UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level

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1 * * UNIVERITY F MRIGE INTERNTINL EXMINTIN General ertificate of Education dvanced ubsidiary Level and dvanced Level ENMI 978/13 Paper 1 Multiple hoice (ore) May/June hour dditional Materials: Multiple hoice nswer heet oft clean eraser oft pencil (type or H is recommended) RE THEE INTRUTIN FIRT Write in soft pencil. o not use staples, paper clips, highlighters, glue or correction fluid. Write your name, entre number and candidate number on the nswer heet in the spaces provided unless this has been done for you. There are thirty questions on this paper. nswer all questions. For each question there are four possible answers,, and. hoose the one you consider correct and record your choice in soft pencil on the separate nswer heet. Read the instructions on the nswer heet very carefully. Each correct answer will score one mark. mark will not be deducted for a wrong answer. ny rough working should be done in this booklet. This document consists of 12 printed pages. I11 6_978_13/FP ULE 211 [Turn over

2 1 What is likely to be greater in a planned economy than a market economy? 2 efficiency flexibility innovation stability 2 Which is a normative statement? n increase in the rate of inflation will lead inevitably to an increase in unemployment. reduction in unemployment below a certain level will lead to higher inflation. Inflation can be reduced only by increasing the level of unemployment. Unemployment is more harmful than inflation. 3 What is consistent with an individual demand curve that slopes down from left to right? s falls, a person switches away from rival products towards the product. s falls, a person s willingness and ability to buy the product will decline. s rises, a person becomes less sensitive to changes. s rises, a person s opportunity cost of purchasing the product falls. 4 What will cause the demand curve for domestically produced cars to shift to the left? an increase in the costs of production of domestically produced cars a reduction in taxes on the purchase of cars a reduction in the tariff on imported cars a reduction in the tax on petrol ULE /13/M/J/11

3 5 The diagrams show changes in the market for a good Which diagrams represent a change in the demanded? 1 and 2 1 and 3 1 only 3 only 1 6 The diagram shows the demand curve for a product with unitary elasticity. What will happen with such a curve? fall in will bring about an increase in expenditure on the product. fall in will bring about an increase in sales but a fall in expenditure on the product. s the rises, expenditure on the product stays the same. s the rises, expenditure on the product rises and then falls. ULE /13/M/J/11 [Turn over

4 7 In the diagram and are the demand and supply curves of a good. 4 1 What could cause the supply curve to shift in the short run to 1? a change in consumer preferences a decrease in the of a complementary good a fall in the cost of raw materials a government warning that consumption of the good can damage health 8 refinery which processes oil into petrol (gas) is faced with the following conditions. 1 It is working at full capacity. 2 Its petrol storage tanks are full. 3 It has received delivery of a new fleet of petrol tankers to transport its petrol. 4 It requires six months to train new workers to qualify in safety procedures. Which of the conditions will tend to make the supply of petrol relatively inelastic? 1 and 2 1 and 4 2 and 3 3 and 4 ULE /13/M/J/11

5 5 9 The table gives estimates of the elasticities and cross elasticities of demand for bus and rail travel. service elasticity with respect to the of: bus travel rail travel bus travel rail travel What would be the change in the volume of rail travel resulting from a 1 % increase in bus fares? an increase of.16 % an increase of.43 % a reduction of.13 % a reduction of.37 % 1 The diagram shows the demand and supply curves for a good. P 1 P Q 1 Q Q 2 The government fixed a maximum of P 1. What would this have achieved? the guarantee of supplies of Q 2 the market equilibrium of Q the need for a government subsidy of PP 1 the rationing of the product for consumers to Q 1 ULE /13/M/J/11 [Turn over

6 6 11 Global stocks of cod are currently under threat due to over-fishing whilst there are plentiful supplies of the less popular laskan pollock. How might the mechanism operate to limit the depletion of fish stocks? The of both cod and laskan pollock will fall. The of both cod and laskan pollock will rise. The of cod will fall whilst the of laskan pollock will rise. The of cod will rise whilst the of laskan pollock will fall. 12 The table shows some of the costs and benefits at a given level of production of a good. costs $m benefits $m private 8 private 9 social 2 external 1 What is correct at this level of production? External benefits exceed external costs. Private benefits exceed external costs. Private costs exceed social benefits. ocial costs exceed social benefits. 13 The consumption of a good generates external benefits. Its market equilibrium is E. Which diagram shows the change in the equilibrium (E to E 1 ) necessary to reflect the correct value of the good to society? 1 E 1 E 1 E E 1 1 E 1 E E E What is an advantage, rather than a disadvantage, of cost-benefit analysis in deciding on a government investment project? Economic agents place different values on external costs and external benefits. Estimates of external costs and external benefits are included. Forecasts of future costs and benefits vary over time. Miscalculations of the costs are financed by the taxpayer. ULE /13/M/J/11

7 15 What is a distinguishing feature of a public good that is not found with private goods? 7 onsumption depends on the ability to pay. It creates negative externalities. Its consumption by one consumer can have an effect on other consumers. Its consumption by one consumer does not restrict consumption by other consumers. 16 In the diagram and 1 are the supply curves for an agricultural product in years 1 and 2 respectively. is the demand curve in years 1 and 2. In year 1 the government purchased an amount necessary to ensure that the was P. (year 1) 1 (year 2) P WX Y Z The is held at P in year 2. How much more must the government buy in year 2 than it bought in year 1? WX XY XZ YZ 17 Each diagram shows the production possibility curves of two economies, X and Y, which produce food and clothes. In which diagram would both economies benefit by specialising in the good in which they have comparative advantage and trading at an exchange rate of 1 unit of clothes to 1.5 units of food? 4 3 food X Y 1 2 clothes food 5 4 X Y 4 5 clothes food 5 4 X Y 2 5 clothes 4 food 2 Y X 4 clothes ULE /13/M/J/11 [Turn over

8 18 n argument against trade protection is that it will increase 8 competition for domestic industries. domestic levels. opportunities for domestic infant industries. the current account deficit. 19 country s terms of trade currently stands at 15 (base year 2 = 1). ince 2 the average the country has received for its exports has increased by 2 %. What has been the change in the average it has paid for its imports? 25 % 2 % +2 % +25 % 2 government wishes to present its final balance of payments account. It has calculated the current account balance, the capital account balance and the financial account balance. What additional information is required to complete the task? change in foreign currency reserves foreign aid net errors and omissions speculative currency flows 21 The table shows inflation rates, unemployment rates and changes in money wage rates between 28 and 29 for a number of countries. country inflation % unemployment % money wages % France Germany UK U What can be concluded from the table? n average, those in employment in the UK had an increase in real incomes. The same number of people were unemployed in the U and France. The same product would have the same in France and Germany. Unemployment was highest where inflation was highest. ULE /13/M/J/11

9 22 The diagram compares the inflation rates of Paraguay and rgentina between 195 and inflation (%) key Paraguay rgentina What can be concluded about inflation rates in the two countries in the period 195 to 25? rgentina s s fell rapidly between 1992 and rgentina stabilised its level between 1973 and Paraguay was always more successful than rgentina at controlling its inflation rate. Paraguay was most successful at controlling its inflation rate between 1962 and ver a period of a year, the annual rate of inflation falls from 1 % to 6 %. Which statement is correct? The cost of living has increased. The purchasing power of money has increased. There has been a reduction in the Retail Price Index. The standard of living has increased. 24 Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the long-run impact on the UK s balance of trade in goods and on its current balance? balance of trade in goods current balance improve improve improve uncertain worsen improve worsen uncertain ULE /13/M/J/11 [Turn over

10 1 25 country experiences changes in the value of its exports and imports of goods and services and its inflow of incomes and transfers. These are shown in the table. Which set of changes is most likely to cause a depreciation in its floating exchange rate? export value import value net inflow of incomes and transfers fall fall fall fall rise fall rise fall rise rise rise rise 26 What is likely to happen if there is a rise in the international value of a country s currency? a fall in the foreign currency of its exports a fall in the volume of its exports a rise in the domestic currency of its imports a rise in the domestic level 27 The table shows observations of the exchange rate of an economy and its current account balance over six years. year exchange rate (U dollars per unit of domestic currency) current account balance (billions of U dollars) Which concept does the data in the table illustrate? exchange rate appreciation purchasing power parity the J-curve effect trade-weighted exchange rates ULE /13/M/J/11

11 11 28 The diagram shows the exchange rate for the UK in terms of the U$. The original equilibrium exchange rate is at E. What will be the new exchange rate equilibrium of the UK following a reduction in UK interest rates and a rise in U interest rates? 2 1 of (in U$) E 1 of s 2 29 The diagram shows the production possibility curves of two economies, X and Y. 2 capital goods 1 X Y 1 2 consumer goods Which statement about the two economies is correct? oth economies always have the identical opportunity costs. oth economies have the same future growth prospects. The opportunity costs are constant in both economies. The two economies can never produce the same combination of products. ULE /13/M/J/11 [Turn over

12 12 3 What distinguishes capital from other factors of production? apital exists only in capitalist market economies. apital results from the operation of the other factors. The rewards earned by the owners of capital are uncertain. Unlike labour or land, capital must be owned rather than hired or rented. opyright cknowledgements: Question 22 Graph extracted from: p.29. Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (ULE) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. University of ambridge International Examinations is part of the ambridge ssessment Group. ambridge ssessment is the brand name of University of ambridge Local Examinations yndicate (ULE), which is itself a department of the University of ambridge. ULE /13/M/J/11

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level *6470369426* UNIVERITY F MRIGE INTERNTINL EXMINTIN General ertificate of Education dvanced ubsidiary Level and dvanced Level ENMI 9708/13 Paper 1 Multiple hoice (ore) ctober/november 2012 1 hour dditional