Cambridge IGCSE Economics 0455 — 2020 May/June Paper 1 · Variant 3

Question 1

1 A natural resource was discovered in a country. The exploitation of this resource allowed the country to double its gross domestic product within ten years. Why did this not solve the basic economic problem? A Exploiting the resource required high expenditure on capital equipment. B Exploiting the resource caused significant environmental damage. C Gross domestic product was unevenly distributed in the country. D Wants still exceeded the resources available to meet those wants.

Accepted Answer

D

Question 2

2 The diagram shows a shift in a country’s production possibility curve (PPC). capital goods Y X O consumer goods What would cause the shift from X to Y? A a fall in the unemployment rate B a fall in consumer demand C a rise in the rate of inflation D a rise in the size of the labour force

Accepted Answer

D

Question 3

3 A farmer decides to grow potatoes instead of wheat. What is the opportunity cost of growing the potatoes? A the output of wheat B the price of seed potatoes C the profit from growing potatoes D the time spent preparing the potato field

Accepted Answer

A

Question 4

4 Which are both macroeconomic decisions? decision 1 decision 2 A a school recruits more teachers a firm sets the prices for its products B a central bank reduces money supply a government spends more on defence C a government increases tax rates a farmer decides which crops to grow D a household cuts its energy use a worker accepts an offer of overtime

Accepted Answer

B

Question 5

5 What is the function of the price mechanism in a market economy? A allocating resources and guiding choices B allowing governments to provide price stability C enabling markets to operate fairly D preventing competitors from entering a market

Accepted Answer

A

Question 6

6 The diagrams show changes in the market conditions for coffee. Which diagram shows the effect of a poor harvest of coffee beans? A B price S2 price S1 S1 S2 D D O O quantity quantity C D price price S S D2 D1 D1 D2 O O quantity quantity

Accepted Answer

A

Question 7

7 The price elasticity of supply of good X is 0.1. The good suddenly becomes very fashionable, leading to a large increase in demand. What would be the likely outcome of this change in the short term? A a large increase in output B a large increase in price C a small increase in price D a small increase in revenue

Accepted Answer

B

Question 8

8 What is a disadvantage to employers of switching to production using division of labour? A average cost decreases B flexibility of workers is lost C repetition of tasks saves time D training time decreases

Accepted Answer

B

Question 9

9 What is an advantage to a country of having an efficient commercial banking system? A It controls the money supply. B It discourages spending. C It encourages tax evasion. D It enables investment.

Accepted Answer

D

Question 10

10 The graph shows women’s wages as a percentage of men’s wages in year 1 and year 2. 85 percent 80 75 year 2 70 65 year 1 60 55 27 30 35 40 45 50 55 60 62 age Which statement is shown by the graph to be true? A Younger women earn more than older women. B Women’s wages remain about the same between the ages of 40–50. C In year 2, all women were earning more than men. D In year 2, women were earning a higher percentage of men’s wages than in year 1.

Accepted Answer

D

Question 11

11 People’s income decreases. How is the proportion spent on food and leisure likely to change? food leisure A decrease decrease B decrease increase C increase decrease D increase increase

Accepted Answer

C

Question 12

12 A firm produces 1000 units and has a total cost of $50 000. The variable cost per unit produced is $40. What is the total fixed cost of the firm? A $1000 B $4000 C $10 000 D $40 000

Accepted Answer

C

Question 13

13 The following information refers to a firm producing shoes. At which level of output does the firm maximise profits? total output of total cost total revenue pairs of shoes ($) ($) A 100 1000 1300 B 200 1800 2200 C 300 2700 3000 D 400 3200 3400

Accepted Answer

B

Question 14

14 Firms can grow by increasing the internal scale of their operations. What might be a disadvantage of this to the firm? A average cost begins to fall B it is difficult to motivate workers C labour is replaced by robots D markets become global

Accepted Answer

B

Question 15

15 A government owns and runs an airline. Which combination of ownership and sector is this? ownership sector A private secondary B private tertiary C public secondary D public tertiary

Accepted Answer

D

Question 16

16 What is not included in public expenditure? A capital spending by firms B interest payments on government borrowing C investment in defence by the central government D subsidies to bus companies from local government

Accepted Answer

A

Question 17

17 When is the budget described as balanced? A when direct taxes and indirect taxes are equal B when exports and imports are equal C when government spending and government revenue are equal D when the demand for money and the supply of money are equal

Accepted Answer

C

Question 18

18 What is the main aim of supply-side policy? A increasing economic growth by raising productivity B increasing the balance of payments surplus by restricting free trade C reducing the government’s budget deficit by increasing taxation D reducing the money supply by increasing the rate of interest

Accepted Answer

A

Question 19

19 A government is not allowed to increase its military spending. Government spending is currently at X. Which diagram illustrates a possible change in government spending? A B Y military military spending Y spending X X O O non-military non-military spending spending C D Y military military spending X spending X Y O O non-military non-military spending spending

Accepted Answer

D

Question 20

20 A country has full employment. Which policy is most likely to lead to a fall in economic growth in the short run but an increase in economic growth in the long run? A lowering the retirement age B raising the school leaving age C restricting the immigration of key workers D selling assets owned in other countries

Accepted Answer

B

Question 21

21 A government has a contractionary fiscal policy to reduce inflation. What will the government increase? A expenditure on infrastructure B income tax rates C personal tax allowances D unemployment benefits

Accepted Answer

B

Question 22

22 What would not be required in the construction of an index of consumer prices? A the selection of a base year B the selection of a representative range of items C the calculation of average wage levels D the weighting of each item in the index

Accepted Answer

C

Question 23

23 The table gives information about three economic indicators in four countries. rate of rate of rate of inflation interest 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.

Accepted Answer

A

Question 24

24 Real incomes have risen in a country. Which situation would definitely have caused this? money price level incomes A fell fell B fell rose C rose rose D rose fell

Accepted Answer

B

Question 25

25 In recent years some low-income countries have achieved higher rates of economic growth than high-income countries. What is most likely to explain this accelerated economic growth? A ease of transfer of modern technology to increase productivity B falling agricultural prices C higher ratios of labour to capital in manufacturing industries D increased trade barriers by high-income countries

Accepted Answer

A

Question 26

26 Which changes usually result when a country develops and is able to provide free healthcare and good living conditions? labour birth rate death rate productivity A falls falls rises B falls rises falls C rises falls falls D rises rises rises

Accepted Answer

A

Question 27

27 What are the effects on price and equilibrium quantity of the imposition of an import tariff on a good? price equilibrium quantity A decreases decreases B decreases increases C increases decreases D increases increases

Accepted Answer

C

Question 28

28 Which change will not increase a surplus on the current account of the balance of payments of a country? A a decrease in the value of imports B a decrease in primary income outflows C an increase in the amount of development aid received D an increase in domestic inflation rates

Accepted Answer

D

Question 29

29 An economy with a floating exchange rate experiences an increased deficit on the current account of the balance of payments. What will result from this? A an increase in government debt B an increase in its foreign currency reserves C an increase in the demand for its currency on the foreign exchange market D an increase in the supply of its currency on the foreign exchange market

Accepted Answer

D

Question 30

30 The table shows components of Japan’s current account balance in trillion Yen (¥) for 2011 and 2012. balance of balance of balance of balance of goods year services primary income secondary income ¥ trillion ¥ trillion ¥ trillion ¥ trillion 2011 –1.61 –1.76 14.04 –1.11 2012 –5.23 –2.33 13.55 –1.02 Which balance improved between 2011 and 2012? A balance of goods B balance of services C balance of primary income D balance of secondary income

Accepted Answer

D

Cambridge IGCSE Economics 0455 — 2020 May/June Paper 1 · Variant 3

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · A natural resource was discovered in a country

Q2 · The diagram shows a shift in a country’s production possibility curve (PPC)

Q3 · A farmer decides to grow potatoes instead of wheat

Q4 · Which are both macroeconomic decisions?

Q5 · What is the function of the price mechanism in a market economy?

Q6 · The diagrams show changes in the market conditions for coffee

Q7 · The price elasticity of supply of good X is 0.1

Q8 · What is a disadvantage to employers of switching to production using division of labour?

Q9 · What is an advantage to a country of having an efficient commercial banking system?

Q10 · The graph shows women’s wages as a percentage of men’s wages in year 1 and year 2

Question 11

Q12 · A firm produces 1000 units and has a total cost of $50 000

Q13 · The following information refers to a firm producing shoes

Q14 · Firms can grow by increasing the internal scale of their operations

Q15 · A government owns and runs an airline

Q16 · What is not included in public expenditure?

Q17 · When is the budget described as balanced?

Q18 · What is the main aim of supply-side policy?

Q19 · A government is not allowed to increase its military spending

Q20 · A country has full employment

Q21 · A government has a contractionary fiscal policy to reduce inflation

Q22 · What would not be required in the construction of an index of consumer prices?

Q23 · The table gives information about three economic indicators in four countries

Q24 · Real incomes have risen in a country

Q25 · In recent years some low-income countries have achieved higher rates of economic growth…

Q26 · Which changes usually result when a country develops and is able to provide free…

Q27 · What are the effects on price and equilibrium quantity of the imposition of an import…

Q28 · Which change will not increase a surplus on the current account of the balance of…

Q29 · An economy with a floating exchange rate experiences an increased deficit on the current…

Q30 · The table shows components of Japan’s current account balance in trillion Yen (¥) for…

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