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do1omay,...!'ltln4~ualltl""don; TEST CODE 01240010
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FORM TP 2012108 '--~~~~~-'--~~~----'
MAY/JUNE 2012

CARIBBEAN EXAMINATIONS COUNCIL

SECONDARY EDUCATION CERTIFICATE
EXAMINATION
PRINCIPLES OF BUSINESS
Paper 01 - General Proficiency
75 minutes

( 25 MAY 2012 (p.m.) )

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

I. This test consists of60 items. You will have 75 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 the sample item below.

Sample Item
The money that a business receives from the sale
of goods or services is called its Sample Answer
(A) assets @@•@
(B) capital
(C) income
(D) resources
The best answer to this item is "income'', 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.

DO NOT TURN THlS PAGE UNTIL YOU ARE TOl,.D TO DO SO.

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Copyrl&ht C 2009 Caribbean Examinatjons Council

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1. Barter is BEST described as a the 4. Private enterprise is run MAINLY to

(A) process of exchange involving the (A) create profits

use of money (B) reduce inflation
(B) purchase of goods and services (C) distribute goods and services
using cheques (D) provide jobs for more people
(C) exchange of goods and services
without the use of money
(D) exchange of goods and services 5. Which ofthe following is NOT an objective
using notes and coins of the public sector?

(A) Maximizing profits

2. Which of the.following is NOT a function (B) Providing essential services
of money? (C) Regulating business activity
(D) Promoting economic growth and
(A) Indivisibility development
(B) ' Store of value
(C) Measure of value
(D) Medium of exchange 6. The PRIMARY role of the human resource
department of an organization is to

3. Which of the following types of business (A) promote recreational activities for
environment is MOST typical of the workers
Commonwealth Caribbean area? (B) hire, recruit, train and motivate
workers
(A) Corporate state (C) assist employees in understanding
(B) Mixed economy industrial relations
(C) Centrally planned (D) produce magazines highlighting
(D) Perfectly competitive outstanding workers

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Item 7 refers to the following diagram which shows a section ofa typical vertical organizational
chart for a manufacturing company.

BOARD OF DIRECTORS

MANAGING DIRECTOR

GENERAL MANAGER

.
PRODUCTION MANAGER MARKETING MANAGER CHIEF ACCOUNTANT

7. The relationship between the highest level of management down to the various departments is
known as

(A) line
(B) rank
(C) staff
(0) flow

8. Which of the following involves selecting 10. ·Which of the following statements BEST
theobjectivesand procedures for achieving describes an authoritarian leader?
goals?
(A) Willing to take suggestions
(A) Planning (B) Allowing workers to plan their own
(B) Motivating work
(C) Organizing (C) Making decisions without consulta-
(0) Controlling tion
(D) Consulting those likely to be
affected by the decision
9. The MAIN purpose ofinstall inga suggestion
box in a company is to get workers' views 11. A MAJOR role of a trade union 1s to
about encourage
(A) each other (A) staff to become members of the
(B) other companies union
(C) ways of improving the workplace (B) advancement of the welfare of its
(D) ways of improving economic condi- members
tions (C) staff to strike whenever they have
problems at work
(D) 11-ipment to pay hiaher saleriet
and give longer V11Cations to staff ·
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12. Which of the following are functions of 16. Which of the following CANNOT be used
the entrepreneur? as collateral for obtaining· a loan from a
financial institution?
I. Ensuring that workers are unionised
II. Co-ordinating the factors of (A) An amount in a fixed deposit account
production (B) An insurance policy with a cash
III. Undertaking risks by anticipating value
demand (C) Legally owned property not covered
by insurance
(A) I and II only (D) A mortgaged home with insurance
(B) I and III only coverage
(C) II and III only
(D) I, II and Ill
17. A post-dated cheque is one which

13. An entrepreneur may reduce his risk of {A) is dated for payment at a future date
loss by (B) was written no longer than six
months ago
{A) planning ahead (C) is dated to agree with the date of the
(B) hiring more staff document requesting payment
(C) securing bank loans (D) is dated by the bank's date on the
(D) purchasing additional fixed assets day the cheque is presented for
payment

14. The MOST important use of collateral

security to the lender is that it 18. A contract may be discharged by

(A) establishes the financial position (A) breach

of the borrower {B) change of mind
(B) can be seized ifthe borrower fails {C) inconsideration
to pay (D) misappropriation
(C) improves the borrower's chance of
getting a loan
(D) gives the lender an idea of the state 19. The monthly payments collected by an
of the business insurance company on behalf of its policy
holders are known as

15. The condensation of the business plan is (A) deposits

contained in the (B) premiums
(C) instalments
(A) feasibility plan (D) endowments
(B) .. marketing plan
(C) keynote summary
(D) executive summary

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20. Which of the following types of cheques 25. The introduction of mechan.ization in the·.
allows an individual to receive cash on production process may affect society by
demand?
(A) reducingjobs for unskilled workers
(A) Open (B) increasing brain drain in the
(B) Crossed economy
(C) Certified (C) reducing pollution of the country's
(D) Banker's cities
(D) providing more jobs for unskilled
workers
21. Which of the following types of capital
is used for the day-to-day operations of a
business? 26. Which ofthe following is a feature ofperfect
competition?
(A) Fixed
( B) · Floating (A) Few buyers and many sellers
(C) Nominal (B) Many buyers and few sellers
(D) Working (C) Many buyers and many sellers
(D) Barrier to entry into the market
22. Which of the following businesses may
BEST be classified as a cottage industry? 27. Which of the following is LEAST likely to
result from growth in an organizsation?
(A) JMN Superstore, located in the rural
area
(A) Greater productivity
(B) Mary's Craft Supplies, located at (B) More division of labour
home
(C) Increased communication
(C) People's Cooperative Bank, located
(D) Increased capital investment
in Trinidad
(D) Peter and John's Company, located
in Jamaica 28. Which of the following can be described
as a marketing activity?
23. The movement of educated, skilled people
(A) Issuing bulletins on staff matters
to settle in other industrialised countries is
referred to as (B) Distributing commodities to outlets
(C) Publicising advertisements fornew
(A) migration staff
(B) brain drain (D) Ensuring that workers are given
(C) unemployment fringe benefits
(D) underemployment

24. The holding of jobs for which employees

are overqualified is referred to as

(A) migration
(B) brain drain
(C) unemplo1meftt
(D) underemployment
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29. A 'market' in economic terms is defined as 34. Market equilibrium exists when

(A) the business centre of the (A) buyers pay rea~onable prices for
community goods
(B) a specific place where buyers and (B) sellers are satisfied with the prices
sellers meet paid for their goods
(C) a place where tangible goods are (C) at current prices, the amount buyers
bought and sold wish to buy equals the amount
(D) a situation which exists when buyers sellers want to sell
and sellers influence the price of (D) at the ruling market price, buyers
goods do not want to add to the stock of
goods they already have
30. Which pf the following is NOT a function
of the retailer?
35. Which of the following can have its shares
(A) Selling in small quantities traded on the stock exchange?
(B) Preparing goods for resale
(C) Providing a local supply of goods (A) Partnerships
(D) Transporting goods to suitable (B) Public companies
storage facilities (C) Private companies
(D) Co-operative societies
31. The term 'loss leader' is BEST described as
a product which
36. Mr. Jones has several bills offixed amounts
(A) has no real market value to pay each month. His bank manager
(B) the retailer is unable to locate agreed to pay them monthly from Mr.
(C) is sold cheaply to attract customers Jones' account. This service, provided by
(D) the retailer gives away to customers the bank, refers to

(A) overdrafts
32. Which of the following gives identity to a (B) letters of credit
specific producer's goods? ( C) standing orders
( D) acting as trustees
(A) Label
(B) Brand
(C) Patent 37. With which of the following is a stock
(D) Copyright market identified?

33. Which of the following factors are likely (A) Costs and prices
to influence customers when choosing a (B) Risks and benefits
toothpaste? (C) Rent and investment
(D) Premium and reward
!-, Size
II. Brand
Ill. Flavour

(A) I and II only

(B) I and Ill only
(C) II and Ill only
(D) I, II and III
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38. Tom invests his savings by buying shares 43. Tax paid on wages and salaries is referred
in a company. From this investment Tom to as
expects to receive
(A) excise duty
(A) profits (B) income tax
(B) interest (C) customs duty
(C) revenue (D) corporation tax
(D) dividends

44. Which of the following actions by

39. One of the MAJOR functions ofa Central government is MOST likely to lead to an
Bank is to improvement in the standard of living?

(A) issue·notes and coins (A) Printing more money

(B) issue stocks and shares (B) Increasing the income tax rate
(C) accept deposit accounts (C) Abolishing taxes on low incomes
(D) • make loans and advances (D) Giving tax incentives to businesses

40. Which ofthe following services is provided 45. Which of the following measures are used
by commercial banks? by government to redistribute income?

(A) Printing money (A) Consumption tax and tariffs

(B) Selling stocks and bonds (B) Customs duties and levies
(C) Controlling the supply of money (C) PAYE and National Insurance
(D) Accepting deposits from customers (D) Excise duties and value added tax

41. Which of the following measures may be 46. Which of the following forms of taxation is
used by goverment to protect consumers? imposed on goods produced in a country?

I. Taxation (A) Excise duty

II. Price controls (B) Preference duty
III. Provision of subsidies (C) Excise drawback
(D) Customs drawback
(A) I and II only
(B) l and III only
(C) ll and III only 47. Which of the following forms of taxation
(D) l, ll and III requires every employee to pay the same
PERCENTAGE of his salary in taxes?

42. Governments can influence business activity (A) Indirect

positively by reducing (B) Regressive
(C) Progressive
(A) taxes (D) Proportional
(B) grants
(C) spending
(D) disposable income
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48. A country has a favourable balance of trade 52. Which of the following is NOT a feature
when of free trade?

(A) it sells more than it buys (A) Protectionism

(B) it buys more than it sells (B) Trade specialization
(C) imported goods are cheaper (C) Increase in world output
(D) there are no restrictions to trade (D) Comparative cost advantage

lt 49. The buying and selling ofgoods and services

among countries is called
53. A government can correct an adverse
balance of payments problem by

I. (A) balance of trade (A) implementing price floors

(B) international trade (B) increasing customs duties
(C) balance of payment (C) reducing severance payments
(D) international marketing (D) improving the rate of inflation

50. 'Which of the following practices would 54. Which of the following is NOT a benefit
NOT contribute to the economic develop- of international trade?
ment and growth of a country?
(A) Producers are able to increase their
(A) Provision of more infrastructure market size.
within the country (B) Political links are developed with
(B) Increased use of the country's other countries.
natural resources (C) Import restrictions can be imposed
(C) Increased importation of consumer on foreign items.
goods (D) A greater variety of goods is
(D) Provision of loans and technical obtained from overseas.
assistance for establishing local
businesses
55. Which of the following methods can
government use to reduce unemployment?
51. Which of the following are LIKELY to
affect the standard of living in a country? (A) Increases in income tax
(B) Deflation of the economy
I. A high crime rate (C) Employment levy on firms
II. A low literacy rate (D) Increased interest rates on
Ill. Widespread pollution borrowing

(A) I and II only

(B) I and III only 56. Which of the following is a feature of
(C) II and III only economic dualism in the Caribbean?
(D) I, II and III
(A) Small farming sector
(B) Rural-urban migration
(C) Urban-rural migration
(D) Large manufacturing sector

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57. Which of the following organisations would 59. In periods of inflation, the ability to raise
settle a dispute among banana-producing . additional capital for expansion is MOST
countries of the Caribbean and Central likely to be a problem for
America over preferential agreement in the
European Community? (A) sole traders
(B) partnerships
(A) World Trade Organization (C) public companies
(B) Caribbean Development Bank (0) multi-national corporations
(C) Caricom Single Market and
Economy
(0) Organization of Petroleum 60. Which of the following agreements
Exporting Countries is Barbados promoting when it sells
furniture to Jamaica?

58. Which of the following are MAJOR (A) OECS

economic problems facing many Caribbean (B) GATT
cOUl\tries today? (C) NAFTA
(0) CARI COM
I. High levels of unemployment
II. · Lack of capital for investment
III. Low productivity in manufacturing

(A) I and II only

(8) I and III only
( C) II and III only
(0) I, II and III

END OFTEST

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

Iri. 01240010/F 2012