4 svn sess ura ‘Testcone02216010 MAYAUNE2009 CARIBBEAN EXAMINATIONS COUNCIL ADVANCED PROFICIENCY EXAMINATION, ECONOMICS Unit 2~ Paper 01 0 minutes (08 TENE 2009 (am: READ THE FOLLOWING INSTRUCTIONS CAREFULLY, ThistestcositsoF45items. Youwillhave90 minutes toanswe them, nation othistesthokle youshould ave sn answer sheet. Donoteconceredtatthe answer sheet provides spaces formoresnswersthan there artes inthistest, achitem inthis test has four soguestedanswersictered(A),(B), (C)(D). Readeachiten you reabouttoanswerand decide which choice isbest ‘Onyouransvershet nthe number whicheorespondsoyourtemandsbdethespacebaving ‘hesame eter asthe answer you hive chosen. Loskat the ample embeow. Sampletem Prime costs calculate by ating dec factory expentestocostof Sample Answer (A) goodsused (8) goods bought eo0e (© tomers used (©) materials product 4 emenssaay } ‘The best answer to thisitem is materials used so answer space (C) has een shaded Ifyou wanttochange your answer, be suretoerase yourldanswercompletelyandfilin your new ehooe ‘Whenyouaretoldtobegn.tumthepageand work asquicklyandascarfulysyoucan, you ‘annotansweranitem,omititand onto thenextone, Youcan comeback otheharer itm Inter, Yourscore willbe the oa numberof somrest answers ‘Youray any ough wrkinthisbooket ‘Youray useslentnon-programmabe calculators toanswer questions, DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO. Copyigh® 2009Canbbean Examinations Council ® “Alleghtreserved o2216010CAPE2009 Ap AFPISEALHERE2 1. Whichofte foiowing are macroeconomic svibles? 1 Aatereetrates ooamiesf scale Proedenmaation Balance of payments (A) andllonly (@)LangiVealy (©) Manditieniy (©) Mand tV only Items2-8referto the following able (tem ss Bago ad et property co income rm abaud [impor and propery income | 65 uid abroad a ie Tou deme epee at market prices 2, Whtisthe Grose National Product ctor ext )$253m @) $267 (©) $268m (©) s278m 3. WhtistheGroet National Product are prices? (A) $248m @) 826m © s7sm (0) $448 ‘22160101CAPE2009 Consumption lie refer tthe following diagram, income Which ofthe following BEST represents clnsavings? W te ® a9, © 90 (oats According to Monstarsts, the demand for money isdetermined by the i 1. rateofinterest I levelofineme UL leetortsation TV. amountofsavings (A) Landttonly (®)—and1Vonly (© Mandittonly (©) WanaiVonly ‘The consumption function is given as (C= a+ bY.Inthis equation represents (A) eutonomousiavestnent (8) sonorous consurion (© minal propensity tsve (©) marginal popensiyo consume i GOON TOTHENEXT PAGEiain 7 cefers tothe following diagram honing the income cxpentre model 7. What does RS represent? (A) Autonomous saving (8) Theiniaionay gp (©) Thedefasonary sap (©) Astonomousinvestent 8. Which ofthe following BEST defines “weal 10 tional inome? (A) The actual GDP inany given year (8) Themoneyvalueofastional income (©) Natonalincome adjusted inion (©) GOPminusnet propery income fom shod n, (2216010CAPE209 emis 9-10 refer to the diagram below showing tbe classical mods for labour aac ‘The curve N represents he total numberof persons inthe (A) conomy (8) labour force () employed taker (©) unemployed bracket ‘The broken line Between the AS, andthe N curves represents te (A) walhbour free (8) euirum wage rate (©) sua eve ofunemployment (©) scqulium evel ofunerployment Which ofthe following statements is TRUE of a eanty's Gross Domestic Product? (4) Abwayssalerthan Gross Nationa Proce. (@) Reflects th tte markt vale ofall oodeandvervices purchased ina sconomy inagiven yar (©) Reflects he tol market vale ofall final goods and services produced ‘naneconomy ina given yeur (O) — Isalwaysargerthan Net Domestic Prodct GOON TO THE NEXTPAGElol a. 13. 4. “ks wages ncreate the sunber of workers willing to work aso increases." This statement explains wy the “ » © © sggregate supply curve ferabouris ‘pardons sstgregate demand curve forlsbour ‘sdownvard sloping ultram wage rte is maintained ‘18500000 quilibrivm national output is Trine by 20000 workers ‘Which ofthe following euatonsisconeet? “ » © o ‘Nominal nest rae = Real intrest rat inflation Realises ate ~ Nominal intrest, rate inflation eal teste = Nominal interest ‘ate x inltion| Real interes ate = Nomina interest rate ialation “The agree suply of abou curve shows te (A) ‘tot oumberof people willing and ble to work at different wage (®) —thalnuberofpeoplewhorequiee ‘ettons who sf willing and able owed. (©) ammount of goods a particular rohceris sling (D) smount of factor services pariularproacors sling Which of te folowing CANNOT be usd tomes inflation? (A) GDP Deter (B) _Expendinwe Method (©) Producer Prive Index (©) Consimer Price Index ea2.@p1nicare 2009 16. 1. 1. 20, ‘What isthe MOST LIKELY efectafarise “ © © A fallinthe saving rte ‘Aninereseinizvestment ‘An neresein bank ending “Anincease intheexteral value of ‘eurency ‘Which ofthe following san automate seal subilze? (a) Sttorequred pension (8) Unemploymert beefs {© Fixedeostofliving allowance ” ‘Constr orabonalincome ‘what type of policy is a government Jmplementing when it places a tax on sesoline? (A) Expansion sal policy (8) Conractinary fea poicy [© Expansonsry money policy (©) Confectionary money policy Which ofthe following statements BEST. sites thespeculatve demand formaney? (A) Ieisnepatively related the ate of (8) eispositvely elated othe rate of (© Wir ot affected by the rate of (©) ie determine by the amount of setae What the MOST LIKELY effect of fall ininterestratcs? “ ® © o A fitinbanklending ‘Atala the savings aio ‘Afalinthe level of nvesiment ‘Anicrease inthe extemal value of ‘seurency GOON TOTHENEXTPAGE‘tem refersto the following ble which gives data on acount’ atonal debt Year [Valueof Exports] Value of ‘Amount Imports Borrowed 1998 [ss00mition ——[s250mition | S40 millon | $380 milion 2008 | s3somition | stcomition | ssomition | $130 miion 21, Frome data inthe tbl, what conclusion ene drawn about the national debe om the psiod 1995 102005? (A) The deb has increased (B) The debhas ben repaid, (©) Debtservce ratio isconstant (D)Thodebeserdoeratio has nereased 22, Thevelocity of culation ofmoney canbe 24. dined as the (A) erage time in which howsholds spend ei mone income (8) money stock ina given time period «vided by the level of prises (©) tal vale of tanaction ina given time end aividedbyteaverage prcelevel (D) number of times in given time 25, ‘period that a unit is used to Durchase fin output 23, What is the effect of «surplus budget on government tal de? (A) Ta deb should ints, (B) Toa debe shuld decease (©) Toa debt should uenats {D) Total debt should remain hese, (22160101CAPE2008 ing 10 the Keynesian model, the Primary ease of large-scale unemployment w o © © sn increase in exports the existence of high prices the existence of low prices ‘inadequate egaseatedeand ‘The ‘crowing ou effec erst station Inwhicharise in goverment spending w @ © © rests ina in private investment ‘pending ress sein private savings ‘causes hot imerestates and pave causes interest rates ¢9 rise and Privateinvestmentspeading fall GOON TOTHENEXT PAGELot 26. Arighovardshittofthe liquid preference cure isthe result of “ @ oO o sminerease inthe ate of intrest expectation of alin share pices fn increas inthe level of national expectation ofa depreciation ofthe exchange ate 27. Which ofthe following is TRUE boat auomadesabizas? 1 1, im W. “ @ © ©) ‘They prevent recession from ‘ctuing, ‘They cushion the economy from the fl effets of recession. “Thy cause utp and unernploy- ‘ment levelstobe very volatile. ‘They re the volt of ouput ndemployment levels. {and oly Tand1V only and it oniy and IV only m21co1acaPe2009 2. 20. a1 ‘Thepreceutonary motive forholing money isbeseden (8) uncertainties aboot he timing of coe nna (©) seers shut movment Donan hare pres (© their tat roney Is needed for ‘chsng Sod an sae a honey ireceivedat interval (©) theft tha bond and sae pies navebeenona downward rend “The Conta Bank determines th sock of money which does NOT change a lees rates chang, therefore the money Supply (A) wpvardsloping (B) perfectly elastic (©) perfectly inlatic (D)Sownwardsloping A fiscal suplsis BEST dofiaed asthe (A) sum of income collected by the government (8) excessoftota govermmentrevenues fever total government expenditures (©) amount of money speat by the {government on social welfare benefits (D) excess of total government expenditures over total government reves Which of the fllowing defines ‘economic growth"? (A) Theincresse intel pereapita cut (B)—Anincreas inthe sundardof living (©) A tepreseaation of the maximum recovery of existing resouross (D) The meeting of two production posibhity boundaries GOON TOTHENEXTPAGE32, Which ofthe following BEST explansthe role ofthe Word Trade Organization? (A) —_Setingthe geographic baundais for the conduct of weed trade (®) Executing the taxes and ait for world ade (© Providing protection for loss developed counties 4D) Seng he rules snd regulations for ‘he conduct of word trade 38. Arminia cororaon is EST deserbed seat (A) withownes rom diferent countries (B) thathas production units at east ° o ‘whose productisa household name ands sol across the globe with sole production ight inatoet 34. Which of the followings an advantage of Mexiblecxchangoraes? o ® oO o “More goods and services are sold ‘broad “More cureney is kept within the ome county. Market forces establish balance of payments equilibrium aute- mately Market foroes establish demand for ‘ood and services utomaticaly. 38. Which ofthe fllowingrefest the reaton ‘of a single monetary and fiscal authority ‘ang junction overaanber of cous? (A) Cosomsunion (B)—Frectrade aco (© Femonscunion (©) Commonmasker 21601WCAPE 2008 ¥. 38 2. ‘An advantage of « fixed exchange rate ‘systems that it “ ® © © forces tbe goverment ioconstanly mone salve requires the strong support of govermenttominainits ale cc provide an automatic solvion ‘balance ofpeyment problems reduces the iceraintiercatsed by ucuatiag impor andexpon prices Which ofthe following factors is NOT a determinant of economic growth? (A) Glotaion (8) Technologial advances © © lnpeovement in abou productivity (Ownership of natural resources Which ofthe flowing combinations is an example of pavatsaton? w ® oO 0) Deregultion and fanchising Franchising and redisrbton ‘Conuactingoutandepuaion Deregulation andnatoelsason ‘Which of the following is NOT included ina balance of payment aecounr? ” @ oO ) Goverment budget account Finca account ‘Capital account (Curent scone (GOON TOTHENEXT PAGE40. Jamaica is lange-sale producer and exporter of bananss, However it fies increasing competition forexpor makes fom produces in countries it Cost Rica nd Guatemala, Which ofthe folowing ‘zaps shows the impact of competion on th exchange re ofthe aman dolar apainst the US. ola? (Pree are quote in US dollars) o © i : ? 3 i i i i a j : 3 i i ©, © H 3 i : in Gol 41, A trade deficit indicates that a country’s 42, Whichof te fllowingfictrsare objectives ‘pone ofglbaliston? (4) cquatitsespons 1, Traetibealiatin (8) srelesstanitsexpons 11, Texhnoioglimovaton (©) aemorethantsexpors IIL Promodon of ifferent utes (D) have decreased significantly IN. Liberals of expt markt (A) Litandit only (8) Llland1V only (© Lien t¥ only (©) titltand IV enty GOON TOTHE NEXT PAGE en2io1ncaPE20948. Assuming both the European Union and Guyana hve italy owing exchange rte systems den an increasing demand for eres by Guyane citizens wil MOST ily cro ‘he Guyana dalle (A) appreciate with he euro (8) depreciate with he euro (©) spresneagnine the oro (D) depreciate aguante euro “4 4s, lem 4485 refer othe dingram boiow ‘whch shows the mkt forthe United Sites Gola U3). 6 3 £ 0s) 02) Ps 9, O92, 0, “emmy Wich ote lowing BEST describes tbe situation if the exchange rate were at st=£04? (A) The dollar wouldbe undervalued, (@)—Thedollar would be overvalued. (©) Demand would be less than spl. {D) Themarket would bein quiitrum, What would be the equim quan of olars(8)? Qt @) a © oO 0) oF IF YOUFINISH BEFORE TIMES CALLED,CHECK YOUR WORK ONTHISTEST. e22i¢o10cAP E2000