ir -t-

diagram
/" Item 4 refers to the following
isTRUE
^t
1. Which of the following statements ilni"nrr,o*s the savings funcdon'
;;;;,ty's Gross D-omestic Product?
Gross
(A) It is alwaYs smaller than Erpenditure E=Y
National Product' and
(B) ft'i, "f*"Ys larger than Net Savings
Domestic Product' I
total market value
(c) " t"d.." the goods
r,
and services
I
ili final I

i-Ju""o ii an economY in a I
I
given Year-
the total market value
of I
(D) It
'- reflects
and services purchased I
"fi-g""at
in an economy in a gtven I
I
year. I
t+
T
the market value"' National Income
2. In the expression "GDP is
'market value' means the
{R of the tax imPosed -
(A) oer unit Price
i"t of the subsidy granted the
(B)
""liJ.i"e
-,
4. Which of the following represents
f.- (c) ptice ai which the inPuts were ' marginal ProPensitY to save?
\ ourchased
are willing to PaY for
S 3o
(D) pril" P.oons
the goods
(A)
MT
VT
VT
(B)
E\ Jtem 3 refers to the
following information' MT
MT
N ConsumPtion sPending: S799
(c)
OT
\6
Gou"*"nt sPending -: $599 NT
.\'I Investment sPending S209 (D)
\\l I Net export = $300 OT

demand?
3. What is the value of aggregate
income is
5. The present level of nationat
(A) $t 100 iiJ iini.. but the tull emplovment-level
lf the
(B) sl 3oo if nationat income is $85 million'
(c) $l 7oo ;Jilii;; is 2.s, bv how much should
(D) $2 3oo ;#;;i1p*ai"e be increased
-
income to
^
i" .the
"n
attempt to rarse nationat
desired level?

(A) S l-6 million

(B) $ 2-5 million
(C) $ 4 million
(D) $10 mitlion

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o2216010/cAPE 20ll

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tt./I\)tt
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h
@-
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 -J

6. The consumption function is given as 9. In Country X. the year 2010 is used as'[he
C : a r bY. In this equation 'b' represents base year for measuring real GDP. What is
the value of the price index in the year 20101'
(A) autonomous investment
(B) autonomous consumption (A) 0
(C) marginal propensity to save (B) l0
(D) marginal propensity to consume (c) 100
(D) 150

Item 7 refers to the following diagram

which shows the income expenditure 10. The underground economy may BEST be
model. described as

Aggregate
(A) the production of intermediate goods

expenditure
(B) those activities which are heavily
taxed
(C) economic activities that foster
growth
(D) economic activities that are hidden
from the government

ll. "As wages increase, the number of workers

"Yf willing to work also increases." This
statement exPlains whY the
7. What does RS represent?
(A) aggregate supply curve for labour is
(A) Autonomous saving upward sloping
(B) The inflationary gap (B) aggregate demand curve for labour
(c) The deflationary gap is downward sloping
(D) Autonomous investment (C) equilibrium wage rate is maintained
ar s5 000.00
(D) equilibrium national output is
8. Which of the following BEST defines 'real maintiined by 20 000 workers
national income'?

(A) The actual GDP in any given year

(B) The money value of national income
(c) GDP minus net property income
from abroad
(D) National income adjusted for
inflation

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02216010/CAPE 201I
 National lncome (Y')'
to the diagrams below showing Equilibrium
Item 12 refers
0lt)
(l)

Aggregate
Aggregate Erpcnditure
Erpenditure (AE)
(AE)

Yr Ye
Real National Income
Real Nrtional Income

Gv)
(D

Aggregate
Aggregate Expenditure
Erpenditure (AE)
(AE)

YE YF
Recl Nationel [ncome
Resl Netional Income

gaP?
rePresents a recessionary
12. Which of the diagnms above

(A) I
(B) II
(c) III
(D) lv
had to be vorun*ry because
berieved that the existence of unemployment
13. The crassicar economists
' "

perso;;;;r;;n"-proy"i;;; r;l""tu''e ttttv refuse to be-self-emploved

(A)governmentsusuallystepinwithmeasuresdesignedtoreduceunemployment
labour
(B) those allJJ;;;;;;ton' *t'o tunnot find jobs to leave the
(C) the possibiiiiy of .rigration
market r r-L^..r ^ocbet therefore those pers
(D)marketforceswillalwaysclearthelabourmarket,thereforethosepersonswithoutjobs
t t
u" out of tnt labour market
"u" "noJJi

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022160t0/cAPE 20tl
14. Which of the following situations would 18. The liquidity preference curve shows the
t t'
MOST likely cause an increase in nominal relationship between the
CDP?
(A) demand for money and the interest
(A) Prices have increased while output rate
remains constant. (B) demand for foreign currency and
(B) Output has increased while prices bond prices
remain constant. (C) demand forbonds and shares and the
(C) Output has fallen and prices have interest rate
increased- (D) idle money balances and active
(D) Either output or prices have in- money balances
creased.

15. In the Tringam economy, the 'marginal 19. The velocity of money circulation can be
propensity to consume'for the unemployed defined as the
is lower than that of taxpayers.
(A) average time in which households
If the Govemment incrcases its spending spend their money income
on unemployment benefits by 50 million (B) money stock in a given time period
dollars. then to maintain national income divided by the level of prices
equilibrium level. taxation MUST be (C) total value of transactions in a given
time period divided by the average
(A) increased by 50 million dollars price level
(B) reduced by more than 5O million (D) number of times in a given time
dollars period that a unit is used to purchase
(C) reduced by less than 5O million final output
dollars
(D) increased by more than 50 million
dollars 20. What type of policy is a government
implementing when it places a tax on
gasoline?
16. The speculative motive for holding money
is based on money's function as a (A) Expansionaryfiscalpolicy
(B) Contractionaryfiscalpolicy
(A) store of value (C) Expansionary monetary policy
(B) unit of account (D) Contractionary monetary policy
(C) medium of exchange
(D) means of defened payment

17. Which of the followingCANNOT be used

to measure inflation?

(A) GDP deflator

(B) Expenditure method
(c) Producer price index
(D) Consumer price index

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0221601o/CAPE 201l
:)(
the following diagram'
IEms 24 - 25 refer to
about
21. Which of the following is TRUE
automatic stabilizers?
from Tar Revenuc
l. TheY Prevent recession
occurring' !ol
of output
U. Ttrey reduie the volatility
ani emPloYment levels 9
il
EI
Government
Spending
III. fn"V the-economy-from 6;1
"utttiin
tne nrU effects of a recesston'
Qs
unemptoy-
;6
lV. They cause output and EE
volatile'
ment levels tobe very 'E
Eb
xl
.6;
FY
(A) I and [I onlY
iel I and [V onlY
ici tl and III onlY t:.lt-"-1lt
ItI and tV onlY What gype of budgetary policv
iPi i
at poini in the diagram?
the government

price. tevl!.and (A) Budget deficit

The relationship beween the
in the notion that igi Budget surPlus
inflation is emUoOieO
icl Balanced budget
higher the
iD) MonetarY PolicY
(A)
\'-' rate of increase in the P1": l:t"l'
the higher the rate
of inflation
NM indicates that
rate of i*i"*t in In the situation above'
the-price'level'
(B)
ih" golr"tnment is using
inflation a
the lower the rate of
of
(c) p'itt r"u"i' mt ttigtt"t the rate
inflation of
(A) deficit budget
(D) P'itt t'n"t' the lower the rate iei budget surPlus
inflation icl balanced budget
ioi monenry PolicY
poliry
.23. An example of expansionuty Ton: -"y is BEST defined
as
i, in"t""te in ihe Central Bank's 26. The term'price index'
"n x
(A) discount rate the overall
oPen-market sales (A) continuous increase in
igi
(C) requued revenue ratio Price level tevel of
iOl oPen-market Purchases (B)
\- ' altltltt ii'tt'" overall price
a
'alfgoods Produced-in 3oultfw
(c) -'::]:1f:HTJI',"1H;';;:'
gooos a
(D) *"o'u'"'iJ"i ttto*ing how the
basket of goods
"n"'"gt';i"" 9r"
changes over ume

PAGE
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o22160lo/cAPE 20lt
\
 27. The demand for money is determined by the 31. Which of the following defines .ecohofnic
growth'?
I. rate of interest
II. level of income (A) The increase in real per capita output
IIL levelof taxation over time
ry. amount of savings (B) An increase in the standard of living
over time
(A) I and [t only (C) The meeting of two production
(B) I and IV only possiblity boundaries
(C) II and III onty (D) A representation of the maximum
(D) III and tV onlv recovery of exisiting resources over
time
28. The precautionary motive for holding
money is based on
Items 32-33 referto the data below. which
(A) uncertainties about the movement show the human development indices of four
ofbond and share prices countries.
(B) uncertainties about the timing
of receipts and payments by a Country H.D.I
firm's customers P 0.21
(C) the fact that money is needed for
purchasing bonds and shares and a 0.s6
money is received at intervals R 0.76
(D) the fact that bond and share prices S 0.03
have been on a downward trend
32. country would have the highest level
{hich
of development?
29. The Central Bank determines the stock of
money which does NOT change as interest
(A) P
rates change, therefore the money suppty
(B) a
curve is
(c) R
(A) upward sloping
(D) s
(B) perfectly elastic
(C) perfectly inelastic
33. Which country would have the lowest level
(D) downward sloping
of human development?

30. An increase in a country's national debt (A) P

results in negative consequences for its (B) a
citizens if borrowing is used as a means to (c) R
(D) S
(A) develop the health sector of the
economy
(B) improve educational facilities in
the nation's schoots
(c) refurbish the country's infrastruc-
ture, for example, roads
(D) increase the salaries and wages of
medical practitioners

022t60totcAPE 201I GO ON TO THE NEXT PACE

 38. An advantage or a nxsu s^e"B"r2- --
characteristic
Which ofthe following is NOT
a
34. system is that it
of develoPing countries?
(A) constantly
forces the government to
FDls
(A) Economic dePendence on monitor is value
caused
(B) Protectionism (B) reduces the uncertainties
and exPort
(C) PovertY bY fluctuating imPort
(D) OPeness Prices to
(C) provides an automatic solution
balance of PaYment Problems
to the creation of
35. Which of the following refers (D) requires the'sirong support
authority value
of a single .on"t"ry- and fiscal number of
government to maintain its
;;;"; ;*isdiction'out' a
countries?
Which of the following factors B:ST
39.
(A) common."lt:, determines export revenue
of a country?
(B) Economic unlon
(C) Customs union I. Domestic income
(D) Free trade area II. lnternational Price
III. tmPort restrictions
quota on IV. Domestic Production
36. What effect will an import -have
Lucia
ii" q""iiitvof wheat imported bv St' (A) I and tI[ onlY
from the United States? (B) t and IV onlY
(C) II and lll onlY
wheat that is
I. lncrease the volume of (D) II and IV onlY
traded-
Reduce the volume of
wheat that is
ll. balance of
traded.
in the 40. The following data refer to the
III. Raise the Price of wheat Payments of
a countrY'
the
imPorting'country and lower
Price in the exPorting:oultry-' the
IV. Lower the Price of wheat.in
the
imPorting country and raise
country'
Price in the exPorting

(A) I and III onlY

(B) I and tV onlY Gvestment and
(C) ll and lll onlY
(D) Il and IV onlY for that
What is the balance of payments
country?
that monitors
37. A systematic record of accounts
one country
economic transactions between (A) -St 400 million
retbned to as the (B) -Sl 300 million
and the r.st of th" wortd is
icl $2 5oo million
(A) caPital account ipl s2 7oo million
(B) current account
icl balance of trade
(D) balance of PaYment

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0221601o/CAPE 201I
41. When the value of a country's curency Items 44 - 45 refer to the diagram belew
appreciates, the country's which shows the market for the United Stetes
dollar (US$).
(A) exports become cheaper
(B) balance of trade improves
Rate I
(C) imports become more expensive ($)
(D) exports become more expensive i

1.0
I
0.8
42. Trinidad and Tobago, and Jamaica produce € I
o.o t ---
natural gas and coffee. Trinidad and Tobago :
0.4 I
is said to have a companative advantage in 0.2 t_

the production of natural gas when i

(A) the opportunity cost of producing

natural gas is greater than in
Jamaica Which of the following BEST describes
44.
(B) it can produce both natural gas and the situation if the exchange rate were at
coffee with halfthe input of factors
US $l = f.,0.4?
required by Jamaica
(C) natural gas exchanges for far more (A) The dollar would be under-valued.
units of coffee in Trinidad and (B) The dollar would be over-valued.
Tobago than in Jamaica
(D) the amount ofcoffee that is foregone
(C) Demand would be less than supply.
(D) The market would be in equilibrium.
for every unit of natural gas
produced is less than in Jamaica
45. What would be the equilibrium quantiry ;i
43. Which of the following are strategies that the US dollars?
the Caribbean can employ to ensure that it
benefi ts from global isation? (A) Ql
(B) Q2
I. Open up branches of domestic (c) Q3
firms globally. (D) Q4
II. Advertise and export indigenous
goods to the world.
lll. Ensure MNCs hire workers at all
levels, including management.
IV. Invest locally and employ only
domestic labour and other
fESOUICES:

(A) I, I[ and III only

(B) [, II and lV only
(c) I, III and IV only
(D) II, III and [V only

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

o22t60totcAPE 20t I

Euo*e,NLtcs bLntT Z f-l

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