TEST CODE 01240010

FORM TP 2014105 MAY/JUNE 2014

CARIBBEAN EXAMINATIONS COUNCIL
CA~BBEAN SECONDARY EDUCATION CERTIFICATE®
EXAMINATION
PRINCIPLES OF BUSINESS
Paper 01 - General Proficiency
1 hour 15 minutes

( 28 MAY 2014 (p.m.))

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1. This test consists of60 items. You will have 1 hour and 15 minutes to answer them.

2. In addition to this test booklet, you should have an answer sheet.

3. Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item
you are about to answer and decide which choice is best.

4. On your answer sheet, find the number which corresponds to your item and shade the space
having the same letter as the answer you have chosen. Look at the sample item below.

Sample Item
The money that a business receives from the sale
of gt>ods or services is called its Sample Answer
(A)
(B)
assets
capital
0® II®
(C) income
(D) resources
The best answer to this item is "income", so answer space (C) has been shaded.

5. If you want to change your answer~ erase it completely before you fill in your new choice.

6. When you are told to begin, tum the page and work as quickly and as carefully as you can.
If you cannot answer an item, go on to the next one. You may return to this item later. Your

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i iiiii
score will be the total number of correct answers.

::::::: DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

---== Copyright © 2012 Caribbean Examinations Council

-- All rights reserved.

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1. Barter is BEST described as the 5. In a public limited company, the losses are
borne by the
(A) process of exchange involving the
use of money (A) staff
(B) purchase of goods and services (B) directors
using cheques (C) community
(C) exchange of goods and services (D) shareholders
without 1\le use of money
(D) exchange of goods and services
using notes and coins 6. The PRIMARY role of the human resoul'ce
department of an organization is to

2. Labour is BEST defined as the (A) hire, recruit, train and motivate
workers
(A) physical and mental capabilities (B) promote recreational activities for
used to perform tasks workers
.(B) ability to carry out ~anagement (C) assist employees in understanding .
functions effectively industrial relations
(C) level of skills training received by (D) produce magazines highlighting
individuals who are working outstanding workers
(D) total number of persons who hold
jobs in government ministries

.3. Which of the following is NOT a trading

' instrument?

(A) Cheques
(B) Credit cards
(C) Bills of exchange
(D) Money remittance

4. The term 'trade' refers to

(A) ·the selling of goods and services

on the stock market
(B) the movement of immigrants from
one country to another
(C) any commercial activity involving
the exchange of goods and
services
(D) the negotiation process between ·
trade unions and management
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Items 7-8 refer to the following diagram.

I
CEO
'
-
T
I

I
Sales
I I I I
Production Finance
r- ~

Manager Manager Manager

HR Purchasing
'-- f--
Supervisor Supervisor

7. The purchasing supervisor reports directly 9. Which of the following departments is

to which of the following? LIKELY to use its Management Information
System (MIS) to manage information about
(A) CEO customers and their response to the products
(B) HR Supervisor they sell?
(C) Finance Manager
(D) Production Manager (A) Finance
(B) Marketing
(C) Production
8. Which of the following positions would be · (D) Human Resource
BEST suited at 'X'?

(A) Chief Advisor 10. Subsidised meals for employees would fall
(B) Board of Directors under which of the following categories?
(C) Managing Director
(D) Human Resource Manager (A) Fringe benefits
(B) Duty allowance
(C) Wages and salaries
(D) Workmen's compensation
 - 4-

11. A MAJOR role of a trade union is to 15. The synopsis of the business plan 1s
encourage the contained in the

(A) unionization of workers (A) feasibility plan

(B) advancement of the welfare of its (B) marketing plan
members (C) keynote sm:runary
(C) sacking ofworkers whenever they (D) executive summary
haye problems at work
(D) incr~ase of salaries and vacations
16. A post-dated cheque is one which

12. An entrepreneur who wants to maintain (A) is dated for payment at a future date
control of the business would be advised (B) was written no longer than six
to register the business as a months ago
(C) is dated to agree with the date of the
(A) Sole Trader document requesting payment
(B) Partnership (D) is dated by the bank on the dfl.Y the
(C) Limited Company cheque is presented for payment
(D) Private Limited Company

17. Which of the following factors prevents an

13. Which ofthe following is NOT an example agreement from being considered a valid
of collateral? contract?

(A) Bonds (A) Consideration

(B) Stocks (B) Legal purpose
(C) Property (C) Misrepresentation
(D) Money orders (D) Offer and acceptance

14. The MOST important use of collateral 18. A contract may be discharged by which of
security to the lender is that it the following?

(A) can be seized if the borrower fails I. Breach

to pay II. Performance
(B) establishes the financial position III. Lapse of time
of the borrower ·
(C) improves the borrower's chance of (A) I and II only
getting a loan (B) I and III only
(D) gives the lender an idea of the state (C) II and III only
of the business (D) I, II and III

19. A 'purchase order' is a

(A) request for additional goods

(B) notification of goods received
(C) statement of outstanding debts
(D) document offering to buy goods

nr. r\1\.T 'lYI TUH' l\TRYT PAITF

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20. Which of the following types of cheques 25. Which of the following conditions would
allows an individual to receive cash on constitute a linkage between two industries?
demand?
(A) Two firms manufacture similar
(A) Open goods.
(B) Crossed (B) One firm shares the use ofmachinery
(C) Certified with another firm.
(D) Banker's (C) Two firms are responsible for the
manufacture of different kinds
of goods.
21 . Which of the following types of capital (D) The output of one industry of the
is used for the day-to-day operations of a economy becomes the input of
business? another industry.

(A) Fixe~ ·
(B) Floating 26. Which ofthe following is a feature ofperfec~
(C) Working competition?
(D) Nominal
(A) Few buyers arid many sellers
(B) Many buyers and few sellers
22. Which ofthe following factors ofproduction (C) Barrier to entry into the market
earns interest? (D) Many buyers and many sellers

(A) Land
(B) Capital 27. Which of the following is an example of
(C) Labour service-type production?
(D) Enterprise
(A) Oil mining
(B) Pottery making
23 . The term ' human resources' refers to (C) Communication
(D) Newspaper printing
(A) materials and goods made by human
· beings
(B) capital invested by shareholders in 28. The PRIMARY function of advertising is to
a company
(C) raw materials used in the manufac- (A) promote brand loyalty
ture of goods (B) promote public relations
(D) persons available for productive (C) communicate information
and professional services (D) ensure wider distribution of goods

24. Which of the following items is a product 29. Which ofthe.following is NOT a function
of the manufacturing industry? of the retailer?

(A) Gold (A) Preparing goods for resale

(B) A car (B) Selling in small quantities
(C) Wood (C) Providing a local supply of goods
(D) A house (D) Transporting goods to suitable
storage facilities
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30. Which of the following market situations 34. Market equilibrium exists when
is typically found where there are a large
number of producers and consumers? (A) buyers pay reasonable prices for
goods
(A) Oligopoly (B) sellers are satisfied with the prices
(B) Monopoly paid for their goods
(C) Perfect market (C) at current prices, the amount buyers
(D) Imperfect market wish to buy equals the amount
sellers want to sell
(D) at the ruling market pric~, buyers
31. Which of the following gives identity to a do not want to add to the stock
specific producer's goods? of goods they already have

(A) Label
(B) Brand 35. Which of the following may cause the bank
(C) Patent to dishonour a cheque?
(D) Copyright
I. Cheque is crossed
II. Irregular signature
32. In which of the following types of trade III. Cheque is post-dated
can the hire purchase method of buying be
used? (A) I and II only
(B) I and III only
(A) Retail (C) II and III only
(B) Import (D) I, II and III
(C) Foreign
(D) Wholesale
36. Which of the following is a function of
the commercial bank and NOT the central
33. The price of an article is usually high when bank?
there is a
(A) Providing personal loans
(A) large quantity for sale and few (B) Carrying out monetary policy
people wanting to buy (C) Giving advice to government
(B) small quantity for sale and few (D) Managing the financial sector
people wanting to buy
(C) large quantity for sale and many
people wanting to buy 37. Which of the following are characteristics
(D) small quantity for sale and many of a stock market?
people wanting to buy
(A) Costs and prices
(B) Risks and benefits
(C) Rent and investment
(D) Premium and reward
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38. Tom invests his savings by buying shares 43 . Which of the following is NOT regarded
in a .company. From this investment Tom as a role of taxation?
expects to receive
(A) To raise revenue for government
(A) profits (B) To influence the distribution of
(B) interests incomes and wealth
(C) revenues (C) To influence total expenditure on
(D) dividends goods and services
(D) To influence the investment deci-
sions of publicly owned enter-
39. One of the MAJOR functions of a Central prises
Bank is to

(A) issue notes and coins 44. Which of the following actions by
(B) issue stocks and shares government is MOST likely to lead to an
(C) accept deposit accounts improvement in the standard of living?
(D) make loans and advances
(A) Printing more money
(B) Increasing the income tax rate
40. Investment can be defined as (C) Abolishing taxes on low incomes
(D) Giving tax incentives to businysses
(A) the stock of goods in a country
(B) additions to the capital stock of a
country 45. Which of the following forms of taxation can
(C) the amount of money available at be classified as 'direct'?
a given time
(D) the amount of capital owned by the (A) Income tax
government (B) Excise duty
(C) Purchase tax
(D) Customs duty
41. Which ofthe following forms oftaxation is
imposed on goods produced in a country?
46. Governments offer subsidies to businesses
(A) Excise duty to
(B) Preference duty
(C) Excise drawback (A) force them to pay corporation tax
(D) Customs drawback (B) increase costs and ultimately prices
(C) reduce the costs and ultimately
pnces
42. A price control may be defined as a (D) increase the price ofimported goods

(A) tax on goods and services

(B) government ban on imports 47. Which of the following forms of taxation
(C) government limit on the price of a requires every employee to pay the same
good or service percentage ofhis salary in taxes?
(D) grant given to producers to reduce
their prices (A) Indirect
(B) Regressive
(C) Progressive
(D) Proportional
 -8-

48. In calculating Net National Product, 52 . Which of the following is NOT a feature
. depreciation refers to the of free trade?

(A) increase in the price level (A) Protectionism

(B) decrease in the price level · (B) Trade specialization
(C) decrease in capital stock value (C) Increase in world output
(D) increase in capital stock value (D) Comparative cost advantage

49. Inflation can BEST be described as 53. The total value of goods imported minus
the total value of goods exported is referred
(A) fluctuations in the general price to as
level
(B) a_ general and sustained rise in the (A) balance of trade
level of prices (B) total currency flow
(C) a fall in the level of prices of goods (C) balance of payments
and services. (D) current account balance
(D) changes in the level of prices of
goods and services
54. A quota can BEST be described as
.
50. Export licences are issued MAINLY to (A) a ban on the sale of goods
(B) a licence given to import goods
(A) encourage local businesses to (C) an external tariff among countries
produce more goods for export (D) a restriction on the quantity
(B) enable the government to control imported
the flow of goods being exported
(C) indicate to the importing country
that the goods are of a high 55. The term 'economic dualism'defines an
standard economy in which one sector is
(D) indicate to the importing country
the price at which the goods are (A) highly dependent on local capital
to be sold (B) highly dependent on foreign capital
(C) overpopulated while the other is
underpopulated
51. ·The term 'trade in securities' refers to (D) technologically advanced while the
other is technologically retarded
(A) the selling of goods and services
on the stock market
(B) the movement of immigrants from 56. To correct an adverse balance of payments,
one country to another a government may
(C) the negotiation process b~tween
trade unions and management (A) reduce credit
(D) any commercial activity involving (B) · increase exports
the exchange of goods and (C) reduce income tax
services (D) increase the money supply
 -9-

57. The purpose ofCARJCOM is to 59. In periods of inflation, the ability to raise
additional capital for expansion is MOST
(A) allow member states to collaborate likely to be a problem for
(B) foster interregional trade and
common services (A) sole traders
(C) encourage the transfer of tech- (B) partnerships
nology within the region (C) public companies
(D) allow for unrestricted movement (D) multi-national corporations
of persons atnong the territories

60. Which of the following countries are NOT

58. The MAJOR aim of the European Union members of the Organization of Eastern
(EU) is free m~wement of Caribbean States (OECS)?

I. goods (A) Anguilla and Grenada

II. people (B) Guyana and Bahamas
III. capital (C) Barbados and Jamaica
(D) Dominica and St. Lucia
(A) I and II only
(B) I and III only
(C) II and III only
(D) I, II and III

ENDOFTEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

01240010/F 2014