AS Economics

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AS Economics

MOST CHALLENGING QUESTIONS 2020

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An economy with a long history of extensive barriers to trade decides to switch to totally free trade. What is most likely to increase in the short term?
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1 point

A consumer surplus

B government revenue

C inflationary pressure

D profits of all domestic companies

What would be a positive effect on the growth of an economy in the short run, if the government reduced a direct tax on individual earnings?
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1 point

A food prices would increase due to shortages

B imports of luxury cars would increase to satisfy a change in demand

C savings would increase due to additional disposable income

D the consumption of domestically produced goods would increase

What is likely to cause a decrease in aggregate demand?
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1 point

A an appreciation in the exchange rate

B an improvement in consumer confidence

C an increase in government expenditure

D an increase in the money supply

The real national income of a country fell by 3%. What could have caused this?
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1 point

A Money national income fell by 3% when the rate of inflation was 6%.

B Money national income fell by 6% when the rate of inflation was 3%.

C Money national income rose by 3% when the rate of inflation was 6%.

D Money national income rose by 6% when the rate of inflation was 3%.

A country’s railways are currently run by private firms. It has been suggested that the government should nationalise the railways. What might be a reason for this?
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1 point

A to control prices of railway services

B to encourage competition in railway services

C to increase the profit incentive

D to provide jobs for local people

The diagram shows the market demand and supply curves for rice. What would happen if a government imposed a maximum price of $10?
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1 point

A The government would need to supply Q1 to Q3.

B The quantity sold would be Q1.

C The quantity sold would be Q2.

D The quantity sold would increase from Q2 to Q3

What is most likely to occur when the government privatises public sector organisations?
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1 point

A Consumer choice will increase.

B Employment will increase in the short run.

C Innovation will be discouraged.

D The production of public goods will increase

The table shows an extract from a country’s balance of payments. What is the current account balance?
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1 point

A –$10 bn

B –$15 bn

C –$30 bn

D –$50 bn

Country W conducts 50% of its trade with country X, 30% of its trade with country Y and 20% of its trade with country Z. The initial value of the trade-weighted exchange rate of country W is 100. Country W’s currency appreciates 10% against the currency of country X, depreciates 10% against the currency of country Y and is unchanged against the currency of country Z. What will be the new trade-weighted exchange rate?
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1 point

A 100

B 102

C 102.5

D 200

What would supporters of a nationalised public transport service expect to be the most likely outcome from the privatisation of train and bus services?
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1 point

A fewer destinations served by trains and buses

B lower fares

C more frequent services to all destinations

D more people employed in public transport services

Which policy measure is an expenditure-switching measure designed to reduce a current account surplus?
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1 point

A a cut in income tax rates

B a depreciation of the exchange rate

C the removal of limits on bank lending

D the removal of subsidies to exporters

In which market would equilibrium not be achieved at point E if price were above Op?
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1 point

What is a necessary characteristic of a public good?
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1 point

A It has a fixed maximum price.

B It has an opportunity cost of production of zero.

C It is non-excludable.

D It is an essential good.

The statements that follow relate to possible gains from an increase in free trade. Which gain is least certain to result in the short run?
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1 point

A a reduction in costs of production

B a rise in the number of jobs

C a wider choice of goods available to consumers

D an increase in the level of competition

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