General Certificates of Education Advanced Level Examination Revision Question Paper

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1 General Certificates of Education Advanced Level Examination Economics I Revision Question Paper Time Two hours Attention : Answer all the questions. Select the accurate or the most appropriate answer. (01) Several Economics Statements have been stated below. A Inflation rate of the last year was 11% B Exceeding 10% of the unemployment rate is harmful for the economy. C Price elasticity of demand regarding a giffen good takes a positive value. D- The most suitable measure of declining poverty is the fair distribution of income. Normative statements among the above statements are, I. A and D II. B and D III. C and D IV. A and C V. B and C (02) What is the criterion that is based in identifying an inferior good? I. When the consumption of that good is gradually increased marginal utility takes a negative value after a certain level. II. Creating negative externalities when consuming that good. III. Creating a disutility for people by those goods. IV. Declining the market demand for that good with the increment of personal income. V. That good is mostly consumed by poors while the rich consume less. (03) An assumption that is used when drawing a production possibility frontier is, I. Equility in productivity of factors. II. Equility in technology that is used for both products. III. Inability of substituting resources between the two products. IV. Fixed resource endowment. V. Fixed prices of products.

2 (04) Price operates in a market economy, I. As a medium of signalling, rationing and incentives. II. As a medium of signalling, collecting taxes and earning profits. III. As a medium of signalling, encouragement and a planning. IV. As a medium of distributing scarce resources and product. V. As a medium of facilitating exchange and providing incentives. (05) Different componants that can be noticed in an economic system are stated below (A) Factor ownership (B) Household and business firms (C) decision co-ordinating mechanism (D) Government (E) Incentive systems The three fundamental componants that should be included in operating an economic system among the above componants are I. A, B, C II. B, D, E III. A, B, D IV. C, D, E V. A, C, E (06) From which changes of the demand curve from the followings illustrate the effect of the substitute and income effect of a price change regarding a normal good? I. shifting to the right II. shifting to the left III. shifting to left or to right IV. tranfering from one point on the curve to another point V. tranfering from one point on one demand curve to a point on another demand curve (07) On which situation from the followings there may be a positive relationship between the price of the good and consumer `s cost? I. if there is a perfectly elastic demand II. if there is an inelastic demand III. if there is an elastic demand IV. if there is a untitary elasticity V. if the elasticity value is greater than one

3 (08) A cause for the demand of a particular good becomes inelastic I. abundance of substitutes II. spending a minor percentage from the income III. easy for mobility of resources IV. being a non essential good V. time lag prevailed after changing the price (09) If the value of a price elasticity f demand and income elasticity of demand regarding a certain good take a positive value respectively the particular good is, I. a luxury good II. a giffen good III. an inferior good IV. an essential good V. a normal good (10) The pair of equations that illustrates the unitary elastic demand and unitary elastic supply is, I. Qd = 50 5p and Qs = p II. Qd = 2p and Qs = p III. Qd = 50 5p and Qs = 2p IV. Qd = 120 and Qs = 2p P V. Qd = 120 and Qs = 1+ p P (11) Market demand and supply of a certain good are linear functions and points releavant to them are stated below Price Quantity demanded Quantity supplied The equilibrium price and quantity of this good are respectively I. Rs.3 and 10 units II. Rs.6 and 15 units III. Rs.8 and 20 units IV. Rs.9 and 25 units V. Rs.10 and 30 units

4 (12) The compulsory condition that may create in the market equilibrium regarding a certain good is, I. equality of producer`s surplus and consumer`s surplus II. equality in price of excess demand and price of excess supply III. zero price of excess demand and excess supply IV. equality of excess demand and excess supply V. zero producer`s surplus and zero consumer`s surplus (13) Following diagram illustrates the impacts of imposing a unit tax on a certain good Peice 60 S + T 50 a S 40 b c d 30 e f 20 g 10 h i j D Quntity The area that illustrates the Dead weight loss (excess burden) created by the unit tax is, I. a and g II. c and g III. h and i IV. e and f V. D and f (14) Market demand and supply equations are stated below Qd = p Qs = 10p If a Rs.10 unit subsidy is provided on this commodity the price paid by the buyer is, I. Rs.15 II. Rs.20 III. Rs.25 IV. Rs.30 V. Rs.35

5 (15) Following diagram illustrates a situation where the government imposed a maximum price on a good that is sold in the market Price a S P3 b c P2 d e P1 f D 0 Q1 Q2 Q3 Quntity Maximum Price The lost economic excess (when there is no cost in searching for goods) after the government imposed the maximum price is, I. a and f II. b and d III. c and e IV. b and c V. d and e (16) When operating a certified price policy for paddy by the government the effective measure that can be taken by the government to maximise the welfare is, I. purchasing the excess production II. storing the excess III. increasing the centres of purchasing paddy IV. operating a de - efficiency payment system V. allocating sufficient amount of money to purchase paddy (17) What is the statement that defines the short term accurately regarding the production process. I. the period which exists at least with one variable factor II. the period which exists at least with one fixed factor III. the period in which the marginal output and normal output are decreasing IV. the period in which the total out put increases in a decreasing rate V. the period which is less than a year

6 (18) Following is the relationship between the input and output in a short term production process Out put Total product (TP) 0 L 1 Variable input In the above short term production proces, at the L1 input level, I. marginal productivity takes a negative value II. avarage productivity becomes zero III. marginal productivity becomes zero IV. marginal productivity and normal productivity are equal V. average productivity takes a less value than the marginal productivity (19) In a short term production process when the out put is further increased beyond the out put level on which the average variable cost becomes minimum, Marginal cost (MC) Average variable cost (AVC) Average fixed cost (AFC) I. declines declines declines II. increases declines declines III. increases declines increases IV. increases increases declines V. declines increases increases (20) In a short term production process when the out put becomes zero total cost is Rs 180 when producing 12 units if the total cost becomes Rs 720 the average variable cost at that input level is, I. Rs II. Rs III. Rs IV. Rs V. Rs

7 (21) The reason for declining of the average total cost (ATC) in the long term production process is, I. decreasing returns of scale II. economies of scale III. marginal diminiishing productivity IV. technological diseconomies V. marketing diseconomies (22) The defference between the gross demestric product to the market price and the demestic income is, I. Net indirect taxes and net exports II. Capital depreciation and net factor income from abroad III. capital depreciation and direct taxes IV. net indirect taxes and net factor income from abroad V. net indirect taxes and capital depreciations (23) Which alternative illustrates the componants that are used to prepare gross domestic product in the final product methord accurately? I. capital goods,consumer s goods and stock change of inter mediate goods II. capital goods,inter mediate goods and services products III. consumer s goods, investment goods amd service products. IV. consumer s goods,investment goods and value of final products. V. Agriculture goods, industrial goods and service products (24) An important factor that infuences to uplift the output level of a country from the following is, I. Increasing the domestic saving II. declining the government subsidies. III. uplifting the government taxes IV. uplifting the government consumption expenditure V. increasing imported goods. (25) Only the three business firms named A,B and C exist in a certain economy. A and B firms produce an output of Rs and Rs respectively where as C firm produces an output of Rs There A firm produces purchasing inputs of Rs.5000 from the B firm and inputs of Rs.3000 from the C firm. B firm purchases inputs of Rs.4000 from the A firm and inputs of Rs.5000 from the C firm. C firm purchases inputs only from the A firm valued Rs.8000.According to these details the value of the output on the value added in the economy is,

8 I. Rs II. Rs III. Rs IV. Rs V. Rs (26) National output of a certain simple economy increased by 1000 as the investment was increased by 100.The consumptiion function of this economy is, I. C= 0.1y II. C= 0.2y III. C= 0.5y IV. C= 0.8y V. C=0.9y (27) If the consumption function of a simple economy without and autonomous consumption is 0.8 out of the disposable income (c= 0.8yd) when the income increases, Marginal propensity to consume (MPC) Avarage propensity to consume I. increases increases II. decreases decreases III. decreases increases IV. increasees decreases V. does not change does not change (28) The components that contract the aggregate demand in an open economy are, I. savings,taxes and exports II. savings, taxes and investments III. taxes, goverment expenditure and imports. IV. Savings, government expenditure and imports. V. Taxes savings and imports (29) Induced consumption expenses are meant by, I. Consumption expecditure existed at the zero income level II. consumption expenditure that exceeds the autonomous consumption expenditure III. consumption enpenses that do not increase as a result of increasing income. IV. Government expenses that increase due to the increment of income V. Consumption expenses that are made by increasing savings in an inflationary situation.

9 (30) The demand made for money on the speculative motive, I. illustrates a positive relationship with the income II. illustrates an inverse relationship with the income III. illustrates an inverse relationship with the interest rate IV. illustrates an inverse relationship with the interest rate V. illustrates an inverse relationship with the price level (31) A demand deposit of Rs.5000 is deposited in a commercial bank available in a commercial banking systerm.if there ia a statutory reverse ratio of 20%.what is the total amount of loans that can be newly issued on the basis of this deposit? I. Rs.1000 II. Rs.4000 III. Rs.5000 IV. Rs V. Rs (32) The major instrument that is currently used by the Sri Lanka Cental Bank in handling the monetory policy is, I. one day repurchasing rate II. bank interest rate III. statutory reverse ratio IV. foreign exchange rate V. maximum interest rate (33) Several components that are relevent to the money supply and price level are stated below. Stock of money in a country Rs. 500 billions The velocity of circulation of money 2.5 Price level Rs. 5 The amount of transactions or the real product of this economy is, I. 125 units II. 200 units III. 250 units IV. 300 units V. 350 units

10 (34) The inflationary gap is concerned as, I. the amount of increase in the price level on the expansion of the money supply II. the amount of aggregate demand of the economy that has exceeded the aggregate demand required for the full employment output level. III. the amount of increase in the price level created by the increase in the aggregate demand due to the decline of the interest rate. IV. the amount of increase in price level due to the decline of the aggregate supply. V. the percentage increment of the price level in adjustments of supply side shock. (35) A-Parks B-Forest C-Knowledge Select the alternative from the following which type of Classification of goods is belonged by the above mentioned goods respectively. I. semi public goods, public goods and global public goods II. pure public goods, public resources and private goods III. semi public goods, public resources and pure public goods. IV. Public resources, global public goods, private goods. V. Collective goods, global public goods, pure public goods. ^36& Price/Cost/refurns(Rs) a c S = MCp,= MCs b MBs MBp 0 Quntity(Units) Q p Qs Above diagram illustates the market equilibrium of a good with positive externalities of consumption and the socially optimum equilibrium. The verticle distance marked by ab in this diagram illustrates, I. Marginal social cost II. Marginal private returns III. Marginal social returns IV. Marginal external returns V. Marginal external cost

11 (37) The budgetory datas of a certain economy has been stated below.(rs.millions) Tax income 100 Capital expenses 75 Non tax income 25 Government loan interest 40 Recurrent expenditure 120 Foreign gifts 45 Loans taken from non- expansionary sources 10 Select the accurate answer that illustates the amount of increasing money supply and the primary deficit of this budget. Primary deficit (Rs.millions) The growth of the money supply (Rs. Millions) I II III IV V (38) The alternative that illustates the most accurate arrangment of the government loans in Sri Lanka recently is, as a presentage of the gross domestic product the institute that provided the highest amount of foreign the source that provided the highest loan loans I. 81.9% Asian Development Treasury bondages bank II. 85.0% Asian Development Treasury bills bank III. 86.2% International Monetory funs Sri lanka Development Bondages IV. 87.9% Europe common Treasury bondages trade union V % International Development bank Treasury bills

12 (39) According to the international trade direction in Sri lanka in 2010 the major export market and the import market were, I. Japan and middle-east countries II. America and India III. Europe Association and India IV. America and China V. Germony and Asia (40) What is the accurate alternative that contains the kind of currencies which determine the valuve of Special Draft Rights (SDR), the reserve assets owned by the international monetory fund? I. American Dollar,Sterling pound,indian Rupees. II. American Dollar, Euro,Yen and Indian rupees. III. American Dollar,Sterling pound,yen and Euro IV. Ammerican Dollar,French Frank,Yen and Indian rupees. V. Sterling pound, Yen,Euro and Indian rupees. (41) Following are several items included in a balance of payment. A- Computer and information Services earnings. B- Compensation payments C- Portfolio investments D- Direct investment income E- Privatization earnings F- Capital transfer earnings What is the accurate letter group that forwards the iterms that are included in a current account and capital and financial account in the balance of payment? Currrent account Capital and financial account I. A,B,E B,C,D II. A,B,D C,E,F III. A,D,E C,F,B IV. A,D,C B,E,F V. A,D,E A,C,F

13 (42) In which elastic combination a depreciation of the external value of money makes a more advantageable effect on the Trade balance according to the Marshal-Learner condition? Price elasticity of foreign demand Price elasticity of domestic demand for for exports imports I II III IV V (43) Foreign resource gap is, I. The difference between foreign earnings and payments on imports II. The difference between export earnings and import payments III. The difference between total foreign earnings and total foreign payments IV. The balance of the current account in the balance of payment V. The value of net exports. (44) The statement that mentions the accurate export combination in Sri Lanka in 2010 is, Agricultural exports Industrial exports Minerals and other exports I. 24.6% 74.3% 1.1% II. 23.9% 74.3% 1.8% III. 22.8% 74.9% 2.3% IV. 24.6% 74.9% 4.5% V. 23.9% 74.9% 1.2% (45) The index that is calculated keeping weight on the deprivations of health,education and living standard is, I. Human development index II. Multi-dimentional poverty index III. Physical living standard index IV. Sri Lanka Saubhagya index V. Human poverty index

14 (46) Select the accurate alternative that shows the human development index and the position of sri lanka among 169 countries in Human development index Position owned by Sri Lanka I II III IV V (47) For the sustainable development addition to the economic development, it is expected, I. minimization of poverty and environmental preservation II. fair income distribution and economic efficiency III. economic structural changes and economic stability. IV. Environmental preservation and economic structural changes V. Social development and environmental preservation (48) Economic growth rates and Gini Coefficient of two countries have been stated below A country B country Average economic 8 6 growth rate(%) within the period from 2008 to 2010 Gini coefficient in Gini coefficient in According to the above data the most accurate conclusion regarding these two countries is that, I. Strategies of economic growth which are friendly with the poverty of A country have succeeded II. Strategies of economic growth which are friendly with the poverty of B country have succeeded III. Strategies of economic growth which are friendly with the poverty of A and B country have succeeded IV. Stratergies of economic growth which are friendly with the poverty of B country have succeeded comparatively to the A country V. Strategies of economic growth which are friendly with the poverty of A country have succeeded comparatively to the B country.

15 (49) What is the criterion that is not used in preparing the human development index which has been introduced by the United Nations Human Development programme? I. Life expectancy at birth II. Mean valuve of the years that were gained the school education III. Number of years that are expected to be indulged in school education IV. Infant mortality rate V. Purchasing power parity per capita gross national income (50) When observing global trends of foreign direct investment flows it is noticed that more opportunities for direct investment in Sri Lanka in the coming years will exist, I. in agricultureral and service sector II. in condtruction and industry sector III. in export product industry sector IV. in infra-structure formaton sector V. in mining and querrying industry sector

G.C.E. (A.L.) Support Seminar- 2016

G.C.E. (A.L.) Support Seminar- 2016 Economics I Two hours Instructions : Answer all the questions. In each of the questions 1 to 50, pick one of the alternatives from (1), (2), (3), (4) and (5), which