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TEST CODE 0 12160 10
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FORM TP 2013061 MAY/JUNE 2013

CARIBBEAN EXAMINATIONS COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE®
EXAMINATION
ECONOMICS
Paper 01 - General Proficiency
1 hour 15 minutes

I ( 05 JUNE 2013 (p.m.))

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1. This test consists of 60 items. You will have 1 hour and 15 minutes to answer them.

2. In addition to this test booklet, you should have an answer sheet.

3. Each item in this test has four suggested answers lettered (A}, (B), (C), (D). Read each item you
are about to answer and decide which choice is best.

4. On your answer sheet, find the number which corresponds to your item and shade the space having
the same letter as the answer you have chosen. Look at how it is done in the sample item below.

Sample Item

Economics may be described as a 'Social Science' Sample Answer

because it deals with

(A) the economy

(B) the environment
(C) human behaviour
(D) production and consumption

The best answer to this item is "human behaviour", so answer space (C) has been shaded.

5. If you want to change your answer, erase it completely before you fill in your new choice.

6. When you are told to begin, turn the page and work as quickly and as carefully as you can. If you
cannot answer an item, go on to the next one. You may return to this item later. Your score will
- be the total number of correct answers.

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DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

- Copyright © 2011 Caribbean Examinations Council

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1. Which of the following rewards accrues to 5. ABC Ltd purchases raw cotton and
the factor of production called 'capital'? produces fabric. XYZ Ltd buys fabric
from ABC Ltd and makes T-shirts which it
(A) Rent markets directly to clothing stores. BOTH
(B) Profit firms engage in economic activity in the
(C) Wage
(D) Interest (A) primary sector
(B) secondary sector
(C) tertiary sector
2. An 'economy' is BEST described as a (D) quaternary sector
system where

(A) suppliers produce all the goods and 6. An unemployed person accepts a job. What
services needed by the consumers is the opportunity cost of his decision?
(B) resources are used by manufactur-
ers to produce goods and maxi- (A) The leisure time lost
mize profits (B) The income from the job
(C) all the goods and services used by (C) The income tax he now pays
citizens of a country are provided (D) The cost of travelling to work
by the government
(D) resources are used to produce
goods and services to meet the Item 7 refers to the following diagram
needs and wants of society which illustrates the production possibility
frontier for an economy in Year 1 (AA) and
Year 2 (BB).
3. Which of the following companies operates
in the primary sector? Capital
goods
Company Description/Activity
(A) White Ltd Flour processing
(B) Red Ltd Tomato cultivation
(C) Yellow Ltd Private taxi services
(D) Green Ltd Herbal medicine
production

7. From the diagram above it can be deduced

that
4. A student has a daily allowance of$20 with
which he can purchase chicken and chips
(A) point X was unattainable in Year 2
or a burger, but NOT both. If he purchases
(B) point X was efficient in Year 1 and
the chicken and chips, the opportunity cost
Year2
of his decision will be
(C) there was decreasing opportunity
cost in Year 2
(A) the burger he gave up
(D) there was economic growth
(B) the satisfaction he gets from
between Year 1 and Year 2
burgers
(C) the price of the chicken and chips
(D) the satisfaction he gets from the
chicken and chips

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8. A country faces the following production 9. An outward shift in a production possibility

combinations: curve can be caused by an
. . .
X = production with unemployed resources (A) mcrease m wages
Y = unattainable production combination (B) increase in prices
Z = efficient production combination (C) increase in imports
(D) improvement in technology
Which of the following production
possibility curves (PPC) correctly illustrates
the information above? · Item 10 refers to the following table which
shows units of labour and total output.
(A) Capital
goods
Units ofLabour Total Output
X
6 372
7 455
8 496
PPC 9 531
z Consumer 10 580
goods
(B) Capital 10. What is the number of labour units that
goods produces the HIGHEST average product
of labour?
X

(A) 6
(B) 7
(C) 8
PPC
(D) 9
Consumer
goods

(C) Capital 11. Which of the following does NOT affect

goods the efficiency of labour?

(A) Firm's profitability

(B) Worker motivation
(C) Level of technology
(D) Education and training
PPC
Consumer
goods 12. Economic choices are made because
(D) Capital
goods (A) people's needs exceed their wants
(B) resources are unlimited and
eY
people's wants are limited
(C) resources are scarce while people's
wants are unlimited
(D) people may not always have the
PPC money to conduct business
Consumer
goods

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13. In an attempt to increase the efficiency of Item 17 refers to the follo wing table
its staff, management assigns specific tasks which shows government spending as a
to each worker. This is an example of percentage of Gross Domestic Product for
four countries, W, X, Y and Z.
(A) progress
(B) productivity
Government Spending
(C) specialization Countries
as a Percentage of GDP
(D) entrepreneurial ability
w 47
X 89
14. In a commercial bank, wages and salaries y 50
are NOT paid to
z ·;
3
(A) shareholders of the bank
(B) bank tellers and supervisors 17. The economic system of Country X is
(C) investment managers of the bank MOST likely
(D) maintenance workers employed by
the bank (A) mixed
(B) planned
(C) subsistence
15. One example of a 'good' is (D) free market

(A) a bottle of soda water

(B) loan approved by a bank 18. In Country N , the government provides
(C) extra lesson at a school essential goods such as water, electricity
(D) beauty makeover at a spa and housing for its citizens. However,
other goods are provided by priv ate
companies. To which economic system
Prices of goods in market economies does Country N MOST likely belong?
16.
fluctuate while prices of goods in planned
(A) Mixed
economies tend to be fixed. The MOST
(B) Planned
likely reason for this difference is that in
(C) Traditional
the market economy,
(D) Free market
(A) profits are lower
(B) producers are never efficient
19. Which of the following is NOT an example
(C) buyers and sellers determine prices
of a factor of production in a commercial
(D) there are higher unemployment
bank?
levels
(A) The building
(B) The bank's vault
(C) Shareholders of the bank
(D) Special savings accounts for
students

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20. A government reduces tax on carrots. This 23. Which of the following features is NOT a
causes the price of carrots to fall by 50%. characteristic of perfect competition?
Demand then rises by 50%. The price
elasticity of demand for carrots in this case (A) Free·dom of entry and exit
is (B) Selling ofhomogeneous products
(C) Many buyers and one seller
(A) 0 (D) Knowledge of market conditions
(B) 0.4
(C) 1
(D) 2.5 24. Which of the following is usually a
consequence of widespread retrenchment
in a country?
·;
Item 21 refers to the following table which
shows the price of a product, the quantity (A) Reduction in crime rate
demanded (QD) and quantity supplied (B) Equality in income distribution
(QS). (C) Increased standard ofliving
(D) A fall in the standard of living
Price QD QS
($) (Units) (Units)
25. A pure public good can be described as
10 8 20
(A) diminishable
8 12 16 (B) zero-priced
6 14 14 (C) excludable
4 16 12 (D) rivalrous
2 29 8

21. At which of the following prices are there Item 26 refers to the following table.
shortages in the market? Pnce of Market Market
Potatoes Demand Supply
(A) $2 and $4 ($) (000 kg) (000 kg)
(B) $4 and $6 4 700 100
(C) $6 and $8 8 500 200
(D) $8 and $10
12 350 350
16 200 530
20 100 700
22. The term 'money supply' refers to the
26. What is the equilibrium price?
(A) total stock of money in an economy
at any moment
(A) $ 4
(B) amount of money traded in the
(B) $ 8
foreign exchange market
(C) $ 12
(C) total asset base of the institutions
(D) $ 16
in the financial sector
(D) total amount of gold, silver and
other precious metals in reserve

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27. 'Globalization' may be MOST accurately 31. Which of the following items is considered
defined as as 'legal tender'?

(A) movement of technology and (A) Gold

financial markets worldwide (B) Lumber
(B) integration of financial services, (C) Cheque
technology and commodity (D) A ten-dollar bill (note)
markets worldwide
(C) international trade of goods and
services including skilled workers 32. A fractional reserve banking system is one
(D) movement of tangible and where banks hold reserves of less than
intangible goods among countries 100% of

(A) retained earnings

28. Which of the following is TRUE about (B) securities
financial markets and institutions? (C) deposits
(D) loans
(A) They provide insurance protection
to speculators.
(B) They place emphasis on consumer 33. Joe Brown sells his produce at the market
education. and saves his money until he has enough
(C) They are free from government to buy a tractor. Which of the following
interference. functions is money performing in this case?
(D) They channel funds from those who
have saved to those who wish to (A) Store of value
borrow. (B) Unit of account
(C) Medium of exchange
(D) Standard of deferred payment
29. Which ofthe following financial instruments
are issued by the Central Bank on behalf of
the government? 34. The organization responsible for the
regulation and control of the financial
(A) Treasury bills sector is the
(B) Corporate bonds
(C) Equity securities (A) Treasury
(D) Shares on the stock exchange (B) Central Bank
(C) Board of Currency Control
(D) Institute of Monetary Affairs
30. For anything to serve as money, it must

(A) be limited in supply 35. Which of the following is a function of the

(B) have limited demand commercial bank?
(C) be backed by law
(D) be acceptable by banks as deposit (A) Printing currencies
(B) Accepting deposits
(C) Fixing import quotas
(D) Fixing currency exchange rates

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36. Which ofthe following is NOT a financial Item 39 refers to the following economic
institution in an economy? measures.

(A) Development bank I. Decreasing money supply

(B) Commercial bank II. Increasing interest rates
(C) Credit union III. Reducing the bank rate
(D) Trade union
39. Which of the above can be used to reduce
inflation?
37. The government of Country M has been
accumulating a fiscal deficit for the past (A) I only
three years without any surpluses. This is (B) II only
known as Country M's (C) I and II only
(D) II and III only
(A) foreign surplus
(B) interest rate
(C) national debt 40. 'Resources, both human and physical, are
(D) national budget required to produce goods'.

The statement above MOST accurately

Item 38 refers to the following diagram describes
which shows the simple circular flow of
income for an economy. (A) productivity
(B) entrepreneurship
I Firms I (C) factors ofproduction
(D) factors of productivity

y
41. Which of the following is NOT a service?

I Households I (A) Education

(B) Health care
38. The nominal flow labelled Y refers to (C) Hairdressing
(D) Motorcycle
(A) investment
(B) factor incomes
(C) savmgs
(D) factors of production

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Item 42 refers to the following table which 45. The MAIN advantage of quotas as
shows the rate of inflation and the average compared to tariffs is that quotas
percentage increase in wages over a four-
year period. (A) are less expensive to administer
(B) have the strong support of
Year Rate of Wage economists
Inflation Increases(%) (C) are easier to get passed in Parliament
(%) (D) remove uncertainty about the
2006 5 quantity of imports
' 20
2007 10 20
2008 10 5 46. Which of the following is a positive effect
2009 15 5 of the 'brain drain' phenomenon for the
country of origin?
42. In which year was the increase in real wages
GREATEST? (A) Source ofremittances
(B) Sustained growth
(A) 2006 (C) Guaranteed development
(B) 2007 (D) Discovery of more talent
(C) 2008
(D) 2009
47. WhichofthefollowingisaDISAVANTAGE
of international trade?
43 . Which of the following is NOT a charac-
teristic of Caribbean countries? (A ) Economies of scale
(B) Improved international relations
(A) High debt burden (C) Increased consumer choice and
(B) High levels ofunemployment variety
(C) Low level of capital formation (D) Stiff competition for local industry
(D) Major producers of manufactured
goods
48. Which of the following bodies tries to
get nations to end preferential trade
44. The role of trade unions in the economy is arrangements with other nations?
to
(A) European Union (EU)
(A) establish a minimum wage rate (B) World Trade Organization (WTO)
(B) increase the wage rate of (C) International Monetary Fund (IMF)
employees (D) Caribbean Community (CARl COM)
(C) negotiate wages on behalf of
workers
(D) create conflict between employers 49. A computer is purchased from the US at a
and employees price of US$500. If the exchange rate is
given as TT$1 0 = US$1.00, the price of the
computer will be

(A) TT$3 050

(B) TT$3 150
(C) TT$5 000
(D) TT$5 630

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50. Which of the following BEST explains the 53. The Central Bank calls for an increase in
term 'tariff'? the reserve requirements of commercial
banks. How will this affect the operations
(A) The amount of subsidies received of commercial banks?
by local exporters
(B) The level of tax that is levied on (A) Their liquid assets will be reduced.
imports entering a country (B) Their ability to create credit will
(C) The amount of goods that can be mcrease.
imported into a country (C) Their loans to money markets will
(D) The common tax levied by countries mcrease.
on member countries within a (D) They will attract less deposits from
regwn the public.

51. Which of the following will contribute

54. The restriction of international trade
to a surplus on the balance of trade of a
through tariffs, embargoes, quotas and
country?
exchange controls is referred to as
(A) Value of imports is greater than the
(A) structural adjustment
value of exports.
(B) globalization
(B) Value of exports is greater than the
(C) bilateral agreement
value of imports.
(D) protectionism
(C) Volume of exports is greater than
the volume of imports.
(D) Volume of imports is greater than
55. Country A is experiencing a balance of
the volume of exports.
payments deficit. Which of the following
measures would it normally take to reduce
52. Which of the following is NOT a function the deficit in the short-term?
of the International Monetary Fund?
(A) Reduce the volume of exports to
(A) Overseeing payments and exchange other countries.
rates between countries (B) Engage in trade with other low-cost
(B) Promoting the financial stability of producers of goods.
countries (C) Increase the importation of goods
(C) Assisting countries with balance of from other countries.
payment difficulties (D) Impose restrictions on goods
(D) Settling trade disputes between imported from other countries.
countries

56. Which of the following is MOST likely

to lead to greater international investment
flows to the Caribbean region?

(A) Globalization
(B) Specialization
(C) Trade unionism
(D) Currency fluctuation

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57. Which of the following are ways of 59. One example of an 'entrepreneur' is
calculating national income?
(A) a shop owner
I. Income method (B) a store worker
II. Elasticity method (C) a bank manager
III. Output method (D) an airline employee
IV. Expenditure method

(A) I and II only 60. Trade liberalization should result in several

(B) II and III only benefits to consumers. Which of the
(C) I, III and IV only following is NOT a benefit to consumers?
(D) II, III and IV only
(A) Prices of goods and services will
increase.
58. The term 'e-commerce' refers to (B) Prices of goods and services will
decline.
(A) ecotourism (C) Cost of providing goods and
(B) export business services will be lower.
(C) electronic business (D) There will be greater access to a
(D) economies of scale variety of goods and services.

ENDOFTEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

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