Section-3

1 The diagram shows that when a tax of $2 on a good raises the supply curve from S 1 to S2, the
price to the consumer rises from $4 to $5.

S2 S
1

price 5
$ 4
3

D
0
75 100
quantity

What is the total tax yield to the government?

A $75 B $150 C $200 D $375

2 What might be a direct benefit to the individual worker of a specialised job?

A Specialisation can enable the worker to become more skilled. B

Specialisation enables a better quality product to be produced. C
Specialisation enables the firm to introduce more machinery.
D Specialisation makes better use of resources.

3 A stock exchange is a market in which

A system of barter operates. B

the interest rate is fixed.
C the value of the exchange rate is determined.
D shares are bought and sold.

4 ‘Savers suffer as inflation rises to 4.4 %.’

Which function of money is most involved in this statement?

A means of deferred payments

B medium of exchange
C store of value
D unit of account

5 ‘There are actors who earn extremely high

incomes.’ What best explains this?

 A Acting is a popular career.

B Actors have regular employment.

C Actors work short hours.
D Some actors have a unique talent.

6 In 2008, the world’s largest metal mining company, BHP, increased its profits by

20 %. What could have helped that happen?

A decrease in economic growth in the UK and the US

B an increase in demand from China
C more competition from other companies
D more difficult mining conditions

7 What is a function of a commercial bank?

A acting as the lender of last resort

B deciding what is a legal tender
C determining monetary policy
D providing overdrafts

8 A person is most likely to save more when there is an increase in a country’s

A exchange rate.
B inflation rate.
C interest rates.
D money supply.

9 One of the functions of money is to act as a measure of value.

What does this mean?

A Money allows people to borrow and lend.

B Money allows people to save their surplus income.
C Money is used to buy goods and services.
D Money is used to compare the worth of different goods and services.

10 What is a function of a trade union?

A to negotiate workers’ contracts

B to promote workers to more responsible jobs
C to recruit workers for the firm
D to supervise the workers in the firm

11 South African companies are planning to undertake major investment in Zimbabwe in order to
mine platinum.
 If this investment occurs, what would happen in the short term to the supply of platinum, the price
of platinum and the profits of the companies?

supply curve price of platinum profits of the companies

A no change rise rise

B shift to left no change fall
C shift to right rise rise
D shift to right fall uncertain

12 Which statement about a country’s banks is correct?

A commercial bank holds the financial accounts of the government.

B Commercial banks settle debts by clearing customers’ cheques.
C The central bank sets the government’s tax and spending policies.
D The central bank supplies foreign currency to members of the public.

13 Why might factory workers have higher wage rates than agricultural workers?

A Factory worker is in greater supply.

B Factory workers face fewer risks of accidents.
C Factory workers have cleaner working conditions.
D Factory workers use more productive equipment.

14 In 2009, the Chinese Government tried to increase household spending.

Which policy measure would have been most likely to achieve this

objective?

A an increase in both direct and indirect taxes

B a reduction in subsidies given to manufacturers
C a requirement for commercial banks to reduce their lending
D a switch from public to private sector provision of health care and pensions

15 Which motive is most likely to increase the wish to open a savings account?

A to have cash immediately available

B to prepare for future expenditure
C to satisfy essential needs
D to widen present consumption choices
16 Share prices on the stock market are most likely to rise if

A employment falls.
B interest rates fall.
C interest rates rise.
D tax rates rise.

17 The ways of making and receiving payments continue to develop. As well as cash, debit cards
and credit cards, mobile (cell) phones are now being used to make payments.

Which method of paying for products provides no information to sellers about their customers?

A Cash
B debit cards
C credit cards
D mobile (cell) phones

18 A group of workers in a firm join a trade union.

What would the union be expected to do?

A arrange for labour-saving technology to be introduced

B discuss safety issues in the workplace with the employer
C ensure job security by promoting the firm’s products through advertising
D negotiate new contracts with major buyers of the firm’s products

19 What might be an advantage to a trade union when arguing for an increase in its members’ pay?

A an increase in imports of a similar product

B the development of a new and profitable brand of the company’s product
C the development of new machines requiring fewer workers
D the establishment of a local college providing training

20 In 2008–2009 the central bank of a developed country reduced interest rates from 5 % to 0.5
% per year to stimulate the economy.

How would this policy have affected the amount saved and the cost of borrowing by individuals?

amount saved cost of borrowing

A decrease decrease
B decrease increase
C increase decrease
D increase increase
 21 For anything to be used as money, it must be

A a fixed value.
B in fixed supply.
C legal tender.
D readily acceptable.

22 The table shows information for two workers.

doctor window cleaner

annual income ($) 50 000 20 000

total deductions ($) 10 000 8 000

Both workers save 10 % of their disposable income.

How much is this in each case?

doctor window cleaner

A $12 000 $40 000

B $1 200 $4 000
C $40 000 $12 000
D $4 000 $1 200

23 On average, doctors earn more than bus drivers.

Which change would be likely to reduce the earnings gap between doctors and bus drivers?

A a decrease in the profits earned by bus companies

B a decrease in the qualifications needed to be a doctor

C an increase in demand for medical care
D an increase in the number of people passing the driving test

24 What could reduce the ability of a trade union to gain a pay rise for its members in a shoe
factory?

A an increase in sales of shoe exports

B a rise in the demand for shoes
C a rise in the productivity of shoe workers
D more people willing to work in the shoe industry

25 What might encourage a consumer to save rather than to spend?

A being made unemployed B

discounts on products
 C government subsidies to producers
D high interest rates

26 Why do banknotes function as money?

A They are backed by gold.

B They are durable.
C They are generally acceptable.
D They have intrinsic value.

27 The table shows the proportion of income saved for different age groups.

age 15 – 29 30 – 39 40 – 49 50 – 62 63+
% of income saved –34% –4 % 18 % 29 % –23 %

What can be concluded from this data?

A 50 – 62 age group has the highest level of income.

B The 50 – 62 age groups save the highest proportion of its income.
C The older age groups earn more than the younger age groups.
D The youngest age group spends more than the oldest age group.

28 Each worker in a firm specializes in performing one task. The firm then decides that each
worker should carry out a variety of tasks.

Which benefit will the firm be expecting to gain from the change?

A a decrease in the equipment workers need to be given

B a decrease in the time it takes to train workers
C an increase in the ability to cover for absent staff
D an increase in the skill gained from repetition

29 Which of the following is most likely to limit wage increases in an industry?

A an increased demand for the industry’s product B

a rise in the industry’s profits

C a rise in wages for workers in similar jobs

D the replacement of workers with robots

30 What is a function of a trade union?

A to negotiate workers’ contracts

B to promote workers to more responsible jobs
C to recruit workers for the firm
D to supervise the workers in the firm
31 The diagram shows how the weekly earnings of four workers changed between ages 16 and 64.

Which line is most likely to represent the change in the weekly earnings of an unskilled, manual
labourer?

average
weekly
earnings
B

C
D
16 32 48 64
age

32 What will be the most likely effect of a fall in interest rates on saving and borrowing?

saving borrowing

A decrease decrease
B decrease increase
C increase decrease
D increase increase

33 When will a trade union find it easier to achieve higher wages for its members?

A when consumers demand more of the product made

B when the company has a decrease in profits
C when the cost of raw materials increases
D when unemployment increases

34 What might be a direct benefit to the individual worker of a specialised job?

A Specialisation enables a better quality product to be produced.

B Specialisation enables the firm to introduce more machinery.
C Specialisation enables the worker to become more skilled.
D Specialisation makes better use of resources.

35 The table shows the change in real incomes for a number of occupations between 1978 and
2008.

change in real income

occupation
%
 doctors 153
lawyers 114
accountants 60
bricklayers 37
bus and coach drivers 19
fork-lift truck drivers –5

What can be concluded from the table?

A All occupations were better off in 2008 than in 1978.

B Fork-lift truck drivers earned the lowest wages in 2008.
C Doctors have earned more than lawyers since 1978.
D Professionals received higher percentage increases in income than manual workers.

36 Which function of money enables people to compare the worth of different products?

A medium of exchange
B standard for deferred payments
C store of value
D unit of account
 UNIT-3
1 What is necessary for a company to be classified as a multi-national?

A It diversifies its range of products.

B It exports most of its output.
C It increases its scale of production.
D It produces some of its output in different countries.

2 In 2001 some countries, including India and Pakistan, criticised the European Union for
continuing to protect European farmers with a subsidy while expecting poorer African countries
not to restrict trade.

Identify the concepts that are not involved in this situation.

A Developing and developed economies

B free trade and protection

C market prices and official intervention

D multi-nationals and public corporations
3 A commercial bank is appointed to act as a country’s central bank. What new

function would it now have?

A controlling monetary policy

B dealing in foreign exchange

C ensuring security for loans
D holding liquid assets
4 Which trade union action is most likely to have harmful effects on the productivity of a firm?

A acceptance of new technology

B agreement to a bonus system
C opposition to planned redundancies
D participation in a profit-sharing scheme

5 Nazmin Uddin works in a local office as a secretary three days a week. She lives with her parents in
a small apartment.
Meer Ali owns a successful fitness centre that employs about twenty people and lives in a
large house.

Which is likely to be true?

A Nazmin spends a smaller proportion of her income than Meer.

B Nazmin saves most of her income.

C Nazmin would find it easier than Meer to borrow money.

D Nazmin has a lower disposable income than Meer.
6 Which of the following groups of workers is most likely to be successful in
obtaining a wage increase?
 A Building workers during a period of bad weather
B computer operators when firms are installing new computers

C doctors when entrance qualifications to the profession are reduced

D farm workers as farming becomes more mechanised

7 There is an increase in interest rates.

What is the likely effect on saving and borrowing?

saving borrowing
A falls falls

B falls rises
C rises falls
D rises rises

8 What might increase the use of money as a medium of exchange?

A an increase in income tax

B an increase in interest rates
C an increase in savings
D an increase in specialisation

9 The following table gives information about four companies. Which one of these

companies is not a multi-national company?

number of countries in number of countries in number of countries in

company which the company has which the company has which the country sells
shareholders factories its products

A 2 1 100
B 1 2 50
C 10 20 20
D 20 5 1

10 In 2002 the trade union representing workers on the London Underground public transport
system called a strike.

Which condition would make a strike least likely to be successful?

A The demand has to be met at a certain time.

B The product or service is regarded as a necessity.
C The union represents a high percentage of the workforce.
 D There is a wide range of alternative services

11 What is a function of a central bank?

A to decide government spending

B to determine all interest rates
C to issue new currency
D to lend to private businesses

12 Which company operates in the primary sector?

company description

A Century City Hong Kong holding company with property and

hotel interests
B Compass East Industries Thai ceiling fan manufacturer

C Delta Gold rapidly expanding Australian gold and platinum

mining company
D First Bangkok City Bank medium-sized commercial Thai bank

13 Which method of advertising would be the most cost-effective way of selling economics
textbooks to schools?

A commercial television
B daily newspapers
C direct mail
D local radio stations

14 The table shows how three people spend their income.

person X person Y person Z

food, clothing and housing 35% 50 % 20 %

entertainment and leisure 25% 20 % 40 %
luxury goods 40 % 30 % 40 %

Place the three people in the most likely order of income, from highest income to lowest income.

13 X, Y, Z
14 Y, Z, X
15 Z, X, Y
16 Z, Y, X
15 The table shows the weekly values of certain items for the average person in each

group. Which group saves the most on average?

income ($) spending ($) borrowing ($)

A employed workers 500 400 50

B retired people 150 140 0
C school students 25 30 5
D unemployed 200 300 100

16 Stock exchange is a market in which

A system of barter operates.
B the interest rate is fixed.
C the value of the exchange rate is determined.
D shares are bought and sold.

17 What is most likely to be the main function of a central bank?

A controlling the money supply

B investing in commerce and industry

C issuing and processing credit cards
D making loans to individuals

18 What would prevent an Egyptian company being classified as a multi-national company?

A It concentrates on one stage of production only.

B It employs only Egyptians as managers.
C It manufactures only in Egypt.
D It uses other firms to transport its goods.

19 What might explain why wages paid in a particular occupation are high?

A a large supply of labour

B a low price for the good produced

C a strong trade union
D pleasant working conditions

20 What is a non-wage factor that can affect an individual’s choice of occupation?

A bonuses

B commission
C long holidays
D overtime pay
21 Which statement about different income groups is true?

A High income groups do not need to borrow money.

B High income groups save less money than low income groups.
C Low income groups find it easier to borrow than high income groups.
D Low income groups save a smaller percentage of their income than high income groups

22 The table gives information about full-time workers in a country.

average annual earnings

hours worked
$ % increase in per week
2003–04
male 21 268 4.4 41.8
female 15 444 5.1 37.6

What can be concluded from the table?

A All female workers earned less than male workers.

B The difference between male and female earnings became smaller.
C The hourly rate of pay for females was higher than for males.
D The productivity of female workers was higher than that of males.

23 What is likely to be found when there are many small firms in an industry?

A There are few barriers to entry.

B There is high expenditure on research developments.

C There is not much competition.
D Very large capital costs are needed to establish a firm.

24 A student records her income and spending for the past month. What function is money

performing in this situation?

A medium of exchange
B standard of deferred payments
C store of value
D unit of account

25 A claim for higher wages by a trade union would not be helped by an increase in

A consumers’ demand.
B Labour productivity.
C Profit.
 D Unemployment.

26 What is meant by ‘the separation of ownership and control’ in business organisations?

A increased control by the workforce

B government intervention in business organisations
C the employment of managers who are not shareholders
D the expansion of private enterprise

27 Which organisation controls the banking system in most countries?

A central bank
B commercial bank
C investment bank
D World Bank

28 Many countries have been extending the role of market forces in their economies. What is

intended to result from this action?

A greater economic efficiency

B greater equality of income
C less specialisation
D more government control

29 In 2000 the governments in a number of European countries had decided to reduce the amount
of gold held in their central banks.

What was likely to happen to the price of gold and the wages of gold miners as a result of this
decision?

price of gold wages of gold miners

A fall fall

B fall rise

C rise fall

D rise rise
30 Which of the following factors is likely to cause wages in an occupation to be low?

A extra responsibility
B rising unemployment
C the need for special skills
D unpleasant working conditions
 31 On completing your studies, you decide you want to work in an organisation which is big enough
to give you a chance of promotion, but where shift work will not normally be required.

Which of the following would be the best one to choose?

A a government office
B a hairdressing salon
C a hospital emergency department
D a local electrician’s

32 Which worker is likely to have the highest wages?

A a hospital doctor
B an office clerk
C a rubbish collector
D a shop assistant

33 The table shows how employment in five industries changed in a country between 1985 and
2002
1985 2000
(thousand) (thousand)
banking and finance 1336 1881
distribution and catering 3678 4323
extraction of minerals 1278 1094
manufacturing 3102 2128
transport 1550 1304

Which statement about these industries can be concluded from the table?

8 Output in the primary industries decreased.

9 Output in the tertiary industries increased.
26 Employment in the tertiary industries increased.
17 Employment in the tertiary industries was less than the secondary industries.

34 Mr Lee bought shares in Intel, a computer company producing throughout the world.

Sandip Patel owns and runs a grocery store.

Which of the following is not represented by the above businesses?

18 co-operative
B multi-national company
C public company
D sole proprietor
35 In what circumstances are trade unions more likely to be effective in wage negotiations for their
members?

A an economic boom
B a recession
C a period of declining productivity
D a period of rising unemployment

36 What function do central banks and commercial banks have in common?

A acting as a banker's bank

B controlling monetary policy
C dealing with foreign exchange
D supervising the banking system

37 The table gives weekly earnings for different groups in 1998.

London Great Britain

male female male female
managers £779.30 £539.20 £625.60 £435.30
unskilled workers £381.90 £237.80 £332.90 £228.60

Which statement about the influence on earnings is supported by the table?

A Female workers gain more promotion than male workers.

B Female managers earn more than unskilled workers.
C Great Britain has a higher cost of living than London.
D Repetitive work is compensated for by higher incomes.

38 Which of the following government policies would lead to a more even distribution of income?

A allowing a balance of payments deficit

B a change in the rate of exchange

C control of lending by commercial banks
D expenditure on unemployment benefits

39 What is an advantage of specialisation in jobs?

A different ability is fully used.

B Jobs are repetitive.
C Production becomes dependent on several groups of workers.
D The possibility of unemployment increases due to automation.
 40 Why do bank notes function as money?

A They are durable.

B They are generally acceptable.

C They count as legal tender.
D They have intrinsic value

42 What is usually a function of a trade union?

A It advertises the products that the members make.

B It appoints company employees.
C It negotiates with employers for increased wages.
D It negotiates with suppliers for reduced costs of materials.

43 To whom does the central bank usually make loans?

A individuals
B limited companies
C the government
D trade unions

44 When will a trade union be most effective in pursuing its members' interests?

A The economy is in recession with rising unemployment.

B The employers have few orders for the product.

C The government passes a law to increase competition in the labour market.

D The members' wages make up a small part of total costs.

45 What is likely to be the effect of a fall in interest rates on a consumer's borrowing and saving?

borrowing saving

A falls falls
B falls rises
C rises falls
D rises rises

46 What is most likely to cause the percentage of income saved in an economy to rise?

A a rise in consumer confidence

B a rise in direct taxation
C a rise in unemployment
D a rise in wage rates
 47 A shopkeeper runs a business as a sole proprietor. What

does this mean?

A The business has limited liability.

B The business is owned by shareholders.
C The business is quoted on a stock exchange.
D The profits of the business go to the shopkeeper.

48 What is least likely to be a function of a trade union?

A improving working conditions

B reducing the cost of labour
C representing members' interests
D securing adequate pay for members

49 The table shows information about four financial institutions, A, B, C and D. Which

institution is most likely to be a commercial bank?

It is the government’s It is owned by

Bank. Shareholders.

A no no
B no yes
C yes no
D yes yes

50 Which reason can explain the high earnings of star footballers?

A There are many of them.

B The training is easy.
C They enjoy playing football.
D They have special skills
51 Which method of payment is a government official most likely to receive?

A commission
B hourly rates
C piece rates
D salary
52 Interest rates fall.

How might this affect consumers’ saving and spending?

saving spending

A fall fall
B fall rise
C rise fall
D rise rise

53 The table shows the percentages of consumer spending on different items in four countries,
which have similar geographical conditions and climate.

Which country is likely to have the highest standard of living?

percentage of consumer spending on each item

country
food housing entertainment

A 20 30 25
B 30 25 15
C 40 25 10
D 40 20 10

54 The table shows the main source of export earnings by product for selected countries.

country product % of export earnings

W diamonds 80 %
X sugar 90 %
Y cars 55 %
Z oil 80 %

From this table we can conclude that

A all these countries specialise in the production of primary products.

B W and X specialise in the production of tertiary products.
C the largest % of export earnings from Y is from the sale of secondary products.
D export earnings of W and Z are identical.