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ZIMSEC A Level · 6073/2 · J2025

Economics Paper 2 June 2025

Questions
20
Total marks
40
Syllabus code
6073/2

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Questions
20
Pass mark
12
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 101

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
Income elasticity of demand measures the responsiveness of quantity demanded of a good to a change in
  1. Athe level of advertising spending on the good
  2. Bconsumer income, other things held constant
  3. Cthe good's own price, other things held constant
  4. Dthe price of a related good, other things held constant

Question 102

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
In a UK survey of income elasticities (1998-2000), liquid whole milk had an income elasticity of demand of -0.17, while fish had an income elasticity of demand of +0.27. Based on these figures, liquid whole milk is classified as
  1. Aa luxury good, since demand rises more than proportionately with income
  2. Ban inferior good, since demand for it falls as income rises
  3. Ca normal good, since demand for it rises as income rises
  4. Da Giffen good, since demand rises as its own price rises

Question 103

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
A survey found food overall has an income elasticity of demand of +0.20: a 10 percent rise in income raises the quantity of food demanded by only about 2 percent. As household income grows over time, this low income elasticity means that spending on food as a proportion of total household expenditure will
  1. Afall only in years when the price of food happens to fall at the same time
  2. Brise, since all spending categories grow at exactly the same rate as household income does
  3. Cstay unchanged, since food is a basic necessity that nobody can ever cut back on
  4. Dfall, since demand for food grows more slowly than income and total spending

Question 104

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
An inferior good is one with a negative income elasticity of demand: quantity demanded falls as income rises. When the price of such an inferior good falls, the substitution effect alone (real income held constant) causes quantity demanded of that good to
  1. Adecrease, because consumers switch entirely to other goods
  2. Bincrease only if the good is also classed as a luxury good
  3. Cincrease, because the good is now relatively cheaper than its substitutes
  4. Dstay unchanged in the short run, because economists treat inferior goods as having no substitution effect worth noting

Question 105

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
For that same inferior good, a fall in its price also raises the consumer's real income. Because the good is inferior, this income effect on its own causes quantity demanded to
  1. Adecrease, partly offsetting the rise the substitution effect produced
  2. Bincrease, reinforcing the rise the substitution effect produced
  3. Cdecrease by exactly the same amount that the substitution effect raises it, leaving quantity demanded unchanged
  4. Dhave no effect on quantity demanded at all

Question 106

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
Zimbabwe's government wants to enhance food security by raising domestic food output directly. Which macro-economic policy would do this most directly?
  1. Afiscal subsidies and input-support schemes, such as subsidised seed and fertiliser, for farmers
  2. Breducing the number of staff employed in the country's agriculture ministries
  3. Craising the central bank's policy interest rate, which makes credit more expensive for every farmer trying to borrow to expand output
  4. Dincreasing import tariffs on all consumer goods

Question 107

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
Zimbabwe's government wants to enhance food security by protecting the real purchasing power households need to buy food. Which macro-economic policy addresses this most directly?
  1. Atight monetary policy that brings down inflation and stabilises the currency
  2. Bexpanding money supply growth to fund larger consumer subsidies
  3. Ccutting government spending on irrigation infrastructure
  4. Dremoving all price controls on staple foods with no other supporting measure

Question 108

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
A food processor's own product has an income elasticity of demand of +0.45 (similar to fruit juices), while a rival's product has an income elasticity of demand of -0.07 (similar to apples). As household incomes rise over time, this tells the processor that demand for its own product will most likely
  1. Agrow faster than demand for the rival's product
  2. Bgrow at exactly the same rate as demand for the rival's product
  3. Cshrink, since any positive income elasticity signals a product in decline
  4. Dbe unaffected by income, since income elasticity only matters for inferior goods

Question 109

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
Knowing that some of its product lines are inferior goods (negative income elasticity of demand) while others are normal goods (positive income elasticity of demand) mainly helps a food processor to
  1. Arely on income trends alone, without needing any information at all about prices or costs, to plan production
  2. Bdecide which product lines to expand investment in as incomes rise, and which to scale back
  3. Cset the same production target for every product line regardless of income trends
  4. Dstop producing every inferior-good line regardless of how profitable it currently is

Question 110

[2 marks]income elasticity of demand, normal and inferior goods, indifference curve analysis, food security policy
Income elasticity of demand estimates for UK food items were calculated from household data pooled over 1998-2000. A food processor in Zimbabwe applying these UK estimates directly to plan production should recognise that
  1. Athe same figures apply equally well in any country at any income level
  2. Bincome elasticity is the only market factor a processor needs when planning production, so nothing else about the local economy is worth checking
  3. Ctastes, prices and income levels differ across countries and time, so the estimates may not transfer directly and need local updating
  4. Dsuch estimates require no updating once they have been calculated

Question 201

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
Inflation is best defined as
  1. Aan increase in the exchange value of the local currency
  2. Ba sustained rise in the general price level of an economy over time
  3. Ca one-off increase in the price of a single good
  4. Da sustained fall in the general price level of an economy over time

Question 202

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
In Zimbabwe, lending rates once peaked at 200 percent, a level set deliberately to stop speculative borrowing that was driving a black market in foreign currency. Speculative borrowing of this kind fuels inflation mainly because
  1. Ait strengthens the local currency by increasing demand for it
  2. Bit has no effect on the amount of money circulating in the economy
  3. Cborrowed money is used to chase foreign currency instead of production, weakening the local currency and raising import costs
  4. Dit increases the economy's output of goods and services, since more borrowing simply means more spending on domestic production

Question 203

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
As Zimbabwe's monthly inflation fell to 0.1 percent in March, with the annual rate down to 87.7 percent, savings interest rates were kept at 30 percent. Falling inflation makes saving in local currency more attractive mainly because
  1. Ait reduces the amount of money already sitting in savers' bank accounts
  2. Bit raises the real, inflation-adjusted return that savers earn on their deposits
  3. Cit automatically forces banks to raise the nominal interest rate they pay
  4. Dit has no bearing at all on the real value of the interest that savers eventually earn

Question 204

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
Zimbabwe's Reserve Bank set high lending rates, peaking at 200 percent, specifically to reduce speculative borrowing that fuelled the black market in foreign currency. This is an example of government controlling parallel-market currency operations through
  1. Alowering interest rates to encourage more borrowing
  2. Bprinting more local currency to meet rising demand for foreign currency in the parallel market
  3. Cabolishing all foreign-currency trading outright
  4. Dtight monetary policy that raises the cost of borrowing to fund speculation

Question 205

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
Zimbabwe allowed bureaux de change to increase their trading margin on foreign currency from 5 percent to 10 percent, with a maximum transaction size of US$100 000. This measure helps control the parallel market mainly by
  1. Abanning bureaux de change from operating at all
  2. Bfixing the exchange rate permanently at one level, with no trading margin allowed at any bureau
  3. Cremoving the transaction size limit entirely
  4. Dmaking the legal bureaux de change market more attractive and competitive against illegal dealers

Question 206

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
A supply-side policy that reduces inflation by lowering firms' costs of production, so they can supply the same output at a lower price, is
  1. Aimposing higher import tariffs on all raw materials used by domestic firms
  2. Braising the central bank's policy interest rate
  3. Csubsidising key production inputs, such as fuel or raw materials
  4. Dincreasing government spending on public sector wages

Question 207

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
A supply-side policy that reduces inflation by raising an economy's productive capacity, shifting aggregate supply to the right, is
  1. Ainvestment in infrastructure, such as roads and irrigation, that raises firms' productivity
  2. Bincreasing the money supply to fund consumer spending
  3. Ccutting interest rates sharply to boost short-run consumer demand across every sector
  4. Draising minimum wages across all industries

Question 208

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
When a country's currency depreciates, its exports become cheaper in foreign-currency terms. This is most likely to benefit the economy by
  1. Aautomatically eliminating the country's trade deficit within a month
  2. Breducing the local-currency cost of servicing foreign-currency debt
  3. Cmaking imported raw materials and capital equipment cheaper for local firms to buy
  4. Dmaking domestically produced goods more price-competitive in export markets

Question 209

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
When a country's currency depreciates, imported goods become more expensive in local-currency terms. This is most likely to harm the economy by
  1. Areducing the local-currency cost of imported fuel and equipment
  2. Braising the cost of imported inputs and consumer goods, feeding into higher domestic inflation
  3. Cimproving the balance of payments no matter how buyers actually respond to the change in relative prices
  4. Dmaking the country's exports less competitive abroad

Question 210

[2 marks]inflation, speculative borrowing, savings, parallel foreign-currency market, supply-side policy, exchange rate depreciation
Depreciation is meant to improve a country's trade balance by making exports cheaper and imports dearer. Whether this actually happens in the short run mainly depends on
  1. Athe level of the country's gold reserves alone
  2. Bnothing in particular, since a weaker currency improves the trade balance no matter how buyers eventually respond over time
  3. Chow responsive, or price elastic, export and import demand are to the price changes the depreciation causes
  4. Dthe exact calendar date on which the central bank announces the depreciation

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