Cambridge International AS & A Level ECONOMICS 9708/12 Paper 1 AS Level Multiple Choice May/June 2023, Exams of Economics

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Cambridge International AS & A Level

ECONOMICS 9708/

Paper 1 AS Level Multiple Choice May/June 2023 1 hour You must answer on the multiple choice answer sheet. You will need: Multiple choice answer sheet Soft clean eraser Soft pencil (type B or HB is recommended) INSTRUCTIONS

• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A , B , C and D. Choose the one you consider correct and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator. INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

© UCLES 2023 9708/12/M/J/ This document has 12 pages. Any blank pages are indicated. IB23 03_9708_12/2RP © UCLES 2023 [Turn over 1 A good is most suitable to be provided by the market if it is A excludable and non-rival. B excludable and rival. C non-excludable and non-rival. D non-excludable and rival. 2 What is the definition of long run? A the time period when all factors of production are specialised B the time period when all factors of production are variable C the time period when all key inputs into production are variable D the time period when at least one factor of production is fixed 3 The table states the consequences of two macroeconomic policies. What correctly identifies whether the statements are normative or positive? a depreciation of an exchange rate will cause the balance of payments to improve a rise in the minimum wage rate will cause unemployment to rise A normative normative B normative positive C positive normative D positive positive 4 The diagram shows the production possibility curve for wheat and corn.

© UCLES 2023 9708/12/M/J/23 [Turn over What can be deduced from the diagram? A As the price of corn falls, more of it is demanded. B Resources used in producing corn are more efficient than in producing wheat. C The opportunity cost of producing corn falls when moving from M to N. D The opportunity cost of producing corn is constant when moving from M to N. 5 A supply curve is represented by the equation quantity supplied = 10 + 5P where P = the price of the product. Which price rise would cause the quantity supplied to double? A $1 to $2 B $1 to $3 C $1 to $4 D $1 to $ 6 Which diagram illustrates unitary elasticity of supply? output of wheat O (^) output of corn

M

N

quantity

A

price quantity

B

price

S S

O O

© UCLES 2023 9708/12/M/J/ 7 In which case is the price system not a possible method of allocating resources? A in the distribution of foodstuff among the population B in the hiring of workers by employers C in the ownership of land for agricultural use D in the provision of public goods by the government 8 A sports stadium has two prices of seats. The cheaper seats are $10 and the more expensive seats are $20. When the prices of all seats are increased by 10%, the effects on demand are a fall of 5% for the cheaper seats and a fall of 12% for the more expensive seats. What describes the responsiveness of demand to the change in price? cheaper seats more expensive seats A elastic elastic B elastic inelastic C inelastic elastic D inelastic unitary elasticity 9 Which statement correctly describes the shape of the demand curve for a normal good? A It shows an inverse relationship between income and quantity demanded. B It shows an inverse relationship between the price of the good and quantity demanded. C It shows a positive relationship between the price of the good and quantity demanded. D It shows a positive relationship between income and quantity demanded. 10 Why does the basic economic problem of scarcity apply to both the rich and the poor? quantity

C

price quantity

D

price

S

S

O O

© UCLES 2023 9708/12/M/J/23 [Turn over A The choices people make are not dependent on income inequalities. B Consumers pay the same prices for goods and services to satisfy their wants. C Human wants exceed what can be produced from available resources. D Natural resources are unevenly distributed amongst nations. 11 Butter and buttermilk are goods in joint supply. Supply curves in both markets slope upwards to the right. Health concerns cause people to reduce their consumption of butter. What are the initial consequences of this for supply in the markets for butter and buttermilk? supply of butter supply of buttermilk A move left along supply curve move left along supply curve B move left along supply curve shift left of the supply curve C shift left of the supply curve move left along supply curve D shift left of the supply curve shift left of the supply curve 12 The diagram shows the demand and supply of a good. When the market is in equilibrium, which area measures the difference between what consumers are willing and able to pay and what producers receive at that output? A x B y C x + y D x – y 13 Why do some local governments subsidise the provision of bicycles to encourage their use? A Consumers are afraid of having car accidents.

O

S

D

price quantity

P

Q

x y

© UCLES 2023 9708/12/M/J/ B Consumers are unable to afford bicycles. C Consumers are not aware of the external benefits of using bicycles. D Consumers ignore the external costs of using bicycles. 14 The table shows Gini coefficients for both income and wealth in two countries. country P country Q income 0.6 0. wealth 0.4 0. Which statement is correct? A Gini coefficients are not comparable between income and wealth because one is a flow concept and the other is a stock concept. B Income inequality is greater in country P than in country Q. C Wealth inequality is greater in country P than in country Q. D Wealth inequality is greater than income inequality in both countries. 15 A government is faced with rising inflation. It wishes to reduce inflationary pressure while avoiding a fall in output. Which action is most likely to meet its needs? A an increase in laws to promote competition B an increase in taxation C an increase in the budget surplus D an increase in the exchange rate 16 The table shows selected information from a country’s national accounts. $ billion GDP 28 net property income from abroad – 3 capital consumption 6 national debt 2 What is the country’s net national income?

© UCLES 2023 9708/12/M/J/23 [Turn over A $19 billion B $25 billion C $31 billion D $33 billion 17 The graphs show the changes in the exchange rates of the pound sterling (£) against the US dollar (US$) and the euro (€) between the years 2001 and 2003. US$ per £ £ per € 2001 2002 2003 2001 2002 2003 year year What happened to the value of the £ between the years 2001 and 2003?

A The £ appreciated against the US$ and depreciated against the €.

B The £ appreciated against the US$ and the €.

C The £ depreciated against the US$ and appreciated against the €.

D The £ depreciated against the US$ and the €.

18 Which statement about the circular flow of income is correct? A Exports and imports do not affect the equilibrium level of national income because they always cancel each other out. B The greater the level of saving, the greater the level of injections in the form of investment must be. C When consumers use past savings to increase their spending, there will be a rise in national income. D When a government increases withdrawals by increasing the rate of income tax, there must be an equivalent increase in injections to compensate. 19 The graph shows a country’s average annual inflation rate over a five-year period.

0.

0.

0.

0.

0.

0.

0.

£

US$

© UCLES 2023 9708/12/M/J/ average annual inflation rate (%) 0 What can be concluded about the general price level during the five years? A It fell in only one year. B It fell in only two years. C It rose in only two years. D It was constant in only one year. 20 In an economy, wages and prices are both rising but wages are rising faster. Which features are likely to exist in this economy? cost-push inflation rise in real incomes A no no B no yes C yes no D yes yes 21 The diagram shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves for a country. X is the original equilibrium position. In one year, over one million foreign workers left the country and at the same time the country’s currency appreciated against the currencies of its major trading partners. What will be the most likely new equilibrium position for this country? 1 2 3 4 5 year

© UCLES 2023 9708/12/M/J/23 [Turn over 22 What is most likely to cause a rise in a country’s exchange rate? A a fall in its direct taxes B a fall in its export orders C a rise in its interest rates D a rise in its imports 23 Which change affecting the foreign exchange market for the US$ would be most likely to result in a shift to the right of the demand curve and a movement along the supply curve? A The US government reduces subsidies on exports to the EU. B Foreign currency speculators in Switzerland believe that the US$ is undervalued and act accordingly. C The US government intervenes in the foreign exchange market so as to bring about a drop in the value of the US$. D US pharmaceutical companies experience a fall in demand for their products from the rest of the world. 24 What can be best understood from a knowledge of a country’s terms of trade? A its balance of payments performance B the purchasing power of its exports C the standard of living within the country D the value of its real exchange rate 25 A company produces goods for export only. Which change could cause a rise in the price of its goods while the quantity sold is unchanged? general price level O (^) real ouput

AD 3

LRAS 3 LRAS 1 LRAS 2

AD 1

AD 2

D

C

A

B

X

© UCLES 2023 9708/12/M/J/ domestic workers’ wages foreign consumers’ wages A unchanged fall B fall unchanged C fall fall D rise^ rise 26 Under which current conditions will supply-side policy measures be most likely to achieve a country’s key macroeconomic goals? unemployment level price level A high stable B high rising C low stable D low rising 27 Why might a government prefer to use floating exchange rates? A It allows the government more independence in policy making. B It encourages the government to build up its foreign exchange reserves. C It eliminates the instability of free markets. D It gives firms more confidence in future costs and prices. 28 What is least likely to rise as a result of the use of expansionary fiscal policy? A aggregate demand B budget surplus C nominal income D inflation

© UCLES 2023 9708/12/M/J/ 29 The table shows GDP indices for a country over a three-year period. year 1 year 2 year 3 real GDP 100 105 106 money GDP 100 107 115 Inflation and economic growth are two macroeconomic policy objectives. Which row gives a correct assessment of the country’s achievement of these two objectives over the period? rate of inflation rate of economic growth A cannot tell positive B declining cannot tell C positive declining D rising negative 30 A government raises interest rates to improve the current account of the balance of payments. What might reduce the effectiveness of this policy? A a fall in domestic growth B consumer pessimism C increased domestic saving D price-elastic demand for exports Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cambridgeinternational.org after the live examination series. Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.