AS ECONOMICS

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AS ECONOMICS

Most Challenging Questions 2016

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In the diagram, the foreign exchange market is initially in equilibrium at X. What could be the new equilibrium position after an increase in demand from US residents for holidays in Europe?

1 point

Clear selection

The graph shows the annual percentage change in the prices of services and in the prices of goods between 2007 and 2012. What can be deduced from the graph?

1 point

On average the price of services was higher than the price of goods throughout the period.

The average price of goods was higher in 2012 than in 2010.

The average price of services was higher in 2012 than in 2010.

There was a fall in the general price level between 2008 and 2010.

Clear selection

What is correct for a normative statement?

1 point

It is objective and based on fact.

It is objective and can be proved correct.

It is subjective and based on opinion.

It is subjective and can be reliably tested.

Clear selection

A government pays a subsidy to a country’s onion producers. With which price elasticity of demand (PED) will this action be most effective in reducing the price of onions?

1 point

PED equals 0

PED is greater than 0 but less than 1

PED equals 1

PED is greater than 1 but less than infinity.

Clear selection

A government imposes an indirect tax on a product with normal demand and supply curves. The tax raises $100 million.What effect will the tax have on the value of the combined consumer surplus and producer surplus?

1 point

It will be unaffected.

It will fall by less than $100 million.

It will fall by exactly $100 million.

It will fall by more than $100 million.

Clear selection

A product with infinite elasticity of supply has sales of 1000 units a week at a price of $1 per unit. Price elasticity of demand is 1.5 over the relevant range. The government imposes a tax of 10%. What will be the government’s weekly tax revenue?

1 point

$15

$85

$100

$150

Clear selection

A country faces twin problems of deflation and a current account deficit on the balance of payments. It decides to run a budget deficit and to lower interest rates.Which effects are these measures likely to have on its twin problems?

1 point

Clear selection

Which combination of policies is most likely to reduce inflation when an economy is close to full employment?

1 point

increasing government spending on food subsidies and reducing import duty

increasing government spending on road building and increasing import duty

reducing government spending on training and increasing indirect taxes

reducing government spending on training and reducing the rate of interest

Clear selection

A government decides to privatise a nationalised company by transferring ownership directly to its managers and workers.What is its most likely motive for this decision?

1 point

to increase the amount of innovation

to increase the level of competition

to increase the level of incentive

to increase the scale of production

Clear selection

The table shows items from the balance of payments for countries A, B, C and D.Official financing including changes in reserves is excluded from the financial account.Which country has the greatest disequilibrium on its balance of payments?

1 point

Clear selection

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