IFYEC002 Economics Examination 2018-19 II
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IFYEC002 Economics
Examination
2018-19
Section A
Answer ALL questions. This section carries 40 marks.
Questions A1 – A20: select either A, B, C or D and write your answer in the
Answer Booklet provided.
Question A1
Market failure is defined as occurring
A when firms go bankrupt.
B when firms make normal profit
C when consumers cannot afford luxuries.
D when free markets fail to efficiently allocate scarce resources.
Question A2
The diagram below shows the demand and supply curve for carrots.
Price |
Q |
price charged for carrots? [ 1 ]
A A fall in the price of fertilisers used to grow carrots
B An increase in the minimum wage for farm workers
C There is a fall in the price of cucumbers
D The government release some information regarding the health benefits
of eating carrots
Question A3
monetary policy? [ 1 ]
A A reduction in company taxes to encourage investment
B An increase in the rate of interest to reduce inflation
C A fall in the exchange rate to increase exports
D Investment into education and training
Question A4
Which one of the following is the best definition of household saving?
A Investments into stocks and shares
B An injection into the circular flow of income
C Disposable income that is not spent on consumption
D Cash deposited in a bank
Question A5
Which of the following is least likely to cause a shift to the right of a country’s production possibility frontier?
A An increase in labour mobility
B An increase in the money supply
C An increase in immigration
D Technological advancement
Question A6
Other things being equal, an appreciation in the value of the pound against the euro is most likely to occur if
A interest rates are lowered.
B the number of European tourists visiting the UK increases. C there is an increase in the money supply.
D UK imports from countries using the Euro increase.
Question A7
The diagram below shows the market demand for smoke alarms when consumers have imperfect information about the benefits of installing a smoke alarm. If consumers had full information, the market demand for smoke alarms would be D2.
Price |
P2 |
P1 |
P0 |
Quantity |
Which one of the following policies is most likely to ensure that consumption and production of smoke alarms is at the socially optimum
level? [ 1 ]
A A subsidy of P1 – P0
B A subsidy of P2 – P0
C A maximum price of P2
D A maximum price of P0
Question A8
The government has implemented an expansionary fiscal policy. Which of the following macroeconomic changes are most likely to happen?
A An increase in employment and a rise in government borrowing
B An increase in consumption and a rise in savings
C A fall in imports and a decrease in inflationary pressure
D A fall in consumption and a rise in government spending
Question A9
Which one of the following would be considered by an economist to be a
factor of production? [ 1 ]
A A car purchased by a consumer
B A bank loan
C Government spending on pensions
D A car purchased by a taxi firm
Question A10
The diagram below shows a shift in the long run aggregate supply curve for an economy from LRAS1 to LRAS2.
Price
Level
LRAS2
P1 |
P2 |
AD |
Real National Output |
[ 1 ]
A has rising demand.
B is experiencing cyclical unemployment.
C has improved its long-run economic growth potential.
D is experiencing deflation.
Question A11
can be inferred from this information? [ 1 ]
A Product X is in high demand
B There are many substitutes available for Product X
C Product X is an inferior good
D A rise in the price of Product X will increase the firm’s revenue
Question A12
The diagram below shows the actual and trend GDP for an economy over time.
Real
GDP
Actual GDP |
Z |
|
Time
When is the economy shown to be in recovery?
A At Point X only
B At Point W and Point Z
C Between Point X and Point Y
D Between Point W and Point Z
Question A13
A monopolist will produce where
A marginal revenue = marginal cost.
B marginal revenue = 0.
C average revenue = average cost.
D total revenue is greater than total cost.
Question A14
The table below shows the index of real GDP for the UK before and after the
2008–09 financial crisis.
|
2007 |
2008 |
2009 |
2010 |
2011 |
UK Index of Real GDP 2009 = 100 |
105.8 |
104.3 |
100.0 |
101.8 |
102.4 |
From the data it can be inferred that in the UK
A
B
C
D
real GDP fell by 3.4% between 2007 and 2011.
the annual rate of inflation was minus 1.5% in 2008.
the rate of economic growth was lower in 2011 than in 2010. total output of the economy fell by 5.8% between 2007 and 2009.
Question A15
The table below shows the quantity demanded and supplied of a good at different prices
Price per unit (£) |
Number of units demanded |
Number of units supplied |
£5 |
800 |
200 |
£6 |
700 |
300 |
£7 |
600 |
400 |
£8 |
500 |
500 |
£9 |
400 |
600 |
£10 |
300 |
700 |
If the government were to offer a producer subsidy of £2 per unit on this product, the new equilibrium price would be
A B C D |
£7 £8 £9 £10 |
Question A16
Which of the following is an example of market failure?
A A subsidy given to private sector firms.
B The government overproducing a merit good.
C Government provision of national defence.
D The government allowing the price of oil in the free market to rise. Question A17
Over a period of years, a country experiences deflation. It can therefore be concluded that
A real wages have increased.
B the real value of money increased.
C the value of savings must have fallen
D unemployment must be rising.
Question A18
Protectionism is most likely to be justified to
A support an established firm.
B boost profits of monopoly firms.
C increase imports.
D protect non-renewable resources.
Question A19
A shift to the left of a supply curve of a product can be caused by
A a tax on the product.
B the entry of new firms into the industry.
C a rise in productivity.
D a rise in the price of a substitute good.
Question A20
The diagram below shows the aggregate demand and short run aggregate supply curves for an economy, where X is the initial equilibrium.
SRAS3 |
AD2 |
Real National Output |
All other things being equal, what would be the new equilibrium position of the economy following a rise in commodity prices and a fall in exports?
A
B
C
D
A
B
C
D
Question A21
Sugar tax may not solve Malaysia’s obesity crisis
Malaysia has become one of Asia’s most obese countries, with almost half the population either obese or overweight, according to the ministry of health.
Last November, following the example of other countries in the region, Kuala Lumpur announced it would impose a tax on sweetened drinks with effect from the beginning of April.
Malaysia is targeting obesity as part of a national plan to tackle the sharp rise in hospital admissions, and wants more employers to promote healthier lifestyles as well as encouraging local communities to provide more opportunities for physical activity.
The tax will be US$0.10 for beverages that contain sugar exceeding five grams (g) per 100 millilitres (ml) and juices that contain more than 12 g per 100 ml.
The healthcare cost of obesity related illnesses is enormous in Malaysia, with estimates ranging from US$1 to US$2.1 billion according to a 2017 study
This works out to be about 10 to 19 percent of Malaysia’s total spending
onhealthcare.
Source: FT.com & theaseanpost.com (adapted extracts)
b) With the aid of a diagram, briefly explain how the imposition of a tax on
sugary drinks might impact upon the market for sugary drinks. [ 3 ]
c) Analyse ONE negative externality that may be caused by the over-
problems caused by the over-consumption of sugary drinks in Malaysia. [ 3 ]
Question A22
Japan posts trade deficit in 2018 as exports fall to the
weakest in 2 years
Trade tensions between China and the United States (US), two of Japan’s biggest trading partners caused Japan to post a trade deficit for 2018, its first deficit since 2015 and reversing from the trade surplus in the previous two years.
Exports in December for Japan also fell the most in more than two years, pulled down by weak global demand.
Exports for the month contracted by 3.8% from a year earlier, which was worse than the 1.9% drop economists had expected. The fall was the biggest contraction since October 2016.
Japan’s central bank is expected to maintain its large monetary stimulus and revise its growth and inflation forecasts for the year, as a result of the weak
export figures.
Source:www.ig.com(adapted extract)
a) Define the term ‘trade deficit’ . [ 1 ]
b) With the aid of a diagram, briefly explain how a rising trade deficit
exports. [ 3 ]
d) Analyse ONE policy Japan could use to improve their trade position. [ 3 ]
Section B
Answer 2 questions. This section carries 60 marks.
• You must answer 2 complete questions.
• Each question has two parts, a) and b). Both parts must be answered for each of the questions you choose.
• You must answer one question from Section B Part One (Micro Economics) and one question from Section B Part Two (Macro Economics).
• For all questions, you may use diagrams to help illustrate your answer.
Part One (Micro Economics)
Question B1
diagram, explain the long-run equilibrium position for a firm that enjoys
monopoly power. [ 10 ]
b) “I don't think it's good in any business for anyone to have a monopoly. On the other hand, you need to have size to get costs down” – Rick Scott, Former Governor of Florida, USA.
to reduce monopoly power in every industry. [ 20 ]
Question B2
will go through AND how it can be used in the evaluation of any
economic activity. [ 10 ]
b) Lester Lave, an economist at the Brookings Institution, said that cost- benefit analysis ''is a delightful tool for economists because it is complete, flexible and allows you to look at everything. ''
benefit analysis is complete, flexible and allows you to look at
everything when considering any economic decision. [ 20 ]
Question B3
a) Explain carefully, with examples, the term market failure AND explain with the use of a diagram how maximum and minimum prices can be used to correct market failure.
b) Evaluate the effectiveness of price controls, such as a maximum or minimum price in correcting market failure.
Question B4
a) Identify and explain the main causes of a recession AND with the aid of a diagram explain the term negative output gap.
b) Evaluate the extent to which you agree that the growth of GDP per capita is desirable?
2022-05-28