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ZIMSEC A Level · 9158/3 · J2006

Economics Paper 3 June 2006

Questions
13
Total marks
175
Syllabus code
9158/3

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Questions
13
Pass mark
8
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 501

[1 marks]labour markets and wage differentials
Which theory of wage differentials explains that a worker's wage reflects the value of their marginal contribution to a firm's output?
  1. AHuman capital theory
  2. BMarginal productivity theory
  3. CMonopsony theory
  4. DCompensating wage differentials theory

Question 502

[1 marks]labour markets and wage differentials
State the economic theory of wage differentials which holds that workers who invest more in their own education, training and skills earn higher wages as a result.

Answer this when you sit the paper.

Question 601

[1 marks]national income measurement and living standards
Which of the following is NOT one of the three standard approaches used to measure a country's national income?
  1. ADistribution approach
  2. BExpenditure approach
  3. CIncome approach
  4. DOutput approach

Question 602

[1 marks]national income measurement and living standards
State the term for the total income earned by a country's residents and firms wherever in the world it is generated, as distinct from GDP which only counts output produced within the country's borders.

Answer this when you sit the paper.

Question 701

[1 marks]investment and national income (multiplier)
An initial rise in investment spending leads to a larger, multiplied increase in national income as the extra income earned is re-spent through successive rounds of the economy. This process is known as the...
  1. AMultiplier effect
  2. BWealth effect
  3. CAccelerator effect
  4. DCrowding-out effect

Question 702

[1 marks]investment and national income (multiplier)
According to economic theory, which of the following changes is most likely to increase the level of business investment in an economy?
  1. AA rise in interest rates
  2. BA fall in interest rates
  3. CA fall in expected future profits
  4. DA rise in corporate tax rates

Question 801

[1 marks]international trade and comparative advantage
According to the theory of comparative advantage, a country should specialise in producing and exporting the good in which it has a...
  1. Alarger domestic market than other countries
  2. Babsolute advantage over all its trading partners
  3. Clower opportunity cost than other countries
  4. Dhigher wage costs than other countries

Question 802

[1 marks]international trade and comparative advantage
State the economic term for a country's ability to produce a particular good at a lower opportunity cost than another country, which forms the basis for both countries gaining from trade even without an absolute advantage.

Answer this when you sit the paper.

Question 901

[1 marks]economic growth and development
Which of the following is most commonly cited by economists as a benefit of economic growth for a developing country?
  1. AHigher structural unemployment as older industries decline
  2. BGreater environmental degradation from higher industrial output
  3. CHigher average incomes and living standards
  4. DIncreased income inequality between rich and poor

Question 1001

[1 marks]externalities and environmental economics
A tax imposed on a firm to make it bear the cost of a negative externality, such as pollution, that it imposes on society is known as a...
  1. Asales tax
  2. Bincome tax
  3. Ccapital gains tax
  4. DPigouvian tax

Question 1002

[1 marks]externalities and environmental economics
State the economic term for a cost of production, such as pollution, that falls on third parties who are not part of the transaction between producer and consumer.

Answer this when you sit the paper.

Question 1101

[1 marks]unemployment and Keynesian economics
According to Keynesian theory, an increase in government spending reduces unemployment mainly by...
  1. Adirectly setting the wage rate that every employer must pay to workers
  2. Breducing the money supply so that market interest rates fall further
  3. Craising taxes on households to fund higher public sector wages directly
  4. Draising aggregate demand and output through the multiplier effect

Question 1102

[1 marks]unemployment and Keynesian economics
State the type of unemployment, caused by a shortfall in aggregate demand in the economy, that Keynesian policies such as higher government spending aim to reduce.

Answer this when you sit the paper.

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