Cambridge A Level Economics 9708 — 2023 Feb/March Paper 1 · Variant 2

Question 1

1 A good is most suitable to be provided by the market if it is A excludable and non-rival. B excludable and rival. C non-excludable and non-rival. D non-excludable and rival.

Accepted Answer

B

Question 2

2 What is the definition of long run? A the time period when all factors of production are specialised B the time period when all factors of production are variable C the time period when all key inputs into production are variable D the time period when at least one factor of production is fixed

Accepted Answer

B

Question 3

3 The table states the consequences of two macroeconomic policies. What correctly identifies whether the statements are normative or positive? a depreciation of an a rise in the minimum exchange rate will wage rate will cause cause the balance of unemployment to rise payments to improve A normative normative B normative positive C positive normative D positive positive

Accepted Answer

D

Question 4

4 The diagram shows the production possibility curve for wheat and corn. M output of wheat N O output of corn What can be deduced from the diagram? A As the price of corn falls, more of it is demanded. B Resources used in producing corn are more efficient than in producing wheat. C The opportunity cost of producing corn falls when moving from M to N. D The opportunity cost of producing corn is constant when moving from M to N.

Accepted Answer

D

Question 5

5 A supply curve is represented by the equation quantity supplied = 10 + 5P where P = the price of the product. Which price rise would cause the quantity supplied to double? A $1 to $2 B $1 to $3 C $1 to $4 D $1 to $5

Accepted Answer

C

Question 6

6 Which diagram illustrates unitary elasticity of supply? A B S S price price O quantity O quantity C D S price price S O quantity O quantity

Accepted Answer

C

Question 7

7 In which case is the price system not a possible method of allocating resources? A in the distribution of foodstuff among the population B in the hiring of workers by employers C in the ownership of land for agricultural use D in the provision of public goods by the government

Accepted Answer

D

Question 8

8 A sports stadium has two prices of seats. The cheaper seats are $10 and the more expensive seats are $20. When the prices of all seats are increased by 10%, the effects on demand are a fall of 5% for the cheaper seats and a fall of 12% for the more expensive seats. What describes the responsiveness of demand to the change in price? more expensive cheaper seats seats A elastic elastic B elastic inelastic C inelastic elastic D inelastic unitary elasticity

Accepted Answer

C

Question 9

9 Which statement correctly describes the shape of the demand curve for a normal good? A It shows an inverse relationship between income and quantity demanded. B It shows an inverse relationship between the price of the good and quantity demanded. C It shows a positive relationship between the price of the good and quantity demanded. D It shows a positive relationship between income and quantity demanded.

Accepted Answer

B

Question 10

10 Why does the basic economic problem of scarcity apply to both the rich and the poor? A The choices people make are not dependent on income inequalities. B Consumers pay the same prices for goods and services to satisfy their wants. C Human wants exceed what can be produced from available resources. D Natural resources are unevenly distributed amongst nations.

Accepted Answer

C

Question 11

11 Butter and buttermilk are goods in joint supply. Supply curves in both markets slope upwards to the right. Health concerns cause people to reduce their consumption of butter. What are the initial consequences of this for supply in the markets for butter and buttermilk? supply of butter supply of buttermilk A move left along supply curve move left along supply curve B move left along supply curve shift left of the supply curve C shift left of the supply curve move left along supply curve D shift left of the supply curve shift left of the supply curve

Accepted Answer

B

Question 12

12 The diagram shows the demand and supply of a good. price S x P y D O Q quantity When the market is in equilibrium, which area measures the difference between what consumers are willing and able to pay and what producers receive at that output? A x B y C x + y D x – y

Accepted Answer

A

Question 13

13 Why do some local governments subsidise the provision of bicycles to encourage their use? A Consumers are afraid of having car accidents. B Consumers are unable to afford bicycles. C Consumers are not aware of the external benefits of using bicycles. D Consumers ignore the external costs of using bicycles.

Accepted Answer

C

Question 14

14 The table shows Gini coefficients for both income and wealth in two countries. country P country Q income 0.6 0.5 wealth 0.4 0.7 Which statement is correct? A Gini coefficients are not comparable between income and wealth because one is a flow concept and the other is a stock concept. B Income inequality is greater in country P than in country Q. C Wealth inequality is greater in country P than in country Q. D Wealth inequality is greater than income inequality in both countries.

Accepted Answer

B

Question 15

15 A government is faced with rising inflation. It wishes to reduce inflationary pressure while avoiding a fall in output. Which action is most likely to meet its needs? A an increase in laws to promote competition B an increase in taxation C an increase in the budget surplus D an increase in the exchange rate

Accepted Answer

A

Question 16

16 The table shows selected information from a country’s national accounts. $ billion GDP 28 net property income from abroad –3 capital consumption 6 national debt 2 What is the country’s net national income? A $19 billion B $25 billion C $31 billion D $33 billion

Accepted Answer

A

Question 17

17 The graphs show the changes in the exchange rates of the pound sterling (£) against the US dollar (US$) and the euro (€) between the years 2001 and 2003. US$ per £ £ per € 0.725 1.750 £ US$ 0.700 1.700 1.650 0.675 1.600 0.650 1.550 0.625 1.500 1.450 0.600 1.400 0.575 2001 2002 2003 2001 2002 2003 year year What happened to the value of the £ between the years 2001 and 2003? A The £ appreciated against the US$ and depreciated against the €. B The £ appreciated against the US$ and the €. C The £ depreciated against the US$ and appreciated against the €. D The £ depreciated against the US$ and the €.

Accepted Answer

A

Question 18

18 Which statement about the circular flow of income is correct? A Exports and imports do not affect the equilibrium level of national income because they always cancel each other out. B The greater the level of saving, the greater the level of injections in the form of investment must be. C When consumers use past savings to increase their spending, there will be a rise in national income. D When a government increases withdrawals by increasing the rate of income tax, there must be an equivalent increase in injections to compensate.

Accepted Answer

C

Question 19

19 The graph shows a country’s average annual inflation rate over a five-year period. average annual inflation rate (%) 0 year 1 2 3 4 5 What can be concluded about the general price level during the five years? A It fell in only one year. B It fell in only two years. C It rose in only two years. D It was constant in only one year.

Accepted Answer

A

Question 20

20 In an economy, wages and prices are both rising but wages are rising faster. Which features are likely to exist in this economy? cost-push rise in real inflation incomes A no no B no yes C yes no D yes yes

Accepted Answer

D

Question 21

21 The diagram shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves for a country. X is the original equilibrium position. In one year, over one million foreign workers left the country and at the same time the country’s currency appreciated against the currencies of its major trading partners. What will be the most likely new equilibrium position for this country? LRAS3 LRAS1 LRAS2 general D price level A X AD2 C AD1 B AD3 O real ouput

Accepted Answer

C

Question 22

22 What is most likely to cause a rise in a country’s exchange rate? A a fall in its direct taxes B a fall in its export orders C a rise in its interest rates D a rise in its imports

Accepted Answer

C

Question 23

23 Which change affecting the foreign exchange market for the US$ would be most likely to result in a shift to the right of the demand curve and a movement along the supply curve? A The US government reduces subsidies on exports to the EU. B Foreign currency speculators in Switzerland believe that the US$ is undervalued and act accordingly. C The US government intervenes in the foreign exchange market so as to bring about a drop in the value of the US$. D US pharmaceutical companies experience a fall in demand for their products from the rest of the world.

Accepted Answer

B

Question 24

24 What can be best understood from a knowledge of a country’s terms of trade? A its balance of payments performance B the purchasing power of its exports C the standard of living within the country D the value of its real exchange rate

Accepted Answer

B

Question 25

25 A company produces goods for export only. Which change could cause a rise in the price of its goods while the quantity sold is unchanged? domestic foreign workers’ consumers’ wages wages A unchanged fall B fall unchanged C fall fall D rise rise

Accepted Answer

D

Question 26

26 Under which current conditions will supply-side policy measures be most likely to achieve a country’s key macroeconomic goals? unemployment price level level A high stable B high rising C low stable D low rising

Accepted Answer

B

Question 27

27 Why might a government prefer to use floating exchange rates? A It allows the government more independence in policy making. B It encourages the government to build up its foreign exchange reserves. C It eliminates the instability of free markets. D It gives firms more confidence in future costs and prices.

Accepted Answer

A

Question 28

28 What is least likely to rise as a result of the use of expansionary fiscal policy? A aggregate demand B budget surplus C nominal income D inflation

Accepted Answer

B

Question 29

29 The table shows GDP indices for a country over a three-year period. year 1 year 2 year 3 real GDP 100 105 106 money GDP 100 107 115 Inflation and economic growth are two macroeconomic policy objectives. Which row gives a correct assessment of the country’s achievement of these two objectives over the period? rate of rate of inflation economic growth A cannot tell positive B declining cannot tell C positive declining D rising negative

Accepted Answer

C

Question 30

30 A government raises interest rates to improve the current account of the balance of payments. What might reduce the effectiveness of this policy? A a fall in domestic growth B consumer pessimism C increased domestic saving D price-elastic demand for exports

Accepted Answer

D

Cambridge A Level Economics 9708 — 2023 Feb/March Paper 1 · Variant 2

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · A good is most suitable to be provided by the market if it is A excludable and non-rival

Q2 · What is the definition of long run?

Q3 · The table states the consequences of two macroeconomic policies

Q4 · The diagram shows the production possibility curve for wheat and corn

Q5 · A supply curve is represented by the equation quantity supplied = 10 + 5P where P = the…

Q6 · Which diagram illustrates unitary elasticity of supply?

Q7 · In which case is the price system not a possible method of allocating resources?

Q8 · A sports stadium has two prices of seats

Q9 · Which statement correctly describes the shape of the demand curve for a normal good?

Q10 · Why does the basic economic problem of scarcity apply to both the rich and the poor?

Q11 · Butter and buttermilk are goods in joint supply

Q12 · The diagram shows the demand and supply of a good

Q13 · Why do some local governments subsidise the provision of bicycles to encourage their use?

Q14 · The table shows Gini coefficients for both income and wealth in two countries

Q15 · A government is faced with rising inflation

Q16 · The table shows selected information from a country’s national accounts

Q17 · The graphs show the changes in the exchange rates of the pound sterling (£) against the…

Q18 · Which statement about the circular flow of income is correct?

Q19 · The graph shows a country’s average annual inflation rate over a five-year period

Q20 · In an economy, wages and prices are both rising but wages are rising faster

Q21 · The diagram shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves…

Q22 · What is most likely to cause a rise in a country’s exchange rate?

Q23 · Which change affecting the foreign exchange market for the US$ would be most likely to…

Q24 · What can be best understood from a knowledge of a country’s terms of trade?

Q25 · A company produces goods for export only

Q26 · Under which current conditions will supply-side policy measures be most likely to achieve…

Q27 · Why might a government prefer to use floating exchange rates?

Q28 · What is least likely to rise as a result of the use of expansionary fiscal policy?

Q29 · The table shows GDP indices for a country over a three-year period

Q30 · A government raises interest rates to improve the current account of the balance of…

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