Final Test 59 — Answer Key
Final Test 59 — ANSWER KEY
For tutor use
Section A — MCQ Answer Key
Q1. (Unit 13: Public vs Private Expenditure) Answer: A
Explanation: Counter-cyclical role.
Q2. (Unit 21: Motives for Spending, Saving and Borrowing) Answer: A
Explanation: Saving + borrowing.
Q3. (Unit 5: Equilibrium Price) Answer: B
Explanation: Buy low, sell high to stabilise.
Q4. (Unit 3: Opportunity Cost) Answer: B
Explanation: Multiple costs.
Q5. (Unit 10: Merits of the Market System) Answer: B
Explanation: Willingness + ability to pay.
Q6. (Unit 6: Changes in Demand) Answer: B
Explanation: Demand rises with income.
Q7. (Unit 2: Factors of Production) Answer: B
Explanation: Investment raises productive capacity.
Q8. (Unit 11: Market Failure) Answer: B
Explanation: Allocative inefficiency.
Q9. (Unit 1: Scarcity) Answer: A
Explanation: Command allocation = central authority decides.
Q10. (Unit 8: Price Elasticity of Demand (PED)) Answer: B
Explanation: Elastic → cut grows revenue.
Q11. (Unit 20: Trade Unions) Answer: A
Explanation: Standard role.
Q12. (Unit 22: Differences in Expenditure Patterns) Answer: A
Explanation: City costs.
Q13. (Unit 7: Changes in Supply) Answer: A
Explanation: Lower cost → more supply.
Q14. (Unit 18: Differences in Earnings) Answer: A
Explanation: Sectoral gap.
Q15. (Unit 19: Changes in Earnings) Answer: A
Explanation: Sector growth.
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Final Test 59 — Answer Key
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Final Test 59 — Answer Key
Section B — Suggested Answers
Marking guidance: award credit for accurate definitions, explanations, examples and balanced
argument. Many essay questions allow for alternative valid points.
Q1. (Unit 19: Changes in Earnings)
Discuss why low-skilled wages have stagnated in developed economies. [8]
Suggested answer: Globalisation, automation, weak unions, declining manufacturing. Each + critique.
Conclusion: structural shift requiring retraining and policy support.
Q2. (Unit 16: Stock Exchanges)
Discuss what causes stock market crashes. [8]
Suggested answer: Triggers: economic shocks, panic, overvaluation, leverage. Amplifiers: herding,
margin calls. Effects: wealth loss, lower investment. Policy: circuit breakers, central bank action.
Conclusion: prevention difficult; cushioning possible.
Q3. (Unit 18: Differences in Earnings)
Analyse how trade unions affect wages. [6]
Suggested answer: Collective bargaining strength raises wages. Threat of strike action gives leverage.
May cause some unemployment if wages rise above equilibrium. Effect depends on union power and
elasticity of demand for labour.
Q4. (Unit 14: Specialisation, Exchange and Money)
Analyse how high inflation can undermine the functions of money. [6]
Suggested answer: Reduces store-of-value; people seek alternatives. Disrupts unit-of-account (prices
change rapidly). May reduce medium-of-exchange role if hyperinflation. Reduces standard-of-deferred-
payment as creditors lose.
Q5. (Unit 21: Motives for Spending, Saving and Borrowing)
Explain THREE motives for saving. [6]
Suggested answer: (i) Precaution against emergencies. (ii) Retirement planning. (iii) Buying expensive
goods (or earning interest, leaving bequests). Each + brief explanation.
End of Test 59 Answer Key.
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