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| CAPE Economics Unit 2 Paper 1 June 2008 806-4493, 968-0427 Which of the following BEST defines the exchangerate? (A) The sumber of exports thet are ‘exchanged for aa import (B) The rate st Which one currency exchanges for another (©) Theratio of umport prices to export Drees (D) THe ato of export price to import paces Wich of the following BEST dexcribes » ‘phistion where there ies fizal deficit? (A) lnnports re greater than exports (B) —Conaumption a grater han income. (©) Government spending is greater than (D) Desires of citizens are grenter than ‘output “The following dats are taken from the Balance ‘of Payrnanta of Caribbean Territory. | ceecuascoun Seon ae 00 | tempore ts | | Trees out | Tacesn is (A) S800 350m (Sim 32350 ‘aouey is determined by th 1. rate ofinterest UL, amnountafenvings I. leveloftwearion Vv tevelofincome Land Monty () Dandifl only {C) MandiVoniy () Tana TV only tera refers to the following siszees va a _ KH ‘Consumption | a OOO Tecome (8) Which of the following BEST saprerente sieesvings? 2 ® 2 1 oeaia ©) vw The folowing information rlats:0 2 Caribbean Tertonyin 2002, (Gross Domestic Product ..$250 milion Depreciation of Capial Azsess $12 sation: lncomecarned by sisanals abroad $5 milion Incomeramed hy foregnersiceally..$7mullon ‘Whats the vatue of Grose National Product? ®— 243miion ) $248mien (©) 260miion ©) S274miion == ac cn ce 306-4493, 960-0427 7. Using thetocal cuputepprosch,caleulstethe 9, Which the following comectly represents vast etna Seoest ecn aiane |. Fratton meee % oN) ” AS. : Exmciv dain a Montego i toms Na hperyoeane i foes $ oo . —— ee w 4 teil : ® % 3 Oo R i & 3 ® ij eee Ho, ireseesol oaeeee woe i oe ee [Lo peer ayer commie Saonloat (0) pect extention tows ss errs on Savion 7 © neaene att eae i Iabour market, therefore those 2 i fone. oe Sones i ' Dhreneneiontmas ' ©) namopctaat enone ead | orcas = | alo Sane | ” 4 if : z As. "National Income n ‘Thediagam aboveiustatesthatas income ‘creases the marginal propensity to save (A) increases (B) decreases (©) increases at first, then decreases ©) decreases a ist then increases ‘The consumption function is given as (Coa+bY. ln this equation*b' represents (A) atosomousconsamption (8) autonomous investoent © marginal propessity osave (D) maginal propensity to consume 8, (A) Tandtlony (®) [and Vonly (© Wandittealy () landIVeuly Which of the following we hike future come, (8) Landllloaly (@) TandtVealy (©) Mand Voaly ©) Mandtonly a ee Item 14 refers to the following diagram 2 showing te income expenditure model 2 & Aggregate Esy Epation | / 4 15, What does RS represent? (A) Autonomous investment (B) Autonomous Saving (© Terinaionary gap ©) Taedefitionary gap ‘The way in which capital expenditure responds to changes in consumption ‘cxpenditureis explained bythe (A) rapier B) accelerator (©) consumption function (D) investment function 1. 18, Which of the following statements BEST escrbesthe speculative demand for money’? (A) Iisnegatively related tothe rate of inerest. 8) tis positively related wo the rate of interest. (©) This not affected by the rate of interest is deteruined by the amount of assets availble © ‘The MO (narrow) measure of the money Supply includes assets that are used mainly (A) amedium ofexchange ) a medium of exchange and those used as.a temporary stoeof value (© oter:porary store of vlueonly (D) collateral when spplying for loan Which measy.cof the money stock takes into «consideration bank deposits building society deposits and money market deposits? (8) Fiatmoney (B) —Brosdmoney (©) Narowmoney ©) Quasimoncy 19. Which diogram below shows how monetary policy fsnefTecive im neloencing te rose atonal product? w » © \ w w © o 2 23, Which of the following CORRECTLY illustrates the effect tha a tight monetary policy has on equilibrium cuvput ard (mnempiosrnent? | equtibeinm Oucpar [s | | Unemployment Increases Inereases Decreases | Decreases | Tncremses | Decrenser Decreases | tereases Which one of the folowing isconsidared a shortcoming of monetary policy whe comparadta fsa policy (A) Privateinvestment series ut B)—Themeanues tack fox vil (©) There ae tenasny sme ass ©) Enreprencurs es not respon What isthe MOST LIKELY eft (A) Afutiabenctending () Absinthe caving roto ©) Afallinthelevelofines sent (©) Anincrease inthe externa! value of ‘seurency. Fiscal policy la defined asthe regulation of Beeconamy via w @ © © arincomesolicy ‘xchange rate policy the money supply nd interest rates ‘goverment expendica and taxes 6 906-4493, 968-2627 Which ofthe following willbeineludedina 27 rellatonary fiscal policy? “ @ © wy ‘An increase in indinect taxes ‘A decrease in goverament expencinure on epi goods A decrease in personal tax An increase in government ‘expenditure on transfer payments INems.25-26 refer to the following diagram. Spending Sey yiNational come Yeort Year? Years 28 entify the type of budgetary policy used by (he government at point Tin the diagram. w @ oO © Balanced budget Moet policy Budget surplus Badgetdetict Inthe sination above, at NM the government iausings (A) monetary policy (®)—dualgetsuplus (©) balincedbuaget ©) deficitbudger Which of the following is the BEST description of "national deme? WW (8) Taeamount of money benowed by the private sector (B) Tee total tmount owed by ‘government 10 local and foreign lenders (©) The net accumulation of a overnment’s budge deficits (D) The shortfall in governments tax sevemues and its expenditures In which ofthe following could an increase in acounty's national debt real in negative Consequences foritecitizens? (A) Borrowing to develop the health ‘ssstorofthe economy (B) Borrowing to improve educational ‘heiies nthe non s schools (©) Borrowing to refurbish dhe county's Infastnctuc, for example, ods (©) Borrowing 1o ierease the salaries sd wagesofmedical practitioners luem.29 refers tothe table below which shows the GDP and total debt of four © matty | Country ] Country we x ¥ Country [aor (S billions) 55 aaa 35 Tosal det bitions) aS sez faa a7 2». ‘Whach county haste highest debt to GDP ratio? w B) © o Nee Ez roles. a 06-4493, 968-8427 30 refers tothe following table which gives data ona country’s national debt [Year [Vane ortspors | Yate ot Interest per | | | mpores acu | [1905 [ss00mitin —_['s250.mition [10 [200s | s3somition | $100mition | $50 ion 30, From#hedstainthe table, what ean be conchuded about the national debt fom the period 1995 m0 20057 (A) Thedebthas increased, (B) —_Debtsenviceratioisconstant (©) Thedebt service ratio has increased, (D) —Thedebchas bees repaid, em ML refers tothe following table Six Caribbean Economies 2004 - 2005: Main Tadieators ‘Country ‘Real per capita | Inflation | unemployment | GDP growin | | Anigeandtatuda | a7 a _ Bacbodos 42 a Grevada 33 23 * [Guyane [aa 35 ° jamaica 07 Bz 7 "Tanidad and Tobago 38 aT aa Key: *nofigures available 31, Fromthe figures givenin the able above, indicate the country with the lowest levelof real growth (8) Gayena ®) Jamaica (©) Grenada (D)— Babsdos 2 33, Which combination of factors BEST 34 determines exportrevenue of your county? 1. Intemational price Domestic production Mi, --Domesticincome TV. Imporerestietions and I only Vand IV only Mandl only 3s Wand IV oaly rem 33 refers tothe following diagram, Pree] > 36, ‘The diagram represents the demand for import of good A into Country B, Assuming 4 perfectly elastic world supply, what are the effects on price and quantity imported, should goverment impose aquotaatS,? Price Quentiy (A) Decreases Decreases (B) Decreases Increases (© Increases. increases (D) Increases Decreases 306-4493, 960-0427 ‘Which ofthe following refers tothe creation of single monetary and fseal authority lunvingjwisdicion overanumaber ofcouties? (A) Commenmarket (®) Economic union (©) Castomsunion (D) Free trade area ‘Which ofthe following items are features of CARICOM? 1. The establishment of « Common Market Hl. ‘Theco-ordination of rade policies among member countries HL The removal or reduction of trade barriers among member countries 1, Theincreasein the impostion of rit nd non-tariff bariers banning, ‘imports from member counzies (A) Land only @) Wand iVenty (©) 1, Wand only ©) Mand only ‘The use of exchange control to eliminate a sation’ sbalance of payments deficit results ina decrease in thenation's (A) imports &) —expons, (©) pricelevel ©) income iS : aan 15 37. The following dats refer to the balance of payments ofacounty, _—— [em “enport of goods Exportof goods Invite balance Investment and other ‘Whats the balance of paymenss? (A) $2700m ) $2500 © “Sic0om @) “S1500m 38. One mearure used to correct balance of Payments disequilibrium is devaluation Devaluation has the efecto (A) decreasing the price oF imports (®) increasing the puoe of export (©) Worsoning teterms of trade {D) —Serproving thetarms ottrade tsi 39 refers to diagram below. Pree Be 5, Coaniry X's currency 39, Inthedisgram, curves D,D, and, $, show the demand snd supply for county Xs Garrency in the foreign exchange musket ‘What may cause the demand curve to shift from D, B, 19,0, ‘An increase m demand fritsimpors ‘A decrease in dernand for stort “An increase in demand fre experts ‘Aldecrenee in demand fort ports ‘Which of the following i an advannage of Aoxibleexshange rater? (A) Mote goods and services are sold ‘bros (©) More currency is kept within te home cout, (©) Market forces establish balance of payments equiliberusn Seiomaticaly (D) Market forees eetablish demand! for ‘Boods and services stomatal Which of the following menmaresis used by the IM to increare ternational guilty? (A) Making available the use of Special Drawing Righis- SDRs ©) Helping counties comer Balance (©) Batabtishing approprinte exhange ©) Supporting asystem of convertible ‘Whats the primary purpose of World Bak fuse? (A) Te foster regional develope i ‘agrcutre (@) To Tinance temporsry balance of ‘payment problems ofdeveloping (©) To. finance infrastructure ‘evelopmentonalong-terts sis ‘developing countries (D) To. promote environmental evelopment of developing 43. WhichoftkefollowingisNOTTRUEsbout ‘eansnational eeporations (TNCs)? (A) Tre parenfinm inthe bome country controls the assets of subsidiaries. (B) The INC proctice of ransfer pricing benefits both home and host countries. (©) TNCs may shift the iocation of pollution intensive production to countries where environmental laws arenot strict, ©) TNCs introduce new products, processes.and technologies int the Seveloping world, 44. nwhich ofthe following ways does foreign iret investment benefit the host county? |. Transfer oftechnotogy I Transferof management skills ML Transferprcing IV. Increased access to markets (A) Tandtlonly ®B) —|.fland itloniy (©) MandiV only D) —I,flandiVonly 16 Inthe last decade, globalisation has ch the way many Caribbean consumer producers operate. Which of the folloi are way’ forthe Caribbean to ensure tha ‘benefits fom globalisation? 1 Invest focally and employ only domestic labour and other IL Advertise and export indigent goods tothe world, ML Ensure MNCs hire workers at all levelsinchuding management. IV. Openup branches of domestic firms otal A) Itland tony @) fi, Mand 1V only © Wifland1V only @) and Vonty