AQA Specimen (2)

The diagram below is a production possibility curve showing the various combinations of goods and services that an economy can produce.

Which one of the following can be deduced from the diagram?

• Point Y is allocatively efficient but Point X allocatively inefficient

• Point Y is productively efficient but Point X productively inefficient

• The opportunity cost of producing more goods, in terms of services, is greater at Point Y than at Point X

• The opportunity cost of producing more goods, in terms of services, is lower at Point Y than at Point X

In the diagram below, SRPC1 and SRPC2 represent short-run Phillips curves and LRPC represents the long-run Phillips curve. Which one of the following would explain a movement from point X to Y?

• A fall in taxation

• An increase in government expenditure

• A cut in real interest rates

• Reduced inflationary expectations

The table below shows the Gini coefficient of income for two countries. From the table it can be inferred that

• the distribution of income is more equal in country X.

• the distribution of wealth is more equal in country Y.

• 40% of the population in country X have more than the median income.

• 60% of the population in country Y have more than the mean income.

If the value of the marginal propensity to consume is 0.8, what is the total increase to real national income, due to the multiplier process if the initial injection is £25m?

• £31.25m

• £62.5m

• £125m

• £250m

A rational consumer will always attempt to

• minimise their marginal utility.

• consume all of their income.

• maximise their total utility.

• save so they are prepared for unexpected events.

The price elasticity of demand for labour measures the responsiveness of

• the supply of labour to a change in the demand for labour.

• the wage rate to a change in the demand for labour.

• the demand for labour to a change in the supply of labour.

• demand for labour to a change in the wage rate.

Which one of the following is generally not used to establish the quality of life in a country?

• GDP per capita figures

• Balance of payments figures

• Life expectancy

• Literacy rates

The diagram below shows the marginal private benefit and the marginal social benefit (MPB and MSB) curves and the marginal private cost and marginal social cost (MPC and MSC) curves for good X. Assuming the free market equilibrium is at point A, what action taken by the government is most likely to lead to output being produced at the socially optimal level?

• Increase in unit taxes on good X

• Subsidies to the producers of good X

• Regulation to reduce consumption of good X

• Issue of permits designed to reduce output of good X

The data below shows the data for the balance of payments for a country in £bn. Between Year 1 and Year 2 the

• surplus on the Current Account fell by £20bn.

• deficit on the Current Account fell by £20bn

• deficit on the Current Account rose by £20bn.

• surplus on the Current Account rose by £20bn.

Inferior goods always have a

• positive price elasticity of demand.

• Negative income elasticity of demand.

• positive cross elasticity of demand.

• negative price elasticity of supply.