isto 35. The ability to turn an asset into cas
h withOut
(A) encourage conSurner spending loss or delay is known as
(B) provide investment funds
for (A) durability
companies
(C) develop the habit of thri ft among (B) liquidity .
its (C) portnbility
members
(D) provide credit ."to governme (D). divisibility
nt
agencies
tontiti A is experiencing .a bal
ance Of
31. Joe Brown sells his produce atthe payments deficit. Which of the
market and following
saves his money until he has eno measures should it take to reduce
ughto buy a the deficit
tractor.. Which ofthe following in the short-term?
functions is
money performing in this case?
Engage in trade with other low cos
t
(A) Unit of account producen3ofgoods.
(B) Store ofvalue Impose restictions on goods importe
d
(C) Standard of deferred payment from other countries.
(D) Medium of exchange (C) Increase the importation of goo
ds.
(D) Reduce the volume of exports
to
other countries.
32. Which of the following is NOT
a financial
institution in an economy?
37. Which of the following will be
included in
(A) Share Market. the capital account of the bal
ance of
(I3) Developtnenti3ank payments of a country?
(C) Credit union
(D) Trade union Items bought from a foreig
n
supplier through the internet
Outstanding loan repayments ma
de
33. Which ofthe following financial to a bank in a foreign country
instruments (C). Investment in a local manufactur
is issued by the Government? ing
industry by a foreign company
(A) Treasury bonds (D) The value of goods exported dur
ing
(B) Corporate bonds the year
(C) Equity security
(D) Shares on the stockexchange
01216010/F2007 GO ON TO THE NEXT PAGE

38_ Which of the following factors will MOST Item 41 refers to the following table.
likely cause afall in a country,' s exchange rate
under a flexible change rate required? . Vein 'AMbunt
(ST14)
(A)' An increased demand for its imports
(B) An increased demand for its exports Consumption 100
(C) An increased inflow ofcapital Net income from abroad 20
(D) A reduced rate ofdomestic inflation Investment 80
Government§pending ' 60
Item 39 refers to the table below which
shows the rate of inflation and the average
percentage increase in wages Over a four- 4 Using the data provided in the table above
yearperiod. calculate the Gross Domestic Product.
(A) $200 M
YEAR RATE OF WAGE (B) $220 NI
INFLATION INCREASES (%) (C) $2101A
2003 5 20. (D) . $260M:
2004 - 10 20
2005 10
2006 15 5 . Some developing countries are trying to
achieve; economic growth :with less
3 In which year was the increase in real wages governmental participatipn. This is MOST
GRF_A I I - likely to be achieved through increased
(A) 2003 (A) private investment

(B) 2004 (B). public expenditure
(C) 2005 (C) • state planning
(D) 2006 - (D) trade barriers'
40. Which ofthe following measures is MOST 43 - Large firms achieve savings in unit costs from
I ikelyto reduce inflation? advertising or packaging. This is a result of
which ofthe following economies ofscaie?
(A) An increase in bank lending
(B) An increase in import duties (A)
(C) A reduction in government (B) Marketing
expenditure (C) Managerial
(D) A reduction indirect taxation (D) Technical -

01216010/F 2007
item 44 refers to the following figure.
:46. CotintrYX dec icles.to protect its agricult
ural
Cord seetOrfrornforeign competition bkzestr
icting
try p the amount 6fagricultural goods importe
d into
the country. This measure is referred
'tom' to as a
(A 'trade barrier
"(6):. .trade bloc
(C) 14uota trading
(D) trade embargp
Q ..Co..od >C.
44. With reference to the diagram above, Which O'f the following is NO
: state T a•
which ofthe following is TRUE.. characteristic of Caribbean econom
ies?
(A) Country P has an abscilute advantage (A) High leVels ofunemployment

in Good Y only. (B) Majorproducers ofrpanufabtured
(B) CountryP has an absolute advantage goods
in Good Y and Good X. • , (C) io:w I evelS ofcapital formation
(C) Country Q has an absolute advantage (D) •: A high debt burden
in Good Y only: •
•(D) Country Q has an absolute advantage
in Good Y and Good X. 4 Country B had an increase of$300 000
000
in foreign direct investment. In wh
ich
section of the balance ofpayments will
this
45. A country is said to have a compar transaction be recorded?
ative
advantage in theproduction ofa com
modity
when it (A) Visible trade account
(B) Balance of trade account
canproduce more ofthat commodity (C) •Invisible trade account
than any other country (D) Capital account
has a larger share of the market for
that commodity than any other
country 49. Which ofthe following events will resu
• lt in a
can produce that commodity at a surplus on the balance of trade ofa cou
ntry?
lower opportunity cost than any
other country Volume ofexports is greater than the
accounts for a greater percentage volume ofimports. . .
of total world sales of that Volume ofimports is greaterthan the
commodity than any other volume ofexports.
commodity Value ofexpoi-ts is greater than the
value of imports.
Value of imports is greater than the
value ofexports.
.1216010/F2007' GO ON TO THE NEXT. PAGE

Item 50 refers to the table be
low which' 54. Which of the following be
- showsfigures taken from the balanc nefits will
payments records for Country e Of . consumers 'derive as: a res
X in the year: Ulf-of trade
2006:: x
liberalisation?
They will enjoy greater access

'to a
variety ofgoods.
Goods and sen.rices will be provid
ed
Export of goods 500 at lower cost!. •
Import of goods 400 Prices ofallgoodS and services
will
Current balance 300: be red need.
(D) Prices of goods andServices wil
l be
more Stable.
50. What is the invisibl ebalance for
County- X?
(A). $ 100M 55. Which ofthe following are cha
racteristic of
(B) '.;$:.`200M MOST Caribbean economies?
(C)', $ 300M
(D) ,$1200M I. High percapita incomes
IT. A diversified manufacturing sec
III. tor
51. Equitable distribution ofincome
Which of the following measu s
res is MOST Dependency on primary pro
likely to reduce inflation? duct
exports
An increase in bank lending (A) TV only
.An increase in import duties (B) Iandllonly
A reduction in government (C) I and III only
expenditure (D) II and IV only
A reduction in direct taxation
52. Chasa Cosmetics seeks to marke 56. All ofthe following are examp
t itsproducts les ofprimary
in the United States. Such a mo products EXCEPT
ve is made
MOSTlikely through
bai 'Kite
the establishment of the Carib furniture
bean bananas
Single Market and Economy
direct foreign investment in the Un petroleum
States ited
effective marketing strategies
trade liberalization
3. The restriction of intern ati on al

trade
tariffs, embargoes, quotas and thro ugh
exchange
controls is referred to as
(A) structural adjustment

(B) globalisation
(C) bi-lateral agreements
(D) protectionism
a16010/F 2007 GO ON TO THE NEXT PAGE

Item 57 refers to.
the table below w
shows a country's hie,11 . 58:
current account of Country A and COun
balance of paymen its" tryB aretradippartner
ts for the year 2006 1-10VVwilltlieir tradin s.
. g relatiOns be affected
the value Of the-. if
etiriency:.of Gdunt
Item increases against th ry A
($M) e value oftheturrenc
Country B? y of.
Invisible impotts -
Invisible exports 50
80 (A) EipOrts froth Coun
Visible imports try B to Country
70 A. will be cheaper..
Visible exports :
32 ( 3)• 'The Volume ofexpo
rts froni Country
What is its balanc A to Country 1. 3 will
e of merchandise tra (C) be cheaper.
de? Exports frorriCOUn
tryBto Country
-A will decrea
(A) -$38 M se:
(D) The Volume ofexpO
(B). rts from
(C)
$20 M to Country B will de Country
$38 M crease.
(D) $48 M
Item 59 refers to
the information be
which shows impo low
rt and export data
County X in 2006. for
Index of import price

s 100
Index Of export price
s 120
Volume of expor6
Volume of imports. 200
80
What were the tent
s ofirade for
in 2006? X
). .0.98
) 1.2
(C) 2.
(D) 120
Item 60 refers to th
e table below below
Domestic Product fo which shows manuf
r four countries. acturing output as a
share of Gross
YEAR COUNTRY A
1960 COUNTRYB
28% COUNTRY C
1980 40% COUNTRY D
23%. 29% . . 29%
1990 34 %
19% 26°A
- 31% 28%
21% 23
60. What trend is comm %
on to ALL countries
shown in the table?
(A) Employment in the
(B) manufacturing sect
There was a declin or increased.
(C) e in the Gross Domes
There was a declin tic Product.
(D) e in the sale ofman
There was a declin ufactured products.
e in manufacturing
output as a share of
Gross Domestic Pr
oduct.
IF YOU FINISH
BEFORE TIME
IS CALLED, CH
ECK YOUR WO
RK ON THIS TE
ST.
I216010/F 2007
TEST CODE 01216010
FORM TP 2008060 MAY/.TUNE 2008
CARIBBEAN EXAMINATIONS COUNCIL
SECONDARYEDUCATION CERT'IF'ICATE
E IS ATION
ECONOMICS
Paper 01 — General Proficiency
75 minutes
READ THE FOLLOWING DIRECTIONS CAREFULLY
1. In addition to this test booklet, you should have an an.cwer sheet.

2. Each item in this testhas four suggested answers lettered (A), (B), (C), (D). After listening to orreading
each item you are about to answer, decide which choice is best.
On your answer sheet, find the number which corresponds to your item and blacken the space having
H113119V3g XIAIV
Sample Item
Economics maybe described as a 'social science' Sample Answer
since it deals with
(A)
(B)
•the environment
the economy
0E13) 0
(C) human behaviour
(D) • productionandcon.sumption
The best answer to this item is "human behaviour" , so answer space (C) has been blackened
If you want to change your answer, be sure to erase your old answer completely and fill in your new
choice.
When you are told to begin, turn the page and work as quickly and as carefully as you can. Ifyou cannot
answer a.nitgm, omit zt and go on to the next one. You can come back to the harder item later. Your
score will be the total number of correct answers.
This test consists of 60 items. You will have 75 minutes to answer them.
• Do not be concerned that the answer sheet provides spaces for more answers than there are items in
Theuse of silent electronic calculators is allowed.
NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

Copyright © 2007 Caribbean Examinations Council @.
'14(11 nt -.7nr)R
-2-
Which of the following statements BEST
describes a 'free good'? 4, Why do consumers have to make choices
among the goods and services that they
(A) A good that is given away by a purchase?
retailer to promote the sale of
another good (A) Their wants are scarce and their
(B) One which gives no satisfaction to resources arelimited.
consumers (B) Their resources are insufficient to
(C) One which has an infinite elasticity of satisfy all their wants.
supply (C) Theirresources increasemore rapidly
/(D) A good whose opportunity cost is than their wants.
zero (D) They receive most oftheir goods and
2. Which of the following statements BEST

describes an 'economy'? 5. In an attempt to increase the efficiency of its
staff, management assigns specific tasks to
(A) A system where suppliers produce each worker. This is an example of
all the goods and services needed
by the consumers specialisation
(B) A system where all the goods and (B) progress
services used by citizens of a (C) productivity
country are provided by the (D) entrepreneurial ability
govetutuent
(C) The utilization of resources to
produce goods and services to Item 6 .refers to the ..tahle..below which
•
provides information on three
meet the needs and wants of similar goods,
society X, Y and Z.
(D) The utilization of resources by
manufacturers to produce goods Good Price s:($)
and maximise profits X 10
Y . . 8
3. Sita and Peter are planning to buy a new Z-' - '
hotise.' -All of the follOwing faCtOrS should
affect the couple's deci pion EXCEPT
Consumers buy more of Good Z because of
(A) theirjointmonthly income its lowerpnee:
(B) the po ssibili ty o f a j ob promoti on for
Peter 6. Which of the following factors will cause
(C) the acquisition of a new home by consumers to buy less of Good Z?
Sita's best friend
(D) the high cost ofrenting their current An increase in the supply of good Z
home An imposition ofa 100per caft tax on
goodZ
The placement of a 100 per cent
subsidy on good Z
The advertisement of good Z as an
impressionalgood

-3-
z.
7. A student has a daily allowance of $20 with Item 10 refers to the diagram below. S is the
which he can purchase chicken and chips or supply curve before a subsidy is given and SS
a hamburger, butNOT both. Ifhepurchases is the supply curve after the subsidy is given.
the chicken and chips, what will be the
economic cost ofhis decision?
Price
(A) The hamburger he gives up S Supply before subsidy
— (13) The price ofthe chicken and chips SS
(C) The price ofthehamburger Supply after subsidy
(D) The satisfaction he gets from the
chicken and chips
SS
Item 8 refers to the diagram below which • 40 41 Quantity

shows the production possibility curve for
two goods: shoes and shirts. 10. As aresult ofthe granting ofthe subsidy, it is
expectedthat
Shoes
(A) supply will increase
(B) supply will decrease
(C) demand will decrease
(D) price will increase
11. Prices ofgoods in market economies fluctu-

ate while prices of goods in planned econo-
Shirts mies tend to be fixed. The MOST likely
reason forthis difference is that in the market
At what point in the diagram are resources
economy
underemployed?
(A)
(A) buyers and sellers determine prices
(B) X
(C) Y (C) profits are lower
-(D) (D) there arehigherunemployment levels
9 Which ofthe following factors may cause an 12. In a commercial bank, wages and salaries are
outward shift in aproductionpossibility curve?
paid to ALL ofthe foil oWing EXCEPT
An increase in wages
(A) bank tellers and supervisors
An increase in prices
(B) shareholders ofthe bank
An increase in trade (C) investment managers in the bank
An improvement in technology
(D) maintenance workers employed by
the bank

-4-
to 13 refers to the following
statement. It 6 refers to the diagram below wh
ich
Expenditure-reducing measures ma shows the production possibility
y be of an
implemented to improve a country's curr economy thatproduces bananas and oranges.
ent
ac-count balance on its Balance ofP aym
ents.
13. Which of the following CANNOT
be
considered an expenditure-redu
cing
measure?
(A) Devaluation of the currency

(B) A credit squeeze
-(C) Granting of export subsidies
(D) Imposition of import controls
X1 X Xz Bananas
Items 14 -15 refeito the f011Ov;ring di agra 16. If OX is the amount of b arianas produc
m ed,
which illustrates the flow of goods What is thdAifidiffit of Oranges produced?
and
services, factors ofproduction and mo
ney --(A) OY
earned and spent.
(B) OY,
S (C) 0Y2
(D) 0Y3
17. Which ofthe following isNOT an exampl

e of
a factor ofproduction in a commercial ban
k?
Shareholders ofthe bank
Special savings account for students
The.building
The bank's vault
14. If T refers to goods and services, the
nS
refers to
18. Sam andjack starteda cateringbusiness.
,. . They
(A) expenditure organised thefactors ofproduction aiadpoo
led
,„0-3) wages their financial resources toproduCe the goo
ds
(C) rent and services- What factors of produc
tion
(D) profit should Sam and JaCk be classified as?
(A) Workers
15. If V includes interest and profit, the (B) Investors
nU (C) Entrepreneurs
represents the flow of
(D) Managers
(A) factors ofproduction
(3) -goods and money
(C) services and money
(D) services and investment

-5-
19. Which of the following is NOT conside
red a A Item 24 refers to the diagrams I,11, 1I1
factor ofproduction in the bauxite ind and IV
ustry? below which show FOUR market
supply
(A) The land on which the mine is located curves.
(13) A worker employed to work in the
mini I
(C) P
A company that uses the mineral S
(D) A person who invests capital in
mining operations V
0
Which of the following would NOT
have to
change for a planned economy to bec
ome a II P
market economy?
_ (A)
The type ofgovernmentin the country
(B) The method of allocating resources
(c) The price of goods in the private
0
sector Q
(D) The ownership of resources by the
state sector 111 P
21. In which ofthe following economic

systems
does the state • own ALL the fac
tors of
productionEXCEPTIabour? Q
..(A) A planned economy P
(B) A market economy
(C) A mixed economy
(D) A subsistence economy
22. Accordingto economic theory, second

-hand
cigarette smoke is an example of a
24. Which diagram shows the market sup
•— - (A) ply
private good •-- curve where price elasticity of sup
ply is
(B) positive externality unitary?
(C) negative exiernality
(D) merit good
23. All of the following featur

es are
characteristic of perfect compet
ition
EXCEPT
• • (A) many buyers and one seller

(B) freedom of entry and exit
(C) selling of homogeneous products
(D) perfect knowledge of market
conditions
01216010/F200S GO ON TO THE NEXT PAGE

-6-
25. Which of the following conditions is 28. Ifa country has an improvement in the terms
UNLIKELY to occur when there is market
of trade' it means that
failure?
the country has a surplus of foreign
A decline in social welfare
currency.
An increase in poverty throughout
the value of the country's imports is
the economy greater than its exports.
Increasing levels of unemployment the country can purchase more
among skilled and unskilledlabour imports than previously with the
Adequate amounts of all goods and
same quantum o f exports.
services for consumers the country cannot purchase more
(D)
imports.
26. In which of the .followingsituations will a
normal supply curve for farm produce slope 29. A treasury bill is an instrument for short-term
upwards from left to right?
borrowing by
(A) Farmers' profit margins increase as public companies
price increases.
governments
(B) Farmers are willing to increase supply insurance companies
as demand increases.
importers
(C) Farmers pass on increased cost to
consumers.
„.„ (D) Farmers are willing to produce more 30. One of the functions of the Central Bank is
as price increases. to
27. provide businesses with capital

To which ofthe following does the temi 'legal
provide aid to countries in need
tender' refer?
accept depositsfrommembers ofthe
--/ Public • •
-- (A) Money that government declares
manage the issue of treasury bills
must be accepted if offered as
settlementofdebt
Money that has no direct backing of 31. JoeBrown sells hisproduce atthe market and
saves his money tmtil he has enoughto buy a
As§Vts.-rat--can,,be converted tractor. Which ofthe following functions is
ifib5wknown amount rnoneyperfoming in this case?
ofmoney •
Assets which only perform the
.(A) Unitof account
function of a store ofwealth
(B) Store of value -
(C) Standard of deferred payment
•(D) Medium ofexchange
32. Which of the following is NOT a financial

•
!Share market -
Development Bank
Creditunion
Trade union
ni.",/.4.-1,111.fr711,1152
-7-
33. Which of the following is reg
arded as an 37. Which of the following financial
invisible export on the Balance instruments
of Payments are issued by the Government?
of CountryX?
(A) (A) Treasury bonds

A citizen of Country X purcha
ses (B) Corporate bonds
a vehicle from a foreign countr
y. (q Equity securities
(B) A citizen from a fOreign cou
ntry (D) Shares on the Stock exchange
receives dividends from his
investment in a company
in
Country X.
C) Item 38 refers to the table bel
A citizen from Country X receiv ow which
es shows the rate of inflation and
interest payments from investme the average
nt percentage increase in wages ove
in a bank in a foreign country. r a four-
(D) yearperiod.
A tourist from a foreign cou
ntry
visits and spends money Y FAR
in RATE OF WA GE
CountryX. INFLATION (%) INCREASES (%)
2004 5 20
2005 10
34. Country B had an increase of $30 20
0 000 000 2006 10
in foreign direct investment. In wh 5
ich section 2007 15
of the Balance of Paymen 5
ts will this
transaction be recorded?
38. In which year was the increase in
(A) Visible trade account real wages /
1CM •,(B) . Balance of tra greatest?
de account
I.; (C) Invisible trade account
• (D) Capital account (A) 2004
(B) 2005 •
(C) 2006
..... The ability to turn an asset (D) 2007
4110i.i.f.,.,Aoss or delay is known into cash without
as
0.) 39. Which of the following measures
durability is MOST
liquidity likely to reduce inflation?
ft4444
4:;,„— 4fivid)
portabili
(A) Increasing bank lending
(B) Increasing import duties
(C) Reducing government expenditur
e
;?9J..natry A is experiencing (D) Reducing direct taxation
:-:..payments deficit. Wh a. balance of
ich of the following
Y-,=measures should it
take to reduce the deficit
in the short-term?
Engage in trade with other low

cost
producers ofgoods.
vv.-1,, • -03) Imposerestictioas ongoods import
ed
from oilier countries.
(C) Increase the importation of goo
(D) ds.
Reduce the volume of export
s to
other countries.
-8-
Item 4(1 refers to the table below which shows
manufacturing output as a percentage of Gross Domestic
Product (GDP) for four countries A,B,C and D.
YEAR COUNTRY A COUNTRY B COUNTRY C COUNTRY D

1980 28% 40% 29% 29%
1990 23% 34% 26% 28%
• 2000 19% • 31% 21% 23%
40. What trend is common to ALL countries

shown in the table?
•
-(A) - Employment in the manufacturing
sector increased.
(B) There was a decline in the Gross
Domestic Product (GDP).
(C) There was a decline in the sale of
manufacturedproducts.
(D) There was adecline in manufacturing
output as a share of GDP.
41. Exchange rate depreciation is LIKELY to 43. Which ofthe following items would NOT
occur when the value ofa currency appear in the current account ofthe Balance
ofPayments account?
(A) falls under a fixed exchange rate
regime The export of goods to another
(B) rises under a flexible exchange rate "country
regime The use of local banking services
(C) rises under a fixed exchange rate by a foreign company
regime .. Payment Ofdividends by a foreign
(D) falls under a flexible exchange rate company "
'regd.= • EstablishinentOfasteetindustryby
• albreignebinpany '
42. :Some developing countries try to achieve
economic growth with less governmental 44. Hi-LoSupetinarket increased theprice ofits
participation. This is MOST likely to be nethebraridtiiSue by 65 per centand sales fell
achieved through increased by -115pettent.
(A) private investment How should theprice elasticity ofdemand for
(B) public expenditure Hi-Lo'stissuebe categorised?
(C) state.planning
(D) trade barriers (A) UxiitarYeldstic
- (B) ElaStic
-(C) inelastic- - ---
(D) Cross elastic

I. INVESIMENT
IL — SAVING
[ FIRMS
HOUSEHOLDS
CONSUMPTION INCOME-1
CONSUMPTION INCOME
HOUSEHOLDS
SAVING FIRMS
--Mk. INVESTMENT
iv. FIRMS
CONSUMPTION INCOME
INVESTMENT SAVING
HOUSEHOLDS
Item 46 refers to the diagram below. 47. Which of the following is NOT a
characteristic ofCaribbean economies?
Low incomes No savings
(A) High levels ofunemployment
(B) Majorproduction of manufactured
goods
No creation of capital,,„3 No finance (C) Low levels of capital formation
and wealth for investment (D) A high debt burden
46. This diagramBESTrepresents 48. Trade liberalisation will result in several

benefits to consumers. Which ofthe following
•(A) the 'poverty trap' Will NOT represent a benefit to consumers?
(B) diseconomies of scale
(C) foreign direct investment They will enjoy greater access to a
(D) problems faced by developed Variety ofgoods.
countries Goods and services will be provided
at lower costs.
Prices of goods and services will be
reduced.
Prices of goods and services will
increase.
-10-
49. The allocation of resources in a mixed 53. The restriction ofinternational trade through
economy is determined by tariffs, embargoes, quotas and exchange
(A) consumers only
(B) government only (A) structural adjustment
(C) government and producers only globalisation
(B)
(D) government, producers and (C) bi-lateral agreement
consumers protectionism
(D)
50. Which of the following will enable 54. Which ofthe following is NOT a function of
Caribbean investors to have access to larger money?
capital imports?
(A) Unit of account
(A) The International Monetary Fund -(B) Form of credit
(B) Specialisation (C) Store of value
(C) The World Bank (D) Medium of exchange
(D) Globalisation
55. The issue of a treasury bond represents a
shows the 2007 import and export data for (A) short-term loan to the government
Country X. (B) long-term loan to the government
(C) long-term loan to the Central Bank
Index of import prices short-term loan by the Central B ank
100
Index of export prices 120
Volume of exports 200 56. The Central Bank calls for an increase in the
Volume of imports 80 reserve requirements from commercial
banks. How will this affect the operations of
51. What was the 'terms of trade' index for commercial banks?
Country X in 2007?
"(A) Their liquid assets will be reduced.
(A) 0.98 (B) Their ability to create credit will
(B) 1.2 increase.
(C) 2.0 (C) Their loans to money markets will
(D) increase.
(D) They will attract less deposits from
thepublic.
52. Which of the following is MOST likely to
occur ifthereiS an increase in the demand for
-- cameras? 57. Which of the following will MOST likely
result in a shift to the right in the supply curve
(A) The price of cameras will fall. for flour?
(B) The price of cameras will rise.
(C) (A) Increased taxation on wheat
The supply of cameras will fall.
The price and supply ofcatneras will producers
(D)
remain the same. (B) Increased advertising by wheat
producers
AC) Government subsidies to wheatfarms
(D) Legislation to limit the use of
pesticides by wheat producers

- 11 -
Items 58 - 59 refer to the following table 60. Large firms achieve savings inunit costs from
which presents data on the supply, demand advertising orpackaging. This is a result of
and price of potatoes. which of the following economies ofscale?
Price of Market Market (A) Financial
potatoes demand supply -0)Marketing
($) (000 kg) (BOO kg) (C) Managerial
4 700 100 • (D) • Technical
8 500 200 '
12 350 350
16 200 530
20 100 700
58 . What is the equilibrium price?
(A) $4
(B) $ 8
-(C) $12
(D) $16
59. Ifsupplyincreased by 300 000kg, what would

be the NEW equilibriumprice?
(A) $8
(B) $12
(C) $16
(D) $20
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK

ON THIS TEST.
(11 71601 niPanns

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TESTCODE01216010
FO TP A109055 4-V4 4.1
MAY/JUNE 2009
SECONDARYEDUCATION CERTIFICATE
EXAMINATION
ECONOMICS
Paper 01 — G eneral Proficiency
75 minutes
( 03 JUNE 2009 (p.m,:))
READ THE FOLLOWING INSTRUCTIONS CAREFULLY.
1. This test consists of 60 items. You will have 75 minutes to answer them.
2. In addition to this test booklet, you should have an answer sheet.
.3. Do not be concerned that the answer sheet provides spaces for more answers than there are items
in this test, • •-••42.
4. Each item in this test has four suggested answers lettered (A), (13), (C), (0). After listening to or
reading each item you are about to answer, decide which choice is best. s-4
Gel
tr-1
5. On your answer sheet, find the number which corresponds to your item and blacken the spat having
the same letter as the answer you have chosen. Look at how it is done in the sample item below. L•1••
S ample Item
Economics may be described as a 'social science' Sample Answer

since it deals with
(A)
(B)
the environment
the economy 000
(C) hunianbehaviour
The best answer to this item is "human behaviour" , so answer space (C) has been shaded. '
6. If you want to change your answer, be sure to erase it completely before you fill in yournew choice.
7. When you are told to begin, turn the page and work as quickly and as carefully as you can. If you
cannot answer an item, ornitit and go on to the next one. Your scorewill be the total number of correct
answers.
8. The use of silent electronic calculators is allowed.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO
Copyright 02009 Caribbean Examinations Council (:).

01216010/F2009
-2-
1. Why do consumers have to make choices Items 3 - 4 refer to the following diagram
among the goods and services that they which illustrates the flow of goods and
purchase? services, factors of production and money
earned and spent.
Their wants are scarce and their
resources are limited.
Their resources are insufficient to
satisfy all their wants.
Their resources increase more
rapidly than their wants.
They receive most of their goods and
2. An 'economy' is BEST described as
(A) a system where suppliers produce all 3. If T refers to goods and services, then S.
the goods and services needed by refers to
the consumers
(B) a system whereby all the goods and (A) expenditure
services used by citizens of a (B) wages
country are provided by the (C) rent
government (D) profit
(C) the utilization of resources to produce
goods and services to meet the
needs and wants of society 4. If V includes interest and profit, then U
(D) the utilization of resources by represents the flow of
manufacturers to produce goods
and maximize profits (A) factors of production
(B) goods and money
(C) services and money
(D) services and investment
-3-
Which of the following combinations gives a Item 8 refers to the diagram below which
similar measurement of the national income? shows the production possibility curve for two
goods: shirts and shoes.
Income method
Central bank method
Output method
Expenditure method
(A) I and IT only

(B) If and III only
(C) I, ll and W only
(D) II, III and W only
Shirts
6. An economy produces two goods, namely
sugar and bauxite. What name is given to 8. At what point in the diagram are resources
the curve which shows the maximum amount underemployed?
of bauxite that can be produced for every
given amount of sugar? (A) W
(B) X
(A) 1\4:)-art supply curve (C) Y
(B) Demand curve (D) z
(C) Production posgibility curve
(D) Individual supply curve
9. Which of the following factors may cause an
outward shift in a producdon possibility curve?
7. A student has a daily allowance of $20 with
(A) An increase in wages
which he can purchase chicken and chips or An increase in prices
a burger, but NOT both. If he purchases the (B)
(C) An increase in trade
chicken and chips, the economic cost of his An increase in the use of technology
decision will be (D)
(A) the burger he gave up

(B) the price of the chicken and chips
(C) the price of the burger
(D) the satisfaction he gets from the
chicken and chips
-4-
S is 13. In which of the following economic syst
the supply curve before a subsidy is ems
given does the state own ALL the factors
and Ss is the supply curve after the of
subsidy is production EXCEPT labour?
given.
(A) A mixed economy

(B) A market economy
S Supply before subsidy (C) A planned economy
Ss (D) A subsistence economy
Price
Supply after subsidy
14. Which of the following will ena
ble
Caribbean investors to have access to
larger
capital imports?
Quantity
Q,
(A) The International Monetary Fund
(B) Specialisation
10. As a result of the granting of the subsidy (C) The World Bank
it is (D)
expected that Globalisation

(B) supply will decrease 15. Sam and Jack started a catering bus
iness.
(C) demand will decrease They organized the factors of producti
on and
(D) price will increase pooled their financial resources to prod
uce
the goods and services. What fact
ors of
production should Sam and Jack be classifie
d
11. Which of the following is MOST like as? .
ly to
immediately affect the supply oflabou
r?
(A) Workers
(A) Improving workerproductivity (B) Investors
(B) Increasing the demand for labour (C) Entrepreneurs
(C) Improving the efficiency of workers (D) Managers
(D) Increasing the length of the work
week
16. Joe uses one plot of I and and 65 seedling
s to
do his farming. Each seedling costs $8
and
12. In a commercial bank, wages and salaries he rents the land for $200. The cost
are of the
paid to ALL of the following EXCEPT land represents his
(A) bank tellers and supervisors (A) average cost

(B) shareholders of the bank (B) fixed cost
(C) investment managers in the bank (C) marginal cost
(D) maintenance workers employed by (D) variable cost
the bank
-5-
17. Which of the following is NOT an example Which of the following features are
of a factor of production in a commercial characteristic of a fully planned economy?
bank?
All wages are equal.
Shareholders of the bank Goods do not have prices.
The building There are no private shareholders.
Special savings account for students The profit motive does not exist.
The bank's vault
(A) III only
(B) IV only
Item 18 refers tq the table below which (C) 11 and III only
provides- information on three similar goods, (D) III and IV only
X, Y and Z.
21. A public good can be described as

Good Prices ($)
X 10 (A) diminishable
(B) excludable
Y 8
(C) zero-pLiced
Z 3 (D) rivalrous .
Consumers buy more of Good Z because of

its lower price. • 22. The type of unemployment which is
USUALLY experienced by workers in the
Which of the following factors cause hotel industry is Imown as
consumers to buy less of Good Z?
(A) frictional
(A) An increase in the supply of good Z (8) seasonal
(B) An imposition of a 100 per cent tax (C) structural
on good Z (I)) cyclical
(c) The placement of a 100 per cent
subsidy on good Z
(D) The advertisement of good Z as an 23. All of the following features are characteristic
in-Ipt:essional good of perfect competition BXCEPT
many buyers and one seller

freedom of entry and exit
19. Which of the following is NOT considered a selling of homogeneous products
factor of production in the bauxite industry? perfect knowledge of market
conditions
(A) The land on which the mine is located
(B) Workers employed to work on the
rnh1L-,
(C) Companies that use bauxite
()) Persons who invest their capital to
callY out mining operations
-6-
24. Which of the following is an example of fixed 28. Which of the following wilINOT occur when
capital? there is market failure?
Bank balance (A) A decline in social welfare

(A)
Cash (B) An increase in poverty throughout
(B)
(C) Machinery the economy
Raw material (C) Increasing levels of unemployment
(D)
among skilled and unskilled labour
(D) Adequate amounts of all goods and
25. In which of the following situations will a services for consumers
normal supply curve for farm produce slope
upwards from left to right? 29. In an attempt to increase the efficiency of its
staff, management assigns specific tasks to
(A) Farmers' profit margins ease as
each worker. This is an example of
price incre ases.
(B) Farmers are willing to increase (A) specialisation
supply as demand increases. progress
(3)
(C) Farmers pass on increased cost to (C) productivity
consumers. entrepreneurial ability
(D)
(D) Farmers are willing to produce more
as price increases.
30. Choice is the MOST important issue in
• economics because
26. According to econo mic theory, second -hand
cigarette smoke is an exam ple of a (A) money is scarce in relation to a
country's resources
(A) private good (B) most countries have a low per capita
(B) positive externality income
(C) negative externality (C) resources are scarce relative to
(D) merit good consumers' wants
(D) incomes are not evenly distributed
27. All things being equal, anincreasein the supply

31. Joe Brown sells his produce at the market
of a goodwill result in
and saves his money until he has enough to
buy a tractor Which of the following functions
(A) an increase in price and quantity
is money performing in this case?
traded
(B) a fall in price and an increase in the
(A) Unit of account
quantity traded
(B) Store of value
(C) a decrease in price and quantity
(C) Standard of deferred payment
traded
(D) Medium of exchange
(D) arise in revenue and a fall in quantity
faded
:institution in an economy?
Share market
Development Bank
Credituaion
Trade union
-7-
33. Which of the following is regarded as an Items 37 - 38 refer to the table below, which
invisible import on the Balance of Payments provides data on costs of production at
of Country X? different levels of output.
(A) A citizen ofCountry X visits a foreign

Output Total Cost
country and spends money in that
country. (Units per day) $
(B) A citizen of a foreign country
receives dividends from his
0 1500.00
investment in a company in Country
X. 1 1700.00
(C) A citizen of Country X receives 2 1800.00
interest payments from investment 1950.00
3
in a bank in a foreign country.
(D) A citizen of Country X purchase's a
vehicle from a foreign country. 37. What is the total fixed cost?
(A) $ 200
34. Country B had an increase of $300 000 000 (B) $1500
in foreign direct investment. In which section (C) $1950
of the Balance of Payments will this (D) $6950
transaction be recorded?
(A) Visible trade account 38. The marginal cost (MC) of production at
(B) Balance of trade account output level of 3 units is
(C) Invisible trade account
(ID) Capital account (A) $ 50
(B) $ 150
(C) $ 650
35. The ability to turn an asset into cash without CD) $1950
loss or delay is known as
(A) 39. Which of the following factors will MOST

(B) durability likely cause a fall in a country's exchange rate
(C) portability under a flexible exchange rate regime?
(D) divisibility
(A) An increased demand forits imports
(B) An increased demand for its exports
36. Country A is experiencing a balance of (C) An increased inflow of capital
payments deficit. Which of the following (D) A reduced rate of domestic inflation
measures should it take to reduce the deficit
in the short-term?
(A) Impose restrictions on goods

imported from other counties.
(B) Engage in trade with other low-cost
producers of goods.
(C) Increase the importation of goods
from other countries.
(D) Reduce the volume of exports to
other countries.
-8-
Item 40 refers to the table below which 42. Some developing countries try to achieve
shows the rate of inflation and the average economic 'growth with less governmental
percentage increase in wages over a four- participation. This is MOST likely to be
year period. achieved through increased
Year Rate of Wage (A) private investment

Inflation Increases (%) (B) public expenditure
2004 5 20 (C) state planning
2005 10 20 (1)) trade barriers
2006 10 5
2007 15 5
43. Which of the following, items would NOT
40. In which year was the inui ease in real wages appear in the current account of the Balance
GREATEST? of Payments account?
(A) 2004 (A) The export of goods to another

2005 country
(B)
(C) 2006 (B) The use of local banking services by
(D) 2007 a foreign company
(C) Payment of dividends by a foreign
41. Which of the following measures is MOST company
likely to reduce inflation? (D) Establishment of a steel industry by
a foreign company
(B) Increasing import duties 44. Bargain Supermarket increased the price of
(C) Reducing government expenditure its name brand tissue by 65% and sales fell
(D) Reducing direct taxation by 115%.
How should the price elasticity of demand

for Bargain's tissue be categorised?
(A) Unitary elastic

(B) Elastic
(C) Inelastic
OD) Cross elastic
-9-
h show the circular flow of income in an
Item 45 refers to diagrams I, II, III and IV below whic
economy.
Saving
Investment
Households
Firms
L
1
Consumption Income
Consumption Income
Households
tzt Saving Firms .4
^'— `*Investment
Fu-ms
IV.
income Investment Saving
Households Households
AL-
flow of income in an
45. Which of the diagrams BEST illustrates the circular
finan cial institutions?
economy consisting of households, films and
(A) I
(B) II
(C)m
(D) IV
47. Which of the following features is NOT

characteristic of Caribbean economies?
(A) High levels of unemployment

(B) Major production of manufactured
goods
(C) Low levels of capital formation
No finance
(D) A high debt burden
for investment
46. This diagram BEST represents 48. Trade liberalization should result in several
benefits to consumers. Which of the
the 'poverty trap' following does NOT represent a benefit to
(A)
diseconomies of scale consumers?
(B)
(C) foreign direct investment
(A) There will be greater access to a
(D) a problem faced by all ARICOM
variety of goods and services.
countries--
(B) Cost of providing goods and services
will be lower_
(C) Prices of goods and services will be
reduced.
(D) Prices of goods and' services will
increase.
-10-
49. Which of the following situations will result 50. • Which of the following is MOST likely to
in a surplus on the balance of trade of a occur if there is an increase in the demand
country? for cameras?
(A) Volume of exports is greater than the (A) The price of cameras will fall.
volume of imports. (B) The price of cameras will rise.
(B) Volume of imports is greater than the (c) The supply of cameras will fall.
volume of exports. (D) The price and supply of cameras will
(C) Value of exports is greater than the remain the same.
value of imports.
(D) Value of imports is greater than the _
value of exports.
Item 51 refers to the table below which shows manufacturing output as a share of Gross Domestic
Product for four countries.
YEAR COUNTRY A COUNTRY B COUNT RY C COUNTRY D

1960 28% - 40% 29% 29%
1980 23% 34% 26% 28%
1990 19% 31% 21% 23%
51. What trend is common. to ALL countries shown in the table?
(A) There was an increase in employment in the manufacturing sector.

(B) There was a decline in the Gross Domestic Product.
(C) There was a decline in the sale of manufactured products.
(D) There was a decline in manufacturing output as a share of Gross Domestic Product.
-11-
52. In 2007, Country X imported 20% more than 55. The issue of a treasury bond represents a
it did in the previous year. This resulted in
arrears in its Balance of Payments (BOP) (A) short:term loan to the government
account. As a result, Country X had to (B) long-term loan by the government
borrow from the International Money Fund. (C) long-term loan to the Central Bank
In addition, its Gross Domestic Product (D) short-term loan by the Central Bank
declined because the currency had been
devalued.
56. The Central Bank calls for an increase in the
The increase in imports depicted above reserve requirements of commercial banks.
resulted in How will this affect the operations of
commercial banks?
(A) reduction in borrowing by
commercial banks (A) Their liquid assets will be reduced.
(B) consequences of a BOP deficit (B) Their ability to create credit will
(C) increased spending in an economy increase.
(D) factors causing a BOP deficit (C) Their loans to money markets will
increase.
53. The restriction of international trade through the public.
tariffs, embargoes, quotas and exchange
Item 57 refers to the diagram below which
(A) structural adjustment shows the production possibility curve for a
(J) globalisation country currently producing at point R.
(C) bilateral agreement
(D) protectionism
Gs x
54. Which of the following statements BEST .Q
describes globalisation?
(A) International trade of goods and

services including skilled workers
(B) Movementin technology and financial .1)
markets worldwide 0 Good y
(C) The integration of financial services,
technology and commodities
markets worldwide 57. At which point will production be MOST
(D) Movement of tangible and intangible efficient?
goods enhanced by growth in
the computer industry (A) P
(B) Q
(C) R
(D)
- 12 -
Items 58 - 59 refer to the following table.
Price of Market demand Market supply

potatoes ($) (000 kg) (000 kg)
4 700 100
8 500 200
12 350 350
16 200 530
20 100 700
58. What is the equilibrium price? 59. If supply increased by 300 000 kg what would
be the NEW eciniiibrillm price?
(A) $4
(B) $8 (A) $8
(C) $12 (B) $12
(D) • $16 (C) $16
(D) $20
60. Large firms achieve savings in unit costs from advertising or packaging.
This is a result of which of the following economies of scale?
(A) Financial
(B) Marketing
(C) Managerial
(D) Technical
ECONOMICS
1. This test consists of 60 items. You will have 75 minutes to answer them.
reading each
3. • .• . Edch item in this test has four suggested answers lettered (A), (B), (C), (D). After
item you are about to answer, decide which choice is best.
On your answer sheet, find the number which corresponds to your item and shade the space having
the same letter as the answer you have chosen: -Look at how it is-done in the sample item below.
Sample Item
because it deals with
(A) the economy DO@

(B) the environment
(C) human behaviour
The best answer to this item is "human behaviour", so answer space (C) has been shaded.
5. If you want to change your answer, erase it completely before you fill in your new choice.
If
6. When you are told to begin, turn the page and work as quickly and as carefully as you can.
you cannot answer an item, go on to the next one. You may return to the omitted item later. Your
score will be the total number of correct answers.
7. The use of silent electronic calculators is allowed_
-2-
1. Which of the following is the MAJOR 4. A student has a daily allowance of $20 with
Problem facing all economies? which he can purchase chicken and chips
or a burger, but NOT both. If he purchases
(A) Allocating scarce resources among the chicken and chips, the opportunity cost
competing users of his decision will be
(B) Achieving an equal distribution of
income (A) the burger he gave up
(C) Preventing the depletion of natural (B) the satisfaction he gets from burgers
resources (C) the price of the chicken and chips
(D) Achieving a fair distribution of (D) the satisfaction he gets from the
wealth chicken and chips
2. An 'economy' is BEST described as a system 5. A 'free good' is BEST described as a good

where
(A) that is given away by a retailer to
(A) suppliers produce all the goods and promote the sale of another good
services needed by the consumers (B) which gives no satisfaction to con-
(B) resources are used by manufacturers sumers
to produce goods and maximize (C) which has an infinite elasticity of
profits supply
(C) all the goods and services used by (D) whose opportunity cost is zero
citizens of a country are provided
by the government
(D) resources are used to produce goods 6. Which of the following is NOT a primary
and services to meet the needs and product?
wants of society
(A) Bauxite
(B) Banana
3. Sita and Peter are planning to buy a new (C) Furniture
house. Which of the following factors (D) Petroleum
should NOT affect the couple's decision?
(A) Their joint monthly income

(B) The possibility of a job promotion
for Peter
(C) The high cost of renting their cur-
rent home
(D) The acquisition of a new home by
Sita's best friend

_r 1 r
3
9. An outward shift in a production possibility

shows the production possibility curve for curve can be caused by an
an economy that produces bananas (X) and
(A) increase in wages
oranges (Y).
(B) increase in prices
(C) increase in imports
(D) improvement in technology
10. Unemployment that results from a change

in technology and the resulting re-training
and re-hiring of staff is an example of
(A) structural unemployment

(B) cyclical unemployment
(C) frictional unemployment
(D) seasonal unemployment
7. If OX is the amount of bananas produced,
what is the greatest amount of oranges that
can be produced?
Item 11 refers to the diagram below. Ss is
OY the supply curve before a subsidy is given.
(A)
(B) 0Y1
(C) 0Y2
(D) 0Y3

shows the production possibility curve for
two goods: shirts and shoes. •• .
Quantity
Shoes 0 Q. Qi
11. As a result of the granting of the subsidy it

is expected that

(B) supply will decrease
Shirts (C) demand will decrease
(D) price will increase
8. At what point in the diagram are resources
underemployed?
(A) w
(B) X
(C) Y
(D)

-4-
Item 12 refers to the table below which 15. Which of the following is an advantage of
- provides infoi illation on three similar goods, a market economy?
• X, Y and Z. Consumers buy more of Good
Z because of its lower price. (A) There is equality of income.
(B) It provides an incentive to produce.
(C) It reduces pollution and congestion.
Good Price ($) (D) Price control measures can be ef-
fected.
X 10
Y 8 - 16. Prices of goods in market economies

fluctuate while prices of goods in planned
Z 3 economies tend to be fixed. The MOST
likely reason for this difference is that, in
the market economy,
12. Which of the following factors will cause
consumers to buy less of Good Z? (A) profits are lower
(A) An increase in the supply of (C) buyers and sellers determine prices
Good Z (D) there are higher unemployment
(B) An imposition of a 100 per cent tax levels
on Good Z
(C) The placement of a 100 per cent
subsidy on Good Z 17. Which of the following are NOT consid-
(D) The advertisement of Good Z as an ered factors of production in_ the bauxite
impressional good industry?
(A) Companies that use bauxite

13. In an attempt to increase the efficiency of (B) Lands on which mines are located
its staff, management assigns specific tasks (C) Workers employed to work on the
to each worker. This is an example of mines
(D) Persons who invest their capital to
(A) progress carry out mining operations
(B) productivity
(C) specialisation
(D) entrepreneurial ability 18. Sam and Su started a catering business.
They organised the factors o fproducti on and
pooled their financial resources to produce
14. In a commercial bank, wages and salaries the goods and services. Which factors of
are NOT paid to production should Sam and Su be classified
as?
(A) shareholders of the bank
(B) bank tellers and supervisors (A) Workers
(C) investment managers of the bank (B) Investors
(D) maintenance workers employed by (C) Managers
the bank (D) Entrepreneurs

-5-
is NOT a
an example 23. Which of the following features
19. Which of the following is NOT characteristic of perfect compet
ition?
mercial
of a factor of production in a com
bank? (A) Freedom of entry and exit
products
(B) ' Selling of homogeneous
(A) The building (C) Many buyers and one sel ler
(B) The bank's vault Knowledge of market con ditions
(D)
(C) Shareholders of the bank
stu-
(D) Special savings accounts for
ond-hand
dents
24, According to economic theory, sec
of a
cigarette smoke is an example
e changed
20. Many developing countries hav (A) merit good
rket-based
from command economies to ma (B) private good
economies in order to inc rea se
(C) . positive externality
(D) negative externality
(A) subsidies
(B) efficiency
price control likely to
(C) 25. Which of the following is MOST
(D) government control occur if there is an increase in the demand
for cameras?
resources
21. An economy in which ALL of the (A) The price of cameras will fall.
the state can
EXCEPT labour are owned by (B) The price of cameras will rise.
.
be described as a (C) The supply of cameras will fall
s
(D) The price and supply of camera
(A) free economy will remain the same.
(B) mixed economy
(C) capitalist economy
(D) command economy Item 26 refers to the following
table.
Market demand Market supply

ns will a Price of
22. In which of the following situatio (000 kg) (000 kg)
duce slope potatoes
normal supply curve for farm pro
upwards from left to right? ($)
100
4 700
t to 500 200
(A) Farmers pass on increased cos 8
350
consumers. 12 350
as 530
(B) Farmers' profit margins increase 16 200
700
price increases. 20 100
re
(C) Farmers are willing to produce mo
as price increases.
se 26. What is the equilibrium price?
(D) Farmers are willing to increa
supply as demand increases .
(A) $4
(B) $8
(C) $12
(D) $16

• -6-
27. An increase in the price of flour is MOST Item 31 refers to the following diagrams,
likely to be followed by an immediate I, II, III and IV.
(A) rise in the quantity demanded for P

bread
(13) fall in the quantity supplied offlour
(C) rise in the quantity supplied offlour D D
(D) rise in the quantity demanded for
flour D
Q 0 Q
I
28. Which of the following will NOT occur
when there is market failure? P D
(A) A decline in social welfare
(B) An increase in poverty throughout
the economy
(C) Increasing levels ofunemployment
among skilled and unskilled la-
bour Q
III Iv
(D) Adequate amounts of all goods and
services for consumers
31. Which diagram above indicates that demand
is perfectly elastic?
29. Which of the following is an example of
fixed capital? (A) I
(B) II
(A) Cash (C) III
(B) Machinery (D) IV
(C) Bank balance
(D) Raw material
32. Large firms achieve savings in unit costs
from advertising or packaging. This is a
30. Which of the following is NOT TRUE of result of which of the following economies
perfect competition? of scale?
(A) Firms are price takers. (A) Financial

(B) Products are homogenous. (B) Technical
(C) - There are no barriers to entry. (C) Marketing
(D) Firms engage in price discrimina- (D) Managerial
tion.

7
37. Which ofthe following financial instruments

33. Joe Brown sells his produce at the market
are issued by the Government?
and saves his money until he• has enough
to buy a tractor. Which of the following
(A) Treasury bonds
functions is money performing in this case?
(B) Corporate bonds
(C) Equity securities
(A) Store of value
(D) Shares on the stock exchange
(B) Unit of account
(C) Medium of exchange
(D) Standard of deferred payment
38. Which of the following is referred to as the
banker's bank?
34. Divisibility is an important function of
(A) The World Bank
money because it
(B) The Central Bank
(C) A commercial bank
(A) encourages the process of speciali-
(D) An investment bank
sation
(B) removes the problems associated
with barter
enables small transactions to take 39. One of the functions of a commercial bank
(C)
place is to
(D) assists individuals to allocate wealth
(A) issue notes and coins
in a profitable manner
(B) provide loans to the public
(C) deteimine the foreign exchange rate
(D) keep the accounts of government
35. To which of the following does the term
departments
`legal tender' refer?
(A) Money that has no direct backing

of gold 40. The Central Bank calls for an increase in
Money that government declares the reserve requirements of commercial
(B)
must be accepted if offered as banks. How will this affect the operations
settlement of debt of commercial banks?
(C) Assets that perform only the func-
?(A) Their liquid assets will be reduced.
tion of a store of wealth
(B) Their ability to create credit will
(D) Assets that can be converted im-
increase.
mediately into a known amount
(C) Their loans to money markets will
of money
increase.
the public.
Development Bank 41. A treasury bill is an instrument for short-

(A)
Share market term borrowing by
(B)
(C) Credit union
(A) importers
(D) Trade union
(B) governments
(C) public companies
(D) insurance companies

8
Item 42 refers to the table below which 45. Which of the following is usually a direct
shows the rate of inflation and the average effect of retrenchment in a country?
percentage increase in wages over a four-
year period. (A) Increased standards of living
(B) Reduced standards of living
RATE OF WAGE (C) Reduction in crime and violence
YEAR ,_
LNFLATION (%) INCREASES (%) (D) Equality in the distribution ofwealth
• 2006 • 5 20
46. Which of the following measures is MOST
2007 10 . 20
likely to reduce inflation?
2008 10 5
(B) Increasing import duties
2009 15 5
(C) Reducing direct taxation
(D) Reducing government expenditure
42. In which year was the increase in real wages
GREATEST?
(A) 2006 shows manufacturing output as a share of
(B) 2007 Gross Domestic Product for four countries
(C) 2008 A, B, C and D.
(D) 2009
YEAR COUNTRY COUNTRY COUNTRY COUNTRY
A B C D
Items 43 - 44 refer to the following table
1970 28% 40% 29% 29%
which shows Government revenue and
Government expenditUre for four countries,
1990 23% 34% 26% 28%
B, C and D.
2000 19% 31% 21% 23%
Government Government
Country Revenue Expenditure
$ (Million) $ (Million) 47. What trend is common to ALL countries
(A) 3.2 3.2 shown in the table?
(B) 3.2 2.2
(A) There was a decline in the Gross
(C) 2.2 • 3.2 Domestic Product.
(D) 0 0 (B) There was a decline in the sale of
manufactured products.
(C) There was an increase in employ-
43. Which country has a fiscal deficit? ment in the manufacturing sector.
(D) There was a decline in manufac-
turing output as a share of Gross
44. Which country has a budget surplus? Domestic Product.

9
Item 52 refers to the following information,

48. Which of the following is LEAST likely to which provides data on two countries P and
be used as a measure to control inflation?
Q, and two goods, X and Y.
(A) Increase in taxation Good Y.
(B) Reduction in government expendi-
• Country P
ture
(C) Reduction in the rate of interest on Country Q
loans
(D) Restrictions on lending by com-
mercial banks
Good X
49. Some developing countries try to achieve
economic growth with less governmental
participation. This is MOST likely to be
52. With reference to the diagram above, which
achieved through increased
of the following is TRUE?
(A) trade barriers
(A) Country P has an absolute advan-
(B) state planning
tage in Good Y only.
`(C) private investment Country P has an absolute advan-
(B)
(D) public expenditure tage in Good Y and Good X.
(C) Country Q has an absolute advan-
tage in Good Y only.
50. Which of the following BEST explains the Country Q has an absolute advan-
(D)
term 'tariff'? tage in Good Y and Good X.
• (A) The amount of subsidies received

by local exporters
(B' The level of tax that is levied on
imports entering a country
(C) The amount of goods that can be
imported into a country
(D) The common tax levied by coun-
tries on member countries within
a region
51. Which of the following will result in a sur-

plus on the balance of trade of a country?
(A) Value of imports is greater than the

value of exports.
(B) Value of exports is greater than the
value of imports.
(C) Volume of exports is greater than
the volume of imports.
(D) Volume of imports is greater than
the volume of exports.

- 10 -
55. Country A is experiencing a balance of

Items 53 - 54 refer to the following table
payments deficit. Which of the following
which illustrates the Balance of Payments
of Caribe Island. measures should it take to reduce the deficit
in the short-term?
$ (billion)
Merchandise exports 500 (A) Reduce the volume of exports to
-555 other countries.
. Merchandise imports (B) Engage in trade with other low-cost
Balance of Trade producers of goods.
Export of Services 100 (C) Increase the importation of goods
• -200 from other countries.
•Imports of Services Impose restrictions on goods im-
(D)
Balance of goods and services ported from other countries.
Net investment income 4
Net transfers 12
56. Which of the following is LIKELY to lead
Balance on current account to greater international iAvestment flows to
Capital inflows 100 the Caribbean region?
Capital outflows -20
(A) , Globalisation
Balance of capital account (B) Specialisation
Current and Capital account balance -59 The World Bank
(C)
Official Reserves 0 (D) The International Monetary Fund
53. The balance of trade in $ (billion) is Which of the following statements BEST
57.
describes globalisation?
(A) 55
(B) -55 International trade of goods and
(A)
(C) 1355 services including skilled workers
(D) -1355 (B) Movement in technology and finan-
cial markets worldwide
(C) The integration of financial serv-
54. The capital account in $ (billion) is ices, technology and commodities_
markets worldwide
(A) 80 (D) Movement of tangible and intangi-
(B) -80 ble goods enhanced by growth in
(C) 120 the computer industry
(D) -120
58. Which of the following BEST defines the

team 'protectionism'?
(A) Restriction ofimports into a country

(B) Dependency on a primary product
for export
(C) Free movement of goods and ser-
vices among countries
(D) Establishment of a trading bloc
among a group of countries

June 2015
t. Which ofthe following rewards accrues to Item 5 refers to the following diagram
the factor of production called lcapital'? which shows afirm's total fixed cost (TFC),
total variable cost (TVC) and total cost
(A) Rent (rc).
(B) Profit
(C) Wage (000) Cost
(D) Interest
2. An 'economy' is BEST described as a

system where
(A) suppliers produce all the goods

and services needed by the
consumers
(B)
3 all the goods and services used
by the citizens of a country are
provided by the government
(C) resources are used by manufacturers 5. The firm's total variable cost at 100 units
of output is
N to produce goods and maximize
profits
K (D) resources are used to produce (A) l0 000
goods and services to meet the (B) 15 000
.l$ needs and wants of society (c) 20 o0o
(D) 25 000
Which of the following pairs of activities

in a count4l falls under the tertiary sector? 6. The economic system of MOST Caribbean
$ (A)
countries can be described as
U (B)
Banking and tourism
Tourism and agriculture (A) mixed
(C) Banking and construction (B) planned
(D) Manufacturing and fishing (C) traditional
(D) free market
4. Astudent has a daily allowance of$20 with

which he can purchase chicken and chips
or a burger, but NOT both. If he purchases
the chicken and chips, the opportunity cost
of his decision will be the
(A) burger he gave up

(B) price of the chicken and chiPs
(c) satisfaction he gets from burgers
(D) satisfaction he gets from the
chicken and chips

0r216010/F 2015
Item 7 refers::tolthe fottowing diagram Item l0 refers to the following table which
wh ich i | ustrates'the production possi bi I ity
| shows a country's gross domestic product
frontier for an,eioncimy that is capable of (GDP) for a five-year period.
producing bauxite and sugar in different
combinations. Year GDP($1\{)
2009 372
20r0 455
20tl 496
2012 53r
20t3 s80
:\
ip \
.-.]-..--...--
10. During the period 2009-2013, the GDP of
i this country
(A) declined
(B) increased
7. Point X on the graph represents (c) fluctuated
(D) remained constant
(A) economic growth
(B) unemployed resources
(C) an efficient combination 11. An advantage of a planned economic
(D) an unattainable combination system is that
(A) there is usually a more equitable

E. The burden of an excise duty falls distribution of wealth
ENTIRELY on the consumer if the (B) firms have a greater incentive to be
efficient
(A) supply curve is perfectly elastic (c) workers are more motivated and
(B) demand curve is perfectly elastic
diligent
(C) demand curve is perfectly inelastic (D) consumers have a wider variety of
(D) supply curve is perfectly inelastic goods
9. An outward shift in a production possibility t2. Economic choices are made because
curve can be caused by an
(A) people's needs exceed their wants
(A) increase in wages (B) resources are unlimited and
(B) increase in prices
people's wants are limited
(c) increase in imports (c) resources are scarce while people's
(D) improvement in technology
wants are unlimited
(D) people may not always have the
money to conduct business
CO ON TO THE NEXT PAGE

0t2t60t0tF 2015
13. In an attempt to increase the efficiency of 17. A firm produces 29 pairs of high quality
its staff, management assigns specific tasks leather shoes at a fixed cost of$20 000 and
to each worker. This is an example of a variable cost of $9 000. On producing
the 30th pair, the new total cost rises to
(A) progress $30 000.
(B) productivity
(C) specialization What is the marginal cost of the 30th pair?
(D) entrepreneurial ability
(A) $ l 000
(B) $ e 000
14. In a commercial bank, wages and salaries (c) $20 oo0
are NOT paid to (D) $2e 000
(A) shareholders ofthe bank

(B) bank tellers and supervisors 18. One ofthe problems associated with barter
(C) investment managers of the bank is that
(D) maintenance workers employed by
the bank (A) it requires the use of coins
(B) it is a cause of market failure
(C) surplus output can be exchanged
15. One example of a'good'is (D) it requires double coincidence of
wants
(A) an extra lesson at school
(B) a loan approval by a bank
(C) a bottle of soda water 19. Which ofthe following isNOTan example
(D) a beauty makeover at a spa of a factor of production in a commercial
bank?
16. Prices of goods in market economies (A) The building

fluctuate while prices of goods in planned (B) The bank's vault
economies tend to be fixed. The MOST (C) Shareholders of the bank
likely reason for this difference is that in (D) Special savings accounts for
the market economy students
(A) profits are lower

(B) producers are never efficient 20. A government reduces tax on carrots. This
(C) buyers and sellers determine prices causes the price of carrots to fall by 50Yo.
(D) there are higher unemployment Quantity demanded then rises by 50%. The
levels price elasticity ofdemand forcarrots in this
case is
(A) 0
(B) 0.4
(c) I
(D) 2.5

01216010/F 201s
/
21. Open competition on a worldwide scale Item 26 refers to the following table which
facilitates shows the market demand and supply of
potatoes at given prices.
(A) high levels of dependence on
tourism Price of Market Market
(B) increases, in trade unions' Potatoes Demand Supply
negotiating power ($) (000 kg) (000 kg)
(C) government manipulation of 4 700 100
market outcomes 500 200
8
(D) the development of comparative
l2 350 350
advantage
l6 200 530
20 r00 700
22. Money is long-lasting, easy to carry 26. What is the equilibrium price?
around and can be changed into smaller
denominations. Which of the following (A) $4
characteristics ofmoney are being described (B) $8
above? (c) $12
(D) $16
(A) Durability, portability, liquidity
(B) Durability,scarcity,uniformity
(C) Durability, portability, divisibility
27. 'Globalization' may be MOST accurately
(D) Portability, uniformity,divisibility defined as the
(A) movement of technology and

23. Which of the following features is NOT a
financial markets worldwide
characteristic of perfect competition? (B) movementoftangibleandintangible
goods among countries
(A) Freedom of entry and exit (C) international trade of goods and
(B) Many buyers and one seller services including skilled
(C) Knowledge of market conditions workers
(D) Selling of homogeneous products (D) integration of financial services,
technology and commodity
markets worldwide
24. Which of the following is usually a
consequence of widespread retrenchment
in a country? 28. If company X is engaged in the cutting of
trees to obtain lumber which is then used
(A) Reduction in crime rate by Company Y to make furniture, to which
(B) Increased standard of living
sector of the economy does Company X
(C) A fall in the standard of living belong?
(D) Equality in income distribution
(A) Public
(B) Primary
25. A pure public good can be described as (C) Tertiary
(D) Secondary
(A) excludable
(B) zero-priced
(C) diminishable
(D) complimentary

01216010/F 20t5
29. Whichofthefollowingfinancialinstruments 33. Joe Brown first sells his produce at the
' are issued by the central bankon behalfof market and then saves his money until he
the government? has enough to buy a tractor. Which of the
following functions is money performing
(A) Treasury bills in the second case?
(B) Corporate bonds
(C) Equity securities (A) Store of value
(D) Shares on the stock exchange (B) Unit of account
(C) Medium of exchange
(D) Standard of deferred payment
30. When injections of capital are greaterthan
withdrawals, national income will
34. Which ofthe following isNOT a function
(A) increase of the financial sector?
(B) decrease
(C) remain constant (A) Providing a safe place for saving
(D) be in equilibrium (B) Preventing liquidity within the
economy
(C) Facilitating payments for goods
Item 31 refers to the following diagram and services
which shows the circular flow of income. (D) Making credit available to
households and firms
r +i Househlds i - r
Ill '----r 35. If Country X has a comparative advantage
X, rPayment in the production of computers over
I I for
goods Country Y then
' and sen'ices
l..l (A) Country X will export all its
L- J computers
-l_Flrms ,t+ (B) X nor Country
neither Country
Y should specialize in the
31. Line X represents payment production of computers
(C) the opportunity cost of producing
(A) for goods taken on credit computers is higher in Country
(B) to the factors of production X than in Country Y
(C) of taxes to the government (D) the opportunity cost of producing
(D) to financial institutions for loans computers is lower in Country X
. than in Country Y
32. When a financial asset is described as

liquid, it means that
(A) it is a weak financial asset

(B) its price or value fluctuates often
(C) it can easily be converted into cash
(D) it is not acceptable as a medium of
exchange

012160r0/F 2015
36. Which of the following,is NOT a financial ltem 39 refers to the following table which
institution in, an, eConomy? shows the flow of money in an economy.
:.-:
(A) Trade union ,

x Y
(B) Credit union
I Borrowers Savers
(C) Commercialbank
(D) Development bank II Savers Borrowers
fI III Lenders Borrowers
IV Borrowers Lenders
(
T
37. Which of the following statements BEST

' describes a fiscal deficit? 39. The flow labelled III represents
(A) Government revenue exceeds (A) loanable funds
government borrowing (B) national income
(B) Government revenues are greater (c) goods and services
than subsidies (D) factors of production
(C) Government spending equals
- govemment revenue
(D) Government spending exceeds 40. 'Resources, both human and physical, are
government revenue required to produce goods'.
Ihe statement above MOST accurately

38. Fred earns his money by occasionally describes
doing jobs such as painting, repairing and
cleaning while Wilma earns her money (A) ' productivity
from occasional babysitting. (B) entrepreneurship
(C) factors of production
In which sector would Fred and wilma's (D) factors of productivity
activities be located?
(A) The formal sector 41. Which of the following is NOT a service?
(B) The foreign sector
(C) The informalsector (A) Education
(D) The financial sector (B) Health care
(C) Motorcycle
(D) Hairdressing

01216010tF 20t5
Item42referstothefollowlngtablewhich 45. Which of the following situations would
shows the rate of inflation and theaverage lead to an improvement in a country's terms
percentage increase, in wages over afour- of trade?
year period.
I. Export prices rise and import prices
Year Rate of Wage fall
Inflation fncrease II. Exportpricesrisefasterthanimport
(o/") (%) prices
20tr 5 20 III. Importprices rise fasterthan export
prices
2012 IO 20
2013 IO 5 (A) I only
2014 l5 5 (B) I and II only
(C) I and III only
42. In which yearwas the increase in real wages (D) II and III only
thc GREATEST?
' (A) 20ll 46. The terms of trade of Country X is 150.

(B) 2012 This is considered to be
(c) 2013
(D) 2014 (A) neutrat
(B) inadequate
(C) favourable
43. which of the following is Nor a (D) unfavourable
characteristic of Caribbean countries?
(A) High debt burden 47. The International Monetary Fund (lMF)
(B) High levels of unemployment functions as a
(C) Low levels of capitalformation
(D) Major producers of manufactured (A) human rights organizatibn
goods (B) regulatory authority for
international trade
(C) large, multinational corporation
44. Which of the following is NOT a benefit maximizing its efficiency
of internationaltrade? through globatization
(D) financial institution that provides
(A) A larger market size strategic guidance to countries
(B) A wider variety of products to ensure financial stability
(C) lncreased efficiency of localfirms
(D) Increased dependency on other
countries

012160t0/F 2015
48. One imporant objective,of CARICOM is 52. Which of the following is NOT
to a 'determinant of demand' for laptop
computers?
(A) improve standafds of living
beginning with smaller states (A) lncome
(B) encourage the economic (B) Price of laptops
development of its members (C) Atax on laptops
(C) maximizemultinationalefficiency (D) Preference for desktop computers
through globalization
(D) provide strategic guidance to
countries to ensure financial 53. The central bank calls for an increase in
stability the reserve requirements of commercial
banks. How will this affect the operations
of commercial banks?
49. Ifa country can produce 20 units ofproduct
X or l0 units of product Y the opportunity (A) Their liquid assets will be reduced-
cost of I unit of product Y is (B) Their ability to create credit will
increase-
(A) 0.1 units of product X (C) Their loans to money markets will
(B) I unit of product X increase.
(C) 2 units of product X (D) They will attract less deposits from
(D) 2.5 units of Product X the Public.
50. Which of the following phrases BEST 54. The restriction of international trade
explains the term 'tariff? through tariffs, embargoes, quotas and
exchange controls is referred to as
(A) The amount of subsidies received
by local exPorters (A) globalization
(B) The level of tax that is levied on (B) protectionism
imports entering a country (C) a bilateral agreement
(C) The amount of goods that can be (D) structural adjustment
imPorted into a country
(D) The common ta:c levied by countries
on member countries within a 55. Country A is experiencing a balance of
region payments deficit. Which of the following
measures could be taken to reduce the
deficit in the short-term?
51. Which of the following will contribute
to a surplus on the balance of trade of a (A) Reduce the volume of exPorts to
other countries.
country?
(B) Engage in trade with other low-cost
producers ofgoods.
(A) The value ofexports is greaterthan
the value of imPorts' (C) Increase the importation of goods
(B) The value of imports is greaterthan
from other countries.
the value of exPorts' (D) lmpose restrictions on goods
(C) The volume of exports is greater imPorted from other countries'
than the volume of imPorts'
(D) The volume of imports is greater
than the volume of exPorts'

0r215010/F 2015
56- Which of the following is MOST likely 59. One example of an 'entrepreneur' is
' to lead to greater international investment
(A) Grobarization [3] :;:ffi;::H,

(B) Specialization (D) airline
an
(C) Trade unionism "rlroy""
(D) Currency fluctuation
60. Which of the following is NOT a benefit
of trade liberalization to consumers?
57. Which of the following are ways of
calculating national income? (A) Prices of goods and services will
decline.
I. Income method (B) There will be greater access to a
II- Elasticity method variet5r of goods and services.
III. Expenditure method (C) Cost of providing goods and
services will be lower-
' (A) I and II only (D) Prices of goods and services witl
(B) I and III only increase.
(C) II and III onty
(D) I, II and III
58. The acronym 'FDI'stands for
(A) Foreign Direct Income

(B) Foreign Direct Investment
(C) Fixed Domestic Investment
(D) Floating Domestic Investment
END OF TEST
IF YOU FINISH BEFORE TIME IS CALLED, CI{ECK YOI'R WORK ON THIS TEST.
0t216010/F 2015
cANDlrrar['. - PI.['.AS['. NOT['.!
PRINT your nome below alrd return this booklet

with youranswersheet ['allure to do 3o may reult
in disqualificrtlon.
TEST CODE 01216010
FORM TP 2016059 MAY/JUNE 2OI6

CARIBBEAN SECONDARY EDUCATION CERTIFICATE@
EXAMINATION
ECONOMICS
Paper 01 - General Proficiency
I hour 15 minutes
01 JUNE 2016 (p.m.)
I. This test consists of 60 items. You will have I hour and l5 minutes to answer them.
3. Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item you
are about to answer and decide which choice is best.
4. On your answer sheet, find the number which corresponds to your item and shade the space having
Sample Item

because it deals with
(A) the economy

@@o@
(B) the environment
(C) human behaviour
The best answer to this item is "human behaviour", so (C) has been shaded.
5 If you want to change your answer, erase it completely before you fill in your new choice.
6. When you are told to begin, turn the page and work as quickly and as carefully as you can. If you
cannot answer an item, go on to the next one. You may return to that item later.
I
I
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO
-
II
Copyright @ 2014 Caribbean Examinations Council
--
I
- All rights reserved.
1
I Which of the following rewards accrues to Item 5 refers to the following diagram
the factor of production called 'capital'? which shows the relationship between the
production of Good X and Cood Y by a
(A) Rent certain country using all its resources.
(B) Profit
(c) Wage
Good X
JDf Interest
2. Which of the following is a component of

a country's balanceof payments account?
-<frI- The value of imports and exports

(B) The value of government 0
expenditure
(C) The country from which goods are 5 What name is given to the curve represented
imported above?
(D) The number of commercial banks
in the country (A) Demand curve
(B) Market supply curve
(C) Individual supply curve
3. Trade liberalization can be defined as -,=(E) --1 Production possibility curve
(A) an increase in trade deficit

(B) _ an increase in trade surplus 6. Some Caribbean countries are experiencing
--(C)
" the removal of trade barriers a lack of industrialization, a low standard
(D) trading between many countries of living and a high population growth
rate. Which of the following terms BEST
describes the economies ofthese countries?
4. Which of the following strategies is
NOT used by governments to influence (A) Advanced
economic decisions of businesses? (B) - Developed
*q Developing
-(*)-'- Increasing retirement benefi ts (D) Agricultural
(B) Passing minimum wage legislation
(c) Regulating the emissions of toxic
waste 7 Country X allows the foreign exchange
(D) Identifying areas where businesses market to determine the rate of its domestic
should be located currency based on the forces of demand
and supply. This type of exchange rate is
referred to as
(A) fixed
(B)
-pegged
$f. floating
(D) managed

0l2l50l olF )ol6
-3-
8. An outward shift in a production possibility 12. Which of the following accounts is NOT
curve can be caused by an included in the balance of payments
account?
(A) lncrease ln pnces
(B) increase in wages 'r'(A) Asset account
(c) - increase in imports (B) Capital account
),Dr= improvement in technology (c) Current account
(D) Offi cial fi nancing account
9 Choice is the MOST important issue in

economics because 13. In seeking to stabilize the economy of
a Caribbean territory, the role of the
(A) incomes are not evenly distributed government should be to
(B) most countries have a low per
capita income (A) increase its taxes, borrow more and
-(e ) resources are scarce relative to forecast revenues
consumers'wants (B) encourage skilled labourers to stay
(D) money is scarce in relation to a within the territory
country's resources
' review its policy on taxation,
,'!Pl
borrowing and expenditure
(D) import more consumer goods to
10. Prices of goods in market economies ' satisfy the needs of the people
fluctuate while prices of goods in planned
economies tend to be fixed. The MOST
likely reason for this difference is that in 14. Jamaica buys motor cars from Japan while
the market economy, Japan buys coffee from Jamaica. This has
resulted in a balance of payments deficit
(A) profits are lower for Jamaica. Which of the following
(B) producers are never efficient statements BEST describes Jamaica's
(c) there are higher unemployment situation?
"-" levels
(D) demand and supply forces -)r'- Jamaica has to pay Japan more
determine prices money.
II. Japan has to pay Jamaica more
._.-..,.-- mOngy.
II Which ofthe following is LEAST likely to ,.LJl:' Jamaica needs to export more to
affect the efficiency of labour? Japan.
(A):_ Worker motivation (A) I only

J;B)'' Firm's profitability
(C) Levelof technology
4$f
(c)
I and III only
II and III only
(D) Education and training (D) I, II and III

0l 21601 otF 2016
4
15. Price elasticity of supply refers to the Item 17 refers to the following diagram
responsiveness of the quantity supplied to which shows the price and quantity
a change in demanded for Cood X.
-wf
'(e)
prrce
income s
(c) demand
(D) prices of substitutes Price
Dt
Item 16 refers to the following table which
shows tlre amount of money associated D
with various items. o Quantity demanded
Item Amount ($)
17. The movement of the demand curve of
;P.gnsumer consumption 800 Good X from D to D, results from an
Government spending 300 increase in
Gross investment
Export of goods
Import of goods
100
80
s0
.4r
(B)
consumer rncome
the price of Good X
(c) .
the price of a complement
(D) the cost of inputs used to produce
16. Based on the information in the table. the Good X
gross domestic product (GDP) is
(A) $l 2oo l8 According to economic theory, 'second

(B) $r 230 hand'cigarette smoke is an example of a
*@\-
(D)
$1 280
$2200 (A) merit good
(B) . private good
iay' (C) positive externality
Li\i ) *gf -
c.l I t
negativeexternality

5
Item 19 refers to the following table which 20. Which ofthe following financial irrstrunrents
shows units of labour and total output of are issued by the central bank on behalfof
labour. the government?
Units of Labour Total Output "1,I'

)-, WY Treasury bills
6 372 (B) Corporate bonds
7 455 (C) Equity securities
8 496 (D) Shares on the stock exchange
9 53r
l0 580
19. What is the number of labour units that

produces the HIGHEST average product
of labour?
(A) 6
(B) 7
(c) 8
(D) 9
Item 2l refers to the following curves which show the demand for some products
PPD
D D
a 0 a
I II
P P D
0 a 0 D a
Itr IV
21. Which of the curves above indicates that demand for the product is perfectly elastic?
(A) |
(B) II
-
g'Irr
(D) rv

0l 2l 601 olF )ot 6
-6
22. The MAIN objective of a credit union is to 25 A normal supply curve for farm produce will
slope upwards from left to right if farmers
(A) z encourage 'summer'spending
encourage thrift among its (A)-"- pass on increased costs to customers
"W
(C)
members
provide credit
agencies
to government r\
(c)
are willing to produce more as
prices increase
increase their profit margins as
(D) provide investment funds for prices increase
companies (D) are willing to increase supply as
demand increases
23. The term 'recession'refers to a period of

26. In 2013, the government's fiscal budget
(A) increased economic activity showed that total estimated revenue
(B) gradual increase in the GDP of a was GREATER than total estimated
country expenditure. The difference ii known as
(c) national economic prosperity in a
country {k)' a budget surplus
)w temporary economic decline (B)

(c)
a budget deficit
a balanced budget
(D). an accumulated budget
Item 24 refers to the following diagram
which shows the demand for and supply
ofgrapes. Item27 refers to the following information
which relates to a manufacturing company.
Price z1
t-/
L)
l-/
$r0 000)
Do Total fixed cost
Total cost $s0 d00'- 'ep
,t,J
Output 100 units
p, v 27. The average variable cost is
(A) ) $ 4oo
r00
$
--T J
JPf
(c)
p, $l
000
Do
(D) $4 000
0 q. q,
Quantity
24 What is the equilibrium price and quantity

demanded?
.iF-,
((A)/ p"andq"
tBt po and q,
(C) p, and q,
(D) p, and q.

-7 -
Item 28 refers to the following diagram Item 30 refers to the following table which
which shows the simple circular flow of shows the price of a product, the quantity
income for an economy. demanded (QD) and quantity supplied
(QS).
Firms
Price QD Qs
($) (Units) (Units)
Y
l0 8 20
I
8 t2 t6
Households 6 t4 t4
4. l6 12"
28. The nominalflow labelled Y refers to 2 29 8
(A) savings 30 At which of the following prices are there

(B) investment @
d
(D)
factor incomes
factors of production 6 $2 and $4
(B) $4 and $6
(c) $6 and $8
29. The term 'money supply'refers to the (D) $8 and $10
(A) total amount of gold, silver and

other precious metals in reserve Item 31 refers to the following table which
(B) total asset base of the institutions shows production costs of three units of a
in the financial sector product.
(c) amount of money traded in the
/-, foreign exchange market Total Fixed Marginal Total
Units
(D) total stock of money in an economy Cost ($) Cost ($) Cost ($)
at a given moment I 100 25 125
2 130
L,L,A
5 60 I
31 What is the total cost when three units

are produced?
(A) $l 25
(B) $l 30
(c) $lss
rv)' $ 190

01216010/F 2016
-E-
Item 32 refers to the following information 33 A coulttty faccs tlrc ftrllowirrg ;rlotlrrc:tiorr
which relates to the cost of output of a combinations:
product.
X = production with uneryployed resources
:
Y unattainable production combination
Z : efficient production combination
Output Level Total Cost
100 l0 000
l0l r0 500 Which of the following production
possibility curves (PPCs) correctly
32 The marginal cost is illustrates the information above?
-/
,(A) $ soo (A) Capital
(B) $lo 000 goods
(c) $lo loo x

(D) $lo soo Y
o 7, Consumer
goods
(B) . CaPital
goods
.Y
o Consumer
goods
(C) CaPltal
goods
.Y
x
oZ
o' Consumer
goods
goods
oY
oX
o Consumer
goods
GO ON TO THE NEXT PACE

-9-
34 The functions of a central bank do NOT Items 36-37 refer to the fo llowing diagram
include which shows the demand and supply
curves for Good X. D, and S, represent
(A) issuing of notes and coins the original respective demand and supply
tq\ providing loans to the public curves.
(c) managing foreign exchange rates
(D) maintaining the foreign currency D2
accounts of the government
D sr
Item 35 refers to the following table which P

shows the market demand and supply at
Pr
given prices.
.D2
Po
Price of Market Market

P2
Potato per Demand Supply
s, s2
Ks ($) (000 kg) (000 kg)
4 700 100 0 x
-'& s00 200
Ytz) 350 350 36. What is the ORIGINAL equilibrium price?
l6 200 530
20 r00 700 Po
P
35. The equilibrium price is (c) P,
(D) P3
(A) $4
$8
B
(D)
$12
$16
37. Holding the supply curves fixed, a shift
in the demand curve ONLY from D,D, to
D,D, will cause the original equilibrium
price to
(A) fallfrom P3 to Po
(B) fall from Po to P,
I
(c) rise from Pr to P,
rise from Po to P,
38. A student has a daily allowance of $20 with

which he can purchase chickert and chips
or a burger, but NOT both. If he put'chases
the chicken and chips, the opportunity cost
of his decision will be the
d'- i
\111/ burger he gave up
(B) satisfaction lre gets from burger
(C) price of the chicken and chips
(D) satisfaction he gets from the
chicken and chips

^1.tzn1 r\tc arllA
- t0 -
39 A government reduces tax on carrots. This 44. The relationship between price and quantity
causes the price of carrots to fall by 50o/o. demanded ofa normal good is described as
Quantity demanded then rises by SD!/p.The
price elasticity of demand for carrots in this (A) direct
a shift
case is
(A)
&
(D)
inverse
indirect
p
0
0.4
I
2.5 45 A countrv has a comoarative advantase in
the production offfimmodity when it
40 The measure that is MOST likely to reduce (A) canproducemoreofthatcommodity

inflation is than any other country
(A)
(B)
an increase in bank lending
an increase in import duties
a reduction in direct taxation
0
(C)
can produce that commodity at a
lower opportunity cost tfran any
other country \
has a larger share of the market for
a reduction in government that commodity than any other
@ expenditure country
(D) accountsforagreaterpercentageof
global sales of that commodity
4t The amount of net exports in an economy than any other country
l .j
is given as -$10m. This indi"6ates that the
7 ,(.L
value of exports is L U
46. A firm produces 29 pairs of high q
(A) zero leather shoes at a fixed cost of$20 000 and
(E equal to imports a variable cost of
$9 000. On pr6ducing
@) less than imports the 30th pair, the-new total cost rises to
(D) greater than imports $30 000 ..-)
.J
,I
c'IL'
What is the marginal cost of the 30th paii?
42. In economics, the excess of human u'ants
over existing resources is known as $ 1000
$ 9000
greed (c) $20 000
ffi
'(e)
scarcity
opportunity cost
(D) $29 000
(D) economic decline

47 In theory, open competition on a world
scale facilitates
43 Large firms can achieve savings in
unit costs as a result of advertising and (A) high levels of dependency on
packaging. These kinds of economies of tourism
scale can be classified as (B) increases in trade unions'
negotiating power
(A) financial government manipulation of
'
/'CI\ technical market outcomes
KC) ) marketing (D) the development of a competitive
D' managerial advantage based on price
i
GO ON TO THE NEXT PACE
Z.A1 niE /)n 1 (
^1.1
- ll -
t-,
48 Which ofthe following isNOTa determinant 52. The economic system where major
of a shift in demand for laptop computers? economic decisions are made by private
individuals and businesses ii known as a
Income
W
(c)
Price of laptop computers
A preference for desktop computers
.g9/free market
(B) planned economy
(D) A rise in the price of desktop (C) controlled economy
computers (D) subsistence economy
49 Which of the following factors will 53. Production can be defined as the
contribute to a surplus on the balance of
trade of a country? (A) interaction between buyers and
sf
sellers
w{ The value of exports is greaterthan
the value of imports.
transformation
outputs
of inputs into
(B) The volume of exports is greater (c) pricing of resources according to
than the volume of imports. demand
(c) The volume of imports is greater (D) economic relationship between
than the volume of exports. output and input
(D) The value of imports is greater than
the value of exports.
54 Which ofthe following measures is LEAST
likely to be used to reduce iniports?
50 The currency of a country may appreciate
in value if there is an increase in (A) Tariff
(B) Quota
(A)
pr-
the demand for its imporls
the demand for its exports
-{w
(D)
Subsidy
Embargo
(c) its balance of trade deficit
(D) its balance of payments deficit
55. A pure public good can be described as
51 When an economy which was once (A) diminishable

booming suddenly starts to experience low
demand for goods and services, leading
ry
(c)
zero-priced
excludable
to companies and businesses closiag (D) rivalrous
down, rising unemployment and falling
standards of living, the country is said to
be experiencing 56. Which ofthe following isNOTan example
of a primary product?
*A\ a recession
(B) a revaluation (A) Banana
(C) an externality (B) Bauxite
(D) a disequilibrium
@f Furniture
(D) Crude oil

01216010/F 2016
!
-t2-
Item 57 refers to the following table Item 60 refers to the following table which
which shows the current account section shows manufacturing output as a share of
of a country's balance of payments for the gross domestic product (CDP) for four
year 2014. countries: W, X, Y andZ.
Item ($M) Country

Invisible imports
Invisible eiports
*50
80
\ \'r
')/J' Year w
(%)
x
("/")
Y
("/")
Z
("/"\
Visible imports
Visible exports
-ex I
2000
990 28
23
40
34
29
26
29
28
57 What is this country's balance of 2010 l9 3l 2t 23
merchandise trade?
@
(B)
_S38 M
$20 M
60 The table shows that ALL countries
experienced
(c) $38 M
(D) (A) a decline in the gross domestic
$48 M
product
(B) a decline in the sale of manufactured
58. Which of the following is NOT a function products
of the International Monetary Fund? (cl an increase in employment in the
manufacturing sector
(A) Fostering global monetary @f a decline in manufacturing output
6(c)
cooperation
Settling trade disputes between
countries
Promoting the financial stability of
,'l'( O
as a share
product
of gross domestic
L'/
countries
(D) Assisting countries with balance of
payments defi cit diffi culties
59 The restriction of international trade

through tariffs, embargoes, qubtas and
exchange controls is referred to as
w
4c>
globalization
protectionism
a bilateralagreement
(D) structural adjustment
END OF TEST
CSEC Economics May/June 2017
1. Which of the following rewards accrues to the Item 5 refers to the following incomplete table which
factor of production called ‘capital’? shows production cost of three units of a product.
Total Marginal Total

(A) Rent
Unit Fixed Cost ($) Cost ($)
(B) Profit
Cost ($)
(C) Wage
1 100 25 125
(D) Interest 2 130
3 60
2. Ana is considering purchasing a new laptop

computer. Which of the following factors is LEAST 5. What is the total cost of producing three units of
likely to influence her decision? the product?
(A) Her level of income (A) $125

(B) The price of the laptop computer (B) $130
(C) The cost of producing the laptop computer (C) $155
(D) Laptop computer advertisement in the (D) $190
newspapers
6. Which of the following is NOT one of the ways in

3. Which of the following factors causes money to which governments influence economic decisions
lose value and become less effective as a medium of the business?
of exchange?
(A) Increasing retirement benefits
(A) Inflation (B) Passing minimum wage legislation
(B) Market Failure (C) Regulating the emissions of toxic waste
(C) Unemployment (D) Identifying areas where businesses should be
(D) Negative externalities located
4. Which of the following is a primary product?
(A) Truck
(B) Bread
(C) Bauxite
(D) Clothing
9. An outward shift in a production possibility curve
can be caused by an
Item 7 refers to the following diagram which illustrates the
production possibility frontier for an economy that is
(A) Increase in wages
capable of producing bauxite and sugar in different
(B) Increase in prices
combinations.
(C) Increase in imports
(D) Improvement in technology
Sugar
10. ABC Ltd. Purchases raw cotton and produces
fabric. XYZ Ltd. buys fabric from ABC Ltd. and
makes T-shirts which it markets directly to clothing
x stores. In which sector of economic activities are
both firms engaged?
(A) Tertiary
(B) Primary
(C) Quaternary
(D) Secondary
Bauxite
11. An advantage of a planned economic system is

7. Point X on the graph represents
that
(A) Economic growth
(A) there is usually a more equitable distribution
(B) Unemployed resources
of wealth
(C) An efficient combination
(B) firms have greater incentive to produce
(D) An unattainable combination
(C) workers are more motivated and diligent
(D) consumers have a wider variety of goods
8. A normal supply curve for farm produce will slope
upwards, from left to right, if farmers
12. The MAIN objective of a credit union is to
(A) Pass on increased cost to consumers
(A) Provide scholarships to students
(B) Are willing to produce more as prices increase
(B) Encourage thrift among its members
(C) Increase their profit margins as prices increase
(C) Provide credit to government agencies
(D) Are willing to increase supply as demand
(D) Provide investment funds for companies
increase
13. Country X has a very low unemployment rate as 16. The government of Country X decides to switch
most of its citizens work overseas for 6-8 months resources from manufacturing to crop production.
during the year. The opportunity cost of this decision is the
This type of unemployment can be classified as (A) Profit earned by farmers

(B) Reduction of manufacturing
(A) Cyclical
(C) Wages earned by farmers
(B) Real wage
(D) Rent for the land on which crops are grown
(C) Seasonal
(D) Structural 17. A government reduces taxes on carrots. This causes
the price for carrots to fall by 50%. Quantity
demanded then rises by 50% The price elasticity of
14. Prices of goods in market economies fluctuate demand for carrots in this case is
while prices for goods in planned economies tend (A) 0
to be fixed. The MOST likely reason for this (B) 0.4
difference is that in the market economy, (C) 1
(D) 2.5
(A) Profits are lower
(B) Producers are never efficient
Item 18 refers to the following curves which shows the
(C) There are higher employment levels
demand for some products.
(D) Demand and supply forces determine prices
15. Item 15 refers to the following diagram which

illustrates the production possibility frontier for an
economy in Year 1 (AA) and Year 2 (BB).
Capital I II
goods
B X
III IV
B A Consumer
goods
18. Which of the curves above indicates that demand
15. From the diagram below, it can be deduced that
for the product is perfectly elastic?
(A) point X was unattainable in Year 2
(B) point X was efficient in Year 1 and Year 2
(A) I
(C) There was decreasing opportunity cost in
(B) II
Year 1 and Year 2
(C) III
(D) there was economic growth between Year 1 and Year 2
(D) IV
19. Which of the following is NOT an example of a 24. Which of the following is TRUE about the financial
factor of production in a commercial bank? institutions?
(A) The building (A) They provide insurance protection to speculators

(B) The bank’s vault (B) They are free from government interference
(C) Shareholders of the bank (C) They place emphasis on consumer education and
(D) Special savings accounts for students national development
(D) They channel funds from those who have saved to
those who wish to borrow
20. Shinelle spends 0.02% of her monthly income on a
particular good. Her demand for this good, in
terms of price, can be described as 25. A pure public good can be described as
(A) Elastic (A) Excludable

(B) Inelastic (B) Zero-priced
(C) Perfectly elastic (C) Diminishable
(D) Perfectly inelastic (D) Complimentary
21. Open competition on a world wide scale facilitates 26. Which of the following is usually a consequence of
widespread retrenchment in a country?
(A) High level of dependence on tourism
(B) Increases in trade unions’ negotiating power (A) Reduction in crime rate
(C) Government manipulation of market outcomes (B) Increase standard of living
(D) The development of comparative advantage (C) A fall in the standard of living
(D) Equality in income distribution
22. The term ‘money supply’ refers to the

27. Globalization may be MOST accurately defined as
(A) The total stock of money in an economy at any the
moment
(B) Amount of money traded in the foreign exchange (A) Movement of technology and financial markets
market worldwide
(C) Total assets base of the institutions in the financial (B) Movement of tangible and intangible goods
sector among countries
(D) Total amount of gold, silver and other precious (C) International trade of goods and services
metals in the reserve including skilled workers
(D) Integration of financial services, technology,
and commodity markets worldwide
23. The organization responsible for the regulation
and control of the financial sector is the
(A) Treasury
(B) Central Bank
(C) Board of Currency Control
(D) Institute of Monetary Affairs
28. Which of the following is LEAST likely to occur 31. Line X represents payment
when there is market failure?
(A) Goods taken on credit
(A) A decline in social welfare (B) To the factor of production
(B) An increase in poverty through the country (C) Of taxes to the government
(C) An increase in the level of unemployment among (D) To the financial institutions for loans
skilled and unskilled labour
(D) An adequate amount of goods and services for
consumers Item 32 refers to the following diagram which shows the
price and quantity demanded for Good X.
29. Governments often put measures in place to Price

control monopolies because monopolies S
(A) Set fair prices

(B) Restrict supply D₁
(C) Earn normal profits
(D) Promote consumer sovereignty D
0 Quantity
32. The movement of the demand curve
30. Which of the following best defines the term Of Good X from D to D₁ results from an increase in
‘protectionism’?
(A) Consumer income
(B) The price of good X
(A) Restriction of imports into the country
(C) The price of a complement
(B) Dependency on a primary product for export
(D) The cost of inputs used to produce good X
(C) Free movement of goods and services among
countries Item 33 refers to the following market supply curves.
(D) Establishment of a trade bloc among a group of
countries I P II P
S
Item 31 refers to the following diagram which shows the S

circular flow of income.
Q Q
Households III P IV P
Payment for S
x Goods and
Services S
Firms Q
(D) Flow of funds into the household sector
33. Which of the following curves shows that price 37. Which of the following statement best describes a
elasticity of supply is unitary. fiscal deficit?
(A) I (A) Government revenue exceeds government
(B) II borrowing
(B) Government revenues are greater than subsidies
(C) III (C) Government spending equals government revenue
(D) IV (D) Government spending exceeds government
revenue
34. Which of the following is NOT a function of the

financial sector?
38. Which of the following is an advantage of a market
economic system?
(A) Providing a safe place for savings
(B) Preventing liquidity within the economy
(A) There is equality in income
(C) Facilitating payments for goods and services
(B) It gives choice to consumers
(D) Making credit available to households and
(C) It reduce pollution and congestion
firms
(D) Price control measures can be effected
35. Which of the following has led to rapid expansion 39. Which of the following is a positive effect of ‘brain
of e-commerce? drain’ phenomenon for the country of origin?
(A) The emergence of the internet (A) Sustained growth

(B) The formation of regional groupings (B) Source of remittances
(C) The increase in the levels of income (C) Guaranteed development
(D) The rise in inflationary pressures (D) Discovery of more talent
Item 36 refers to the following diagram. 40. “Resources, both human and physical, are
required to produce goods and services.”
Financial Sector
The statement MOST accurately describes
Savings Loanable
Deposit funds for (A) Productivity
Sese (B) Entrepreneurship
Investment/
Firms/Households
Spending (C) Factors of production
(D) Factors of productivity
36. The diagram best describes the
(A) Functions of the central bank

(B) Flow of deposit into the financial sector
(C) Role the financial sector performs for
customers
41. Country A is experiencing a balance of payment 45. Which of the following is a likely DISADVANTAGE
deficit. Which of the following measures would of international trade?
the government MOST likely use to reduce the
deficit in the short term? (A) Economies of scale
(B) Improved international relations
(A) Reduce the volume of exports to other countries (C) Increased consumer choice and variety
(B) Engage in trade with other low-cost producers of (D) Stiff competition of local industries
goods
(C) Increase the importation of goods from other
countries 46. The terms of trade of country X is 150. This is
(D) Impose restrictions on goods imported from other considered to be
countries
(A) Neutral
(B) Inadequate
42. The term recession refers to a period of (C) Favourable
(D) Unfavourable
(A) Increased economic activity
(B) Gradual increase of GDP of a country
(C) National economic prosperity in a country 47. The currency of a country may appreciate in value
(D) Temporary economic decline if
(A) The demand for its imports rises

Item 43 refers to the following economic (B) The demand for its exports rises
measures. (C) Its balance of trade deficit rises
(D) Its balance of payment deficit rises
I. Reducing the bank rate
II. Increasing interest rate
III. Decreasing money supply 48. The economic system where major economic
decisions are made by private individuals and
43. Which of the measures above can be used to businesses is known as a
reduce inflation?
(A) Free market economy
(A) I and II only (B) Planned economy
(B) I and III only (C) Controlled economy
(C) II and III only (D) Subsistence economy
(D) I, II and III
44. Which of the following is NOT a benefit of

economic integration?
(A) Higher cost of living

(B) Increased productivity
(C) Improved competitiveness of products
(D) Mutual benefits among member countries
Item 49 refers to the following diagram which shows the 51. Which of the following will contribute to a surplus
price of an item and the quantity demanded and supplied on the balance of trade of a country?
before and after the item is subsidized. S is the supply
curve before a subsidy is given. (A) The value of exports is greater than the value of
Price S imports
(B) The value of imports are greater than the value of
exports
Ss (C) The volume of exports are greater than the volume
Po of imports
(D) The volume of imports are greater than the
P1 volume of exports
D
52. Which of the following is referred to as the
0 Q0 Q1 Quantity banker’s bank?
49. As a result of the granting of the subsidy, it is (A) The World Bank
expected that (B) The Central Bank
(C) A commercial bank
(A) Supply will increase (D) An investment bank
(B) Supply will decrease
(C) Demand will decrease
(D) Price will increase 53. Country X is obtained an inflow of $300, 000, 000
in foreign direct investment. IN which section of
the balance of payments accounts of Country X,
50. A country has a comparative advantage in the will this be recorded?
production of a commodity when it
(A) Capital
(A) Can produce more of that commodity than any (B) Visible trade
other country (C) Invisible trade
(B) Has a larger share of the market for that (D) Balance of trade
commodity than any other country
(C) Can produce that commodity at a lower
opportunity cost than any other country 54. The restrictions on international trade through
(D) Accounts for a greater percentage of global sales tariffs, embargoes, quotas, and exchange controls
of that commodity than any other country is referred to as
(A) Globalization
(B) Protectionism
(C) A bilateral agreement
(D) Structural adjustment
55. The term ‘e-commerce’ refers to Item 59 refers to the following table which shows a
country’s current account of its balance of payment for the
(A) Ecotourism year 2015.
(B) Export businesses
(C) Electronic businesses Item ($M)
(D) Economies of scale Invisible imports 50
Invisible exports 80
Visible imports 70
Visible exports 32
56. Country X allows foreign exchange markets to
determine the rate of its domestic currency based
on the forces of demand and supply. This type of 59. What is this country’s balance of merchandise
exchange rate is referred to as trade?
(A) Fixed (A) -$38M

(B) Pegged (B) $20M
(C) Floating (C) $38M
(D) Managed (D) $48M
57. Which of the following is referred to as a 60. If a country can produce 20 units of products X or
withdrawal from the circular flow of income? 10 units of product Y, the opportunity cost of 1
unit of a product Y is
(A) Exports
(B) Savings (A) 0.1 units of product x
(C) Investment (B) 1 unit of product x
(D) Household income (C) 2 units of product x
(D) 2.5 units of product x
58. The acronym FDI, in economics, means
(A) Foreign Direct Income

(B) Foreign Direct Investment
(C) Fixed Domestic Investment
(D) Floating Domestic Investment
S db C S
26.
(A)
(B)
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Economics June 2022 P1

CSEC Economics P1 Booklet

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CSEC Economics P1 Booklet

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CARIBBEAN E XAM I NATI O N S COUNCIL

SECONDARY EDUCATION CERTIFICATE

READ THE FOLLOWING DIRECTIONS CAREFULLY

Economics may be described as a “social

Copyright © 2008 Caribbean Examinations Council.

1. Economics may be described as a “social 4. Which of the following describes the

7. In a mixed economy, resources are allocated

(A) the government alone

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10. What is the MOST appropriate label for Y?

(A) Money supply

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(A) A visit to the doctor P

12. What type of economic system exists in

Which sector will benefit MOST as a result

(A) The primary industry in the private

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Item 18 refers to the diagram below.

Costs borne by third party

Rare birds are no Local councillor

Bather rushed to Playgroup mothers

What type of market failure does the above situation represent?

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(A) taste (A) surplus

21. A market structure in which there are many

(A) a monopoly Price ($) QD QS

(A) A change in consumer preferences

Price (A) goods X and Y are substitutes

0 Quantity of soft drinks

What can explain this change?

(A) An increase in the advertising of soft

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30. Rob and Steele joined an underground group

Which quality of money is the group eroding?

From this graph, it may be concluded that (A) Prices

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Item 35 refers to the data below on Sea Island.

Year Annual Percentage Annual Decline

2000 1.4 3.5

(A) It has declined.

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Which government objective was achieved?

(A) Price stability

Item 39 refers to the following diagram.

42. In a floating exchange rate system, what

43. The following statement represents a part of

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45. If there is an increase in demand for imports “Expenditure-reducing measures may be

(A) There was a surplus throughout the period.

(A) produce a greater variety of goods

52. Which of the following is a feature of (A) increasing levels of employment

(A) economic integration

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(A) Caribbean Basin Initiative

Item 58 refers to the following table.

(A) economies of scale

SECONDARY EDUCATION CERTIFICATE

SPECIMEN PAPER 2008

Item Key Syllabus Profile Item Key Syllabus Profile

Profile 1 – Knowledge and Comprehension

TEST CODE 01216010

• .READ THE FOLLOWING DIRECTIONS CAR FULLY-

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

3. Sita and Peter are planning to buy a new