cANDlrrar['. - PI.['.AS['. NOT['.!

PRINT your nome below alrd return this booklet

with youranswersheet ['allure to do 3o may reult
in disqualificrtlon.
TEST CODE 01216010
FORM TP 2016059 MAY/JUNE 2OI6

CARIBBEAN EXAMINATIONS COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE@
EXAMINATION
ECONOMICS
Paper 01 - General Proficiency
I hour 15 minutes

01 JUNE 2016 (p.m.)

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

I. This test consists of 60 items. You will have I hour and l5 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 how it is done in the sample item below.

Sample Item

Economics may be described as a 'Social Science' Sample Answer

because it deals with

(A) the economy

@@o@
(B) the environment
(C) human behaviour
(D) production and consumption

The best answer to this item is "human behaviour", so (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, turn 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 that item later.
I

I
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO
-
II
Copyright @ 2014 Caribbean Examinations Council
--
I
- All rights reserved.
 1

I Which of the following rewards accrues to Item 5 refers to the following diagram
the factor of production called 'capital'? which shows the relationship between the
production of Good X and Cood Y by a
(A) Rent certain country using all its resources.
(B) Profit
(c) Wage
Good X
JDf Interest

2. Which of the following is a component of

a country's balanceof payments account?

-<frI- The value of imports and exports

(B) The value of government 0
expenditure
(C) The country from which goods are 5 What name is given to the curve represented
imported above?
(D) The number of commercial banks
in the country (A) Demand curve
(B) Market supply curve
(C) Individual supply curve
3. Trade liberalization can be defined as -,=(E) --1 Production possibility curve

(A) an increase in trade deficit

(B) _ an increase in trade surplus 6. Some Caribbean countries are experiencing
--(C)
" the removal of trade barriers a lack of industrialization, a low standard
(D) trading between many countries of living and a high population growth
rate. Which of the following terms BEST
describes the economies ofthese countries?
4. Which of the following strategies is
NOT used by governments to influence (A) Advanced
economic decisions of businesses? (B) - Developed
*q Developing
-(*)-'- Increasing retirement benefi ts (D) Agricultural
(B) Passing minimum wage legislation
(c) Regulating the emissions of toxic
waste 7 Country X allows the foreign exchange
(D) Identifying areas where businesses market to determine the rate of its domestic
should be located currency based on the forces of demand
and supply. This type of exchange rate is
referred to as

(A) fixed
(B)
-pegged
$f. floating
(D) managed

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0l2l50l olF )ol6
 -3-

8. An outward shift in a production possibility 12. Which of the following accounts is NOT
curve can be caused by an included in the balance of payments
account?
(A) lncrease ln pnces
(B) increase in wages 'r'(A) Asset account
(c) - increase in imports (B) Capital account
),Dr= improvement in technology (c) Current account
(D) Offi cial fi nancing account

9 Choice is the MOST important issue in

economics because 13. In seeking to stabilize the economy of
a Caribbean territory, the role of the
(A) incomes are not evenly distributed government should be to
(B) most countries have a low per
capita income (A) increase its taxes, borrow more and
-(e ) resources are scarce relative to forecast revenues
consumers'wants (B) encourage skilled labourers to stay
(D) money is scarce in relation to a within the territory
country's resources
' review its policy on taxation,
,'!Pl
borrowing and expenditure
(D) import more consumer goods to
10. Prices of goods in market economies ' satisfy the needs of the people
fluctuate while prices of goods in planned
economies tend to be fixed. The MOST
likely reason for this difference is that in 14. Jamaica buys motor cars from Japan while
the market economy, Japan buys coffee from Jamaica. This has
resulted in a balance of payments deficit
(A) profits are lower for Jamaica. Which of the following
(B) producers are never efficient statements BEST describes Jamaica's
(c) there are higher unemployment situation?
"-" levels
(D) demand and supply forces -)r'- Jamaica has to pay Japan more
determine prices money.
II. Japan has to pay Jamaica more
._.-..,.-- mOngy.
II Which ofthe following is LEAST likely to ,.LJl:' Jamaica needs to export more to
affect the efficiency of labour? Japan.

(A):_ Worker motivation (A) I only

J;B)'' Firm's profitability
(C) Levelof technology
4$f
(c)
I and III only
II and III only
(D) Education and training (D) I, II and III

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0l 21601 otF 2016
 4

15. Price elasticity of supply refers to the Item 17 refers to the following diagram
responsiveness of the quantity supplied to which shows the price and quantity
a change in demanded for Cood X.

-wf
'(e)
prrce
income s
(c) demand
(D) prices of substitutes Price

Dt
Item 16 refers to the following table which
shows tlre amount of money associated D
with various items. o Quantity demanded
Item Amount ($)
17. The movement of the demand curve of
;P.gnsumer consumption 800 Good X from D to D, results from an
Government spending 300 increase in
Gross investment
Export of goods
Import of goods
100
80
s0
.4r
(B)
consumer rncome
the price of Good X
(c) .
the price of a complement
(D) the cost of inputs used to produce
16. Based on the information in the table. the Good X
gross domestic product (GDP) is

(A) $l 2oo l8 According to economic theory, 'second

(B) $r 230 hand'cigarette smoke is an example of a
*@\-
(D)
$1 280
$2200 (A) merit good
(B) . private good
iay' (C) positive externality
Li\i ) *gf -
c.l I t
negativeexternality

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 5

Item 19 refers to the following table which 20. Which ofthe following financial irrstrunrents
shows units of labour and total output of are issued by the central bank on behalfof
labour. the government?

Units of Labour Total Output "1,I'

)-, WY Treasury bills
6 372 (B) Corporate bonds
7 455 (C) Equity securities
8 496 (D) Shares on the stock exchange
9 53r
l0 580

19. What is the number of labour units that

produces the HIGHEST average product
of labour?

(A) 6
(B) 7
(c) 8
(D) 9

Item 2l refers to the following curves which show the demand for some products

PPD

D D

a 0 a
I II

P P D

0 a 0 D a
Itr IV

21. Which of the curves above indicates that demand for the product is perfectly elastic?

(A) |
(B) II
-
g'Irr
(D) rv

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0l 2l 601 olF )ot 6
 -6

22. The MAIN objective of a credit union is to 25 A normal supply curve for farm produce will
slope upwards from left to right if farmers
(A) z encourage 'summer'spending
encourage thrift among its (A)-"- pass on increased costs to customers
"W
(C)
members
provide credit
agencies
to government r\
(c)
are willing to produce more as
prices increase
increase their profit margins as
(D) provide investment funds for prices increase
companies (D) are willing to increase supply as
demand increases

23. The term 'recession'refers to a period of

26. In 2013, the government's fiscal budget
(A) increased economic activity showed that total estimated revenue
(B) gradual increase in the GDP of a was GREATER than total estimated
country expenditure. The difference ii known as
(c) national economic prosperity in a
country {k)' a budget surplus

)w temporary economic decline (B)

(c)
a budget deficit
a balanced budget
(D). an accumulated budget
Item 24 refers to the following diagram
which shows the demand for and supply
ofgrapes. Item27 refers to the following information
which relates to a manufacturing company.
Price z1
t-/
L)
l-/
$r0 000)
Do Total fixed cost
Total cost $s0 d00'- 'ep
,t,J
Output 100 units

p, v 27. The average variable cost is

(A) ) $ 4oo
r00

$
--T J
JPf
(c)
p, $l
000
Do
(D) $4 000
0 q. q,
Quantity

24 What is the equilibrium price and quantity

demanded?
.iF-,
((A)/ p"andq"
tBt po and q,
(C) p, and q,
(D) p, and q.

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 -7 -

Item 28 refers to the following diagram Item 30 refers to the following table which
which shows the simple circular flow of shows the price of a product, the quantity
income for an economy. demanded (QD) and quantity supplied
(QS).
Firms
Price QD Qs
($) (Units) (Units)
Y
l0 8 20
I
8 t2 t6
Households 6 t4 t4
4. l6 12"

28. The nominalflow labelled Y refers to 2 29 8

(A) savings 30 At which of the following prices are there

(B) investment @
d
(D)
factor incomes
factors of production 6 $2 and $4
(B) $4 and $6
(c) $6 and $8
29. The term 'money supply'refers to the (D) $8 and $10

(A) total amount of gold, silver and

other precious metals in reserve Item 31 refers to the following table which
(B) total asset base of the institutions shows production costs of three units of a
in the financial sector product.
(c) amount of money traded in the
/-, foreign exchange market Total Fixed Marginal Total
Units
(D) total stock of money in an economy Cost ($) Cost ($) Cost ($)
at a given moment I 100 25 125
2 130
L,L,A
5 60 I

31 What is the total cost when three units

are produced?

(A) $l 25
(B) $l 30
(c) $lss
rv)' $ 190

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01216010/F 2016
 -E-

Item 32 refers to the following information 33 A coulttty faccs tlrc ftrllowirrg ;rlotlrrc:tiorr
which relates to the cost of output of a combinations:
product.
X = production with uneryployed resources
:
Y unattainable production combination
Z : efficient production combination
Output Level Total Cost
100 l0 000
l0l r0 500 Which of the following production
possibility curves (PPCs) correctly
32 The marginal cost is illustrates the information above?
-/
,(A) $ soo (A) Capital
(B) $lo 000 goods

(c) $lo loo x

(D) $lo soo Y

o 7, Consumer
goods

(B) . CaPital
goods

.Y
o Consumer
goods

(C) CaPltal
goods

.Y
x

oZ

o' Consumer
goods

goods

oY

oX
o Consumer
goods

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 -9-

34 The functions of a central bank do NOT Items 36-37 refer to the fo llowing diagram
include which shows the demand and supply
curves for Good X. D, and S, represent
(A) issuing of notes and coins the original respective demand and supply
tq\ providing loans to the public curves.
(c) managing foreign exchange rates
(D) maintaining the foreign currency D2
accounts of the government
D sr

Item 35 refers to the following table which P

shows the market demand and supply at
Pr
given prices.
.D2
Po

Price of Market Market

P2
Potato per Demand Supply
s, s2
Ks ($) (000 kg) (000 kg)
4 700 100 0 x
-'& s00 200
Ytz) 350 350 36. What is the ORIGINAL equilibrium price?
l6 200 530
20 r00 700 Po
P
35. The equilibrium price is (c) P,
(D) P3
(A) $4
$8
B
(D)
$12
$16
37. Holding the supply curves fixed, a shift
in the demand curve ONLY from D,D, to
D,D, will cause the original equilibrium
price to

(A) fallfrom P3 to Po
(B) fall from Po to P,

I
(c) rise from Pr to P,
rise from Po to P,

38. A student has a daily allowance of $20 with

which he can purchase chickert and chips
or a burger, but NOT both. If he put'chases
the chicken and chips, the opportunity cost
of his decision will be the
d'- i
\111/ burger he gave up
(B) satisfaction lre gets from burger
(C) price of the chicken and chips
(D) satisfaction he gets from the
chicken and chips

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^1.tzn1 r\tc arllA
 - t0 -

39 A government reduces tax on carrots. This 44. The relationship between price and quantity
causes the price of carrots to fall by 50o/o. demanded ofa normal good is described as
Quantity demanded then rises by SD!/p.The
price elasticity of demand for carrots in this (A) direct
a shift
case is

(A)
&
(D)
inverse
indirect

p
0
0.4
I
2.5 45 A countrv has a comoarative advantase in
the production offfimmodity when it

40 The measure that is MOST likely to reduce (A) canproducemoreofthatcommodity

inflation is than any other country

(A)
(B)
an increase in bank lending
an increase in import duties
a reduction in direct taxation
0
(C)
can produce that commodity at a
lower opportunity cost tfran any
other country \
has a larger share of the market for
a reduction in government that commodity than any other
@ expenditure country
(D) accountsforagreaterpercentageof
global sales of that commodity
4t The amount of net exports in an economy than any other country
l .j
is given as -$10m. This indi"6ates that the
7 ,(.L
value of exports is L U
46. A firm produces 29 pairs of high q
(A) zero leather shoes at a fixed cost of$20 000 and
(E equal to imports a variable cost of
$9 000. On pr6ducing
@) less than imports the 30th pair, the-new total cost rises to
(D) greater than imports $30 000 ..-)
.J
,I
c'IL'
What is the marginal cost of the 30th paii?
42. In economics, the excess of human u'ants
over existing resources is known as $ 1000
$ 9000
greed (c) $20 000
ffi
'(e)
scarcity
opportunity cost
(D) $29 000

(D) economic decline

47 In theory, open competition on a world
scale facilitates
43 Large firms can achieve savings in
unit costs as a result of advertising and (A) high levels of dependency on
packaging. These kinds of economies of tourism
scale can be classified as (B) increases in trade unions'
negotiating power
(A) financial government manipulation of
'
/'CI\ technical market outcomes
KC) ) marketing (D) the development of a competitive
D' managerial advantage based on price
i
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Z.A1 niE /)n 1 (
^1.1
 - ll -

t-,

48 Which ofthe following isNOTa determinant 52. The economic system where major
of a shift in demand for laptop computers? economic decisions are made by private
individuals and businesses ii known as a
Income
W
(c)
Price of laptop computers
A preference for desktop computers
.g9/free market
(B) planned economy
(D) A rise in the price of desktop (C) controlled economy
computers (D) subsistence economy

49 Which of the following factors will 53. Production can be defined as the
contribute to a surplus on the balance of
trade of a country? (A) interaction between buyers and

sf
sellers
w{ The value of exports is greaterthan
the value of imports.
transformation
outputs
of inputs into
(B) The volume of exports is greater (c) pricing of resources according to
than the volume of imports. demand
(c) The volume of imports is greater (D) economic relationship between
than the volume of exports. output and input
(D) The value of imports is greater than
the value of exports.
54 Which ofthe following measures is LEAST
likely to be used to reduce iniports?
50 The currency of a country may appreciate
in value if there is an increase in (A) Tariff
(B) Quota
(A)
pr-
the demand for its imporls
the demand for its exports
-{w
(D)
Subsidy
Embargo
(c) its balance of trade deficit
(D) its balance of payments deficit
55. A pure public good can be described as

51 When an economy which was once (A) diminishable

booming suddenly starts to experience low
demand for goods and services, leading
ry
(c)
zero-priced
excludable
to companies and businesses closiag (D) rivalrous
down, rising unemployment and falling
standards of living, the country is said to
be experiencing 56. Which ofthe following isNOTan example
of a primary product?
*A\ a recession
(B) a revaluation (A) Banana
(C) an externality (B) Bauxite
(D) a disequilibrium
@f Furniture
(D) Crude oil

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01216010/F 2016
!
-t2-

Item 57 refers to the following table Item 60 refers to the following table which
which shows the current account section shows manufacturing output as a share of
of a country's balance of payments for the gross domestic product (CDP) for four
year 2014. countries: W, X, Y andZ.

Item ($M) Country

Invisible imports
Invisible eiports
*50
80
\ \'r
')/J' Year w
(%)
x
("/")
Y
("/")
Z
("/"\
Visible imports
Visible exports
-ex I

2000
990 28
23
40
34
29
26
29
28

57 What is this country's balance of 2010 l9 3l 2t 23

merchandise trade?

@
(B)
_S38 M
$20 M
60 The table shows that ALL countries
experienced
(c) $38 M
(D) (A) a decline in the gross domestic
$48 M
product
(B) a decline in the sale of manufactured
58. Which of the following is NOT a function products
of the International Monetary Fund? (cl an increase in employment in the
manufacturing sector
(A) Fostering global monetary @f a decline in manufacturing output

6(c)
cooperation
Settling trade disputes between
countries
Promoting the financial stability of
,'l'( O
as a share
product
of gross domestic
L'/

countries
(D) Assisting countries with balance of
payments defi cit diffi culties

59 The restriction of international trade

through tariffs, embargoes, qubtas and
exchange controls is referred to as

w
4c>
globalization
protectionism
a bilateralagreement
(D) structural adjustment

END OF TEST

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