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2

1 An economy with few resources is encouraged to improve the quality of its human resources.

Which policy will lead to such an improvement?

A conserving and protecting more of its natural resources


B limiting the immigration of skilled labour
C providing more opportunities for education and training
D reducing the use of machines in production

2 The diagram shows a countrys production possibility curve for rice and wheat.

P
rice

Q R S

O wheat

A major flood destroys a large area of agricultural land.

Which movement could represent the resulting change in output?

A P to Q B Q to R C R to S D S to P

3 A country raises the school leaving age from 15 to 17 years.

What is the opportunity cost of this increased period of school education to the young people
affected?

A costs of training and employing more teachers


B financial help necessary for school leavers who go to university
C government expenditure on building extra classrooms
D lost income from paid employment because of school attendance

4 In a market there is a shortage of a good.

What change would cause the market to come to an equilibrium?

A a decrease in supply
B a fall in price
C an increase in demand
D a rise in price

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3

5 A product has a totally inelastic price elasticity of demand.

What will happen to total revenue if the price of the product falls by 25%?

A It will fall by 25%.


B It will fall to zero.
C It will remain unchanged.
D It will rise by 25%.

6 In 2014, a plan for a major new rail link funded by central and regional government was
announced. It would involve the redevelopment of a city area, generate 14 000 jobs and allow the
development of 2000 homes and offices for private businesses.

What economic concepts are indicated directly in the above statement?

A budget surplus and inflation


B factors of production and multinational companies
C fiscal policy and mixed economy
D regional unemployment and average wage rates

7 How are social costs calculated?

A fixed costs plus variable costs

B private benefits less private costs


C private costs plus external costs
D social benefits less external costs

8 What is a disadvantage for a trade union representing workers in a company that has increased
specialisation?

A Capital equipment can be substituted for labour.


B Different abilities can be used fully.
C Production levels are decreased.
D Workers are able to gain a higher level of skill.

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4

9 A government finance minister said that the purchasing power of most peoples incomes had
risen in the last year.

What must have increased for the purchasing power to rise?

A money wages
B net income after tax
C real wages
D wage rates

10 The table shows the change in incomes for a number of occupations between 2003 and 2013.

change in
occupation income
%

builders 80
plumbers 60
electricians 50
police officers 12
teachers 10
nurses 5

What can be concluded from the table?

A All occupations were better off in 2013 than in 2003.


B Builders earned the highest income in 2013.
C Electricians earned 40% more than teachers in 2013.
D Non-manual workers had lower percentage increases in income than manual workers.

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5

11 The table shows information for two workers.

doctor window cleaner

annual income ($) 60 000 24 000


total deductions ($) 10 000 8 000

Both workers save 10% of their disposable income.

How much is this in each case?

doctor window cleaner

A $1 000 $800
B $5 000 $1 600
C $6 000 $2 400
D $50 000 $16 000

12 What is most likely to increase a firms profits?

A government controls on its prices


B grants for the purchase of new machines
C an increase in the wages paid to its workers
D rising costs of its raw materials

13 Sohrab bought shares in a French telecommunications company operating in many countries.

Joel owns and runs a mobile telephone accessories and repair shop.

What is not identified above?

A multinational company
B partnership
C public company
D sole proprietor

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6

14 A firms average revenue is $20. It sells 1000 units.

What is the firms total revenue and the price of the product?

total revenue price


($) ($)

A 20 20
B 1 000 500
C 20 000 20
D 20 000 500

15 The table shows the daily output and costs of four firms making chairs.

Which firm has the highest average cost of production?

fixed costs variable costs


output (units)
($) ($)

A 6 100 140
B 9 30 150
C 12 200 160
D 15 120 330

16 Other things being equal, what is likely to decrease public spending?

A an increase in the age of retirement


B an increase in the birth rate
C an increase in the school-leaving age
D an increase in unemployment

17 When is a tax regressive?

A when some goods have a lower tax than others


B when the tax as a proportion of income decreases as income increases
C when the tax is linked to the rate of inflation
D when the tax is on incomes rather than on goods or services

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7

18 The Government of India wishes to help the very poorest people.

Which policy would be most likely to achieve this?

A lowering capital gains tax


B lowering housing subsidies
C lowering indirect taxation
D lowering inheritance tax

19 Suppose the Indian Government raises the rate of interest.

What is likely to be the direct effect on the economy?

A It will raise any deficit on the current account.


B It will raise the economic growth rate.
C It will raise the foreign exchange rate.
D It will raise the inflation rate.

20 What is involved in the construction of a retail price index?

A a basket of goods
B average incomes
C economic growth rate
D income tax rate

21 What identifies a recession?

A a fall in the general price level


B a fall in the level of national output
C a fall in the real value of money
D a fall in the stock market index

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22 The table shows the percentage changes in earnings and consumer prices for four countries for
one year.

Which country is likely to have experienced the greatest increase in real income during the year?

country earnings consumer prices

A France +6.5 +3.5


B Germany +4.0 +4.0
C Japan +4.0 1.0
D UK +6.5 2.0

23 In the US Consumer Price Index (CPI), food has a weighting of 13.7%. In India food has a
weighting of 46.2% in the CPI.

What can be concluded from this?

A Consumers in India spend more on food than US consumers.


B Food is a bigger proportion of consumer spending in India than in the US.
C The farming sectors output of food is higher in India than in the US.
D The price of food is rising more rapidly in India than in the US.

24 In many developing economies there is a high rate of population growth.

What is a cause of this?

A Jobseekers migrate from rural to urban centres.


B Poor people have many children to provide labour on family farms.
C There is increased resistance to life saving drugs.
D There is not enough clean water.

25 A country has a birth rate of 30 per 1000 and a death rate of 35 per 1000 and no migration.

What is most likely to cause the population to fall?

A The birth rate decreases and the death rate increases.


B The birth rate increases and the death rate remains the same.
C The birth rate remains constant and the death rate decreases.
D The increase in the birth rate is greater than the increase in the death rate.

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26 The diagram shows the different age distribution of the population in three areas of the world.

%
69.6
65.6
60.7
area X
area Y
35.1
area Z
21.5
18.1
12.9 12.3
4.2

under 15 15-64 over 64

Other things being equal, what can be deduced from the diagram?

A X has the highest dependency ratio.


B Y has the largest working population.
C Y spends most on schools.
D Z spends most on pensions.

27 What is likely to cause a rise in a countrys foreign exchange rate?

A a fall in its exports of goods and services

B a fall in its imports of goods and services


C a fall in its inflow of income
D a rise in its outflow of transfers

28 Drinks producers in India are resisting plans to remove tariffs on imported drinks. They claim that
a reduction in tariffs would destroy the emerging drinks industry with large-scale imports of cheap
drinks.

Which argument for protectionism are they putting forward?

A the declining industry argument


B the infant industry argument
C the strategic industry argument
D the sunset industry argument

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29 Who is most likely to benefit if India bans all steel imports?

A buyers of steel in India


B foreign steel producers
C Indian firms buying steel
D Indian firms selling steel at home

30 What is certain to encourage a higher level of international trade?

A conservation of resources and unstable exchange rates


B exploitation of resources and wider use of quotas
C increased support for home industries and increased tariffs
D more specialisation and falling transport costs

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2

1 The diagram shows an initial production possibility curve of PPC1.

PPC2

capital PPC1
goods

O consumer goods

What may cause the movement of the production possibility curve from PPC1 to PPC2?

A a better educated workforce


B a decrease in availability of raw materials
C increased wages
D lower productivity

2 An increase in the number of manufacturing robots in the car manufacturing industry represents
an increase in the quantity of which factor of production?

A capital
B enterprise
C labour
D land

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3

3 The diagram shows the choices for an individual between leisure and earnings.

18

15

12
hours of leisure X
9
per day
Y
6

0
10 20 30 40 50 60
earnings $

What is the opportunity cost to the individual of the extra earnings when moving from position X
to position Y?

A $10
B $40
C 3 hours of leisure per day
D 9 hours of leisure per day

4 A government taxes the production of cars.

What is likely to decrease?

A the cost of supplying cars


B the price of cars
C the revenue for the government
D the supply of cars at every price

5 Which pair of economic institutions can be found in a market economy?

A charities and public corporations


B multinationals and commercial banks
C public corporations and private companies
D stock exchange and government hospitals

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4

6 Developers want to increase the size of a major retail shopping area in a city. It is thought that the
proposal would create hundreds of jobs, be profitable for the shops but cause major traffic
congestion.

What economic concepts are directly involved in this statement?

A external cost and private benefit


B income distribution and inelastic demand
C private investment and a decrease in supply
D social benefit and perfect competition

7 The diagram shows the market for rice.

S2
S1

P2
price P1

D
O Q2 Q1
quantity

What would have caused the equilibrium price to rise from OP1 to OP2?

A a government subsidy to rice farmers


B a successful advertising campaign for rice
C improved rice farming methods
D poor weather conditions

8 What might a trade union usually be expected to do for its members?

A arrange childcare facilities for members children


B ensure adequate promotion prospects exist
C negotiate better working conditions
D provide medical insurance

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5

9 What is the usual reason why citizens trust their countrys banknotes?

A They are acceptable for trade and exchange.


B They are backed by gold at the central bank.
C They are convertible into the US$ or Chinese Yuan.
D They are recognisable and in infinite supply.

10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a
legal minimum wage.

An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.

D1 S1

S2
W

wage
($)

S1 D1
S2
0 1 2 3 4 5 6 7 8 9 10
labour (millions)

How many people will be employed if the minimum wage legislation is then abolished?

A 4 million B 5 million C 6 million D 7 million

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6

11 The table shows how three people spend their income.

person X person Y person Z

food, clothing and housing 30% 25% 50%


entertainment and leisure 35% 35% 25%
luxury goods 35% 40% 25%

For these three people, what is the most likely order of income, from highest income to lowest
income?

A XYZ

B YXZ

C YZX

D ZXY

12 How does a firm guarantee that it makes the maximum profit?

A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost

13 Which characteristic does a firm in perfect competition have in common with a monopoly?

A the ability to exclude rivals


B the benefit of internal economies of scale
C the problem of diseconomies of scale
D the wish to maximise profits

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7

14 The table shows the units of factors of production that a firm needs to employ for two different
levels of output.

land labour capital output

5 2 4 100
10 4 8 150

What is the firm experiencing?

A constant returns to scale


B diseconomies of scale
C external diseconomies of scale
D external economies of scale

15 The diagram shows the demand and supply of places in independent (private) schools which
charge fees. The equilibrium position is X.

The costs of independent (private) schools rise. Also a report is issued which states that
Government schools achieve very good examination results.

What is likely to be the new equilibrium position?

C
B
price A X

O quantity

16 A government wishes to stimulate economic recovery.

Which action will assist this?

A decreasing government investment


B decreasing income tax
C increasing indirect taxation
D increasing interest rates

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8

17 What is an expansionary monetary policy?

A a decrease in the interest rate


B a decrease in the rate of value added tax
C an increase in the power of trade unions
D an increase in the standard rate of income tax

18 A government decides to make two changes to its taxation policies. It lowers the tax on petrol and
raises the tax on food.

How do these changes affect the regressive nature of the taxes?

lower petrol higher food


tax tax

A less regressive less regressive


B less regressive more regressive
C more regressive less regressive
D more regressive more regressive

19 The table shows a governments receipts from taxation.

$m

air passenger duty 10


company profits tax 100
import duty 75
income tax 200
insurance policy tax 10
sales tax (VAT) 400

What is the total amount of revenue raised by indirect taxes?

A $95 m B $300 m C $400 m D $495 m

20 What is Gross Domestic Product (GDP) divided by to calculate GDP per head?

A net migration
B the birth rate
C the total population
D the working population

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9

21 Who is made worse off during a period of deflation?

A cash holders
B creditors
C debtors
D fixed income earners

22 The table gives information about three economic indicators in four countries.

inflation interest rates unemployment


% % %

country W 1.4 3.4 10.2


country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2
country Z 2.1 6.0 7.7

What may be concluded from this information?

A Countries with higher inflation have higher interest rates.


B Countries with higher interest rates have lower unemployment.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the lowest inflation.

23 What must result when a country experiences economic growth?

A a higher Gross Domestic Product


B a lower rate of inflation
C a surplus on the balance of trade
D an improved standard of living for everybody

24 Why may the figure calculated for a developing countrys Gross Domestic Product be inaccurate?

A There are unused resources.


B There is a high reliance on imports.
C There is a large amount of subsistence farming.
D There is a small amount of skilled labour.

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10

25 The table gives information on four countries.

Which country is likely to be most developed?

Gross Domestic life


population Product expectancy
(m) ($ billion) (years)

A 100 800 51
B 200 6000 62
C 300 600 48
D 1000 1600 63

26 It has been predicted that by 2050 China will have 53 million fewer children under 14, 100 million
fewer workers and 234 million more people aged over 60.

What will be the likely effect in China of these changes?

A The dependency ratio will fall.


B The Governments expenditure will fall.
C The Governments income will fall.
D The total population will fall.

27 What might cause the balance on the current account of Mauritius to improve?

A increased purchases of coffee from Kenya


B increased transport of Mauritian goods in Greek ships
C increased spending by Mauritians on holidays in South Africa
D increased spending by tourists in Mauritian hotels

28 A country says that it wishes to increase its trade protection policies.

What might that involve?

A conservation of resources and taxes on external costs


B eliminating waste in the use of resources and grants to multinational companies
C increased self sufficiency and increased tariffs
D price controls and increased regulations on domestic monopoly industries

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29 It has been suggested that all countries producing arms should ban the export of weapons and
cut production in order to reduce the risk of war.

What would happen if this occurred?

A The balance of payments on current account of countries exporting weapons would


immediately improve.
B The price of existing weapons would fall.
C There would be a risk of structural unemployment in countries that are major producers of
weapons.
D There would be no overall effect on the balance of payments as countries would produce
their own weapons.

30 70% of the 10 million kilograms of tea produced in India is exported. The UK, Japan, and
Germany buy the most.

Wholesale prices rose 10% in 2013 as supply was restricted because of a strike.

How would these circumstances be shown in international trade accounts?

A a credit on the goods and services account for Germany


B a debit on the goods and services account for Japan
C a 10% fall in the balance of the goods and services account for India
D a 10% rise in the balance of goods and services account for the UK

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2

1 What economic concept must be at work when there is movement by a country along its
production possibility curve?

A economies of scale
B equilibrium price
C maximum profit
D opportunity cost

2 The diagram shows the choices for an individual between leisure and earnings.

24

20

16
hours of leisure 12 X
per day
Y
8

0
20 40 60 80 100 120
earnings $

The person decides to take a job that gives more leisure time.

What is the opportunity cost to the individual of moving from position Y to position X?

A $20
B $80
C 4 hours of leisure per day
D 12 hours of leisure per day

3 What is the best example of the existence of the economic problem?

A A government provides accommodation for all those who are homeless.


B A police force has a lengthening list of unsolved crimes.
C Janitha hands her homework in at the last permitted deadline.
D Musa completes his journey without putting petrol in his car.

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3

4 A government taxes the production of cars.

What is likely to decrease?

A the cost of supplying cars


B the price of cars
C the revenue for the government
D the supply of cars at every price

5 Which pair of economic institutions is most likely found in a market economy?

A free accident and emergency hospitals and charities


B partnerships and public corporations
C stock exchange and monopolies
D trade unions and local government schools

6 Developers want to increase the size of a major retail shopping area in a city. It is thought that the
proposal would create hundreds of jobs, be profitable for the shops but cause major traffic
congestion.

What economic concepts are directly involved in this statement?

A external cost and private benefit


B income distribution and inelastic demand
C private investment and a decrease in supply
D social benefit and perfect competition

UCLES 2016 0455/12/M/J/16 [Turn over


4

7 The diagram shows the price of a product during year 1 and year 2.

price
($)

O year 1 year 2

Which changes in demand and supply are consistent with the price behaviour in year 2?

demand supply

A falls by 5% falls by 10%


B falls by 10% falls by 5%
C unchanged falls by 10%
D rises by 15% falls by 5%

8 A trade union agrees on a closed shop policy with employers in an industry.

How does this operate?

A All workers will be members of the trade union.


B Employment will be open only to skilled workers.
C The employers cannot make workers redundant.
D Workers cannot move between employers.

9 When will a central bank act as lender of last resort to a commercial bank?

A when a commercial bank faces a liquidity crisis


B when a commercial bank fails to make a profit
C when a commercial bank needs to raise share capital
D when a commercial bank reduces its lending rates

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5

10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a
legal minimum wage.

An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.

D1 S1

S2
W

wage
($)

S1 D1
S2
0 1 2 3 4 5 6 7 8 9 10
labour (millions)

How many people will be employed if the minimum wage legislation is then abolished?

A 4 million B 5 million C 6 million D 7 million

11 The table shows how three people spend their income.

person X person Y person Z

food, clothing and housing 35% 50% 20%


entertainment and leisure 25% 20% 40%
luxury goods 40% 30% 40%

For these three people, what is the most likely order of income, from lowest income to highest
income?

A XYZ

B YXZ

C YZX

D ZXY

UCLES 2016 0455/12/M/J/16 [Turn over


6

12 How does a firm guarantee that it makes the maximum profit?

A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost

13 Two firms agree to integrate their activities.

What must result?

A a change in their ownership structure


B a lowering of average costs of production
C a move from national to international markets
D a reduction in the level of market risk

14 The table shows the units of factors of production that a firm needs to employ for two different
levels of output.

land labour capital output

6 8 4 100
9 12 6 200

What is the firm experiencing?

A constant returns to scale


B economies of scale
C external diseconomies of scale
D external economies of scale

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7

15 By 2014, government subsidies for the Chinese steel industry led to 200 million tonnes of excess
output.

The diagrams show the market for Chinese steel.

Which would represent the position after the subsidy but before the market adjusted?

A B

price price
($) ($)

0 100 300 0 100 200 400


output (million tonnes) output (million tonnes)

C D

price price
($) ($)

0 100 200 300 0 100 200 400


output (million tonnes) output (million tonnes)

16 A government wishes to stimulate economic recovery.

Which action will assist this?

A decreasing government investment


B decreasing income tax
C increasing indirect taxation
D increasing interest rates

UCLES 2016 0455/12/M/J/16 [Turn over


8

17 A government fixes the rate of income tax at $0.20 per dollar earned.

What describes this type of taxation?

A indirect
B progressive
C proportional
D regressive

18 A government introduces a law to reduce the restrictive practices of trade unions.

What would be the most likely purpose of this law?

A to change from a mixed to a planned economy


B to ensure a fairer distribution of earnings
C to increase competition in labour markets
D to reduce government expenditure on job training

19 The table shows a governments receipts from taxation.

$m

air passenger duty 10


company profits tax 100
import duty 75
income tax 200
inheritance tax 50
sales tax (VAT) 300

What is the total amount of revenue raised by indirect taxes?

A $300 m B $350 m C $385 m D $435 m

20 What would best indicate the start of an economic boom?

A negative growth of Gross Domestic Product


B rising interest rates
C rising levels of employment
D steadily falling price levels

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21 A country has a very high Gross Domestic Product and a small population but has a low standard
of living.

What may be the cause of this low standard of living?

A There is a high inequality of income distribution and a high provision of merit goods.
B There is a high inequality of income distribution and a limited provision of merit goods.
C There is equality of income distribution and a high provision of merit goods.
D There is equality of income distribution and a low provision of merit goods.

22 The table gives information about three economic indicators in four countries.

inflation interest rates unemployment


% % %

country W 1.4 3.4 10.2


country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2
country Z 2.1 6.0 7.7

What may be concluded from this information?

A Countries with higher inflation have higher interest rates.


B Countries with higher interest rates have lower unemployment.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the lowest inflation.

23 The weight for a product in the consumer price index was increased.

What is most likely to have caused this adjustment?

A The product has become more expensive to produce.


B The product has been offered for sale in more retail outlets.
C The product has improved in quality and performance.
D The product has taken a bigger share of consumers income.

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10

24 China is classified as a developing country. Recently, contributions to its Gross Domestic Product
(GDP) were agriculture 10%, construction 13%, manufacturing 32% and services 45%.

Which contribution to GDP usually decreases first when countries move to a higher level of
development?

A agriculture
B construction
C manufacturing
D services

25 Some people think that the debts and interest payments of the poorest countries in the world
should be cancelled.

What might be a disadvantage for the poorest countries if this were done?

A International banks might be less willing to give loans to poor countries.


B Interest payments to the lenders would fall.
C The standard of living of people in the poorest countries would fall.
D Trade between the poorest countries and the rest of the world would increase.

26 Which country is likely to have the highest standard of living?

infant mortality
birth rate death rate life expectancy
rate

A 41 20 31 49
B 32 14 29 59
C 25 6 25 79
D 25 5 22 79

27 What might cause the balance on the current account of Mauritius to improve?

A increased purchases of coffee from Kenya


B increased transport of Mauritian goods in Greek ships
C increased spending by Mauritians on holidays in South Africa
D increased spending by tourists in Mauritian hotels

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11

28 A country says that it wishes to increase its trade protection policies.

What might that involve?

A conservation of resources and taxes on external costs


B eliminating waste in the use of resources and grants to multinational companies
C increased self sufficiency and increased tariffs
D price controls and increased regulations on domestic monopoly industries

29 It has been suggested that all countries producing arms should ban the export of weapons and
cut production in order to reduce the risk of war.

What would happen if this occurred?

A The balance of payments on current account of countries exporting weapons would


immediately improve.
B The price of existing weapons would fall.
C There would be a risk of structural unemployment in countries that are major producers of
weapons.
D There would be no overall effect on the balance of payments as countries would produce
their own weapons.

30 The US currently trades in oil with the UK. The discovery of new oil and gas deposits in the US
will mean that its oil imports decrease and its oil exports increase.

From the initial equilibrium point of X, which letter indicates the new equilibrium point for the US
exchange rate?

S1
B
A S
price
of $ X S2

C
D

D1 D D2
O
quantity of $

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2

1 Which statement about a production possibility curve is correct?

A A production possibility curve is an alternative name for an industry supply curve.


B A production possibility curve is an economic model of potential output.
C A realistic production possibility curve must be drawn as a straight line.
D A production possibility curve applies only to an economys production of goods.

2 Which firm is likely to find it most difficult to expand the use of its main factor of production?

A a farm growing crops in extensive fields


B a technology firm dependent on risky innovations
C a textile firm making use of labour-intensive systems
D an engineering firm relying upon capital-intensive methods

3 The diagram shows the choices for an individual between leisure and earnings.

18

15

12
hours of leisure X
9
per day
Y
6

0
10 20 30 40 50 60
earnings $

What is the opportunity cost to the individual of the extra earnings when moving from position X
to position Y?

A $10
B $40
C 3 hours of leisure per day
D 6 hours of leisure per day

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3

4 A government taxes the production of cars.

What is likely to decrease?

A the cost of supplying cars


B the price of cars
C the revenue for the government
D the supply of cars at every price

5 Which pair of economic institutions can be found in a market economy?

A local government and charities


B monopolies and commercial banks
C nationalised industries and partnerships
D stock exchange and public corporations

6 Developers want to increase the size of a major retail shopping area in a city. It is thought that the
proposal would create hundreds of jobs, be profitable for the shops but cause major traffic
congestion.

What economic concepts are directly involved in this statement?

A external cost and private benefit

B income distribution and inelastic demand


C private investment and a decrease in supply
D social benefit and perfect competition

7 The diagram shows demand and supply curves for a product. Initially the market is in equilibrium
at point X.

What would be the new equilibrium point if the costs of production fell and a rumour circulated
that the product could become unsafe in extreme weather conditions?

A X C
price

O quantity

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4

8 What does the term closed shop mean?

A a bankrupt retail establishment


B a trade union that is approved by the government
C an agreement that all workers must be members of the same trade union
D an agreement by trade unions to share members

9 What function does a central bank fulfil?

A It issues currency.
B It offers overdraft facilities to individuals.
C It operates deposit accounts.
D It raises taxation.

10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a
legal minimum wage.

An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.

D1 S1

S2
W

wage
($)

S1 D1
S2
0 1 2 3 4 5 6 7 8 9 10
labour (millions)

How many people will be employed if the minimum wage legislation is then abolished?

A 4 million B 5 million C 6 million D 7 million

UCLES 2016 0455/13/M/J/16


5

11 The table shows how three people spend their income.

person X person Y person Z

food, clothing and housing 30% 25% 50%


entertainment and leisure 35% 35% 25%
luxury goods 35% 40% 25%

For these three people, what is the most likely order of income, from lowest income to highest
income?

A YXZ

B YZX

C ZXY

D ZYX

12 How does a firm guarantee that it makes the maximum profit?

A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost

13 What is true when comparing a monopoly to a perfectly competitive firm?

A Monopolies will have perfect knowledge of their market.


B Monopoly costs are always lower owing to economies of scale.
C Monopoly price is likely to be higher.
D The products that monopolies produce have more limited demand.

UCLES 2016 0455/13/M/J/16 [Turn over


6

14 A manufacturing firm increases the scale of its production. Its average total cost curve in the long
run (LRAC) is shown below.

At which point on the LRAC curve is the firm experiencing diseconomies of scale?

A LRAC

cost D

B C

O output

15 The table shows the units of factors of production that a firm needs to employ for two different
levels of output.

land labour capital output

4 3 5 20
8 6 10 40

What is the firm experiencing?

A constant returns to scale


B economies of scale
C external diseconomies of scale
D external economies of scale

16 A government wishes to stimulate economic recovery.

Which action will assist this?

A decreasing government investment


B decreasing income tax
C increasing indirect taxation
D increasing interest rates

UCLES 2016 0455/13/M/J/16


7

17 When a government aims to encourage economic growth it may adopt supply-side policies.

Which policy is a supply-side policy?

A increasing the money supply


B lowering interest rates
C reducing direct taxation
D retraining unemployed workers

18 The table shows a governments receipts from taxation.

$m

air passenger duty 10


company profits tax 100
import duty 75
income tax 200
inheritance tax 50
sales tax (VAT) 300

What is the total amount of revenue raised by direct taxes?

A $135 m B $200 m C $300 m D $350 m

19 Which policy combination will be the most effective if a government wishes to increase the level
of employment?

A decrease general taxation and increase the rate of interest


B decrease general taxation and decrease the rate of interest
C increase general taxation and decrease the rate of interest
D increase general taxation and increase the rate of interest.

20 What is most likely to lead to a rise in the rate of inflation?

A a decrease in consumer spending


B a decrease in unemployment benefits
C an increase in import prices
D an increase in income tax

UCLES 2016 0455/13/M/J/16 [Turn over


8

21 Which measures, in addition to Gross Domestic Product per capita, are included in the Human
Development Index?

A average earnings and inequalities of incomes


B balance of trade and balance of payments
C life expectancy at birth and expected years of schooling
D size of population and age structure of population

22 The table gives information about three economic indicators in four countries.

inflation interest rates unemployment


% % %

country W 1.4 3.4 10.2


country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2
country Z 2.1 6.0 7.7

What may be concluded from this information?

A Countries with higher inflation have higher interest rates.


B Countries with higher interest rates have lower unemployment.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the lowest inflation.

23 Which type of government policy would be most suitable to control external costs of production?

A employment policy
B fiscal policy
C monetary policy
D trade policy

UCLES 2016 0455/13/M/J/16


9

24 The diagrams show birth rate (BR) and death rate (DR) in three countries, X, Y and Z, in two
years, 1 and 2.

There was no migration.

X Y Z

BR
BR, BR, BR,
DR DR DR DR

BR
DR
DR BR
1 2 1 2 1 2
year year year

Where was there a rise in population in year 1 and a fall in population in year 2?

A X and Z B X only C Y and Z D Y only

25 Why might the emigration of workers help the economy of a developing country?

A The dependency ratio is likely to improve.

B The inflow of transfers of money is likely to increase.


C The least healthy workers are likely to be the last ones to leave.
D The more skilled workers are likely to be the ones to leave.

26 What combination of changes in the birth rate and death rate is most likely to increase the
dependency ratio in a country?

birth rate death rate

A falls falls
B falls rises
C rises falls
D rises rises

27 What might cause the balance on the current account of Mauritius to improve?

A increased purchases of coffee from Kenya


B increased transport of Mauritian goods in Greek ships
C increased spending by Mauritians on holidays in South Africa
D increased spending by tourists in Mauritian hotels

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10

28 A country says that it wishes to increase its trade protection policies.

What might that involve?

A conservation of resources and taxes on external costs


B eliminating waste in the use of resources and grants to multinational companies
C increased self sufficiency and increased tariffs
D price controls and increased regulations on domestic monopoly industries

29 It has been suggested that all countries producing arms should ban the export of weapons and
cut production in order to reduce the risk of war.

What would happen if this occurred?

A The balance of payments on current account of countries exporting weapons would


immediately improve.
B The price of existing weapons would fall.
C There would be a risk of structural unemployment in countries that are major producers of
weapons.
D There would be no overall effect on the balance of payments as countries would produce
their own weapons.

30 The value of the Pakistani rupee changes, from 60 rupees to US$1, to 50 rupees to US$1.

What effect will this have on the price of Pakistani products sold in the US and the price of US
products sold in Pakistan?

price of Pakistani products price of US products


sold in the US sold in Pakistan

A increase increase
B increase decrease
C decrease increase
D decrease decrease

UCLES 2016 0455/13/M/J/16


2

1 Each factor of production earns an income.

What correctly identifies the income for labour and capital?

labour capital

A profit interest
B rent profit
C wages profit
D wages interest

2 What could be the opportunity cost of a nuclear power station?

A the running costs of the power station

B a coal-fired power station


C the current value of the power station
D the cost of building the power station

3 The diagram shows a production possibility curve for maize and cotton.

maize P Q

R S

O cotton

Bad weather causes a poor harvest for both crops.

Which movement could be used to represent this change?

A P to R B Q to R C S to Q D S to R

4 The market for a good was in equilibrium. A change occurred which resulted in a new equilibrium
with a higher price for the good and a lower quantity traded.

What change would have caused this?

A the demand curve moved to the left


B the demand curve moved to the right
C the supply curve moved to the left
D the supply curve moved to the right

UCLES 2016 0455/12/O/N/16


3

5 A demand curve shows the relationship between the quantity demanded and

A a change in income
B consumer tastes
C the supply of the product
D the price of the product

6 A government subsidises the production of pineapples.

This is likely to

A increase the price of pineapples


B raise the costs of supplying pineapples
C raise revenue for the government
D cause the supply of pineapples to increase at every price

7 What indicates the existence of external costs in an economy?

A An international trade deficit has caused the country to be in debt.


B National companies have borrowed from foreign investors.
C Private costs of production are less than social costs.
D Private costs of production are more than social benefits.

8 What might be a disadvantage to a trade union when arguing for an increase in its members pay?

A an increase in imports of a cheaper, similar product


B the closure of a local training college resulting in fewer potential workers
C the development of a new and profitable brand of the companys product
D the development of new techniques that increase productivity

9 What shows the correct examples of income and wealth?

income wealth

A dividends from shares wages


B rent from a house overtime payments
C overtime payments wages
D wages house

UCLES 2016 0455/12/O/N/16 [Turn over


4

10 Nazmin Uddin works in a local office as a secretary three days a week. She lives with her parents
in a small apartment.

Meer Ali owns a successful fitness centre that employs about twenty people. He owns a large
house.

Which is most likely to be correct?

A Nazmin spends a smaller proportion of her income than Meer.


B Nazmin saves most of her income.
C Nazmin would find it easier than Meer to borrow money.
D Nazmin has a lower disposable income than Meer.

11 The table shows how household spending changes with income.

income spending
($ per month) ($ per month)

4000 4150
4300 4375
4600 4650
4900 4900
5200 4975
5500 5275

What is the first level of income shown at which savings are positive?

A $4000 B $4600 C $4900 D $5200

12 A survey of managers in the USA revealed that most businessmen feel that a companys
responsibility is to serve the interests of owners, employees, customers and the public.

The idea of profit maximisation, in contrast, implies that a companys main responsibility should
be to the

A customers
B employees
C owners
D public

UCLES 2016 0455/12/O/N/16


5

13 Some agricultural co-operatives have changed from labour-intensive to capital-intensive methods


of production.

What might be a cause of this change?

A Average productivity of agricultural workers has increased.


B Farming equipment has become more efficient.
C People are eating less food for health reasons.
D Some agricultural land has been sold for housing.

14 A firm has fixed costs of $200 for its daily output. The table shows its daily total variable costs.

output (units) 1 2 3 4

total variable costs ($) 300 400 700 800

What can be concluded about the firms average total cost?

A it falls continuously
B it is highest at output 4 units
C it is lowest at output 4 units
D it rises continuously

15 The table shows the growth rate of output (%) in four sectors of an economy.

construction energy manufacturing services


sector % sector % sector % sector %

first quarter of 2014 0.9 0.1 0.7 3.4


second quarter of 2014 0.5 1.6 0.5 0.5

Which two sectors showed an increase in the growth rate in the first half of 2014?

A construction and energy


B construction and manufacturing
C services and construction
D services and manufacturing

UCLES 2016 0455/12/O/N/16 [Turn over


6

16 A government decides to sell the monopoly supply of gas to households to a private firm.

How could the government protect the interests of households after selling a large company to
the private sector?

A by excluding all competition from foreign companies


B by imposing a tax on excess profits
C by introducing a quota system for imports of gas
D by removing price controls on gas

17 In 2015, 70 000 extra people lost their jobs but total employment rose by 75 000. What could
explain this?

A Some people may have emigrated.


B Some people may have gone back to education.
C Some people may have re-entered the labour force.
D Some people may have retired early.

18 The table shows taxes as a percentage of Gross Domestic Product (GDP) for four countries.

From this information, which country had the highest percentage of direct taxation as a
percentage of GDP?

tax on tax on goods


income tax tax on
business and services
% dividends %
profits % %

A 12 14 2 5
B 14 15 2 14
C 17 13 5 10
D 18 10 1 10

UCLES 2016 0455/12/O/N/16


7

19 A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X
is the original equilibrium position.

The effect is illustrated in the diagram.

S3 S1
20 S2

X
15
price
($ per kilo) 10 D1

0
4 8 12 16 20 24
quantity supplied
(000 kilos)

What will be the new equilibrium price and quantity supplied as a result of the subsidy?

equilibrium price quantity supplied


($ per kilo) (000 kilos)

A 10 16
B 13 20
C 15 16
D 20 8

20 What is involved in the construction of a Retail Price Index?

A a base year
B incomes
C price elasticity of products
D quantity supplied

21 Why is nominal Gross Domestic Product not a good measure to compare the standard of living in
a country between two years?

A It does not account for inflation.


B It does not allow for savings.
C It does not include government expenditure.
D It only compares export prices with import prices.

UCLES 2016 0455/12/O/N/16 [Turn over


8

22 In 2010 there was an increase in net emigration from Ireland.

What is most likely to have caused this increase?

A a decrease in job security abroad


B a decrease in wage rates abroad
C an increase in Irelands real GDP
D an increase in unemployment in Ireland

23 Some goods take a greater percentage of a typical households total spending than others.

How is this accounted for in the construction of a Retail Price Index?

A by deducting the goods and services


B by giving a weight to the goods
C by taking an average of price fluctuations during a year
D by using the price elasticity of demand for the goods

24 Which outcome is least likely to be found with greater economic development?

A A greater percentage of the population are highly educated.


B A greater percentage of the population are homeowners.
C A greater percentage of the population are old.
D A greater percentage of the population are very poor.

25 A government introduces state benefits for the unemployed and increases the top rate of income
tax to pay for the benefits.

What effect will these changes have on poverty and the tax system?

poverty tax system

A increase make it more progressive


B increase make it more regressive
C reduce make it more progressive
D reduce make it more regressive

UCLES 2016 0455/12/O/N/16


9

26 The chart shows total world carbon emissions in 1995 and predicted emissions by 2035.

1995 2035
other Asia
6%
developing developing
world world
27% 50%

other US
Latin
China US Asia
America 4% 15%
11% 22% 14% W.
Africa 3% China Europe
Middle East 17% 12%
W. Europe
3% 17% E. Europe
E. Europe 19%
Japan Africa
27%
7% 8%
Latin
America
6% developed
developed world
world 50%
Middle Japan
73%
East 4%
5%

If the chart proves to be correct, what will have happened by 2035?

A Africa and the Middle East will have responsibility for the same amount of carbon emissions
in 2035 as in 1995.
B Between 1995 and 2035, the Middle East will have increased its industrialisation by as much
as Latin America.
C By 2035 the combined percentage of carbon emissions caused by Africa and Latin America
will have doubled.
D The US will have decreased its carbon emissions by a smaller percentage than Western
Europe.

27 What encourages international specialisation?

A a foreign exchange shortage


B diseconomies of scale
C free trade
D quotas

UCLES 2016 0455/12/O/N/16 [Turn over


10

28 A Japanese car manufacturer decided to produce its cars in a factory in Europe.

What would not be a reason why they might have chosen to do this?

A cheaper wage costs in Europe

B the availability of raw materials


C to gain external economies from skilled labour in Europe
D to increase Japanese self-sufficiency

29 A government removed the quota on goods imported into the country.

What is the most likely result of this?

A a decrease in demand for domestic production


B a decrease in domestic unemployment
C a decrease in exports
D a decrease in the balance of trade deficit

30 The table shows components of Japans current account balance in trillion Yen for 2011 and
2012.

balance of balance of balance of


balance of goods
year services current transfers income
trillion
trillion trillion trillion

2011 1.61 1.76 1.11 14.04


2012 5.23 2.33 1.02 13.55

Which balance improved between 2011 and 2012?

A balance of current transfers


B balance of goods
C balance of income
D balance of services

UCLES 2016 0455/12/O/N/16


2

1 What is not a factor of production?

A a $20 banknote
B an office
C a photocopier
D a secretary

2 What could be the opportunity cost of a nuclear power station?

A the running costs of the power station

B a coal-fired power station


C the current value of the power station
D the cost of building the power station

3 In 2014 private companies began to drill in areas of the country to exploit natural gas supplies
that were known to exist.

R
V
manufactured
goods S
T
U

O gas supplies

How might this decision be represented on the diagram which shows a production possibility
curve for the country?

A by a movement from R to S
B by a movement from R to V
C by a movement from S to T
D by a movement from U to V

UCLES 2016 0455/13/O/N/16


3

4 The market for a good was in equilibrium. A change occurred which resulted in a new equilibrium
with a higher price for the good and a lower quantity traded.

What change would have caused this?

A the demand curve moved to the left


B the demand curve moved to the right
C the supply curve moved to the left
D the supply curve moved to the right

5 The demand for cocoa beans is price-inelastic.

What is most likely to decrease as a result of an increase in demand for cocoa beans?

A price of cocoa bean products


B production of cocoa beans
C profits of cocoa bean producers
D unemployment among cocoa bean farmers

6 A government subsidises the production of pineapples.

This is likely to

A increase the price of pineapples.


B raise the costs of supplying pineapples.
C raise revenue for the government.
D cause the supply of pineapples to increase at every price.

UCLES 2016 0455/13/O/N/16 [Turn over


4

7 The use of cars in many cities creates negative externalities. The diagram shows the free market
equilibrium X1 and the socially efficient market equilibrium X2.

S2

S1
costs P2 X2
/ benefits
P1 X1

D
O
quantity

Using the diagram, which statement is correct?

A Socially efficient supply is S and the market price P is too high.


B Socially efficient supply is S and the market price P is too low.
C Socially efficient supply is S1 and the market price P is too high.
D Socially efficient supply is S1 and the market price P is too low.

8 What could increase the ability of a trade union to gain a pay rise for its members in a coat
factory?

A a decrease in the demand for coats


B a decrease in the number of people willing to work in the coat industry
C a decrease in the productivity of workers making coats
D a decrease in the sale of coat exports

9 What does net income mean?

A income after allowing for price changes


B income after paying regular household bills
C income less tax and government deductions
D income plus overtime payments

UCLES 2016 0455/13/O/N/16


5

10 Nazmin Uddin works in a local office as a secretary three days a week. She lives with her parents
in a small apartment.

Meer Ali owns a successful fitness centre that employs about twenty people. He owns a large
house.

Which is most likely to be correct?

A Nazmin spends a smaller proportion of her income than Meer.


B Nazmin saves most of her income.
C Nazmin would find it easier than Meer to borrow money.
D Nazmin has a lower disposable income than Meer.

11 The table shows how household spending changes with income.

income spending
($ per month) ($ per month)

2600 2625
2900 2925
3200 3190
3500 3275
3800 3500
4100 3725

What is the first level of income shown at which savings are positive?

A $2600 B $2900 C $3200 D $3500

12 A survey of managers in the USA revealed that most businessmen feel that a companys
responsibility is to serve the interests of owners, employees, customers and the public.

The idea of profit maximisation, in contrast, implies that a companys main responsibility should
be to the

A customers.
B employees.
C owners.
D public.

UCLES 2016 0455/13/O/N/16 [Turn over


6

13 Why is a firm in perfect competition a price taker?

A It has no information about market price.


B Its output is too small to have any effect on market equilibrium.
C There are few barriers to entry.
D There are only a few firms in the industry.

14 A firm produced 200 cars a week and employed 50 workers. A fall in demand caused the firm to
reduce its output to 160 cars a week and its labour force to 32.

What was the percentage change in the firms productivity?

A It fell by 20%.
B It fell by 25%.
C It increased by 20%.
D It increased by 25%.

15 A firm has fixed costs of $100 for its daily output. The table shows its daily total variable costs.

output (units) 1 2 3 4
total variable costs ($) 200 360 500 720

What can be concluded about the firms average total cost?

A It falls continuously.
B It is highest at output 4 units.
C It is lowest at output 3 units.
D It rises continuously.

16 A government decides to sell the monopoly supply of gas to households to a private firm.

How could the government protect the interests of households after selling a large company to
the private sector?

A by excluding all competition from foreign companies


B by imposing a tax on excess profits
C by introducing a quota system for imports of gas
D by removing price controls on gas

UCLES 2016 0455/13/O/N/16


7

17 A government decides to increase the rate of income tax and spend the extra revenue on
providing training colleges.

How might this be described?

A as fiscal and monetary policy


B as fiscal and supply-side policy
C as fiscal, monetary and supply-side policy
D as monetary and supply-side policy

18 A government taxes farmers $12 per kilo when they supply food on the open market where X is
the original equilibrium position.

The effect is illustrated in the diagram below.

50
S4 S3 S1
S2
40
X
price 30
($ per kilo)
20
D1
10

0
10 20 30 40 50 60
quantity supplied
(000 kilos)

What will be the new equilibrium price and quantity supplied as a result of the tax?

equilibrium price quantity supplied


($ per kilo) (000 kilos)

A 20 40
B 25 50
C 35 30
D 40 20

UCLES 2016 0455/13/O/N/16 [Turn over


8

19 The table shows taxes as percentages of Gross Domestic Product (GDP) for four countries.

From this information, which country had the lowest percentage of direct taxation as a percentage
of GDP?

tax on
income tax tax on tax on goods
business
% dividends % and services %
profits %

A 12 14 2 4
B 14 15 2 13
C 17 8 5 9
D 17 13 5 9

20 A newspaper reports that there has been an economic slump in an economy.

What would an economist expect the immediate effect to be?

A Production will decrease.


B Saving will decrease.
C Taxation will decrease.
D The population will decrease.

21 How is the pattern of employment likely to change when a country becomes more developed?

A from regular employment to seasonal employment


B from rural employment to urban employment
C from skilled employment to manual employment
D from tertiary employment to primary employment

22 In 2010 there was an increase in net emigration from Ireland.

What is most likely to have caused this increase?

A a decrease in job security abroad


B a decrease in wage rates abroad
C an increase in Irelands real GDP
D an increase in unemployment in Ireland

UCLES 2016 0455/13/O/N/16


9

23 The table shows some economic indicators.

Which increase in the first indicator is most likely to lead to an increase in the second indicator?

first indicator second indicator

A budget surplus consumer saving


B consumer spending unemployment
C inflation trade surplus
D productivity living standards

24 What would be most likely to cause the population to decrease if other things remain constant?

A a decrease in the birth rate


B a decrease in the death rate
C an increase in net immigration
D an increase in the fertility rate

25 Developed countries have a high and increasing proportion of their population over the age of 65.

Which economic consequence will be most likely to result from this kind of population change?

A Government transfer payments will increase.


B More facilities will be needed to retrain workers.
C There will be a rise in the economic growth rate.
D The total savings in the economy will increase.

UCLES 2016 0455/13/O/N/16 [Turn over


10

26 The chart shows total world carbon emissions in 1995 and predicted emissions by 2035.

1995 2035
other Asia
6%
developing developing
world world
27% 50%

other US
Latin
China US Asia
America 4% 15%
11% 22% 14% W.
Africa 3% China Europe
Middle East 17% 12%
W. Europe
3% 17% E. Europe
E. Europe 19%
Japan Africa
27%
7% 8%
Latin
America
developed 6% developed
world world
73% Middle Japan 50%
East 4%
5%

If the chart proves to be correct, what would have happened by 2035?

A Africa will emit the least carbon.


B China will cause about a third of the emissions of all developing areas shown.
C Developed areas will have reduced their absolute amount of carbon emissions.
D The US will have decreased its carbon emissions by a smaller percentage than Western
Europe.

27 What encourages international specialisation?

A a foreign exchange shortage


B diseconomies of scale
C free trade
D quotas

28 A Japanese car manufacturer decided to produce its cars in a factory in Europe.

What would not be a reason why they might have chosen to do this?

A cheaper wage costs in Europe

B the availability of raw materials


C to gain external economies from skilled labour in Europe
D to increase Japanese self-sufficiency

UCLES 2016 0455/13/O/N/16


11

29 A government removed the quota on goods imported into the country.

What is the most likely result of this?

A a decrease in demand for domestic production


B a decrease in domestic unemployment
C a decrease in exports
D a decrease in the balance of trade deficit

30 In 2009 the exchange rate of the Singapore dollar changed from 1.49 = 1 US dollar to 1.43
Singapore dollars = 1 US dollar.

How would this affect the import prices and export prices for Singapore?

prices paid by Singapore prices paid to Singapore


for imports for exports

A decrease decrease
B decrease increase
C increase decrease
D increase increase

UCLES 2016 0455/13/O/N/16

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