MACROECONOMICS

Section A – MCQ
1. Which of the following government policies will help the economy to recover during
inflation?
A The selling of government securities in the open market
B The purchase of government securities in the open market
C A decrease in the cash reserve requirements
D A decrease in the bank interest rate

2. Government ensures the stability and economic growth of a country by the following
except
A Adjusting the allocation of resources to alter the composition of the domestic
output
B Controlling inflation and unemployment, which are caused by business
fluctuations
C Encouraging the power of monopoly firms
D Redistributing income and wealth among the population

3. A deficit budget occurs when ___________.

A The government’s total expenditure exceeds total revenue
B The government’s total expenditure equals total revenue
C Tax collection is more than government expenditure
D The public debt decreases

4. If the government’s total revenues are more than its total expenditure, it is called a
_____________.
A Balanced budget
B Surplus budget
C Deficit budget
D Trade surplus

5. Which of the following are examples of indirect taxes in Malaysia?

I Petroleum income tax
II Export duties
III Sales tax
IV Service tax
A I and II
B I, II and III
C II, III and IV
D All of the above

6. All of the following are examples of direct tax except _______________.

A Personal income tax
B Company tax
C Stamp duties
D Services tax

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7. The objectives of government taxation are as follows except
A To increase inequality of income distribution between the rich and the poor
B To restrain the consumer from consuming unhealthy products
C To protect local and infant industries
D To increase government revenue

8. A progressive tax is a tax that _______________.

A Is imposed only on higher income earners
B Will be the same for all income levels
C Goes on increasing with income
D Falls with the increase in income

9. Government development expenditure consists of ______________.

A Pension and gratuities
B Debts service charges
C Social services
D Subsidies

10. External sources of public borrowings are _______________.

A Loans from the international money market
B Borrowing from financial institutions
C Loans from commercial banks
D Loans from the central bank

11. The monetary policy objectives are as follows except

A To achieve the balance of payment equilibrium
B To maintain domestic price instability
C To achieve full employment of resources
D To achieve higher economic growth

12. Which of the following is a monetary policy tool?

A A change in required reserves ratio of commercial banks
B Controlling government expenditure
C A reduction in personal income tax
D An increase in public debt

13. The following are monetary policy instruments except

A Legal cash reserve requirements
B Government expenditure
C Open market operations
D Funding

14. Which of the following can be categorized into qualitative instruments of monetary
policy?
A Funding
B Interest rates
C Open market operations
D Legal cash reserve requirements

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15. The expansionary monetary policy:
A Increases money supply in the economy
B Decreases money supply in the economy
C Increases government expenditure
D Decreases government expenditure

16. The effect of expansionary monetary policy is _____________.

A An increase in interest rate
B A decrease in interest rate
C An increase in government expenditure
D A decrease in government expenditure

17. The discount or bank rate refers to _____________.

A The interest rate the central bank charges on loans of reserves to commercial
banks
B The interest rate that the central bank charges individuals
C The interest rate that the commercial banks charge investors
D The interest rate that the central bank has to pay to the World Bank

18. An example of fiscal policy is _____________.

A The purchase or selling of securities and treasury bills in the open market
B Influencing the rate of interest on deposits
C Adjusting the bank rate or discount rate
D A change in value added tax

19. The contractionary fiscal policy is imposed by the government to _____________.

A Reduce problems of inflation
B Reduce problems of deflation
C Increase aggregate demand
D Increase the money supply in the economy

20. The government imposes the expansionary fiscal policy by ______________.

A Increasing government taxes and increasing government expenditure
B Decreasing government taxes and decreasing government expenditure
C Increasing government taxes and decreasing government expenditure
D Decreasing government taxes and increasing government expenditure

21. Which of the following is NOT an element of fiscal policy?

A Government spending
B Government borrowing
C Taxation
D Exchange rates

22. Which of the following is associated with a negative public sector net cash
requirement?
A The government is running a budget deficit
B The government is running a budget surplus
C Public sector debt repayment is high
D The government’s expenditure exceeds its income

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23. ________________taxes are collected by the revenue authority from a business,
which attempts to pass on the tax to consumers in the price of goods.
Which word correctly completes this statement?
A Progressive
B Direct
C Indirect
D Regressive

24. If a government has a macro-economic policy objective of expanding the overall level
of economic activity, which of the following measures would NOT be consistent with
such an objective?
A Increasing public expenditure
B Lowering interest rates
C Increasing taxation
D Lowering taxation

25. The currency in country X is the Krone while country Y uses the Euro. Country Y has
recently experienced an increase in its exchange rate with country X. Which of the
following effects would result in country Y?
A A stimulus to exports in country Y
B An increase in the costs of imports from country X
C Reducing demand for imports from country X
D A reduction in the rate of cost push inflation

26. All of the following except one are ‘protectionist measures’ in international trade.
Which is the exception?
A Import quotas
B Subsidies for exporters
C Customs procedures
D Tariffs

27. Which of these statements is/are correct?

(1) Frictional unemployment will be short term.
(2) Governments can encourage labour mobility if they want to reduce
unemployment.
A (1) only
B (2) only
C Both
D Neither
28. Which TWO of the following does government economic monetary policy relate to?
A Interest rates
B Taxation
C Public borrowing and spending
D Exchange rates

29. Which TWO of the following does government economic fiscal policy relate to?
A Interest rates
B Taxation
C Public borrowing and spending
D Exchange rates

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30. Which TWO of the following are the goals of macroeconomic policy?
A Encouraging economic growth
B Low unemployment
C Achieving zero inflation
D Maximizing a currency’s foreign exchange value

31. Which of the following is an example of cyclical unemployment?

A The entry of school leavers into the labour pool each year
B Lay-offs among agricultural labourers in winter
C Automation of ticketing services in tourism
D Recession in the building industry

32. A surplus on the balance of payments usually refer to a surplus or deficit on

the______________ account.
Which word correctly complete this statement?
A Current
B Capital
C Financial
D Cost

33. Country A, B, C and D are four countries of Asia. The following statistics have been
produced for the year 20x7.
Country A B C D
Change in GDP (%) -0.30 +2.51 -0.55 +2.12
Balance of payments current account ($m) +5550.83 -350.47 -150.90 +220.39
Change in consumer prices (%) +27.50 +15.37 +2.25 +2.15
Change in working population employed (%) -4.76 +3.78 +1.76 -8.7
Which country experienced stagflation in the relevant period?
A Country A
B Country B
C Country C
D Country D
34. Which fiscal policy would be best used when trying to address a deflationary gap?
A Running a budget surplus
B Having a budget deficit
C Lowering interest rates
D Raising interest rates

35. Increases in unemployment, reduced demand, falling household incomes and low
business confidence and investment are associated most strongly with which of the
following?
A High interest rates
B Increase in the money supply
C A budget deficit
D Recession
36. Which group is usually most adversely affected by high rates of inflation?
A The poor and those on fixed incomes
B Small businesses
C Medium businesses
D Large businesses

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37. The balance of payments ‘surplus’ will result in _____________.
A Lower rate of economic growth
B Inflation
C Unemployment
D Budget deficit

38. Demand side policies are best described as _____________.

A A belief that government should manipulate its spending so as to boost
aggregate demand
B Ensuring that demand is contained so that inflation is controlled
C Managing down excessive growth by reducing government borrowing
D Keeping employment levels substantially below full levels
39. The following sentences contain gaps which are missing a particular economic term.
Management of the government’s taxation and spending plans is known as
_________.
A Deflationary gap
B Fiscal policy
C Monetary policy
D Stagflation

40. The following sentences contain gaps which are missing a particular economic term.
Poor economic growth over an extended period can sometimes lead to rises in the
prices of goods and services. This is referred to as ___________.
A Deflationary gap
B Fiscal policy
C Monetary policy
D Stagflation

41. Macroeconomics approaches the study of economics from the viewpoint of:
A The entire economy.
B Governmental units.
C The operation of specific product and resource markets.
D Individual firms.

42. Which of the following is associated with macroeconomics?

A An examination of the incomes of Harvard Business School graduates.
B An empirical investigation of the general price level and unemployment rates.
C A study of the trend of pecan prices since the Second World War.
D A case study of pricing and production in the textbook industry.

43. The problems of aggregate inflation and unemployment are:

A Major topics of macroeconomics.
B Major topics of microeconomics.
C Peculiar to command economics.
D Not relevant to the central government.

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44. Which of the following statements pertains to macroeconomics?
A Mrs Smith decided to enter the labour force because the minimum wage was
raised.
B A decline in the price of soybeans caused farmer to plant more in wheats.
C The national productivity rate grew by 2.7%.
D The commercial bank increased its interest rate on consumer loans by 1%.

45. Macroeconomics can best be described as the:

A Analysis of how a consumer tries to spend income.
B Study of the large aggregates of the economy or the economy as a whole.
C Analysis of how firms attempt to maximize their profits.
D Study of how supply and demand determine prices in individual markets.

46. Nominal GDP is ____________.

A The sum of all monetary transactions that occur in the economy in a year.
B The sum of all monetary transactions involving final goods and services that
occur in the economy in a year.
C The amount of production that occurs when the economy is operating at full
employment.
D Money GDP adjusted for inflation.

47. Real GDP refers to ______________.

A The value of the domestic output after adjustments have been made for
environmental pollution and changes in the distribution of income.
B GDP data that embody changes in the price level, but not changes in physical
output.
C GDP data that reflect changes in both physical output and the price level.
D GDP data that have been adjusted for changes in the price level.
48. Real GDP measures _____________.
A Current output at current prices.
B Current output at base year prices.
C Base year output at current prices.
D Base year output at current exchange rates.

49. Nominal GDP is adjusted for price changes through the use of ____________.
A The Consumer Price Index (CPI)
B The Retail Price Index (RPI)
C The GDP price index
D Exchange rates

50. A price index is ______________.

A A comparison of the current price from a base year price.
B A comparison of real GDP in one period relative to another.
C The cost of a group of goods and services in a base period divided by the
cost of the same group of goods and services in another period.
D A ratio of real GDP to nominal GDP.
51. The GDP price index ___________.
A Includes fewer goods and services than the consumer price index.
B Is identical to the consumer price index.
C Is another term for the retail price index.
D Includes all goods comprising the nation’s domestic output.

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52. Real GDP and nominal GDP differ because of the real GDP:
A Is adjusted for changes in the volume of intermediate or semi-transactions.
B Includes the economics effects of international trade.
C Has been adjusted for changes in the price level.
D Excludes depreciation charges.

53. Real GDP is _____________.

A The nominal value of all goods and services produced in the economy.
B The nominal value of all goods and services produced in the domestic
economy corrected for inflation or deflation.
C The aggregate output that is produced when the economy is operating at full
employment.
D Always greater than nominal GDP.

54. In comparing GDP over a period of years, a difference between nominal and real
GDP may arise because:
A The changes in trade deficits and surpluses.
B The length of the working days has declined historically.
C The price level may change over time.
D Depreciation may be greater or smaller than gross investment.

55. The phase of the business cycle in which real GDP is at a minimum is called ______.
A The peak.
B A recession.
C The trough.
D The pits.

56. A recession is a period in which:

A Cost-push inflation is present.
B Nominal domestic output falls
C Demand-pull inflation is present.
D Real domestic output falls.

57. Kimberly voluntarily quit her job as an insurance agent to return to school full-time to
earn an MBA degree. With degree in hand she is now searching for a position in
management. Kimberly currently is:
A Cyclically unemployed.
B Structurally unemployed.
C Frictionally unemployed.
D Not a member of the labour force.

58. To be officially unemployed a person must:

A Be in the labour force.
B Be 21 years of age or older.
C Have just lost a job.
D Be waiting to be called back from a layoff.

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59. The natural rate of unemployment is ___________.
A Higher than the full employment rate of unemployment.
B Lower than the full employment rate of unemployment.
C The rate of unemployment occurring when the economy is at its potential
output.
D Found by dividing total unemployment by the size of the labour force.

60. The labour force includes ____________.

A Employed workers and persons who are officially unemployed.
B Employed workers, but excludes persons who are officially unemployed.
C Full-time workers, but excludes part-time workers.
D Permanent employees, but excludes temporary employees

61. Which one of the following is a type of near money?

A Store card
B Rail card
C Debit card
D Credit card

62. A regular monthly payment for the same amount that is made by your bank on your
instructions is known as a:
A Standing order
B Direct debit
C Standing debit
D Direct order

63. An electronic method of payment usually used for wages is known as:
A CABS
B ABCS
C BACS
D SCAB

64. Which one of the following is not a security feature of a five pound (£5) note?
A Watermark
B Metallic strip
C Hologram
D PIN number

65. Which one of the following is a form of ‘near’ money?

A Pay slip
B Bank statement
C Payment receipt
D Travellers cheque

66. Which one of the following financial products would you be most likely to use to
purchase a house?
A Personal loan
B State benefits
C Mortgage
D ISA

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67. Which one of the following is a type of personal tax?
A Income tax
B Corporation tax
C Value added tax
D Inheritance tax

68. Which one of the following does not offer advice on personal taxes?
A Independent financial advisor
B HM revenue and customs
C Financial services authority
D Citizens advice bureau

69. Which one of the following is an ethical consumer?

A person who pay for:
A the name
B fairtrade goods
C value for money
D the cheapest goods

70. A £1 coin is equal to 100 pennies.

This means that it is:
A portable
B durable
C valuable
D divisible

71. Which one of the following is a description of the price of one currency against
another currency?
A Exchange rate
B Foreign currency
C Currency converter
D Rate of inflation

72. Which type of account has an overdraft facility?

A Savings account
B Current account
C Cheque account
D Credit account

73. Which one of the following cannot be used to open bank accounts?
A Passport
B Driving licence
C Utility bill
D Library card

74. Which one of the following is a type of money?

A Cheque
B Rail card
C Season ticket
D Loyalty card

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75. Which one of the following would be able to give the widest source of advice?
A Bank
B Building society
C Independent financial adviser
D Department of work and pensions

76. Which one of the following is a source of personal income?

A Loan interest
B Savings interest
C Mortgage interest
D Credit card interest

77. A property of money is that it is durable.

Which one of the following is a definition of ‘durable’?
A Easy to carry around
B Contains a hologram
C Hard wearing and long lasting
D Difficult to counterfeit or copy
78. Which one of the following are you most likely to go for advice on mortgage
products?
A Bank
B Citizen advice bureau
C Revenue and custom
D Department for work and pensions

79. Which one of the following is a benefit of planning a personal budget?

A Keeping a diary of spending
B Identification of monthly bills
C Knowledge of taxation
D Maintaining a good credit rating

80. Which one of the following indicates that someone is risk averse?
A Buying a lottery ticket every week
B Investing savings in stocks and shares
C Putting cash surplus into a savings account
D Buying only designer label clothes and shoes

81. Which one of the following means the same as “cambio”?

A Citizens advice bureau
B Bureau de change
C Building society
D Post office

82. Which one of the following do you need to withdraw cash from an ATM?
A PIN number
B Password
C Phone number
D Username

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83. International trade differs from domestic trade because of ______________.
A Usage of different units of currency in international trade
B The size of the market is relatively bigger for international trade
C Resources are more mobile domestically than they are internationally
D All of the above reasons

84. A nation can gain from international trade if _________________.

A It exports the product which has a lower opportunity cost and imports the
product that has higher opportunity cost
B Its currency appreciates in value
C It imposes a quota on imported goods
D None of the above

85. If country A has an absolute advantage over country B in the production of a

particular product, it can produce that product _______________.
A Lower inputs per unit
B Greater absolute quantities
C Comparative advantage
D Lower opportunity cost of production

86. Theory of specialization and free trade that will benefit all the trading partners is
known as ___________.
A Comparative advantage
B Absolute advantage
C Mutual advantage
D None of the above
87. Which of the following represents a way in which international trade differs from
domestic trade?
A Cultures
B Currencies
C Politics and laws
D All of the above

88. ____________ consists of business transactions between more than one countries.
A Domestic trade
B Corporate expansion
C International trade
D None of the above

89. Which one of the following is not a reason why companies engage in international
trade?
A Expanding sales
B Diversifying sources
C Exploiting resources
D Reducing competitive risk
90. The main benefits of globalization seem to flow into ____________.
A Most countries equally
B Primarily developed countries
C Primarily developing countries
D Primarily lesser developed countries

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91. The main motives for going global are _______________.
A Market, economic and social reasons
B Market, economic and strategic reasons
C Consumer, producer and government reasons
D Financial, competitive and profit oriented reasons

92. Any business activities that involve cross border transactions are considered to be
international trade.
A True
B False

93. Government policy on taxation, public borrowing and public spending is:
A Monetary policy
B Fiscal policy

94. A government can increased demand by using fiscal policy.

A True
B False

95. A tax which takes a higher proportion of a poor person’s salary than of a rich
person’s is:
A Proportional tax
B Regressive tax
C Progressive tax
D Indirect tax

96. High rates of personal income tax are thought to have a disincentive effect. This
refers to the likelihood that the high rates of tax will:
A Encourage illegal tax evasion by individuals
B Lead to a reduction in the supply of labour
C Lead to a reduction in savings by individuals
D Discourage company investment

97. The government of a certain country decides to introduce a poll tax, which will involve
a flat rate levy of $200 on every adult member of the population. This new tax could
be described as:
A Regressive
B Proportional
C Progressive
D Ad valorem

98. Which of the following will not be the immediate purpose of a tax measure by the
government?
A To discourage an activity regarded as socially undesirable
B To influence interest rates
C To protect a domestic industry from foreign competition
D To price certain products so as to take into account their social cost

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 99. Which of the following government aims might be achieved by means of fiscal policy?
1. A redistribution of income between firms and households.
2. A reduction in aggregate monetary demand.
3. A change in the pattern of consumer demand.
A Objectives 1 and 2 only
B Objectives 1 and 3 only
C Objectives 2 and 3 only
D Objectives 1, 2 and 3

100. Other things remaining the same, an increase in the money supply will tend to reduce:
A Interest rates
B Liquidity preference
C The volume of bank overdrafts
D Prices and incomes

101. Injections into the economy are:

A Consumption and investment
B Investment and government expenditure
C Investment, government expenditure and export demand
D Consumptions, investment, government expenditure and export demand

102. A deflationary gap occurs when:

A Aggregate demand is insufficient to buy up all the goods and services the
company is capable of producing.
B Aggregate demand is more than sufficient to buy all the goods and services
produced by an economy.
C A government attempts to spend its way out of recession.
D A government is cutting its level of expenditure.

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Section B – Short Essay/Structured Questions

1 – Question 1
(a) Identify the following as microeconomic or macroeconomic?
(1 mark each = 10 marks)
(i) Inflation –
(ii) Deflation –
(iii) International trade –
(iv) Balance of payments –
(v) Exchange rate –
(vi) Exports and imports –
(vii) Demand of buyers –
(viii) Supply of producers –
(ix) Individual markets –
(x) Whole economy –

1 – Question 2
Identify the following terms as macroeconomic or microeconomic.
(1 mark each = 10 marks)
(a) Studies individual income –
(b) Analyzes demand for and supply of labour –
(c) Deals with households’ and firms’ decisions –
(d) Studies individual prices –
(e) Analyzes demand and supply of goods and services –
(f) Studies national income –
(g) Analyzes total employment in the economy –
(h) Deals with aggregate decisions –
(i) Studies overall price level –
(j) Analyses aggregate demand and aggregate supply –

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 2 – Question 1
Given the following information (All values are in $ million)
Fixed consumption = 200
Marginal propensity to consume = 0.75
Investment I = 100
Government spending G = 50
Taxation T = 100
Export X = 100
Import M = 50

(a) Determine the coefficient of marginal propensity to save (MPS). (2 marks)

(b) Determine the equation of savings. (2 marks)

(c) Calculate the national equilibrium income by using BOTH the AD-AS and the Leakage-Injection methods.
(8 marks)

(d) If the full-employment level of income for the above economy is $2000 million, is there an inflationary or
deflationary gap? Sketch a diagram to show this situation. (8 marks)

(TOTAL = 20 MARKS)

2 – Question 2

Given the following information (All values are in $ million)

Fixed savings = -700
Marginal propensity to save = 0.3
Investment I = 450
Government spending G = 500
Taxation T = 350
Export X = 400
Import M = 300

(a) Determine the coefficient of marginal propensity to consume (MPC). (2 marks)

(b) Determine the equation of consumption. (2 marks)

(c) Calculate the national equilibrium income by using BOTH the AD-AS and the Leakage-
Injection methods. (10 marks)

(d) If the full-employment level of income for the above economy is $4000 million, is there an
inflationary or deflationary gap? Sketch a diagram to show this situation. (6 marks)

(TOTAL = 20 MARKS)

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2 – Question 3
In a closed economy, the national savings equation for country Z is S = -100 + 0.3Y and
Investment (I) is $250 million. Based on this information, answer the following questions.
(a) Complete the table below. (10 marks)
(All values are in $ million)
National Income Savings (S) Consumption (C) Investment (I)
(Y)
0
250
500
750
1000
1250
1500
1750
2000

(b) Derive the consumption equation. (2 marks)

(C = 100 + 0.7Yd)

(c) Calculate the equilibrium national income for country Z. (4 marks)

(Ye = $1,167 million)

(d) If the government increases salaries for government servants by $150 million, what is
the new equilibrium national income? (4 marks)
(Y1 = $1,667 million)
(Total = 20 marks)
2 – Question 4
The table below shows the consumption equation, taxation, government spending and
investment level in country A and country B respectively.
(All values are in $ billion)
Items Country A Country B

Consumption equation (C) C = 150 + 0.75Yd C = 150 + 0.75Yd

Taxation (T) 60 0.2Y

Government spending (G) 75 200

Investment (I) 50 150

(a) Derive the savings equation for both countries. (2 marks)

(Sᴀ = -150 + 0.25Yd Sᴃ = -150 + 0.25Yd)
(b) Calculate the equilibrium national income for both countries. (8 marks)
(Yᴀ = $920 billion Yᴃ = $1,250 billion)
(c) If the government in both countries increases their government spending by $ 6
billion, what will be the change in the equilibrium level of national income in each
country? (10 marks)
(Yᴀ₁ = $944 billion ∆ Yᴀ₁ = 944 – 920 = ↑ $24 billion)
(Yᴃ₁ = $ 1,265 billion ∆ Yᴃ₁ = 1,265 – 1,250 = ↑ $15 billion)

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3 – Question 1
The following data shows the price index of four categories of consumer goods in a country.
Commodity Weight Price index
Food 8 110
Clothing 5 120
Housing 4 130
Transport 3 105

(a) Calculate the consumer price index and comment upon your answer. (5 marks)

(b) Briefly outline FIVE uses of index numbers. (5 marks)

The average monthly wages earned within the service sector of an economy over the last
three years is recorded in the table below along with the inflation index.
Year Average monthly wage Inflation index
($) (2001 = 100)
2003 200 115
2004 220 125
2005 230 130

(c) Deflate the figures using 2003 as the base period. (5 marks)

(d) Comment upon the real change in average monthly wage. (2 marks)

(e) Identify THREE factors involved in creating a general price index such as the Retail
Price Index. (3 marks)
(TOTAL = 20 MARKS)

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3 – Question 2
In January 2002 a Retail Price Index has the following categories, Weights and Index Values
(Jan 1991 = 100).
Category Weight Index
Food 121 134.9
Catering 57 186.2
Alcoholic drink 67 174.6
Tobacco 35 238.5
Housing 183 185.7
Fuel and light 44 174.0
Household goods 70 132.9
Household services 61 141.4
Clothing and footwear 52 128.5
Personal goods and services 43 193.1
Motoring expenditure 138 185.6
Fares and other travel costs 23 168.4
Leisure goods 43 127.5
Leisure services 63 139.6

(a) Calculate for all items the Retail Price Index number for January 2002 with January
1991 = 100. (5 marks)
(165.3)
(b) Comment on your answer. (2 marks)

Currently the company is involved in a dispute over pay levels with the transport drivers.
They claim that recent pay increases have not resulted in a real increase in wage levels.
To assess this claim, management collected the following data:
Year Average salary Index of retail prices
($) (Jan 2005 = 100)
2006 22,000 103.5
2007 22,400 106.3
2008 22,650 110.0
(c) Convert the index of retail prices to a series with 2006 = 100. (5 marks)

(d) Calculate the real salary for each year relative to 2003 and explain whether the
drivers’ claim is justified. (5 marks)

(e) State THREE uses of an index number. (3 marks)

(TOTAL = 20 MARKS)

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3 – Question 3

(a) Distinguish between the demand pull and cost push inflation. (5 marks)

Year Consumer price index (CPI)

2013 122.0

2014 135.0

(b) Calculate the rate of inflation for the year 2014 and comment on your answer.
(5 marks)

(c) If the population is 50 million, the labour force is 26 million and the number of
employee is 23.5 million. Calculate the unemployment rate. (5 marks)

(d) Identify the type of inflation.

– cost push, demand pull, expectations or imported. (5 marks)
(i) Workers seek above inflation pay rises.
(ii) Growth in demand for new homes has exceeded supply.
(iii) Retailers have increased their prices in advance of inflation.
(iv) Worldwide increase in copper prices, increasing the cost of electrical cables.
(TOTAL = 20 MARKS)

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3 – Question 4
Refer to the table below, answer the following questions (a) to (e).
Commodity Weight Price ($)
2004 2005
A 1 1.00 1.20
B 2 1.50 1.90
C 4 2.00 2.30
D 5 0.80 0.70
(a) Assuming that 2004 is the base year, calculate the weighted price index for each
commodity for the year 2005. (4 marks)

(a) Calculate the overall consumer price index for the year 2005. (4 marks)

(b) What is the rate of inflation or deflation in the year 2005? Briefly comment on your
answer. (4 marks)

(c) Calculate the change in the value of money for the year 2005. What is the real value
of $100 for this year? (4 marks)

(d) Based on your answer in (b) above, if a person received gross salary $2,000 in the
year 2000 and $2,500 in the year 2005, has his or her standard of living risen?
(4 marks)
(TOTAL = 20 MARKS)
3 – Question 5
The following table shows the price index for four types of commodity for two different years.
Commodity Weight Price Index for 2002 Price Index for 2004
Rice 5 100 103.5
Sugar 3 100 104
Palm oil 4 100 98
Wheat 3 100 112

(a) (i) How much has the price of palm oil changed from 2002 to 2004? (2 marks)
(ii) How much has the price of wheat changed from 2002 to 2004? (2 marks)

(b) Assuming that 2002 is the base year, calculate the weighted price index for each
commodity for the year 2004. (4 marks)

(c) Calculate the overall consumer price index for the year 2004. (4 marks)

(d) What is the rate of inflation or deflation in the year 2004? Briefly comment on your
answer. (4 marks)

(e) Outline FOUR factors involved in creating a general price index such as the
Consumer price Index. (4 marks)
(TOTAL = 20 MARKS)

21
3, 4 – Question 1
The table below shows the total population, labour force and the total employment of
Malaysia in 2000, 2001 and 2002 (thousands of persons).
2000 2001 2002

Total population 18000 18500 18700

Labour force 6834.1 7046.5 7527.9

Total employment 6350.8 6621.0 6848.9

(a) Calculate the unemployment for the years 2000, 2001 and 2002. (5 marks)
(b) Based on the answer in (a), in which year was the unemployment rate the highest?
(2 marks)
(c) Given the total number in the labour force, complete the table below by calculating
the total employed and the unemployment rate. (5 marks)
Year Total labour force Total employed Unemployment rate
(thousands of (thousands of persons) (%)
persons)
1996 8372.0 8162.7
1997 9038.2 8805.1

1998 8880.9 3.2

1999 9010.0 3.0

2000 9892.1 3.6

(d) Identify the type of unemployment: (5 marks)

(i) Jack lost his job because he lacks marketable job skills.
(ii) Workers at the construction site lost their jobs due to a recession
(iii) Some fishermen were laid off during the monsoon season.
(iv) Fresh graduates from a university seeking employment for the first time.

22
3, 4 – Question 1
The table below shows the amount of tax paid by individuals in three countries at different
income levels in $.
Country Original income level New income level Original tax paid New tax paid
A 10000 15000 1500 2250
B 13000 16000 1300 1440
C 12000 18000 1320 2340
Determine the tax structure adopted by each country. (5 marks)

3, 4 – Question 2
Refer to the table below and answer the following questions.
Total taxable Amount of tax paid ($)
income ($)
A B C

1000 50 50 50
4000 400 200 160

8000 960 400 240

(a) Calculate the rate of taxation when total taxable income is $4000 for individuals
A, B and C. (4 marks)

(b) Identify and explain the type and rate of taxation each individual is paying.
(10 marks)
(c) List three examples of direct tax. (3 marks)

(d) List three examples of indirect tax. (3 marks)

(TOTAL = 20 MARKS)
3, 4 – Question 3
The table below shows the total taxes paid by individuals from three countries at different
income levels.
Income ($) Total income tax

Country X Country Y Country Z

1000 100 90 150

2000 200 220 150

3000 300 450 150

(a) Calculate the tax rate for countries X, Y and Z. (6 marks)

(b) Determine and define the tax structure for countries X, Y and Z with the help of
diagrams. (10 marks)

23
3, 4 – Question 4
The table below shows the total tax paid by individuals from country A and B at different
income levels in $.
Country Original income Original tax New income New tax paid
paid

A 5000 450 7500 675

B 8000 800 10000 900
Identify whether countries A and B are adopting the proportional, progressive or regressive
tax structure. (5 marks)

5 – Question 1

(a) Distinguish between barter and money. (5 marks)

(b) Briefly state:

(i) the characteristics of money (5 marks)

(ii) the functions of money (5 marks)

(iii) the main forms in use today. (5 marks)

(TOTAL 20 MARKS)

24
6 – Question 1
The assets and liabilities of a commercial bank consist of notes and coins, statutory
reserves, short term bills and deposits from customers. The total deposits for this bank are
$150,000
Cash ratio 10%
Statutory reserve ratio 8%
Short term bills 5%
(a) How much is the total money supply and the amount of money created based on
the cash ratio? (4 marks)
(b) What is the total money supply if the cash reserve was increased to 20%.
(2 marks)
(c) List down two limitations of credit creation in the economy. (2 marks)

6 – Question 2
If the cash ratio is 20% and original deposit is $2,000
Calculate the money supply and the amount of money created. (4 marks)

6 – Question 3
If all banks in Malaysia observe a 25% reserve asset ratio, by how much can the banking
system increase deposits in response to a new deposit of RM5000? (4 marks)

6 – Question 4
Assume that the banking sector maintains a 10% cash ratio. An initial increase by RM10
million in deposits of the banking system will lead to a final increase in the deposits of the
banking system. Calculate the money supply and the amount of money created. (4 marks)

6 – Question 5
If initial deposit is RM5000 and cash ratio is 12%.
Calculate the increase of money supply in the economy. (4 marks)

6 – Question 6
(a) What is the most important characteristic of money? (2 marks)

(b) A banking system is required to maintain 10% of its deposits in the form of cash and
always lends the remainder in the form of advances. If a new deposit of RM1 million
cash is made into the banking system and the public’s demand for cash remains
unchanged, what will be the value of the additional deposits created by bank
lending? (4 marks)

25
7, 8, 9 – Question 1

If a Canada hockey stick has a price of $36, how much does it cost in

(a) Vietnam? Assuming an exchange rate of $1 Canadian = $17.64 Vietnam. (2 marks)

(b) UK? Assuming an exchange rate of £1 = $2.00 Canadian? (2 marks)

Fill in the blanks.

(c) If $1 Canadian equals US$0.70, then US$1 equals__________ (2 marks)

(d) If $1 Canadian equals 75 yen, then 1 yen equals_____________ (2 marks)

(e) If 1 euro equals $1.2 Canadian, then $1 Canadian equals_________ (2 marks)

(TOTAL = 10 MARKS)

26
7, 8, 9 – Question 2

The price of a US car is $20,000.

(a) If the exchange rate is 0.9 Euros for $1, what is the price of that car in Euros?
(2 marks)

(b) If the exchange rate changes to 1.1 Euros for US$1, what is the price of that car in
Euros? (2 marks)

(c) Considering the law of demand, will the car maker sell more cars or fewer cars if the
exchange rate changes to 1.1 Euros per US$1? Give a reason for your answer.
(2 marks)

(d) If the exchange rate changes from 1 Euro per US$1 to 1.2 Euros per US$1, the Euro
has _____________. (2 marks)

(e) If the exchange rate changes from 1 Euro per US$1 to 0.7 Euros per US$1, the Euro
has _____________. (2 marks)

(TOTAL = 10 MARKS)

27
7, 8, 9 – Question 3
The table below shows the output that can be produced by two countries.
Country/Product Rice (Tonnes) Palm oil (Tonnes)

Malaysia 650 1000

Thailand 1100 850

Assume that the resources are divided equally between the two productions.
(a) Which country has an absolute advantage in the production of
(i) Rice? (2 marks)
(ii) Palm oil? (2 marks)

(b) Calculate the opportunity cost of producing one ton of rice and one ton of palm oil
by each country. (4 marks)

(c) Which country has the comparative advantage of producing rice and palm oil?
(4 marks)
(d) With the assumption of complete specialization after trade, construct a table to
show the production output of both countries after trade. (4 marks)

(e) What is the term of trade that will benefit both countries equally? (4 marks)
(TOTAL = 20 MARKS)

28
7, 8, 9 – Question 4
The table below shows the production possibilities of two countries that only produce two
goods before the international trade.
Country/Product Car (units) Computer (units)

Japan 28 20

USA 35 30

Assume that the resources are divided equally between the two productions.
(a) Which country has an absolute advantage in the production of computers? Cars?
(4 marks)

(b) Calculate the opportunity cost of producing one unit of car and one unit of
computer in each country. (4 marks)

(c) Identify the comparative advantage gained by Japan and USA for each product.
(4 marks)

(d) Which country will import cars? Export cars? (4 marks)

(e) Suggest a term of trade where both countries can gain equally from it. (4 marks)
(TOTAL = 20 MARKS)

29
7, 8, 9 – Question 5
The table below shows the total output that can be produced by both countries.
Country/Product Rubber (Tons) Palm oil (Tons)

Malaysia 400 200

Indonesia 300 200

Assume that the resources are divided equally between the two productions.
(a) Which country has an absolute advantage in the production of rubber and palm
oil? (4 marks)

(b) Calculate the opportunity cost of producing one ton of rubber in each country.
(4 marks)

(c) Identify the comparative advantage gained by Malaysia and Indonesia for each
product. (4 marks)

(d) With the assumption of complete specialization after trade, construct a table to
show the production output of both countries after trade. (4 marks)

(e) What is the term of trade that will benefit both countries equally? (4 marks)
(TOTAL = 20 MARKS)

30
7, 8, 9 – Question 6
The following table shows the production of cars and radios in two countries.
Country/Product Car (units) Radio (units)

Country A 80 100

Country B 60 60

Assume that the resources are divided equally between the two productions.
(a) Which country has an absolute advantage in the production of
(i) Car? (2 marks)
(ii) Radio? (2 marks)
(b) Which country has the comparative advantage in the production of
(i) Car? (2 marks)
(ii) Radio? (2 marks)
(c) According to the principle of comparative advantage, which country should
specialize in producing
(i) Car? (2 marks)
(ii) Radio? (2 marks)

(d) Assume that both countries allocate 40% of their resources to the car industry
and the remaining 60% to the radio industry before trade. Construct a table to
show the production output of each country before trade.
(4 marks)

(e) With the assumption of complete specialization after trade, construct a table to
show the production output of both countries after trade.
(4 marks)
(TOTAL = 20 MARKS)

31
1, 2 – Extra Question 1
(a) Distinguish between micro and macro-economics. (5 marks)

(b) State whether the following are micro or macro-economic: (5 marks)

(i) study of the general level of prices

(ii) unemployment amongst construction workers has risen

(iii) study of national income

(iv) overall as society’s income levels increase, more is spent on consumer goods

(v) the demand for coffee is relatively price insensitive because caffeine is habit
forming.

(c) The table below shows figures for government spending (G), investment (I), imports
(M), savings (S), taxation (T), exports (X) and national income (Y) for an open
economy.

Y G I M S T X $ million
A 1000 400 200 100 100 200 400
B 2000 300 400 200 300 200 500
C 3000 200 500 400 500 100 300
D 4000 100 150 600 600 100 50

(i) Distinguish between open and close economy. (5 marks)

(ii) Calculate the equilibrium level of national income. (Show your workings)

(5 marks)

(TOTAL 20 MARKS)

32
1, 2 – Extra Question 2

(a) In an economy, autonomous consumption expenditure is $50 billion, investment is

$200 billion, and government expenditure is $250 billion. The marginal propensity to
consume is 0.7 and net taxes are $250 billion. Exports are $500 billion and imports
are $450 billion. Assume that net taxes and imports are autonomous and the price
level is fixed.

(i) Find the consumption equation. (2 marks)

(ii) Find the aggregate demand equation. (3 marks)

(iii) Calculate the equilibrium level of national income. Show your workings.
(5 marks)

(iv) Calculate the multiplier. (2 marks)

(v) If investment decreases to $150 billion, what is the change in equilibrium level
of national income? (3 marks)

(b) State whether each of the following statements are positive or normative economic.
(5 marks)
(i) Cigarette consumption is falling.

(ii) Cigarettes ought to be taxed heavily.

(iii) More tax on cigarettes would reduce tax revenues.

(iv) Increasing the earnings of minimum wage employees is desirable, and raising
the minimum wage is the best way to accomplish this.

(TOTAL 20 MARKS)

33
1, 2 – Extra Question 3

(a) Contractionary monetary policies implies the interest rates, bank reserves and
aggregate demand. Explain how the interest rates, bank reserves and aggregate
demand will be affected in this case.
(5 marks)

(b) Expansionary monetary policies implies the interest rates, bank reserves and
aggregate demand. Explain how the interest rates, bank reserves and aggregate
demand will be affected in this case.
(5 marks)

(c) National income is forecast to rise at 6% per annum over the next 3 years. Briefly
outline the implications for the following cases:
(i) a seller of food stall with a positive income elasticity of demand of +2 (5 marks)

(ii) a motorbike manufacturer with a negative income elasticity of -2.5 (5 marks)

(TOTAL 20 MARKS)

34
3, 4 – Extra Question 4
Weekly income Taxes paid in country
A B C
$50 $5.00 $5.00 $5.00
$100 $12.00 $10.00 $8.00
(a) Using the table above, explain which country has a progressive income tax system.
Show your workings. (5 marks)

(b) What mechanism helps to bring savings and investment into equilibrium in the
circular flow? (1 mark)

(c) What mechanism helps to keep the balance of payments in equilibrium? (1 mark)

(d) What is the term for a situation where government expenditure exceeds government
revenues? (1 mark)

(e) Suggest TWO ways why a government might spend more than it receives in
revenues.
(2 marks)

(f) Explain THREE possible causes of inflation. (5 marks)

(g) Explain why the control of inflation become such as important objective. (5 marks)

(TOTAL 20 MARKS)

35
3, 4 – Extra Question 5

(a) Distinguish clearly between the terms in each of the following pairs of economic
terms:

(i) cost-push and demand-pull inflation (5 marks)

(ii) frictional and structural unemployment (5 marks)

(b) Distinguish between money wages and real wages. (5 marks)

(c) If money wages are rising, is it possible for real wages to fall? Explain your answer.
(5 marks)

(TOTAL 20 MARKS)

36
3, 4 – Extra Question 6

(a) Explain the possible costs of high and rising unemployment. (5 marks)

(b) Explain how each of the following policies might affect the level of unemployment
within an economy:

(i) reducing taxes on employment income (5 marks)

(ii) reducing interest rates. (5 marks)

(c) Describe THREE main objectives of a government’s economic policy. (5 marks)

(TOTAL 20 MARKS)

37
3, 4 – Extra Question 7

(a) Identify the main type of unemployment to be found in each example given below.
(i) In region A economic activity is booming as workers readily change jobs.
(ii) In region B the staple industry has gone into permanent decline.
(iii) In region C all businesses has been affected by general downturn in activity.
(iv) In region D has an ageing population. (5 marks)

(b) In country A, the rate of growth is 3%, the rate of inflation is 1% and population is
falling by 2% per year. In country B, the rate of growth is 9%, the rate of inflation is
4% and population is growing at 2% per year. Comment briefly on the relative
performance of the TWO countries. (5 marks)

(c) Explain how your host country government alter the structure of taxation if
government objective was to:

(i) Increase the incentive to work (2.5 marks)

(ii) Reduce inequality in the distribution of income. (2.5 marks)

(d) Explain TWO methods that might be used by a government in an attempt to reduce
the level of inflation in their country. (5 marks)
(TOTAL 20 MARKS)

38
5 – Extra Question 8

(a) Distinguish between barter and money. (5 marks)

(b) Briefly state:
(i) the characteristics of money (5 marks)
(ii) the functions of money (5 marks)
(iii) the main forms in use today. (5 marks)
(TOTAL 20 MARKS)

39
6 – Extra Question 9

(a) Describe TWO main functions of a central bank. (5 marks)

(b) Describe TWO main functions of a commercial bank. (5 marks)
(c) Describe TWO main functions of a stock exchange. (5 marks)
(d) A banking system is required to maintain 10% of its deposits in the form of cash and
always lends the remainder in the form of advances. If a new deposit of $1 million
cash is made into the banking system and public’s demand for cash remains
unchanged. What will be the value of the additional deposits created by bank
lending?
(5 marks)
(TOTAL 20 MARKS)

40
6 – Extra Question 10

(a) Describe how an open market purchase of $7 million by the central bank will affect
the money supply.

(i) Assuming a required reserve ratio of 5%, calculate the maximum amount by
which the money supply can change due to the open market operation.
(5 marks)

(ii) How will your answer to (a) (i) above change if banks decide to hold reserves
over and above the required amount? (5 marks)

(b) Describe the possible impacts of an increase in interest rates on Nike’s sport shoes
manufacturer. (5 marks)

(c) Explain the importance of an increase in productivity to an economic growth.

(5 marks)
(TOTAL 20 MARKS)

41
7, 8, 9 – Extra Question 11

(a) Explain what is meant by each of the following:

(i) barriers to international trade (5 marks)

(ii) international debt. (5 marks)

(b) Suppose the exchange rates are 0.5 British pound per dollar; 10 Mexican pesos per
dollar; and 100 Chinese yuan per dollar. Further suppose that a Big Mac costs 3
dollars in America; 2 pounds in England; 50 pesos in Mexico; and 200 yuan in China.
In which country is a Big Mac most expensive? (5 marks)

(c) Suppose the real interest rate in a country rises. What can be expected to happen to
the demand for this nation’s currency and therefore, the value of its currency and net
exports? (5 marks)
(TOTAL 20 MARKS)

42
7, 8, 9 – Extra Question 12

(a) Labour hours needed to produce a unit of:

Country Wine Cheese
France 40 80
Belgium 15 60

Describe the absolute advantage and comparative advantage in each country for the
production of wine and cheese with labour hours needed. (5 marks)

(b) If interest rates rise relatively more in country A than in country B, then the value of
country A’s currency will __________.
Explain how the interest rates will affect the nation’s currency in this case.
(5 marks)

(c) Suppose that interest rates in Malaysia fall relative to the rest of the world. Explain
how this will affect:
(i) The value of the ringgit. (5 marks)
(ii) The net exports. (5 marks)
(iii) Now suppose the monetary authorities in Malaysia did not want the value of
the ringgit depreciates. Explain how the value of the ringgit could be stable
(fixed or peg) in this situation. (5 marks)
(TOTAL 25 MARKS)

43
Extra Question 13

(a) Describe ONE negative effect of rapid inflation for each of the following:
(i) an individual (2 marks)
(ii) a saver (2 marks)
(iii) a firm (2 marks)
(iv) a creditor (2 marks)
(v) the country. (2 marks)

(b) Explain how fiscal and monetary policies can be used as a cure for:
(i) inflation (5 marks)

(ii) deflation (5 marks)

(TOTAL 20 MARKS)

44
Extra Question 14

(a) State with your reason the effect of an increase in the price of motor cars on the
following markets.
(i) the car market (2 marks)
(ii) the petrol market (2 marks)
(iii) the public transport market (2 marks)
(iv) the job market for car workers (2 marks)
(v) the motorbike market (2 marks)

(b) State the following as microeconomic or macroeconomic. (1 mark each = 5 marks)

(i) whole economy
(ii) exchange rate
(iii) supply of sellers
(iv) demand of consumers
(v) aggregate demand and aggregate supply

(c) Explain THREE reasons why an entrepreneur would produce a business plan.
(5 marks)
(TOTAL 20 MARKS)

45
Extra Question 15

(a) Describe ONE POSITIVE effect of a SUSTAINABLE ECONOMY for each of the
following:
(i) an individual (2 marks)
(ii) a saver (2 marks)
(iii) a firm (2 marks)
(iv) a creditor (2 marks)
(v) the country. (2 marks)

(b) State with your reason the effect of a DECREASE in the price of motor cars on the
following markets.
(i) the car market (2 marks)
(ii) the petrol market (2 marks)
(iii) the public transport market (2 marks)
(iv) the job market for car workers (2 marks)
(v) the motorbike market (2 marks)
(TOTAL 20 MARKS)

46
Extra Question 16

(a) Explain the relationship between productivity and competitiveness in your own
country. (5 marks)

(b) Describe the importance of technology in increasing the productivity of the economy.
(5 marks)

(c) Explain the implications which rising input costs are a problem for food and drink
firms. (5 marks)

(d) How are businesses affected by fiscal and monetary policy? (5 marks)

47
Extra Question 17 (Banking – Financial Technology Fintech or IT or IS)

1. Landis Co has a team of experts whose role is to analyse vast volumes of data
concerning many areas of the business that come from a wide variety of sources.
Landis is seeking competitive advantage from:
A An internet gateway
B Big data
C Its accounting information system
D Artificial intelligence (AI)

2. Which characteristic of big data relates to the ability to stream data in real-time?
A Veracity
B Volume
C Variety
D Velocity

3. Which of the following accounting tasks could data analytics help to make more
effective?
A Processing routine transactions
B Asset management
C Risk management
D Payroll processing

4. ______________ is a source of big data that originates from public data (for example
transport, government financial and public service data).
Which word correctly completes this statement?
A Machine-generated data
B Open data
C Processed data
D Closed data

5. Which of the following is a disadvantage of using cloud accounting software?

A Cloud accounting software only allows one user to access the system at any
one time
B Financial data held in the cloud must be manually transferred between
individual computers
C Upgrading cloud accounting software is expensive and time-consuming
D Users of cloud accounting software are completely reliant on the provider of
the software to ensure their data is secure and to take backups of it

6. Which of the following technologies allows unconnected organisations and

individuals people to trust a shared record of events?
A Cloud computing
B Data analytics
C Distributed ledger
D Artificial intelligence

7. Which of the following is an area of an accountant or auditor’s work that is made

more effective by automation?
A Downloading bank transactions into the accounting system
B Report writing
C Forming an audit opinion
D Posting transactions to nominal codes

48
8. Which of the following is an area of an accountant or auditor’s work that is made
more effective by artificial intelligence?
A Report writing
B Forming an audit opinion
C Downloading bank transactions into the accounting system
D Posting transactions to nominal codes

9. Distributed ledgers reduce the need for auditors to __________ because they have a
source of information that they can trust.
Which word or phrase correctly completes this statement?
A Form an audit opinion
B Verify the ownership of assets
C Check for material misstatement
D Check for payroll processing

10. Big data contains both financial and non-financial data.

Is this statement TRUE or FALSE?
A True
B False

11. Cloud computing allows storage and accessing of data programmes over the internet
instead of on the computer’s hard drive.
Is this statement TRUE or FALSE?
A True
B False

12. Spreadsheet packages are primarily used to analyse and sort data.
Is this statement TRUE or FALSE?
A True
B False

13. ABC Co has recently commissioned a report into the potential sales of a prototype
product that it has developed. The report is extremely detailed and filed with jargon.
The management of ABC are finding it difficult to follow the report’s findings.
Which of the following criteria of good quality information is NOT being met by this
report?
A Relevant
B Complete
C Accurate
D Understandable

14. Which of the following is a reasonable drawback of using a database?

A Any system failures may cause widespread disruption and loss of information
B It is difficult for two people to use it at the same time
C The quantity of information is limited to just a few thousand records
D Costs of setting it up often outweigh the benefits of using it

15. Which of the following is an advantage of using an accounting package over a

manual accounting system?
A Set-up costs tend to be lower
B Recording transaction is usually faster
C Little training is usually required
D Better for small businesses with low volumes of transactions

49
16. Blockchain technology presents the possibility of an accounting ledger that can be
continuously updated and verified without the threat of being altered or corrupted.
Is this statement TRUE or FALSE?
A True
B False

17. Phishing is a type of computer virus.

Is this statement TRUE or FALSE?
A True
B False

18. This system type converts data from a transaction processing system into information
for monitoring performance and maintaining co-ordination.
Identify the system is being described – decision support system or management
information system.

19. When the government authority at the end of the tax year sends thousands of
notifications to people with an estimate of the tax they need to pay, these letters are
likely to be produced by this system type.
Identify the system is being described – expert system or management
information system.

20. What is artificial intelligence?

A Programming with your own intelligence
B Making a machine intelligent
C Putting more memory into a computer
D Backing up data, enabling more efficient data recovery

21. Esther has recently started looking at ways of gathering big data for her business.
She is concerned that some of the sources of data she has chosen are unreliable
and may therefore lead her to inaccurate conclusions.
Which of the following features may be missing from Esther’s big data?
A Variety
B Velocity
C Veracity
D Volume

22. Which of the following is a common example of a ‘phishing’ attack?

A You receive an email from an acquaintance who you are rarely in contact with
that contains only a web link.
B You got an email that appears to be from your bank asking you to enter your
account number and password, but the web address looks unfamiliar.
C You received a text message claiming that you won a contest and asking you
to click on the link.
D All of the above.
23. Jay has to analyse the historic results for his business over the last ten years. He
wishes to represent the information using a series of graphs that he can show to
potential investors.
Which software application would be most appropriate for Jay to use?
A Database
B Accountancy package
C Spreadsheet
D Desktop publishing

50
24. Identify the information systems that may be used within organisations with each of
the following descriptions.
A Decision support system
B Transaction processing system
C Executive information system
D Management information system
(i) Converts information about basic transactions into information that will help
tactical managers control the organisation.
(ii) Records all the daily transactions within the organisation and summarises
them periodically.
(iii) A tailor-made system that will draw on internal and external information to
help to deal with unstructured or semi-structured problems.
(iv) Provides internal and external information to strategic managers, enabling
modelling of the entire business.

25. Which TWO of these are characteristics of ‘good’ information?

A Cost free
B Easy to use
C Rapid
D Adaptable
E Perfect
F Cautious
G Factual

51
Extra Question 18
1. Which of the following is NOT likely to result from a fall in the exchange rate?
A A stimulus to exports
B An increase in the costs of imports
C Reducing demand for imports
D A reduction in the rate of domestic inflation

2. ____________ inflation arises from an excess of aggregate need over the productive
capacity of the economy.
Which word or phrase correctly completes this statement?
A Demand pull
B Cost push
C Frictional
D Imported

3. If all other factors remain unchanged, which ONE of the following would lead to a fall
in share prices?
A A reduction in the rate of tax which companies have to pay
B Forecasts predicting a rise in company profits
C A rise in interest rates
D A reduction in the number of shares issued

4. Which of the following best describes comparative advantage in international trade?

A A country should produce all goods it consumes
B A country should produce goods it can produce most efficiently
C A country should focus on its least efficient industries
D A country should focus on non-traded goods

5. If a country imposes a quota on the import of textiles, what is a likely immediate

effect?
A Increase in textile prices domestically
B Decrease in textile prices domestically
C Increase in textile exports
D Decrease in textile imports

6. How would an increase in tariffs on imported steel affect the steel market?
A It would increase the demand for domestic steel
B It would decrease the demand for domestic steel
C It would not affect the steel market
D It would increase the demand for foreign steel

7. Which policy would be most effective for a country to protect its emerging technology
industry?
A Implementing strict import quotas
B Subsidizing local technology industries
C Reducing tariffs on technology imports
D Increasing trade agreements with technology exporting countries

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8. Which strategy would be the most effective for a small nation to leverage
international trade for economic growth?
A Focus solely on importing goods
B Negotiate trade agreements to reduce tariffs and promote exports
C Restrict all foreign investments
D Increase local taxes on imports

9. What does WTO stand for in the context of international trade?

A World Trade Organization
B World Tourism Organization
C World Treaty Organization
D World Transport Organization

10. Which of the following best defines comparative advantage?

A The ability to produce more of a good than another country
B The ability to produce a good at a lower opportunity cost than another country
C The total output of a country
D The maximum production capacity of a country

11. Comparative advantage relies on which principle of economics?

A Diminishing returns
B Marginal utility
C Opportunity cost
D Supply and demand

12. If Country A has a comparative advantage in producing wine and Country B has a
comparative advantage in producing cheese, what should they do?
A Produce only wine
B Produce only cheese
C Trade wine for cheese with each other
D Focus on agriculture

13. How would to determine if Country X has a comparative advantage in technology

compared to Country Y?
A Compared their total technology outputs
B Evaluate their technology efficiency
C Assess their opportunity costs
D Assess the maximum production capacity

14. What is the exchange rate between the US dollar and the Euro if 1 USD in exchange
for 0.85 EUR?
A 1 USD = 0.90 EUR
B 1 USD = 0.80 EUR
C 1 USD = 0.85 EUR
D 1 USD = 1.15 EUR

15. Why might the exchange rate between two currencies fluctuate?
A Changes the population
B Changes in interest rates
C Changes in currency
D Changes in government holidays

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16. How would you convert 100 Euros to US dollars if the exchange rate is 1 USD = 0.85
EUR?
A Multiply 100 by 0.85
B Divide 100 by 0.85
C Multiply 100 by 1.15
D Divide 100 by 1.15

17. When analyzing the impact of exchange rate changes on a business, what factor is
crucial?
A Company’s blueprint
B Company’s financial stability
C Company’s marketing strategy
D Company’s number of employees

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Extra Question 19 (CHPT 5, 6)
1. What is the primary function of money?
A To act as a store of value
B To be used for personal identification
C To serve as a medium of exchange
D To function as a credit tool

2. How does the central bank control inflation?

A By increasing government spending
B By decreasing interest rates
C By selling government bonds
D By issuing more currencies

3. What is the process for a bank to grant a loan to a customer?

A Verifying the customer’s identity
B Checking the customer’s creditworthiness
C Issuing a cheque
D Opening a new account

4. How should a bank manager assess the effectiveness of a new monetary policy?
A By comparing it to past policies
B By evaluating customer satisfaction
C By monitoring the unemployment rate
D By analyzing market trends

5. What is the impact of a high reserve requirement on the banking system?

A Increased lending
B Decreased liquidity
C Lower interest rates
D Higher investment returns

6. Evaluate how a change in the discount rate by the central bank would influence the
overall economy.
A It would not affect consumer spending
B It would impact the money supply and borrowing costs
C It would lead to higher inflation immediately
D It would solely affect stock prices

7. What is a budget deficit?

A A situation where revenue exceeds expenses
B A situation where revenue equals expenses
C A situation where expenses exceed revenue
D A situation where expenses below revenue

8. How does a budget surplus impact national debt?

A It increases national debt
B It has no impact on national debt
C It burdens national debt
D It decreases national debt

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9. If a government runs a budget deficit, what is a likely short-term action?
A Increase taxes
B Decrease government spending
C Reduce taxes
D Increase government spending

10. Compare the effects of a budget surplus and a budget deficit on a country’s
economy.
A Both lead to higher inflation
B Both reduce government debt
C Both affect economic growth
D Both lead to higher unemployment

11. Assess the impact of continuous budget deficits on a country’s long-term economic
stability.
A It will strengthen the economy
B It will lead to higher national debt and possible economic instability
C It will weaken the economy
D It will stabilize the economy

12. Propose a comprehensive policy to manage a persistent budget deficit.

A Increase interest rates to attract foreign investment
B Reduce interest rates to attract foreign investment
C Cut all social welfare programs
D Increase all social welfare programs

13. Alex needs to convert $250 (USD) into Argentinean Pesos (ARS).
Information on exchange rates is as follows: $1 = ARS3.9600 and bank commission
is 1.2%. Calculate how many ARS Alex will get from this bank?
A ARS990.00
B ARS978.12
C $63.13
D $62.37

14. Jeannie needs to convert 110 Euros into Pounds Sterling (£).
Information on exchange rates is as follows: £1 = Euros 0.8727 and bank
commission is 1.9%. Calculate how many £ Jeannie will get from this bank?
A £130.83
B £128.44
C £126.05
D £123.66

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