Which one of the following represents investment expenditure?

A firm spends £7m on new computer software

What is meant by the division of labour?

Each worker specialises in a different task in production

Which statement is correct?

Positive economics can be tested by data and evidence

The diagram represents the market for a good. Which statement is correct?

XYZ represents producer surplus

In which one of the following situations could the UK be said to be experiencing a negative output gap?

Real GDP in the UK is less than the economy’s productive potential

What would not cause the economy’s production possibility curve to shift from PPC1 to PPC2?

a fall in the amount of spare labour

Demand for a product is inversely related to its price, ceteris paribus. What does ceteris paribus mean?

Factors affecting demand other than price are held constant

Which one of the following is the most likely cause of the movement from Y1 to a new equilibrium at Y2?

A decrease in spending on imports

How might a firm raise the value of price elasticity of supply for its product?

employ new technology to increase its productive capacity

The table shows a market in equilibrium in two periods. What could explain the change from period 1 to period 2?

an increase in the price of a substitute

Which one of the following is the best definition of a household’s total saving?

That part of disposable income not spent on consumption

Which one of the following best describes the accelerator theory of investment?

Firms invest in capital equipment due to higher economic growth

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Economics Revision (Dec 2020)

20 termsStudBud Administration1,819 plays

Twenty quick-fire revision questions covering both micro and macroeconomics.

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Questions 20

Answers

1
Which one of the following represents investment expenditure?
An individual spends £28 000 buying company shares
A household puts £10 000 into an interest paying account
A government spends £10m more on nurses wages
A firm spends £7m on new computer software
2
What is meant by the division of labour?
The same amount of output per hour is produced by each worker
Workers divide their time between different jobs
Each worker specialises in a different task in production
Some workers work part-time and others work full-time
3
Which statement is correct?
Positive economics can be tested by data and evidence
Positive economics is subjective and offers a value judgement
Normative economics concerns the description of economic models
Normative economics is objective and factual
4
It was estimated that milk has an income elasticity of demand of –0.6. What can be concluded about milk from this data?
It has very few substitutes
It accounts for only a small proportion of household spending
Spending on milk will decrease if the price of milk increases.
It is an inferior good
5
The diagram represents the market for a good. Which statement is correct?
XYZ represents producer surplus
PYZ represents consumer surplus
OZ represents the minimum price consumers are prepared to pay
OX represents the price above which no producer stays in the market
6
The % change in the consumer prices index falls from 6% to 3%. This economy is best described as
entering a recovery period.
experiencing deflation.
experiencing disinflation.
entering a positive output gap.
7
Long-run aggregate supply curve is most likely to shift to the right if there is an increase in
the national minimum wage
indirect taxation such as VAT
raw material prices
labour productivity
8
In which one of the following situations could the UK be said to be experiencing a negative output gap?
Skills possessed by UK workers do not match required by UK businesses
UK firms do not have sufficient productive capacity to satisfy demand
Real GDP in the UK is less than the economy’s productive potential
Output per worker is lower in the UK than in the USA
9
What would not cause the economy’s production possibility curve to shift from PPC1 to PPC2?
an increase in the use of capital by firms
an increase in the retirement age
a fall in the amount of spare labour
an increase in the skills level of employees
10
Demand for a product is inversely related to its price, ceteris paribus. What does ceteris paribus mean?
Price falls result in increased quantity demanded
Price changes result from changes in demand
Factors affecting demand other than price are held constant
Factors affecting price other than demand are held constant
11
If demand shifts from D1 to D2, which area shows total producer surplus at the new equilibrium?
KNJ
FMH
GNJ
HMJ
12
Which one of the following is the most likely cause of the movement from Y1 to a new equilibrium at Y2?
A rise in household saving
An increase in productivity
A rise in corporation tax
A decrease in spending on imports
13
The table below shows the components of GDP for an economy in 2016. Aggregate demand in the economy is
£1310bn
£1350bn
£1560bn
£1770bn
14
How might a firm raise the value of price elasticity of supply for its product?
reduce the level of stocks in order to cut costs
increase advertising expenditure to generate more revenue
employ new technology to increase its productive capacity
decrease the amount of labour that it employs
15
Which one of the following A, B, C or D, is most likely to occur in a boom phase of the economic cycle?
B
A
D
C
16
The table shows a market in equilibrium in two periods. What could explain the change from period 1 to period 2?
a fall in the cost of raw materials used in making the product
an increase in the price of a substitute
an increase in the price of a complement
the imposition of a carbon tax on suppliers
17
Which one of the following is the best definition of a household’s total saving?
Money placed in bank and building society accounts
Contributions to a pension fund for retirement
An injection into the circular flow of income
That part of disposable income not spent on consumption
18
Which one of the following best describes the accelerator theory of investment?
Improved business confidence causes firms to increase their investment
Large profits encourage firms to invest in new capital equipment
Firms invest in capital equipment due to higher economic growth
Firms decide to invest more following a cut in interest rates
19
Demand for a good falls whilst at the same time, costs of production decrease. What will be the combined effect?
A
B
D
C
20
In the circular flow of income model, which one of the following is an injection?
Consumer spending
Imports
Wages
Government spending

Economics Revision (Dec 2020) Flashcards | StudBud