Cambridge International AS & A Level

ECONOMICS 9708/13
Paper 1 Multiple Choice October/November 2020
1 hour

You must answer on the multiple choice answer sheet.

*5602956257*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 11_9708_13/RP
© UCLES 2020 [Turn over
 2

1 An economy is operating at a point inside its production possibility curve.

Why is this described as inefficient?

A Individuals are enjoying too much leisure.

B More of one good can be produced without decreasing production of another.
C The combination of labour and capital is wrong.
D There are shortages of some goods and an excess supply of others.

2 What is characterised as a free good?

A one that has zero opportunity cost

B one that is non-excludable and non-rivalrous
C one that is supplied by the government with no charge
D one that receives a 100% government subsidy

3 A country is moving from a planned economy to a market economy. The government previously
provided transport services but has now sold these to private firms.

What is a consequence of this?

A Government ownership of resources has increased.

B Services provided by the public sector have increased.
C There has been an increase in central planning.
D There has been an increase in consumer sovereignty.

4 A government wants to prevent the spread of an infectious disease by vaccinating all children.

Why might vaccination be classified as a merit good?

A The benefit to society is equal to the benefit received by the individual.

B The good is excludable.
C The good is not vital.
D The good would otherwise be under-consumed.

© UCLES 2020 9708/13/O/N/20

 3

5 A product has a downward-sloping demand curve and an upward-sloping supply curve.

What would explain a rise in the price of the product and a fall in the quantity of the product sold?

A The decrease in demand is double the decrease in supply.

B The decrease in supply is double the decrease in demand.
C The increase in demand is double the increase in supply.
D The increase in supply is double the increase in demand.

6 Public transport in an economy has an income elasticity of demand of –0.36.

What does this mean about public transport?

A It has close substitutes.

B It is a necessity.
C It is a normal good.
D It is an inferior good.

7 The quantity demanded of a product is given by QD = 400 – 10P, when P is the price in dollars.
Supply of the product is fixed at 100 units.

If the price is $20, what will be the position in the market?

A It will be in disequilibrium with excess demand of 100 units.

B It will be in disequilibrium with excess supply of 100 units.
C It will be in equilibrium with 100 units traded.
D It will be in equilibrium with 200 units traded.

© UCLES 2020 9708/13/O/N/20 [Turn over

 4

8 D1 and S1 are the initial demand and supply curves in the market for new cars with an equilibrium
at X.

S2
price S1

X
D2
D1
O quantity

What will cause the demand curve to shift to D2 and the supply curve to shift to S2?

A a decrease in real incomes and a rise in the costs of new car production
B a decrease in the price of petrol and a subsidy on new car production
C an increase in the availability of loans for new car purchases and a specific tax on new cars
D an increase in the price of train travel and an increase in the number of car producers

9 A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000 units.

How many units will the firm sell if it charges a price of $5?

A 10 000 B 100 000 C 160 000 D 200 000

10 A bus journey is considered an inferior good in a relatively rich country such as Singapore but a
normal good in a relatively poor country such as Tanzania.

In which direction would an increase in incomes in both countries cause the demand curve for
bus journeys in Singapore and Tanzania to shift?

Singapore Tanzania

A left left
B left right
C right left
D right right

11 The quantity of a good supplied by a firm is Q. Each of these goods sells for a price of P. The
area under the supply curve for Q goods is equal to C.

What is the producer surplus of the firm?

A P–C B P×Q C (P × Q) – C D (P – C) × Q

© UCLES 2020 9708/13/O/N/20

 5

12 The diagram shows the market demand for and supply of good E.

price of
good E S1

Y
X D2

D1

O
quantity of
good E

The equilibrium has changed from X to Y.

Which statement is not correct?

A Incomes of consumers may have increased and good E is a normal good.

B The quantity supplied has risen because price has increased.
C The quantity supplied has risen because the production of good E has been subsidised.
D The price of good F, which is a substitute for good E, may have risen.

13 The diagram shows the market for CDs.

price S
($)
14
12
10

0 4 5 6 7 8
quantity

A government raises the minimum price of CDs from $12 to $14.

What will be the outcome?

A Excess demand increases by 2 units.

B Excess demand increases by 4 units.
C Excess supply decreases by 2 units.
D Excess supply increases by 2 units.

© UCLES 2020 9708/13/O/N/20 [Turn over

 6

14 A government regards alcoholic drinks as a demerit good and introduces a minimum price above
the equilibrium in an attempt to protect consumers. Demand for alcoholic drinks is price inelastic.

What is the most likely outcome?

A a fall in the revenue of alcoholic drink producers

B a fall in the quantity of alcoholic drink sales
C a long-run shortage of alcoholic drinks
D an increase in specific tax revenue from the sale of alcoholic drinks

15 A government subsidy of $50 per unit is paid to manufacturers of solar panels.

What will be the impact of this?

A It will guarantee equilibrium in the solar panel market.

B It will maintain high market prices.
C It will reduce total production costs.
D It will stabilise levels of output.

16 Why might a government privatise the railway industry in a country?

A Economists classify railway journeys as a public good.

B Privatisation would provide funds for investment from a wider range of sources.
C Privatised railways would be run to maximise producer surplus.
D Railway fares can be taxed to raise money for the government only if railways are privatised.

17 Which tax is levied on a stock of wealth rather than a flow of income?

A company profits tax

B goods and services (expenditure) tax
C individual direct tax
D personal asset tax

18 What is classified as a transfer payment?

A money paid as a gift to a charity

B money paid as a tip to a waiter
C money paid as commission to a salesperson
D money paid for an imported good

© UCLES 2020 9708/13/O/N/20

 7

19 Under which circumstance would the rate of inflation be most likely to fall?

A Government spending increases and society’s marginal propensity to save falls.

B Reduced interest rates result in consumers increasing their spending.
C The government increases direct taxes and the level of investment falls.
D The prices of imported raw materials rise, whilst demand for exports falls.

20 In which circumstances will country X have a comparative advantage in the production of rice
over country Y?

A when X has lower opportunity costs in producing rice than Y

B when X is in a customs union and Y is outside that union
C when X uses dollars for trading and Y uses a different currency
D when X uses more units of labour than Y to produce rice

21 The diagram shows an economy with an initial equilibrium real output of Y1 at a price level of P1.

price AS1 AS2

level

P1

AD1 AD2
O Y1 Y2
real output

Which combination of events is likely to cause the equilibrium real output to rise to Y2?

A an increased budget deficit and a fall in energy costs

B an increased budget surplus and a rise in energy costs
C an increased trade deficit and a fall in indirect tax
D an increased trade surplus and a rise in indirect tax

© UCLES 2020 9708/13/O/N/20 [Turn over

 8

22 The table gives figures from the current account of the balance of payments for New Zealand in
2018.

There are two blank spaces, X and Y, in the account.

NZ$(millions)

exports of goods 54 700

imports of goods 57 400
balance of trade in goods X
balance of trade in services Y
primary income balance –10 600
secondary income balance –400
current account balance –8 500

Four students were asked to fill in the spaces.

Which student was correct?

X Y

A +2700 +5200
B +2700 –5200
C –2700 +5200
D –2700 –5200

23 What is indicated by an economy’s terms of trade?

A the degree of its dependence on imports

B the international competitiveness of its exports
C the purchasing power of its exports relative to its imports
D the relative strength of its currency in the foreign exchange market

24 A country operates a floating exchange rate.

Why might a government change to a fixed exchange rate?

A to increase the stock of foreign currency reserves

B to make the terms of trade more favourable
C to raise the level of certainty for businesses
D to use the exchange rate to reduce domestic prices

© UCLES 2020 9708/13/O/N/20

 9

25 What term relates to a fall in the domestic real value of a currency?

A deflation
B depreciation
C devaluation
D inflation

26 A country has a persistent balance of payments deficit.

What is most likely to improve the situation in the long run?

A a lowering of the level of import duties

B a reduction in the level of income tax
C the introduction of expansionary monetary policy
D the use of grants to encourage new investment by firms

27 To counter deflation a central bank uses expansionary monetary policy.

What is likely to result?

A a higher cost of borrowing

B a higher rate of inflation
C an appreciation of the exchange rate
D an increase in government debt

28 A government reduces the benefits that it pays to unemployed workers to increase the incentive
to work.

Which types of macroeconomic policies are being used?

fiscal monetary supply-side

policy policy policy

A
B
C
D

© UCLES 2020 9708/13/O/N/20 [Turn over

 10

29 Suppose a country has a rate of inflation well below its target rate, high unemployment and a
large balance of payments deficit.

What would an economic advisor to the government be most likely to recommend?

A a long-run supply-side policy, aimed at improving the country’s efficiency, so improving both
the unemployment and the balance of payments positions
B a revaluation of its currency, because that would lead to reduced unemployment and an
improved balance of payments
C a rise in interest rates, because it would lead to an improved balance of payments and help
achieve the inflation target
D a rise in levels of direct taxation, because that would improve unemployment and move
inflation in the direction of a target level

30 Country X is an open economy with a fixed exchange rate.

Which combination of fiscal and monetary policies would be most effective in solving deflation?

fiscal policy monetary policy

A lower direct taxes devaluation

B lower direct taxes revaluation
C lower indirect taxes devaluation
D lower indirect taxes revaluation

© UCLES 2020 9708/13/O/N/20

 11

BLANK PAGE

© UCLES 2020 9708/13/O/N/20

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9708/13/O/N/20

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 Multiple Choice October/November 2020
1 hour

You must answer on the multiple choice answer sheet.

*2777451927*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 11_9708_12/RP
© UCLES 2020 [Turn over
 2

1 The diagram shows a production possibility curve.

good X

O
good Y

What can be deduced from the shape of this curve?

A decreasing marginal returns to consumption

B decreasing opportunity costs of consumption
C increasing opportunity costs of production
D increasing returns to scale

2 Which statement is correct?

A Private goods are both non-rival and non-excludable.

B Private goods are only provided by the private sector.
C Public goods are both non-rival and non-excludable.
D Public goods do not incur opportunity costs.

3 Below are two statements.

1 A rise in the price of rice is the best way to give farmers in South-East Asia higher
living standards.
2 A rise in the price of rice will lead to a fall in demand.

Which row correctly describes these two statements?

1 2

A normative normative
B normative positive
C positive normative
D positive positive

© UCLES 2020 9708/12/O/N/20

 3

4 What is a characteristic of money but not a function of money?

A medium of exchange
B portability
C standard of deferred payment
D store of value

5 In the UK, attempts to encourage people to change from road to rail travel by the introduction of a
system of road pricing were forecast to have little effect because ‘people like using their cars too
much’.

How would this forecast be explained?

A The price elasticity of demand for cars is high.

B The price elasticity of demand for petrol is high.
C The price elasticity of demand for rail travel is low.
D The price elasticity of demand for car travel is low.

6 The diagram shows the demand curve for a product with unitary price elasticity.

price

D
O
quantity

What will happen with such a curve?

A A fall in price will bring about an increase in total expenditure on the product.
B A fall in price will bring about an increase in sales but a fall in total expenditure on the
product.
C As the price rises, total expenditure on the product will stay the same.
D As the price rises, total expenditure on the product will rise and then fall.

© UCLES 2020 9708/12/O/N/20 [Turn over

 4

7 The diagram shows the market supply and demand for a good.

price $ supply

T
U V
demand
O
quantity

Which area represents producer surplus?

A S+T B T C U D U+V

8 Vanilla is an important ingredient in the production of ice cream. Between 2011 and 2018 the
price of vanilla increased from about US$100 per kg to nearly US$600 per kg. The diagram
shows the market demand for and supply of ice cream. The original equilibrium is X.

Which point illustrates the effect of this price rise on the market for ice cream?

S2
price of
ice cream D
S1
C

B
P X D3
A
D1
D2

O Q
quantity of
ice cream

© UCLES 2020 9708/12/O/N/20

 5

9 A government reduces income tax but at the same time raises the rate of sales tax (VAT).

What are the likely effects on the demand and supply of a normal good?

demand supply

A decreases decreases
B decreases increases
C increases decreases
D increases increases

10 An increase in the popularity of air conditioning units has resulted in their price increasing by
20%. In response to this the quantity supplied increased by 30%.

What can be concluded from this?

A price elasticity of supply = 0

B price elasticity of supply < 1
C price elasticity of supply = 1
D price elasticity of supply > 1

11 Which change does not have an immediate effect on the position of the demand curve for a
product?

A a fall in the price of a complementary product

B a range of new products entering the market
C a rise in the labour costs of its production
D an increase in the price of a substitute product

12 When demand for a good falls, its price falls.

What is the function of the price fall?

A to eliminate shortages
B to reduce consumer surplus
C to send a signal to producers
D to stimulate a further fall in demand

© UCLES 2020 9708/12/O/N/20 [Turn over

 6

13 A firm estimates that the price elasticity of supply of its product is 0.4.

Should the firm be concerned by this figure?

A No, as it implies that the firm will be able to raise revenue by raising price.
B No, as it suggests there are few substitutes for the product.
C Yes, as it means that demand for its product is increasing at a slow rate.
D Yes, as it shows that the firm is not able to adjust supply easily when demand changes.

14 A government decides to privatise a state-owned company.

What should the government do to try to ensure that this will result in an improvement in
efficiency?

A allocate vouchers to all citizens entitling them to a share in the ownership of the company
B encourage competition
C impose a maximum profit margin
D increase business tax rates

15 The graph shows an individual’s income before and after the deduction of income tax.

45°
17 500
income
after tax
($)
10 000

0
0 10 000 20 000
income
before tax
($)

What is the marginal percentage rate of tax between $0 and $10 000, and between $10 000 and
$20 000?

$0–$10 000 $10 000–$20 000

A 0% 12.5%
B 0% 25.0%
C 1% 12.5%
D 1% 25.0%

© UCLES 2020 9708/12/O/N/20

 7

16 In year 1, in the market for a good represented in the diagram, the initial demand and supply
conditions are shown by D1 and S1, and the government has set a maximum price of OP2.

price
S1

P1
P2
P3

D2

D1
O Q1 Q2 Q3 Q4 Q5 quantity

In year 2, demand increases to D2, but there are no other changes to the conditions of supply or
to the maximum price.

Which row accurately shows the price and quantity in the market in each year?

year 1 year 2
price quantity price quantity

A OP2 OQ1 OP1 OQ4

B OP2 OQ3 OP2 OQ5
C OP3 OQ2 OP1 OQ4
D OP3 OQ2 OP2 OQ3

17 What is necessary for an action to be classed as a transfer payment?

A It must include a cash payment.

B It must involve a banking transaction.
C It must originate from government activity.
D It must relate to a non-productive activity.

© UCLES 2020 9708/12/O/N/20 [Turn over

 8

18 The market for good X is in equilibrium. The government introduces a subsidy to the producers of
good X.

Under which conditions will the total expenditure by the government on the subsidy be the
greatest?

price elasticity of price elasticity of

demand for good X supply for good X

A <1 <1
B <1 >1
C >1 <1
D >1 >1

19 Under which combination of circumstances will a policy of increasing the money supply be
most effective at moving an economy out of recession?

circumstance one circumstance two

A depreciating exchange rate global financial crisis

B high nominal interest rates appreciating exchange rate
C low aggregate demand inflation rate above the target level
D low nominal interest rates no spare capacity available

20 In which economic context is the term ‘protectionism’ usually applied?

A the protection of consumers against excessive prices

B the protection of employees against exploitation by multinational companies
C the protection of local producers against foreign competitors
D the protection of the foreign exchange rate against currency speculators

21 What is most likely to cause a rise in a country’s exchange rate?

A a fall in its direct taxes

B a fall in its export orders
C a rise in its interest rates
D a rise in its imports

© UCLES 2020 9708/12/O/N/20

 9

22 The table shows an approximate summary of the current account of the balance of payments for
Thailand.

Bank of Thailand
current account
(millions of US dollars)
April 2018

1 exports 18 990
2 imports 18 715
3 trade balance 275
net services, primary income
4 1130
and secondary income

What is the current account balance, in millions of US dollars?

A –855 B 1405 C 1680 D 39 110

23 The diagram shows the production possibility curves for two economies using all resources.
Country X can produce 10 million cars or 20 million bicycles and country Y can produce 20 million
cars or 40 million bicycles.

cars 20
(millions)

10

X Y
0 20 40

bicycles
(millions)

Which statement is correct about country X and country Y according to the theory of comparative
advantage?

A Country X and country Y would not gain from free trade.

B Country X has a lower opportunity cost ratio in producing cars and bicycles than country Y.
C Country X has an absolute advantage over country Y in the production of both goods.
D Country Y will have a faster rate of economic growth than country X.

© UCLES 2020 9708/12/O/N/20 [Turn over

 10

24 A country has a balance of payments deficit. It devalues its currency.

Which combination leads to a reduction in its balance of payments deficit in the long run?

price elasticity of price elasticity of

demand for exports demand for imports

A less than 0.5 less than 0.5

B less than 1 zero (0)
C more than 0.5 more than 0.5
D zero (0) less than 1

25 The diagram shows aggregate demand curves AD1 and AD2 and an aggregate supply curve AS1.

AS1
price
level

AD2
AD1
O
real output

What could cause the shift in the aggregate demand curve from AD1 to AD2?

A a rise in the interest rates

B a rise in output per worker
C a rise in the budget deficit
D a rise in the value of the exchange rate

26 The government of an open economy with an overvalued currency decides to abandon its fixed
exchange rate in favour of a floating exchange rate.

Which macroeconomic policy aim is least likely to be met because of this change?

A a low inflation rate

B a low level of unemployment
C a reduced balance of payments deficit
D a sustainable rate of economic growth

© UCLES 2020 9708/12/O/N/20

 11

27 Devaluation always has the effect of

A decreasing the price of imports.

B decreasing the value of imports.
C worsening the balance of payments.
D worsening the terms of trade.

28 A government uses monetary policy and fiscal policy to solve a problem of deflation.

Which policy combination is likely to be the most successful?

monetary policy fiscal policy

A increasing interest rates contractionary

B increasing interest rates expansionary
C reducing interest rates contractionary
D reducing interest rates expansionary

29 A government reduces its expenditure on workplace training, increases the level of indirect taxes,
and reduces the rate of interest it pays on government debt.

How would these government macroeconomic policies be categorised?

supply-side fiscal monetary

A con con exp key

B exp con con con = contractionary
C con exp exp exp = expansionary
D exp exp con

30 What represents the total of aggregate demand in a closed economy?

A C+I+G

B C+I+G+X

C C + I + G + (X – M)
D C – (S + T)

© UCLES 2020 9708/12/O/N/20

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9708/12/O/N/20

 Cambridge International AS & A Level

ECONOMICS 9708/11
Paper 1 Multiple Choice October/November 2020
1 hour

You must answer on the multiple choice answer sheet.

*2724305823*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 11_9708_11/3RP
© UCLES 2020 [Turn over
 2

1 The diagram shows an economy’s production possibility curve.

1000
consumer
goods

0
50
capital goods

It has been employing its resources in the ratio of 80% consumer goods production and 20%
capital goods production.

What will be the result if it decides to double its output of capital goods?

A a gain of 20 capital goods

B a gain of 40 capital goods
C a loss of 200 consumer goods
D a loss of 600 consumer goods

2 Which comment relating to the introduction of charges for previously free medical treatment is
normative?

A Fewer people will be able to afford treatment.

B It will be unfair on lower income groups.
C Richer citizens will pay the higher charges.
D Workers’ health and productivity will fall.

3 Which characteristic of money is the most important if it is to function as a medium of exchange?

A acceptable
B divisible
C durable
D portable

4 What is not a characteristic of a planned economy?

A Consumers have limited influence on what is produced.

B Profit is the motive for increasing output.
C Resources are owned by the government.
D There is limited competition in the market.

© UCLES 2020 9708/11/O/N/20

 3

5 Good X is a substitute for good Y and a complement to good Z.

What would happen after a fall in the price of good X?

A Only the demand for X will rise.

B Demand for X, Y and Z will rise.
C Demand for Y will fall and for Z will rise.
D Demand for Y will rise and for Z will fall.

6 The table shows how an individual’s weekly consumption of biscuits and coffee varies with
income.

income ($) biscuits (packs) coffee (cups)

100 0 5
150 5 10

Which statement about the income elasticity of demand over the range of income shown is true?

A For biscuits it is greater than 1.

B For biscuits it is zero.
C For coffee it is less than 1.
D For coffee it is unitary.

7 The diagram shows four supply curves.

W X
price
Y

O quantity

Which statement about the price elasticity of these supply curves is correct?

A W has elasticity of 0 that will rise as price rises.

B X has elasticity greater than 1 that will be constant as price rises.
C Y has elasticity greater than 1 that will fall as price rises.
D Z has elasticity of 0 that is constant as quantity rises.

© UCLES 2020 9708/11/O/N/20 [Turn over

 4

8 The diagram shows the market for a good with an initial equilibrium price of $10. The demand for
the good increases by 40 units at every price causing the equilibrium price to rise to $12.

24
price
$ 20
S1

12
10
D2

D1

0 80 100 120 140

quantity

What is the value of the producer surplus after the price increase?

A $500 B $720 C $1000 D $1440

9 The equation for the quantity demanded (QD) for a product is QD = 400 – 20P where P = price in
dollars. The quantity supplied (QS) is given by QS = 100 + 40P.

What change will occur if the price rises from $5 to $6?

A the market will move from equilibrium to shortage

B the market will move from equilibrium to surplus
C the market will move from shortage to surplus
D the market will move from surplus to shortage

10 A farmer divides his land between growing two crops – wheat and oats. To increase production of
one he must reduce production of the other.

What would cause the farmer to increase his supply of wheat?

A A subsidy is given for the production of oats.

B A unit tax is imposed on the production of wheat.
C There is an increase in wages for all farm workers.
D There is improved efficiency in the harvesting of wheat.

© UCLES 2020 9708/11/O/N/20

 5

11 What would cause the demand curve for vegetables to shift from D1 to D2 as shown?

S
price

P2
P1

D1 D2
O Q1 Q2
quantity

A a change in supply from Q1 to Q2

B a poor harvest due to unfavourable weather
C a price change from P1 to P2
D an increase in real incomes

12 The demand curve for new cars in a country shifted to the left.

Which change could have caused such a shift?

A an increase in real disposable income

B an increase in the cost of borrowing
C an increase in the price of new cars
D an increase in the price of train travel

13 What is correct about market supply?

A Market supply can increase only when all individual firms increase their output.
B Market supply is effective when consumers have sufficient income to buy the good.
C Market supply is the result of aggregating the supply of all individual firms.
D Market supply of an inferior good falls as price increases.

14 Which statement best describes a transfer payment?

A It is a loan from the government to help firms.

B It is a payment to individuals not linked to economic activity.
C It is the redistribution of income from government to individuals for work done.
D It is the redistribution of income from households to firms for goods purchased.

© UCLES 2020 9708/11/O/N/20 [Turn over

 6

15 The diagram shows the impact of a unit tax imposed by a government on a good. The original
supply curve is S1 and the supply curve after the unit tax is S2.

price
S2
$
S1
80
70
60
50

D
0 100 120
quantity

What would be the amount of tax paid by the consumer?

A $500 B $1000 C $1500 D $2400

16 The diagram shows the demand and supply curves for healthcare in a private market.

supply
price

demand
O Q
quantity

What would happen if the government provides the same amount of healthcare free of charge?

A Healthcare will become a public good.

B Healthcare will no longer have external benefits.
C There will be over-consumption of healthcare.
D There will need to be rationing.

17 A good is provided by the government. Consumption by one person does not affect the amount of
the good available for others.

Which type of good must this be?

A complementary good
B merit good
C private good
D public good

© UCLES 2020 9708/11/O/N/20

 7

18 A government imposes an income tax on individuals. The first $100 000 of earned income is
taxed at a rate of 20%, and all further earned income above $100 000 is taxed at a marginal rate
of 50%.

Which statement is not valid?

A The average income tax rate is 20% at an income of $80 000 and 35% at an income of
$200 000.
B The tax is a direct tax for incomes above $100 000.
C The tax is a proportional tax for incomes between $20 000 and $40 000.
D The tax is regressive when incomes change from below to above $100 000.

19 Agricultural economies have faced a deterioration in their terms of trade.

What might have contributed to this?

A falling exchange rates of agricultural economies

B falling productivity in agricultural production
C increasing productivity in manufacturing economies
D the high income elasticity of demand for foodstuffs

20 The table shows the output of rice and cotton for countries X and Y.

units of output of units of output of

rice per year cotton per year

country X 5000 5000

country Y 4000 2000

Each country divides its resources equally between the production of rice and cotton.

Based upon the law of comparative advantage, which statement is correct?

A Country X has the higher opportunity cost in producing cotton.

B Country Y has the lower opportunity cost in producing rice.
C Country X should produce both goods as the opportunity cost is the same.
D Country Y should produce both goods as it has an absolute advantage in both.

© UCLES 2020 9708/11/O/N/20 [Turn over

 8

21 An economy is represented by the AD / AS diagram, which is initially in macroeconomic

equilibrium.

AS
price
level

AD

O real output

Which change will definitely result in a rise in real output?

A a fall in personal taxation and a fall in government expenditure

B a rise in consumption and a rise in the cost of raw materials
C a rise in export revenues and a fall in import expenditure
D a rise in government expenditure and a fall in investment

22 The data shows the consumer prices index (CPI) and an index of money wages in an economy
during four years.

year 1 2 3 4

CPI 100 102 105 110

index of money wages 100 102 107 110

Which statement is not correct?

A Inflation was at its greatest between years 3 and 4.

B Real wages remained constant between years 1 and 2.
C Real wages rose between years 3 and 4.
D The rate of inflation increased over the whole period.

© UCLES 2020 9708/11/O/N/20

 9

23 A country has a deficit of $300 million on the current account of its balance of payments. It
devalues its currency in an attempt to reduce the deficit.

Which row is consistent with the idea that the J-curve operates in the short run but the
Marshall-Lerner condition is satisfied in the long run?

short-run deficit long-run deficit

($ million) ($ million)

A 200 100
B 200 400
C 600 100
D 600 400

24 A family takes a holiday abroad. Four students are asked to show where the cost of the
accommodation would be recorded in the current account of the balance of payments of the
country visited.

Which student is correct?

trade in goods trade in services export / credit import / debit

A
B
C
D

© UCLES 2020 9708/11/O/N/20 [Turn over

 10

25 The diagram shows the imposition of a tariff on imports.

domestic supply
price

P2 U T world supply after tariff

P1 world supply before tariff
P Q R S

domestic demand

O Q1 Q2 Q3 Q4
output

Which set of values is correct?

imports imports
tax revenue
before tariff after tariff

A OQ4 OQ3 PUTS

B OQ4 OQ3 QUTR
C Q1Q4 Q2Q3 PUTS
D Q1Q4 Q2Q3 QUTR

26 When is a deficit on the current account of the balance of payments likely to worsen?

A when a government adopts a deflationary macroeconomic policy

B when a government subsidises exports
C when prices of essential imported raw materials increase significantly
D when tariffs are placed on imported products with a wide range of domestic substitutes

27 A government with a floating exchange rate wishes to encourage a rise in the international value
of its currency.

What should it do?

A lower the level of domestic interest rates

B reduce the amount of foreign currency available to its citizens
C reduce subsidies to its exporters
D remove trade barriers on imports

© UCLES 2020 9708/11/O/N/20

 11

28 Greece had an unemployment rate of over 20% in 2016.

Which combination of policies would be best for the Greek government to try to reduce
unemployment?

government profit
monetary policy
expenditure tax

A decrease interest rates increase decrease

B decrease interest rates decrease increase
C increase interest rates increase increase
D increase interest rates decrease decrease

29 The diagram shows the relationship between the income tax rate and tax revenue.

tax
X
revenue

O Z Y
income tax
rate (%)

Which statement is correct?

A A tax rate cut from Y to Z will cause tax revenue to decrease.

B At tax rates below Z a tax rate cut will cause tax revenue to increase.
C The greater the rate of tax increases beyond Z, the smaller will be the tax revenue
generated.
D Tax revenue will always increase as the rate of income tax increases.

30 What would be classified as a supply-side policy measure?

A a law to reduce the power of trade unions

B a reduction in the government’s fiscal deficit
C an open market sale of securities
D the imposition of a tariff on imported goods

© UCLES 2020 9708/11/O/N/20

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9708/11/O/N/20

 Cambridge International AS & A Level

ECONOMICS 9708/13
Paper 1 Multiple Choice May/June 2020
1 hour

You must answer on the multiple choice answer sheet.

*9573337254*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 06_9708_13/4RP
© UCLES 2020 [Turn over
 2

1 An economist knows the current point at which an economy is operating within its production
possibility curve.

What can the economist judge from this knowledge about the economy?

A its degree of self-sufficiency

B its international competitiveness
C its level of output of two goods
D its rate of economic growth

2 Abdul earns $50 000 a year working as a teacher. He owns a house valued at $250 000 and has
shares worth $20 000. He has a current bank account with a balance of $1500 and $200 in his
wallet. In his house there is a jar containing $100, which he has saved to spend on his
forthcoming holiday.

What is the value of Abdul’s liquid assets?

A $200 B $300 C $1800 D $21 500

3 Which type of good is healthcare?

A demerit
B free
C merit
D public

4 Which is a normative statement?

A If interest rates fall consumption is likely to increase.

B If interest rates fall consumption will definitely increase.
C Interest rates and consumption are usually inversely related.
D The rate of interest should be reduced.

5 In a free market there is a surplus of a good.

Which change would cause the market to come to an equilibrium?

A a decrease in demand
B a fall in price
C a government minimum price
D an increase in supply

© UCLES 2020 9708/13/M/J/20

 3

6 What is most likely to increase the quantity of houses supplied?

A a policy to help house buyers on modest incomes

B a restriction on the level of rent that can be charged
C a rise in the tax on materials used for building houses
D the removal of a subsidy to house builders

7 The diagram shows two demand curves and two supply curves for a product.

Which equilibrium point is most likely to represent the long-run equilibrium in the market?

price S
A
B
D

C D

O
quantity

8 The equilibrium price of a product is $10. The government introduces an effective minimum price
of $12 for the product.

Under which condition will the value of the producer surplus increase the most?

price elasticity
of demand

A 0
B between 0 and 1
C 1
D greater than 1

© UCLES 2020 9708/13/M/J/20 [Turn over

 4

9 Diesel engines are a major cause of air pollution in cities. A city authority placed a charge on
diesel taxis entering the city.

What would be the most likely effects on the demand and supply of taxi journeys into the city?

demand for supply of

taxi journeys taxi journeys

A fall fall
B fall remain unchanged
C remain unchanged fall
D rise fall

10 Which combination of the classification of a good and market change will cause the demand
curve for the good to shift right?

classification of good market change

A inferior good income decrease

B inferior good price decrease
C normal good income decrease
D normal good price decrease

11 The supply (S) of a product is determined by the equation S = 10 + 10P when P is the price of the
product in $.

What is the product’s price elasticity of supply when its price rises from $1 to $2?

A 0.5 B 1.0 C 2.0 D 5.0

12 The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail
travel.

elasticity with respect to the price of

service
bus travel rail travel

bus travel –0.37 +0.13

rail travel +0.16 –0.43

What would be the change in the volume of rail travel resulting from a 1% increase in bus fares?

A a decrease of 0.13%
B a decrease of 0.37%
C an increase of 0.16%
D an increase of 0.43%

© UCLES 2020 9708/13/M/J/20

 5

13 Which combination is most likely to result in the demand for a product being highly price-elastic?

number of close % of income

substitutes spent on product

A large large
B large small
C small large
D small small

14 What is most likely to occur when the government privatises public sector organisations?

A Consumer choice will increase.

B Employment will increase in the short run.
C Innovation will be discouraged.
D The production of public goods will increase.

15 The diagram shows the market for bus services before and after a government subsidy.

supply before subsidy

price
supply after subsidy
G
P3 L
H
P1 J

P2 I K

demand
O Q1 Q2
number of bus journeys

Which area on the diagram shows the incidence of the subsidy for the consumer?

A P1HIP2 B P1JKP2 C P2IGP3 D P2KLP3

© UCLES 2020 9708/13/M/J/20 [Turn over

 6

16 The diagram shows the market for eye tests.

price of eye S
tests ($)
P3

P2
P1

D
O Q1 Q2
quantity of
eye tests

Which policy would enable the government to increase the number of eye tests from OQ1 to
OQ2?

A a maximum price of OP3 per test

B a minimum price of OP2 per test
C a subsidy paid to opticians of P3–P2 per test
D a subsidy paid to opticians of P3–P1 per test

17 In November 2017, the Scottish government introduced a minimum price for alcohol because of
the detrimental health effects of alcohol consumption.

Which combination of actions is most likely to lead to a failure with respect to reducing the
detrimental effects of the consumption of alcohol?

action 1 action 2
A minimum price is set too high effective information provision regarding
the health effects of consuming alcohol
B minimum price is set too high effective subsidisation of
non-alcoholic beverages
C minimum price is set too low health benefits of reduced alcohol
consumption have been overestimated
D minimum price is set too low stricter enforcement of the regulations
relating to the sale of alcohol

18 What is an example of direct provision by a government?

A The government introduces a subsidy on renewable fuels to help the environment.

B The government introduces a unit tax on cigarettes to discourage consumption.
C The government sets a maximum rent on housing to protect tenants.
D The government takes over a private library to improve local services.

© UCLES 2020 9708/13/M/J/20

 7

19 The graph shows the annual percentage change in the prices of services and in the prices of
goods between 2007 and 2012.

10

% annual 8
price
change 6
services
4

0
2007 2008 2009 2010 2011 2012
–2 goods

–4

What can be deduced from the graph?

A On average the price of services was higher than the price of goods throughout the period.
B The average price of goods was higher in 2012 than in 2010.
C The average price of services was higher in 2012 than in 2010.
D There was a fall in the general price level between 2008 and 2010.

20 A government decides to devalue the country’s currency to remove the deficit on its current
account of the balance of payments.

What is the most likely reason why this would not work?

A The country gains a competitive advantage from the devaluation.

B The country has a surplus on its capital and financial accounts.
C The price elasticities of demand for the country’s exports and imports are greater than one.
D There are high trade barriers with the country’s main trading partners.

21 What will increase if aggregate demand rises when aggregate supply is perfectly elastic?

A labour shortages
B real output
C the price level
D wage rates

© UCLES 2020 9708/13/M/J/20 [Turn over

 8

22 A country operates a floating exchange rate.

What will cause the demand curve for the country’s currency to shift left in the foreign exchange
market?

A a decrease in the country’s interest rate

B a decrease in the country’s money supply
C an increase in the country’s export sales
D an increase in the country’s import purchases

23 The table shows the relative price of exports compared with imports expressed as an index
number for an economy (2013 = 100).

date index

2013 100
2014 97
2015 95

Which statement about the period 2013–2015 is correct?

A Export prices have increased each year.

B The general level of prices has fallen.
C The terms of trade have deteriorated.
D The volume of imports increasingly exceeds the volume of exports.

24 The table shows an extract from a country’s balance of payments.

exports imports
$ billion $ billion

trade in goods 150 200

trade in services 70 50
primary (investment) income 120 100
secondary (transfer) income 15 20

What is the current account balance?

A –$10 bn B –$15 bn C –$30 bn D –$50 bn

© UCLES 2020 9708/13/M/J/20

 9

25 The real national income of a country fell by 3%.

What could have caused this?

A Money national income fell by 3% when the rate of inflation was 6%.
B Money national income fell by 6% when the rate of inflation was 3%.
C Money national income rose by 3% when the rate of inflation was 6%.
D Money national income rose by 6% when the rate of inflation was 3%.

26 An economy with a long history of extensive barriers to trade decides to switch to totally free
trade.

What is most likely to increase in the short term?

A consumer surplus
B government revenue
C inflationary pressure
D profits of all domestic companies

27 Why is a balance of payments deficit a potential problem for an economy with a fixed exchange
rate?

A Domestic money supply will increase.

B Rival economies may react with trade protection measures.
C The economy’s foreign exchange reserves may decrease.
D The economy’s short-run standard of living will be reduced.

28 What would be a positive effect on the growth of an economy in the short run, if the government
reduced a direct tax on individual earnings?

A food prices would increase due to shortages

B imports of luxury cars would increase to satisfy a change in demand
C savings would increase due to additional disposable income
D the consumption of domestically produced goods would increase

© UCLES 2020 9708/13/M/J/20 [Turn over

 10

29 Which combination of fiscal and monetary policies is most likely to be effective in the short run for
tackling deflation in a closed economy?

fiscal policy monetary policy

A decreasing the budget deficit decreasing the interest rate

B decreasing the budget deficit decreasing the money supply
C increasing the budget deficit decreasing the interest rate
D increasing the budget deficit decreasing the money supply

30 Which policy measure is an expenditure-switching measure designed to reduce a current account

surplus?

A a cut in income tax rates

B a depreciation of the exchange rate
C the removal of limits on bank lending
D the removal of subsidies to exporters

© UCLES 2020 9708/13/M/J/20

 11

BLANK PAGE

© UCLES 2020 9708/13/M/J/20

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9708/13/M/J/20

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 Multiple Choice May/June 2020
1 hour

You must answer on the multiple choice answer sheet.

*4545510894*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 06_9708_12/2RP
© UCLES 2020 [Turn over
 2

1 Which statement is the most valid reason for government intervention in a free market economy?

A Consumers are well informed, making it difficult for producers to make profits.
B Health and education are not available in sufficient quantities.
C Producers are motivated only by profit.
D There are many competitive firms and not enough sole suppliers.

2 What would not be considered a barter transaction?

A a car repairer undertaking the annual service on a plumber’s van in return for the plumber
fitting a new sink in the car repairer’s kitchen
B a consumer negotiating with a shopkeeper and buying a pair of trousers at US$10 rather
than the asking price of US$30
C a graduate student exchanging a set of textbooks for a radio with a student about to start the
course
D a train company allowing a phone company to advertise on its trains in return for the right to
advertise on the phone company’s website

3 A factory introduces an automated production line to take advantage of division of labour.

What is most likely to increase?

A average cost of production

B job satisfaction of workers
C range of skills of each worker
D worker productivity

4 Which statement is normative?

A A minimum wage is the correct government policy to increase the incomes of the lowest paid
workers.
B A minimum wage is the lowest amount that employers can legally pay their workers.
C In Pakistan, a minimum wage of 15 000 Pakistani Rupees per month was set on
1 June 2016.
D Setting the minimum wage rate above the equilibrium will result in an excess supply of
workers.

© UCLES 2020 9708/12/M/J/20

 3

5 In the diagram, D is the demand curve for an agricultural commodity and S1 is the initial supply
curve. A good harvest causes the supply curve to shift to S2.

6 S1
price 5
($)
4 S2

1
D
0
0 1 2 3 4 5 6
quantity
(’000 tonnes)

By how much will the demand curve have to shift to leave farm incomes unchanged?

A 500 tonnes at all prices

B 1000 tonnes at all prices
C 2000 tonnes at all prices
D 4000 tonnes at all prices

6 A manufacturer progressively reduces the price of his product.

The table shows the outcome of this policy.

price total revenue

($) 000s ($)

10 750
9 750
8 750

What is the price elasticity of demand for the product?

A perfectly inelastic
B relatively inelastic
C perfectly elastic
D unitary

© UCLES 2020 9708/12/M/J/20 [Turn over

 4

7 The diagram shows a consumer’s demand curve for a product.

30
price
($) 25

20

15

10

5
D

0 5 10 15
quantity

How does consumer surplus change as the price of the product rises?

A It falls at a constant rate (%) with each $5 rise.

B It falls by a constant amount with each $5 rise.
C It falls by a decreasing amount with each $5 rise.
D It falls by an increasing amount with each $5 rise.

8 Following the introduction of a 10% increase in charges for car parking in a city centre, the
demand for bus journeys per day into the city rose from 800 to 1000.

What was the cross elasticity of demand for bus journeys with respect to car parking charges?

A –0.4 B +0.4 C +2.0 D +2.5

© UCLES 2020 9708/12/M/J/20

 5

9 An economy is suffering from a housing shortage. The demand for housing continues to rise as
real incomes increase and more construction firms enter the market to build more houses.

Which diagram represents this situation?

A B
S1 S2 S2 S
1
price of price of
houses houses

D1 D2 D1
O quantity O quantity
of houses of houses

C D
S1 S2 S
1
price of price of
houses houses

D2
D1 D2 D1
O quantity O quantity
of houses of houses

10 A good has a price elasticity of supply of 2.0. The current quantity supplied is 300 units per week
at a market price of $20 per unit. The firm raises the price to $25 per unit.

What will the new quantity supplied be per week?

A 150 units
B 375 units
C 400 units
D 450 units

11 What is a major function of the price mechanism?

A providing incentive for government intervention to reduce income inequality

B removing shortages by creating incentives for market prices to fall
C removing surpluses by creating incentives for market prices to rise
D signalling changes in market conditions to producers and consumers

© UCLES 2020 9708/12/M/J/20 [Turn over

 6

12 The diagram shows the supply curve of a product.

S
20
price ($)
15

10

0
quantity

The government imposes a specific indirect tax of $5 on the product.

How will the price elasticity of supply of the product change?

A from elastic (>1) to inelastic (<1)

B from inelastic (<1) to elastic (>1)
C from inelastic (<1) to unitary (=1)
D from unitary (=1) to elastic (>1)

13 In the market for a good the quantity supplied (QS) and the quantity demanded (QD) are given by
QS = P – 30 and QD = 240 – 2P where P = price in dollars.

A change in the tax on the good makes QS = P – 36.

How will the change affect equilibrium price?

A It will fall by $2.

B It will fall by $6.
C It will rise by $2.
D It will rise by $6.

© UCLES 2020 9708/12/M/J/20

 7

14 Privatisation can be achieved by the sale of shares to the general public (public offers, PO) or by
the direct sale to a private company (private sales, PS). The diagram shows privatisation
transactions and revenue for the European Union between 1981 and 2012.

90 000 200
revenues (current EUR mil)

key
80 000 180

transactions
revenues from PS
70 000 revenues from PO 160
transactions 140
60 000
120
50 000
100
40 000
80
30 000 60
20 000 40
10 000 20
0 0
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

2012
2011
year

What can be concluded from the diagram?

A Any increase in the number of privatisations resulted in an increase in privatisation revenue.

B The average revenue per privatisation was highest in 2000.
C The main revenue from privatisation changed from public offers to private sales.
D The number of privatisations and revenue raised peaked in the same year.

© UCLES 2020 9708/12/M/J/20 [Turn over

 8

15 The diagram shows the market demand and supply curves for rice.

S
price
($)

10
8

O Q1 Q2 Q3
quantity

What would happen if a government imposed a maximum price of $10?

A The government would need to supply Q1 to Q3.

B The quantity sold would be Q1.
C The quantity sold would be Q2.
D The quantity sold would increase from Q2 to Q3.

16 A government decides to replace a private company with its own company to collect household
waste.

Why could such action be justified?

A Because waste collection is a public good.

B Costs of waste collection are bound to be lower if paid out of local taxes.
C Private companies are always less efficient than government companies.
D Private companies might put profits before customer needs.

17 Which measure would not be part of a government subsidy to protect domestic producers from
competition?

A import quotas
B interest-free loans provided by the government
C reductions in profits (business) taxes
D transfer payments

© UCLES 2020 9708/12/M/J/20

 9

18 A country’s railways are currently run by private firms. It has been suggested that the government
should nationalise the railways.

What might be a reason for this?

A to control prices of railway services

B to encourage competition in railway services
C to increase the profit incentive
D to provide jobs for local people

19 What is likely to cause a decrease in aggregate demand?

A an appreciation in the exchange rate

B an improvement in consumer confidence
C an increase in government expenditure
D an increase in the money supply

20 A country maintains its foreign exchange rate against the United States dollar, within a narrow but
changing band.

What is this type of exchange rate?

A fixed
B floating
C managed float
D trade-weighted

21 Which components are included in the financial account of the balance of payments?

the balancing foreign direct interest, profits

item investment and dividends

A key
B = included
C = not included
D

© UCLES 2020 9708/12/M/J/20 [Turn over

 10

22 Which argument is an importer most likely to use to gain the support of consumers for free
trade?

A More imports allow the government to raise revenue from tariffs.

B More imports improve the country’s terms of trade.
C More imports increase competition in the domestic economy.
D More imports raise total employment in the domestic economy.

23 According to US Consumer Prices Index (CPI) statistics, an identical good that cost $100 in 1913
would cost $2359.60 in 2013.

What was the approximate cumulative rate of inflation over the period?

A 23% B 230% C 2300% D 23 000%

24 The diagram shows an economy at full employment equilibrium.

LRAS
general
price
level

AD

O YFE
real output

Which short-run measures should the government take to maintain the economy’s current
equilibrium if there is an unexpected balance of trade surplus?

A higher government spending on education financed by an equal rise in direct taxation

B higher direct taxation with government spending unchanged to create a budget surplus
C higher spending on infrastructure financed by a budget deficit
D lower interest rates to promote investment spending in the private sector

25 Why does the value of a country’s terms of trade have no monetary units?

A It cannot be calculated accurately enough.

B It includes more than one currency.
C It is a ratio of two index numbers.
D It measures change over time.

© UCLES 2020 9708/12/M/J/20

 11

26 The statements that follow relate to possible gains from an increase in free trade.

Which gain is least certain to result in the short run?

A a reduction in costs of production

B a rise in the number of jobs
C a wider choice of goods available to consumers
D an increase in the level of competition

27 In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5% to 3% per
annum.

What will be a benefit of this fall?

A Menu costs will fall to zero.

B People on fixed incomes will be better off in real terms.
C Savers will gain in real terms.
D The purchasing power of the currency will rise.

28 Which combination correctly classifies an expansionary fiscal measure and its impact on a
budget deficit?

fiscal policy budget deficit

A increased quantitative easing unchanged

B increased welfare spending increased
C lower income tax reduced
D lower interest rates unchanged

29 In 2018 the United States (US) government introduced tariffs on a wide range of imports from
China.

Which type of policy was the US government adopting?

A expenditure-reducing
B expenditure-switching
C monetary
D supply-side

© UCLES 2020 9708/12/M/J/20 [Turn over

 12

30 During the Great Depression the US government believed that deflation was caused by a
collapse in the prices of stock and other assets, reducing the levels of wealth and confidence.
The diagrams show two approaches to counter deflation.

diagram Y diagram Z

price price
level AS1 level AS2

P2
AS1
P1 P2

P1
AD2
AD1 AD1

O Y1 Y2 O Y2 Y1
real GDP real GDP

Given this belief, which policy should the US government have used, in an attempt to remove the
deflation and which diagram represents the intended outcome of the policy?

policy intended outcome

A decrease interest rates diagram Y

B reduce corporation tax diagram Z
C increase interest rates diagram Z
D reduce corporation tax diagram Y

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9708/12/M/J/20

 Cambridge International AS & A Level

ECONOMICS 9708/11
Paper 1 Multiple Choice May/June 2020
1 hour

You must answer on the multiple choice answer sheet.

*3956358326*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 06_9708_11/2RP
© UCLES 2020 [Turn over
 2

1 The transition of centrally planned economies to market economies was accompanied by a

significant change in the composition of output.

What was an immediate consequence of this transition?

A a build-up of unsold stocks of goods

B an increase in exports of goods
C an increase in unemployment
D decreasing prices of goods and services

2 Which statement is correct?

A Normative economics concerns the description of economic models.

B Normative economics is objective and factual.
C Positive economics can be tested by data and evidence.
D Positive economics is subjective and offers a value judgement.

3 Consumers do not use enough of a product to maximise their private benefit because they have
imperfect information about the product.

How would an economist classify this product?

A demerit good
B free good
C merit good
D public good

4 What is meant by the division of labour?

A Each worker specialises in a different task in production.

B Some workers work part-time and others work full-time.
C The same amount of output per hour is produced by each worker.
D Workers divide their time between different jobs.

5 What describes a market supply curve?

A It is downward sloping.
B It is the same as the aggregate supply curve.
C It is the sum of all firms’ supply curves for a product.
D It is the supply of all products within an economy.

© UCLES 2020 9708/11/M/J/20

 3

6 In the diagram, D is the demand curve for Indian tea exports and S1 is the supply curve when
there is a tax on tea exports.

S1
price
S2
x
z

w
y
D
O
quantity

The Indian government removes the tax, which causes the supply curve to shift to S2.

Which areas in the diagram measure the resulting loss in tax revenue to the Indian government
and the resulting gain in consumer surplus?

loss in tax gain in

revenue consumer surplus

A x w+y
B x x+z
C x+y z
D x+y x+z

© UCLES 2020 9708/11/M/J/20 [Turn over

 4

7 In which market would equilibrium not be achieved at point E if price were above Op?

A B
S D S
price price
D
p E p
E

O q O q
quantity quantity

C D
S D
price price
S
p p E
E

D
O q O q
quantity quantity

© UCLES 2020 9708/11/M/J/20

 5

8 In the diagram, the supply curve shows the number of spaces in a car park and the demand
curves show the demand for spaces on four different days (D1, D2, D3 and D4).

S
price
P4
P3 D4
P2 D3
P1 D2
D1
O
quantity

The owner wishes to charge a parking fee on each of these days to allocate the spaces
according to the market mechanism.

Which pricing policy should the owner use?

A set a fixed price at P1

B set a fixed price at P4
C vary prices between P2 and P3
D vary prices between P1 and P4

9 An indirect tax is imposed on a product in a competitive market.

Under which circumstances would the value of the consumer surplus be most likely to remain
unchanged?

A New substitutes are developed for the product and production costs rise.
B Some producers merge so there is less competition in the market.
C The product is an inferior good, consumer incomes increase and production costs rise.
D The product is a normal good, consumer incomes increase and production costs fall.

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

A decrease the amount of labour that it employs

B employ new technology to increase its productive capacity
C increase advertising expenditure to generate more revenue
D reduce the level of stocks in order to cut costs

© UCLES 2020 9708/11/M/J/20 [Turn over

 6

11 Shoe manufacturers often use leather to make their most expensive shoes. Due to a world
shortage of leather, the price of leather has risen.

What will be the effect of this price change?

A The demand curve for leather shoes will shift to the left.
B The demand curve for a substitute for leather shoes will shift to the right.
C The supply curve for leather shoes will shift to the right.
D The supply curve for a substitute for leather to make expensive shoes will shift to the right.

12 The diagram represents the market for a good.

P
price S1

X
Y

D1
Z

O
quantity

Which statement is correct?

A OX represents the price above which no producer wishes to stay in the market.
B OZ represents the minimum price consumers are prepared to pay.
C PYZ represents the total consumer surplus.
D XYZ represents the total producer surplus.

13 The economics department of a university calculates that the price elasticity of demand for the
products of a local firm is between –1.1 and –1.3.

Which decision could be justified by the research?

A Increase prices to increase profit.

B Invest in more capital to increase output.
C Reduce advertising to reduce costs.
D Reduce prices to increase revenue.

© UCLES 2020 9708/11/M/J/20

 7

14 A specific tax is imposed on a product for which the elasticity of supply is zero.

Which statement is correct?

A The burden of this tax will fall entirely on consumers.

B The burden of this tax will fall entirely on suppliers.
C The burden of this tax will fall mainly on consumers.
D The burden of this tax will fall mainly on suppliers.

15 The diagram shows a market where a government has set a minimum price of OM.

S
price
M minimum price

O
quantity

What can be concluded from the diagram?

A At prices above OM, there would be a surplus of the good.

B At the minimum price OM, there would be a shortage of the good.
C Price will fall automatically from OM to OP.
D The minimum price will be ineffective.

16 What would supporters of a nationalised public transport service expect to be the most likely
outcome from the privatisation of train and bus services?

A fewer destinations served by trains and buses

B lower fares
C more frequent services to all destinations
D more people employed in public transport services

© UCLES 2020 9708/11/M/J/20 [Turn over

 8

17 A teenager received a cheque for $50 as a birthday gift from her parents. The teenager paid the
cheque into her savings account at the bank.

Why is this gift a transfer payment?

A It did not involve a cash payment.

B It transfers money between bank accounts.
C The parents did not spend their money.
D The teenager did not produce any output.

18 What is a necessary characteristic of a public good?

A It has a fixed maximum price.

B It has an opportunity cost of production of zero.
C It is non-excludable.
D It is an essential good.

19 What is least likely to change an advanced industrialised economy’s terms of trade?

A its level of labour productivity

B its rate of inflation
C the maintenance of a stable foreign exchange rate
D the occurrence of random supply shocks

© UCLES 2020 9708/11/M/J/20

 9

20 The diagram shows the aggregate demand (AD) and aggregate supply (AS) curves for an
economy.

general AS
price level

AD2
AD1
O
real output

Which situation would not cause a shift from AD1 to AD2?

A a fall in the general price level as government spending is reduced

B an easing of credit by commercial banks for household purchases of consumer goods
C an increase in earnings from exports of high-tech products
D an increase in investment by firms in computer systems

21 Which combination of changes is most likely to lead to an increase in the aggregate price level
and the level of real output?

income tax rate net exports

A fall decrease
B fall increase
C rise decrease
D rise increase

22 Country W conducts 50% of its trade with country X, 30% of its trade with country Y and 20% of
its trade with country Z. The initial value of the trade-weighted exchange rate of country W is 100.

Country W’s currency appreciates 10% against the currency of country X, depreciates 10%
against the currency of country Y and is unchanged against the currency of country Z.

What will be the new trade-weighted exchange rate?

A 100 B 102 C 102.5 D 200

© UCLES 2020 9708/11/M/J/20 [Turn over

 10

23 The table shows the goods balance and services balance for a country in selected years.

goods balance services balance

year
($ billion) ($ billion)

2015 +120 –30

2016 +110 –30
2017 +50 –10
2018 +130 –60
2019 +140 –50

Between which years did the overall goods and services balance change the most?

A 2015 to 2016
B 2016 to 2017
C 2017 to 2018
D 2018 to 2019

24 What is not an example of protectionism?

A export subsidies
B import subsidies
C quotas
D tariffs

25 What is an expenditure-switching policy to reduce a country’s balance of payments deficit?

A an increase in budget surplus

B an increase in direct taxes
C an increase in import tariffs
D an increase in interest rates

© UCLES 2020 9708/11/M/J/20

 11

26 The diagram shows the aggregate demand (AD) and aggregate supply (AS) for an economy.

AS2
general
price
AS1
level

AD

O real output

Which changes in subsidies and indirect taxes would have caused the change in AS shown?

A higher subsidies and higher indirect taxes

B higher subsidies and lower indirect taxes
C lower subsidies and higher indirect taxes
D lower subsidies and lower indirect taxes

27 In its recent budget a government increased defence expenditure and also the amount spent on
training that increased the productivity of the workforce. The initial equilibrium point is shown by X
on the aggregate demand (AD) and aggregate supply (AS) diagram.

What would be the equilibrium point after these changes?

AS3
AS1
general B
price level AS2

X
A C

AD3 AD1 AD2

O
real output

© UCLES 2020 9708/11/M/J/20 [Turn over

 12

28 An increase or decrease in exchange rates can take place in both a floating and a fixed exchange
rate system but different terminology is used for each system.

What is the correct terminology?

decrease in floating increase in fixed

A depreciation appreciation
B depreciation revaluation
C devaluation appreciation
D devaluation revaluation

29 In 2018 the United States (US) government reduced direct taxes on consumers and businesses.

What are likely to be the effects of these changes on consumption, investment and national
output?

consumption investment national output

A decrease decrease decrease

B decrease increase increase
C increase decrease decrease
D increase increase increase

30 A country experienced a significant fall in unemployment but its inflation rate remained low.

What could explain this?

A Global competition prevented firms passing on higher costs.

B Increased spending on imports had lowered the exchange rate.
C There was a low level of spare capacity in the economy.
D Wage rates had increased by more than labour productivity.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9708/11/M/J/20

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 Multiple Choice February/March 2020
1 hour

You must answer on the multiple choice answer sheet.

*5346426346*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 03_9708_12/2RP
© UCLES 2020 [Turn over
 2

1 The diagram shows the production possibility curve of a desert island economy where the
inhabitants produce just two commodities, coconuts and fish.

coconuts

O fish

What explains the shape of the production possibility curve?

A Coconuts and fish are perfect complements.

B Coconuts and fish are perfect substitutes.
C The inhabitants consume more fish than coconuts.
D The opportunity cost of increasing fish production is constant.

2 A worker earns $40 per hour. Rather than work, she decides to visit a museum for three hours.
The visit costs a total of $40.

What is the opportunity cost of visiting the museum?

A $40 B $80 C $120 D $160

3 A newspaper article contains the following comments.

1 The burden of tax should be shifted more to the highest earners.

2 It is in the public interest that key services are nationalised.

Which type of economic statement is illustrated by each comment?

1 2

A normative normative
B normative positive
C positive normative
D positive positive

© UCLES 2020 9708/12/F/M/20

 3

4 Which change in the way resources are allocated in an economy is consistent with moving from a
planned economy to a market economy?

A A minimum price guarantee for apple producers is removed.

B A new government authority is established to monitor inefficiencies in apple production.
C The production of apples is subsidised to increase output.
D The sale of apples has a maximum price imposed.

5 In which circumstance will the total expenditure by consumers on a good increase when its price
increases?

A Demand for the good is income elastic.

B Demand for the good is price inelastic.
C The price of a complementary good also increases.
D The price of substitute goods also increases.

6 When will a manufacturer’s ability to increase the quantity supplied in the short run be greater?

A when labour is immobile

B when spare capacity exists
C when the product is perishable
D when unemployment is low

7 The diagram shows the market for strawberries. The original equilibrium position is X.

What will be the new position following the failure of strawberries to ripen and a fall in the price of
cream (a complement to strawberries)?

S3
price
S1
A
S2

X B
D

D2
C
D1
D3

O
quantity

© UCLES 2020 9708/12/F/M/20 [Turn over

 4

8 Good X is related to good Y. Incomes increase and the price of good Y falls.

Which combination would give the greatest increase in demand for good X?

relationship between
nature of good X
good X and good Y

A inferior good complements

B inferior good substitutes
C normal good complements
D normal good substitutes

9 What must be correct when the free market for a good is in disequilibrium?

A Consumers can buy all of the good that they demand at the market price.
B Producers can sell all of the good that they supply at the market price.
C The market price of the good will not change.
D The quantity of the good demanded differs from the quantity supplied.

10 A power station burns waste to produce electricity. This also produces a by-product of fertiliser for
farmers.

What is the effect in the fertiliser market of an increase in the demand for electricity?

A The price of fertiliser falls and the quantity demanded rises.

B The price of fertiliser falls and the quantity supplied falls.
C The price of fertiliser rises and the quantity demanded falls.
D The price of fertiliser rises and the quantity supplied rises.

11 The table shows the supply and demand for avocados in Mexico City.

price per quantity demanded quantity supplied

kilogram ($) per day (kg) per day (kg)

45 170 230
40 190 190
35 210 150
30 230 110

As a result of lower transport costs, supply rises by 60 kg at all prices.

What is the new equilibrium price?

A $45 B $40 C $35 D $30

© UCLES 2020 9708/12/F/M/20

 5

12 The diagram shows a demand curve for pineapples.

2
price
($) X
1.5

1
Y
0.5

0 D
0 3 6 9 12
quantity (000s)

What happens to the value of price elasticity of demand (PED) when there is a movement from
point X to point Y and what describes the value at point Y?

effect on value of
value of PED PED at Y

A fall elastic
B fall inelastic
C rise elastic
D unchanged unitary

13 Four firms produce furniture. The table shows the price elasticity of supply (PES) for each firm.

If the price of furniture rises by 5% which firm would experience an increase in quantity supplied
of 2.5%?

PES for
firm
furniture

A 2.5
B 2.0
C 0.6
D 0.5

14 Which argument has often been used to justify the privatisation of state enterprises?

A Private firms can produce the same outputs using fewer inputs.
B Private firms try to earn large profits.
C State enterprises are always monopolies which exploit consumers.
D State enterprises cannot operate without government subsidies.

© UCLES 2020 9708/12/F/M/20 [Turn over

 6

15 A government imposes a maximum rent in order to make rented housing more affordable.

What is likely to be a long-run consequence if the maximum is set below the current free market
level?

A a shortage of applicants for rented housing

B a shortage of rented housing
C an increase in supply to satisfy the increased demand for rented housing
D an increase in the number of houses being rented

16 What would be categorised as direct government provision of goods and services?

A a government grant to a firm to provide healthcare services

B a government regulation on the amount of sugar in soft drinks
C a government subsidy to a firm that operates a regional train service
D a government takeover of a local bus service

17 Which type of tax is the 15% sales tax levied in South Africa?

A ad valorem direct
B ad valorem indirect
C specific direct
D specific indirect

18 What is an example of a transfer payment?

A a household moving savings from one bank account to another

B a monthly repayment on a loan used to buy a new cooker
C the amount paid to transport goods from one city to another
D the payment of student grants by the government

19 What will lead to an immediate improvement in the balance of payments deficit on current
account?

A a fall in interest rates

B a reduction in dividend payments to foreign investors
C a reduction in the standard rate of income tax
D an increase in the level of government current expenditure

© UCLES 2020 9708/12/F/M/20

 7

20 An appreciation of the South African rand in the foreign exchange markets is most likely to assist
the South African government achieve which policy objective?

A a redistribution of income
B a reduction in the rate of inflation
C a reduction in the volume of imports
D an increase in the level of employment

21 Four countries, A, B, C and D, trade internationally.

Each circle in the diagram represents a free trade area between the countries within the circle. A
country can belong to more than one free trade area. Countries outside of a circle face trade
barriers.

Which country has the greatest opportunity to benefit from free international trade?

A
C

22 The diagram shows Greece’s trade position with the EU between 2005 and 2014.

60
Greek
trade 50
key
$bn 40
imports from EU
30 exports to EU
20
10
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

How does the Greek trade balance with the EU differ in 2014 compared to 2005?

A an increased deficit
B an increased surplus
C a reduced deficit
D a reduced surplus

© UCLES 2020 9708/12/F/M/20 [Turn over

 8

23 A central bank forecasts a rise in raw material costs. The government plans to increase spending
on health and education.

The initial equilibrium point is shown by X on the aggregate demand, AD, and aggregate supply,
AS, diagram.

What would be the new equilibrium point in the short run if the forecasts prove to be accurate and
the government plans are implemented?

AS1
general AS2
AS
price C
level
D X
B

A
AD2
AD1 AD
O
real output

24 A country with a floating exchange rate experiences a large surplus on the current account of its
balance of payments.

What is likely to decrease as a consequence?

A exports of capital from the country

B the level of employment in the county
C the prices of imports into the country
D the value of the country’s currency

25 In 2018 an investor in the United States (US) purchased shares in a German bank. In December
2018 the US investor was paid a dividend on these shares.

How were these activities recorded in the US balance of payments for 2018?

share purchase dividend payment

A capital account credit current account credit

B capital account credit current account debit
C capital account debit current account credit
D capital account debit current account debit

© UCLES 2020 9708/12/F/M/20

 9

26 Which statement describes disinflation?

A a fall in the price level

B a fall in the rate of inflation
C a rise in the value of money
D inflation below zero

27 In a closed economy a rise in aggregate demand is needed to increase output in the country.

What is necessary to achieve this increase in output in the economy?

A enough capacity to produce the extra goods and services demanded

B free trade to allow imports to make up any shortages in supply
C government spending to be less than tax revenue
D reduced credit to lower inflation

28 A country with a fixed exchange rate and a deficit in the current account of its balance of
payments enters a recession. It devalues its currency in an effort to correct its balance of
payments.

Under which conditions is the deficit most likely to improve?

price elasticity of price elasticity of income elasticity of

demand for imports demand for exports demand for imports

A 0.3 0.5 0.8

B 0.4 0.8 0.8
C 0.3 0.5 1.2
D 0.4 0.8 1.2

29 What is an example of fiscal policy aimed at increasing aggregate demand in an economy?

A increasing expenditure by firms on skills training programmes for unskilled workers

B increasing the commercial banks’ lending ability
C reducing the rate of income tax for all income earners
D reducing the rate of interest on loans to manufacturing companies

© UCLES 2020 9708/12/F/M/20 [Turn over

 10

30 A country with a fixed exchange rate experiences a balance of payments surplus.

Which policy measure will enable it to maintain its exchange rate?

A decreasing government borrowing

B decreasing government spending
C decreasing the interest rate
D decreasing the money supply

© UCLES 2020 9708/12/F/M/20

 11

BLANK PAGE

© UCLES 2020 9708/12/F/M/20

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9708/12/F/M/20

 Cambridge International AS & A Level

ECONOMICS 9708/13
Paper 1 Multiple Choice October/November 2021
1 hour

You must answer on the multiple choice answer sheet.

*5711423759*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 11_9708_13/2RP
© UCLES 2021 [Turn over
 2

1 In the diagram JK is the initial production possibility curve for an economy producing computers
and cars.

J
computers

O L K
cars

What could cause the curve to shift to JL?

A a fall in output per worker in the car industry

B a fall in the level of competition in the car industry
C a rise in the potential workforce of the economy
D a rise in the price of cars

2 Consumers in country X buy some goods and services from private sector firms. Other goods
and services are provided by the state.

What is this type of economy?

A free market economy

B joint economy
C mixed economy
D planned economy

3 In 2017 the Bank of England introduced a new version of the £1 coin as there were concerns that
large quantities of illegal £1 coins had been put into circulation.

Which characteristic of money did the illegal £1 coins threaten?

A acceptability
B divisibility
C durability
D portability

© UCLES 2021 9708/13/O/N/21

 3

4 Which statement is a positive statement?

A Low inflation is preferable to low unemployment as a government aim.

B Low inflation will provide a more stable macro economy.
C The government must intervene in all markets to improve resource allocation.
D The government should cut income tax so living standards can improve.

5 What could cause an increase in consumer surplus in the market for a good?

an increase in an increase in
demand for supply of
the good the good

A no no
B no yes
C yes no
D yes yes

6 The diagrams show the effect of a change in the market for good X on the market for good Y.

S2 S1 S
price price
P2 P2
P1 P1

D1
D1 D2
O Q2 Q1 O Q1 Q2
quantity quantity
change in the market effect on the market
for good X for good Y

What can be concluded from the diagrams?

A X and Y are complements.

B X and Y are in joint supply.
C X and Y are substitutes.
D Y is a derived demand from X.

© UCLES 2021 9708/13/O/N/21 [Turn over

 4

7 The diagram shows the average world price of coffee in US cents per pound weight (lb) between
1997 and 2005.

150

US cents / lb 125

100

75

50

25

0
1997 2001 2005
year

Which event is consistent with the price behaviour shown in the specified time period?

A a continuous rise in the price of tea between 1997 and 2001

B the entry to the market of new producers of coffee between 1997 and 2001
C a series of good coffee harvests between 2001 and 2005
D increasing health worries about drinking coffee between 2001 and 2005

8 The diagram shows a shift in the supply curve for a product from S1 to S2.

S1
price S2

O quantity

What could cause this shift in the supply curve?

A an increase in the cost of producing the product

B an increase in the income of consumers of the product
C an increase in the demand for a product that is jointly supplied
D an increase in the price of the product

© UCLES 2021 9708/13/O/N/21

 5

9 The diagram shows four supply curves.

For which curve is the price elasticity of supply constant?

price B
C
D

O quantity

10 What would be the price elasticity of demand for smartphones if their price fell from US$100 to
US$90 and the quantity demanded rose from 200 to 250?

A 0.2 B 0.4 C 2.5 D 5.0

11 The diagram shows the demand for and supply of a normal good. E1 is the initial equilibrium
position.

price
E2 S

E1

D
O quantity

Which changes could result in a new equilibrium E2?

A a decrease in both the demand for and the supply of the good
B an increase in both the demand for and the supply of the good
C an increase in consumer incomes, and a decrease in the supply of the good
D an increase in the price of a complement to the good, and an increase in the supply of the
good

© UCLES 2021 9708/13/O/N/21 [Turn over

 6

12 The table shows the market demand and market supply for kiwifruit over a year.

At a market price of $3 per kg there is disequilibrium in the market.

price of total market total market

kiwifruit demand supply
($ per kg) (thousand tonnes) (thousand tonnes)

1 220 120
2 190 130
3 160 140
4 130 150
5 100 160

Which action would the government have to take to achieve market equilibrium at a price of
$3 per kg?

A impose an indirect tax of $2 per kg on kiwifruit

B purchase the entire supply at $3 per kg and sell at $2 per kg
C set a maximum price of $3 per kg
D subsidise kiwifruit production by $2 per kg

13 The cross-elasticity of demand of good S with respect to the price of good P is +1.5.
The cross-elasticity of demand of good S with respect to the price of good R is –1.5.
The cross-elasticity of demand of good P with respect to the price of good R is –1.5.

What can be concluded about goods P, R and S?

A S and P are complements; P and R are substitutes.

B S and P are complements; R is an inferior good.
C S and P are substitutes; P and R are complements.
D S and P are substitutes; R is an inferior good.

14 A government wishes to impose a tax on a good so that the consumer pays most of the tax
increase.

Which type of elasticity would best achieve this aim?

A high price elasticity of supply

B low price elasticity of supply
C unitary price elasticity of supply
D perfectly inelastic price elasticity of supply

© UCLES 2021 9708/13/O/N/21

 7

15 Why does the production of public goods have to be financed by the government?

A One person’s consumption of a public good means it is not available for anyone else.
B People are able to consume public goods without paying for them.
C Private sector firms will charge a price significantly above cost for public goods.
D The cost of producing public goods is higher in the private sector.

16 Which payment is a transfer payment?

A households’ payments of indirect taxes

B government pension payments
C payments between firms for the supply of raw materials
D payment of salaries

17 The diagram shows the effects of a subsidy in the market for wheat.

S1
price
S2

I
P4
F
P3
P2 J
G
P1 H

D1

O Q1 Q2
quantity

Which area shows the total government spending on the subsidy?

A OP2JQ2 B OP3FQ1 C P3FJP2 D P2P4IJ

18 A government wishes to reduce the consumption of alcohol.

Which policy will it use to achieve this aim by fixing the price of alcohol?

A fix maximum price above market price

B fix maximum price below market price
C fix minimum price above market price
D fix minimum price below market price

© UCLES 2021 9708/13/O/N/21 [Turn over

 8

19 According to the theory of comparative advantage, what makes trade beneficial between two
countries?

A Each country has different goods to sell and different tastes.

B Each country has different opportunity costs of production.
C One country has the absolute advantage in producing both goods.
D The prices of goods are different between each country.

20 The demand for a country’s exports is price-elastic. Its government introduces export subsidies.

What will be the effect on its balance of trade and on its terms of trade?

balance of trade terms of trade

A increase increase
B increase decrease
C decrease increase
D decrease decrease

21 The table shows the average changes in the prices and volumes of exports and imports.

Which combination of changes would result in an increase in the terms of trade?

export export import import

prices volumes prices volumes

A –10% +15% –15% +10%

B –3% +6% –2% +1%
C +5% –5% +6% –1%
D +10% –5% +12% –6%

22 A government decides to increase a quota on an imported good.

What is likely to happen?

A The demand for the good will fall.

B The good will become more expensive.
C The government’s revenue will decline.
D There will be more of the good imported.

© UCLES 2021 9708/13/O/N/21

 9

23 The diagram shows aggregate demand (AD) and aggregate supply (AS) for an economy.

AS1
price AS2
level
P1
P2

AD

O Y1 Y2
real
output

What is most likely to cause the shift from AS1 to AS2?

A a decrease in the exchange rate

B a decrease in the price level
C a fall in immigration
D a fall in the average level of wages

24 Country X places a tariff of 20% on steel products imported from country Y. Country Y retaliates
with a 20% tariff on computers imported from country X.

What is a certain economic consequence of these actions?

A The balance of payments of country X and country Y will remain unchanged.

B The exchange rate value on which trade between the two countries is based will be
maintained.
C The profits and employment of domestic firms in both countries will be preserved.
D The volume of bilateral trade between country X and country Y will be reduced.

25 A country has a floating exchange rate.

An increase in which variable within that country can cause its exchange rate to appreciate?

A employment levels
B income levels
C interest rates
D price levels

© UCLES 2021 9708/13/O/N/21 [Turn over

 10

26 The diagram shows the effects of the imposition of a tariff on an internationally-traded good. Sdom
is the supply and D the demand in country R. Sw is the world supply curve of the product and Swt
is the world supply curve after the imposition of a tariff by country R.

Sdom
price

Swt
Sw

D
O Q1 Q2 Q3 Q4
quantity

Which combination describes the effect on domestic supply of and demand for the good in
country R after the imposition of the tariff?

domestic
demand
supply

A falls falls
B falls rises
C rises falls
D rises rises

27 The graph shows the change in the current account of Belgium’s balance of payments from 2016
to 2017.

3.6
US$
billion

–2.8
2016 2017

What will be the most likely impact of the change shown by the graph on Belgium’s domestic
economy?

A a fall in the rate of economic growth

B a fall in the foreign currency reserves
C a fall in the number of unemployed
D a fall in the rate of inflation

© UCLES 2021 9708/13/O/N/21

 11

28 What is an example of the use of monetary policy?

A a cut in the rate of corporation tax

B a reduction in interest rates
C a switch from direct to indirect taxation
D the introduction of maximum price controls to reduce inflation

29 Which policy would be likely to increase inflation?

A an increase in income tax

B an increase in interest rates
C limiting the amount banks can lend
D raising the level of import tariffs

30 What are the components of aggregate demand?

A consumption + investment + government spending + (exports – imports)

B consumption + investment + taxation – (exports – imports)
C consumption + saving + taxation – (exports – imports)
D consumption + saving + taxation + (exports – imports)

© UCLES 2021 9708/13/O/N/21

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9708/13/O/N/21

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 Multiple Choice October/November 2021
1 hour

You must answer on the multiple choice answer sheet.

*3232902904*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 16 pages. Any blank pages are indicated.

IB21 11_9708_12/3RP
© UCLES 2021 [Turn over
 2

1 Line XX is the production possibility curve (PPC) of a worker picking peas and beans in a 10 hour
working day.

Y
quantity of peas
picked per day

Y X
O
quantity of beans
picked per day

What could cause the worker’s PPC to shift to the line YY?

A a decrease in working hours to 8 per day and a machine that increases the worker’s pea
picking productivity
B a machine that increases the worker’s pea picking productivity only
C a new work schedule where the worker spends 6 hours per day picking peas and only
4 hours picking beans
D a reduction in working hours to 8 per day only

2 What is a function of money?

A divisibility
B durability
C portability
D medium of exchange

3 What is classified as a public good by economists?

A flood defences
B government-funded hospitals
C government-run national parks
D the internet

© UCLES 2021 9708/12/O/N/21

 3

4 Which statement about the factors of production is correct?

A The factor capital includes shares and deposit accounts at banks.

B The factor labour includes human-made resources.
C The factor land includes forests and undiscovered copper.
D The factor enterprise takes risks and is rewarded with interest.

5 Which supply curve shows that the price elasticity of supply of the good is always equal to 1?

A a straight line that intersects the horizontal axis

B a straight line that intersects the vertical axis
C a straight line that passes through the origin
D a straight line that is vertical to the horizontal axis

6 What could cause a shift in the supply curve of good X and a movement along its supply curve?

shift in the supply curve movement along the supply curve

A a change in demand for good X an increase in the price of a substitute good

B a decrease in factor productivity the imposition of a tax on good X
C an increase in the price of a an increase in factor productivity
complementary good
D an increase in the wage rates a change in demand for good X
in the industry

© UCLES 2021 9708/12/O/N/21 [Turn over

 4

7 The market for mobile phones is initially in equilibrium at X. The government then imposes a
sales tax.

What is the government’s total tax revenue from this tax?

supply plus tax

U J
price
supply before tax

T K

S L
X

R M

demand

O Q2 Q1
quantity

A JKX B TKLS C TKMR D UJXS

8 What is an example of the rationing function of the price mechanism?

A When the price of a product is falling, firms will allocate less resources to its production.
B When the price of a product is falling, the government can set an effective minimum price.
C When the price of a product is rising, firms will expand production of the product to make
profits.
D When the price of a product is rising, some consumers will no longer be able to buy it.

© UCLES 2021 9708/12/O/N/21

 5

9 In 2016 car drivers bought more fuel because the price of oil from which it was made had fallen.

Which diagram represents this change in the market for fuel?

A B

price S price
of fuel of fuel
P2 P S
P1
D2
D2
D1 D1
O Q1 Q2 O Q1 Q2
quantity quantity
of fuel of fuel

C D

price price S1
S
of fuel of fuel S2

P1 P1
P2 P2
D1
D2 D

O Q2 Q1 O Q1 Q2
quantity quantity
of fuel of fuel

© UCLES 2021 9708/12/O/N/21 [Turn over

 6

10 The diagram shows the demand and supply curves for bread in a developed economy. Bread is a
substitute for pasta and rice.

S1
price

D2
D1
O quantity

What would cause the demand curve for bread to shift from D1 to D2 in a developed economy?

A a rise in the price of pasta and rice

B a decrease in the real income of consumers
C a recession and rising unemployment
D a subsidy given to producers of pasta and rice

11 The table shows the quantity demanded of three goods when the price of good X changes.

price of X quantity of X quantity of Y quantity of Z

($) demanded demanded demanded

5 100 60 20
4 110 50 22
3 140 30 28
2 200 15 40
1 300 4 60

Which relationships between X, Y and Z can be deduced from the table?

Y is Z is

A a complement for X a complement for X

B a complement for X a substitute for X
C a substitute for X a complement for X
D a substitute for X a substitute for X

© UCLES 2021 9708/12/O/N/21

 7

12 The diagram shows three supply curves.

S1
price

S2

S3

O quantity

What can be concluded about the price elasticity of supply of the curves?

A As price rises, the price elasticity of supply of S 2 will increase.

B At any price, the price elasticity of supply of S1 will be less than that of S3.
C At any price, the price elasticity of supply of S2 will be higher than that of S3.
D The price elasticity of supply of each curve is constant.

13 The diagram shows the market for smartphones in India.

F
price
G S

M
H
J
N

K
D1 D 2
O R T
quantity

Rising incomes in India have seen a demand for this normal good shift from D1 to D2.

Which area now represents consumer surplus and which area now represents producer surplus?

consumer producer
surplus surplus

A FMH HMK
B FMH OKMT
C GNJ HMNJ
D GNJ JNK

© UCLES 2021 9708/12/O/N/21 [Turn over

 8

14 A nationalised industry is privatised.

Assuming there is no change in the output of the industry in the short run, what are the direct
effects of the change?

proportion of industry
size of public sector output entering the
market

A decreases increases
B decreases no change
C no change increases
D no change no change

15 What is a distinguishing feature of a progressive income tax?

A High earners pay a higher proportion of their income in tax than low earners.
B High earners pay a lower proportion of their income in tax than low earners.
C High earners pay the same proportion of their income in tax as low earners.
D Low earners pay more tax than high earners.

16 Why might a government nationalise a private firm?

A to gain greater efficiency due to more competition

B to increase merit good provision
C to increase choice for the consumer
D to raise more tax revenue

© UCLES 2021 9708/12/O/N/21

 9

17 The diagram shows a firm’s supply of and demand for apples.

price S
P2
P1

D
O Q2 Q1 Q3 Q4
quantity of apples

If a minimum price is increased from P1 to P2 what will happen to the amount of apples sold?

A It will decrease from Q1 to Q2.

B It will decrease from Q4Q1 to Q2Q3.
C It will increase from Q3 to Q4.
D It will increase from Q3Q2 to Q4Q1.

18 In an attempt to reduce crime, a government introduces a subsidy on the production of burglar

alarms, but sales rise very little.

Which possible characteristics of the good would lead to this outcome?

price elasticity price elasticity

of demand of supply

A high high
B high low
C low high
D low low

19 Compared with Pakistan, Germany has a higher output of pharmaceuticals per unit of resources
used.

What could explain this?

A the existence of floating exchange rates

B the law of absolute advantage
C the Marshall–Lerner condition
D the terms of trade

© UCLES 2021 9708/12/O/N/21 [Turn over

 10

20 Which statement about inflation is correct?

A Inflation will lead to a rise in exports.

B Inflation will lead to a rise in real incomes.
C Inflation will lead to a rise in the cost of living.
D Inflation will lead to a rise in the purchasing power of money.

21 Why is it that a country’s balance of payments must always balance?

A Exchange rate changes will correct any deficit or surplus.

B One country’s deficit is balanced by another country’s surplus.
C The current account is balanced by the capital and financial accounts.
D The government must act to correct any disequilibrium.

22 Which argument for protection would be most relevant if the government of country X decided to
exercise voluntary export restraint in its trade with country Y?

A Voluntary export restraint would achieve an immediate correction for X’s balance of trade
deficit.
B Voluntary export restraint would cause the level of GDP to increase in country X.
C Voluntary export restraint would help to negotiate improved trading conditions between X
and Y.
D Voluntary export restraint would help to reduce the level of unemployment in country X.

23 The average price of a country’s exports increased by 5% and the average price of its imports
increased by 10%.

What can definitely be concluded from this information?

A Its balance of trade will improve.

B Its balance of trade will worsen.
C Its terms of trade have improved.
D Its terms of trade have worsened.

© UCLES 2021 9708/12/O/N/21

 11

24 There is an increase in indirect taxes.

What will be the impact on demand-pull inflation and on cost-push inflation?

demand-pull cost-push
inflation inflation

A fall fall
B fall rise
C rise fall
D rise rise

25 The table shows the number of biscuits and cakes that can be produced by four workers in an
hour.

Laura Mo Nathan Omar

biscuits 6 10 13 8
cakes 3 10 12 16

Who has the greatest comparative advantage in producing biscuits?

A Laura
B Mo
C Nathan
D Omar

26 Which condition is necessary for a country’s balance of payments on its current account to
improve if it reduced its exchange rate?

A Both the price elasticities of supply for its imports and its exports must be elastic.
B The importing country will buy all the excess supplies of its trading partner to clear the
market.
C The sum of the price elasticities of domestic demand for imports and the foreign demand for
exports must be greater than one.
D The trading partners need to agree on the maximum prices to be charged for imports and
exports.

© UCLES 2021 9708/12/O/N/21 [Turn over

 12

27 The diagram shows the effect of the United States (US) imposing a tariff on the import of steel in
2018.

Z domestic supply of steel

price of
steel

T Y world supply of steel plus tariff

P1
U V W X world supply of steel
P

domestic demand for steel

O Q1 Q2 Q3 Q4
quantity of steel

Which statement about the impact of the tariff is correct?

A Consumer surplus falls from P1TO to PUO.

B Domestic output increases from OQ1 to OQ3.
C Imports fall from Q1Q4 to Q2Q3.
D The tax revenue raised on imports is P1YWP.

28 In 2012, the Indian Government stated that it aimed to reduce its budget deficit to 5.1% of GDP.

Which policy is most likely to help this aim in the short run?

A a decrease in import tariffs

B a decrease in the rate of interest
C an increase in the sale of state-owned assets
D an increase in government pension payments

29 What would make a policy of raising interest rates less likely to be effective in reducing inflation?

A Aggregate supply is increasing faster than aggregate demand.

B Consumers expect prices to rise even faster in the future.
C Consumers’ spending is largely paid for on credit.
D Interest rates are still higher abroad.

© UCLES 2021 9708/12/O/N/21

 13

30 Country X is an open economy with a floating exchange rate. It changes to a fixed exchange rate.

Which combination of policy changes would be most effective in reducing inflation?

fiscal policy new fixed exchange rate

A higher direct taxes above purchasing power parity

B higher direct taxes below purchasing power parity
C higher indirect taxes above purchasing power parity
D higher indirect taxes below purchasing power parity

© UCLES 2021 9708/12/O/N/21

 14

BLANK PAGE

© UCLES 2021 9708/12/O/N/21

 15

BLANK PAGE

© UCLES 2021 9708/12/O/N/21

 16

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9708/12/O/N/21

 Cambridge International AS & A Level

ECONOMICS 9708/11
Paper 1 Multiple Choice October/November 2021
1 hour

You must answer on the multiple choice answer sheet.

*1952975717*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages.

IB21 11_9708_11/RP
© UCLES 2021 [Turn over
 2

1 A European airline opens a new route to Dubai. It purchases additional aeroplanes, rents
additional landing slots, hires pilots and buys back some of its shares to raise the value of the
firm on the stock market.

What is an example of the factor of production capital?

A aeroplanes
B landing slots
C pilots
D shares

2 Which statement about the behaviour of firms in a planned economy is correct?

A Firms are sent signals to produce through the price mechanism.

B Firms will operate in competitive markets.
C Firms will attempt to make profits for the benefit of shareholders.
D Firms are more likely to consider the private and external costs of production.

3 The table provides information on entrepreneurship among males in three countries in 2013.

percentage of males percentage of males

with access to with access to
training on how to finance to start
start a business (%) a business (%)

Italy 19.1 10.3

Japan 31.3 34.0
Sweden 61.6 49.7

What can be concluded from the table?

A In Sweden, it is easier for male entrepreneurs to get training than finance.

B It is always more difficult for male entrepreneurs to get finance than training.
C Italy provides less money for male entrepreneurs than Japan or Sweden.
D Sweden has more male entrepreneurs than Italy or Japan.

© UCLES 2021 9708/11/O/N/21

 3

4 The diagram shows the production possibility curves of two economies, Northland (Y1–X1) and
Southland (Y2–X2).

Y1 R

food

Y2
P

O X1 X2
drink

Both economies specialise based on the theory of comparative advantage and trade with one
another.

What can be concluded from the diagram?

A Both economies face increasing opportunity costs.

B Point P represents the final equilibrium outcome.
C Point R shows the total possible combined production of food and drink.
D All points on Y1–X2 are only attainable through trade.

5 The supply curve for fresh fish shifts from S1 to S2 as shown.

S2 S1

price

O quantity

What is a possible reason for this change in the supply of fresh fish?

A Demand for fresh fish increases due to promotion of the health benefits.
B Favourable weather increases the quantity of fish being caught.
C Price of fresh fish falls due to a new substitute product becoming popular.
D Regulations limit the number of fish being caught to prevent over-fishing.

© UCLES 2021 9708/11/O/N/21 [Turn over

 4

6 When the supply of a good decreases, equilibrium price stays the same.

What is the price elasticity of demand of the good?

A –1
B zero
C +1
D infinite

7 What can be measured by cross-elasticity of demand?

A a change in real income as a result of a change in the price of consumer goods

B a change in the demand for a good in response to a change in the price of a complement
C a change in the price of a good in response to a change in the demand for a substitute
D a change in the price of a good when the demand for it changes

8 The table shows the maximum price a consumer would be willing to pay for successive cans of
fruit juice.

cans first second third fourth fifth

price ($) 14 10 6 4 3

The price of a can of fruit juice is $4 and, having bought three cans, the consumer decides to buy
a fourth.

How does buying the fourth can affect his consumer surplus?

A It leaves it unchanged.
B It lowers it by $2.
C It raises it by $4.
D It raises it by $34.

© UCLES 2021 9708/11/O/N/21

 5

9 The diagram shows four supply curves.

1 2 3 4
price

4
3
2 1
O
quantity

Which statement about the price elasticities of the curves is correct?

A Curve 1 has constant infinite elasticity.

B Curve 2 has elasticity greater than curve 4 over its whole length.
C Curve 3 has increasing elasticity as price rises.
D Curve 4 has decreasing elasticity as price rises.

10 The diagram shows the demand and supply curves for a good in a free market.

S
price

P1

D
O Q1
quantity

What can definitely be deduced from the diagram?

A All the costs and benefits of consumption are reflected in OP1.

B At OP1 consumer expenditure is greater than the firm’s revenue.
C At OP1 the price elasticity of supply is equal to one.
D The market will not clear at a price of OP1.

© UCLES 2021 9708/11/O/N/21 [Turn over

 6

11 The demand for a good increases.

Under which circumstances will the quantity supplied of the good rise the most?

A It is an agricultural good that has an annual growing cycle and requires a cool climate.
B It is an agricultural good that is perishable and very expensive to store.
C It is a manufactured good that uses unskilled labour and there is unemployment in the
economy.
D It is a manufactured good that uses capital-intensive production and it is currently at full
capacity.

12 The diagram shows the demand curve and supply curve for a good on which the government
imposes a specific tax.

price

S
O quantity

What will be the result of this tax?

A Most of the incidence of the tax will fall on the producer.

B There will be a new demand curve parallel to DD.
C The price will rise by the full amount of the tax.
D The quantity bought will fall proportionately to the tax rate.

© UCLES 2021 9708/11/O/N/21

 7

13 The diagram shows how a 10% increase in consumer incomes shifts the demand for good X from
D to D1.

price
($)

10

D1 D

0 80 100
quantity (kg)

Which statement about good X is correct?

A It is a normal good with income elastic demand.

B It is a normal good with income inelastic demand.
C It is an inferior good with income elastic demand.
D It is an inferior good with income inelastic demand.

14 What is an example of privatisation?

A the sale on the market of a French state-owned power-generation company

B the sale of a privately-owned water company to a German firm
C the takeover of a French car manufacturer by the French government
D the purchase of a Swedish pharmaceutical producer by a larger American pharmaceutical
producer

15 What did Adam Smith mean by ‘economy’ when describing his canons of taxation?

A The cost of collecting the tax should be low.

B The tax should be easy to pay.
C The tax should have a neutral effect on the use of resources.
D The tax should have a positive effect on aggregate supply.

© UCLES 2021 9708/11/O/N/21 [Turn over

 8

16 A government decides to remove fees for higher education provided by the public sector and the
private sector.

What is the consequence of this policy?

A Higher education is less likely to be provided by the private sector.

B Resources in higher education will be allocated through the price mechanism.
C The demand for higher education will be perfectly elastic when the price is zero.
D The opportunity cost of higher education to students will be zero.

17 What would be the main effect of imposing an effective maximum price on foodstuffs?

A Inflation would rise.

B The price of foodstuffs would rise.
C There would be a decrease in the import of foodstuffs.
D There would be a shortage of foodstuffs.

18 An effective minimum price is applied to alcohol in an attempt to reduce consumption.

Why would a government not buy up any surplus created?

A Buying the surplus would be costly to the government.

B Buying the surplus would decrease the incomes of producers.
C Buying the surplus would lead to a shortage.
D Buying the surplus would lead to unemployment.

© UCLES 2021 9708/11/O/N/21

 9

19 A government plans to increase spending on education and training every year.

Which diagram shows the likely effect of this increase on the economy’s long-run output and
price level?

A B
LRAS1 LRAS1 LRAS2
price price
level level

P2
P1 P1
P2
AD2 AD1
AD1
O Y1 O Y1 Y2
real output real output

C D
LRAS1 LRAS2 LRAS2 LRAS1
price price
level level

P2 P1
P1 P2

AD2 AD2 AD1

AD1
O Y1 Y2 O Y2 Y1
real output real output

20 What is disinflation?

A a fall in output
B a fall in the price level
C a fall in the rate of increase of the price level
D a fall in the value of national income

© UCLES 2021 9708/11/O/N/21 [Turn over

 10

21 What best describes a country’s terms of trade?

A the difference between the volume of its exports and its imports
B the average price of its exports divided by the average price of its imports
C the total value of its exports divided by the total value of its imports
D the volume of its exports divided by the volume of its imports

22 A developed country has a price-inelastic demand for oil, all of which it imports. The oil-producing
countries increase the supply of oil.

What is likely to happen to the developed country’s rate of inflation and its balance of trade?

rate of inflation balance of trade

A decreases improves
B decreases worsens
C increases improves
D increases worsens

23 Country X and country Y both produce rice and tables. Half of their resources are used to
produce rice and the other half to produce tables. The resulting output of each product is given in
the table shown.

country rice tables

X 150 100
Y 100 50

What can be concluded from the table?

A Country X has a comparative advantage in the production of both goods.

B Country X has a comparative advantage in the production of rice.
C Country Y has a comparative advantage in the production of both goods.
D Country Y has a comparative advantage in the production of rice.

24 An economy experiences a deficit on the current account of its balance of payments.

What could the economy do to finance this deficit?

A adopt a fixed exchange rate

B attract more foreign direct investment
C decrease income tax rates
D lower the rate of interest

© UCLES 2021 9708/11/O/N/21

 11

25 A resident of country X buys shares in a firm in country Y. The shares then pay the resident a
dividend.

Where are these two flows recorded in country X’s balance of payments?

purchase dividend
A capital account primary income
(income)
B capital account secondary income
(current transfers)
C financial account primary income
(income)
D financial account secondary income
(current transfers)

26 What is the most likely cause of cost-push inflation in an economy?

A an increase in the exchange rate

B an increase in the money supply
C an increase in the prices of imports
D an increase in the rate of income tax

27 Which changes are most likely to reduce the accuracy of the consumer prices index (CPI) as a
measurement of inflation?

A A larger sample is used in the household spending survey.

B Technology makes it easier for retailers to submit accurate monthly price data.
C Households change their spending habits.
D The weightings attached to the basket of goods are reviewed more often.

28 A government reduces the rate of direct income tax and devalues its currency.

Which row describes the policy effects of these decisions?

fiscal policy monetary policy supply-side policy

A contractionary expansionary contractionary

B expansionary contractionary expansionary
C expansionary expansionary contractionary
D expansionary expansionary expansionary

© UCLES 2021 9708/11/O/N/21 [Turn over

 12

29 The balance of payments on the current account for Guatemala in 2011 was –US$1.6 bn and in
2016 was +US$1.0 bn.

What is most likely to have been a contributory factor to this change in the balance of payments
on the current account over this five-year period?

A an appreciation of Guatemala’s currency

B a growth of household incomes in Guatemala
C a lowering of tariffs on goods imported into Guatemala
D productivity improvements in Guatemala’s export sector

30 The government wishes to increase aggregate demand.

Which actions would be most likely to succeed?

A a reduction in income tax and an increase in interest rates

B a reduction in income tax and an increase in production subsidies
C an increase in corporate tax and an increase in government spending
D an increase in value added tax (sales tax) and a reduction in government spending

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9708/11/O/N/21

 Cambridge International AS & A Level

ECONOMICS 9708/13
Paper 1 Multiple Choice May/June 2021
1 hour

You must answer on the multiple choice answer sheet.

*5987706670*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 06_9708_13/RP
© UCLES 2021 [Turn over
 2

1 A government department provides milk at no charge to very low income families.

Which term best describes the milk?

A free good
B inferior good
C private good
D public good

2 Which statement is a normative statement?

A China has never had a balance of payments surplus.

B Higher interest rates might reduce investment.
C Perfect competition is allocatively efficient.
D Welfare payments should be increased.

3 What do economists regard as the reward for taking risks and organising production?

A enterprise
B interest
C wages
D profit

4 The British pound is the national currency of the UK. In Brixton in south London it is possible to
get a distinctively marked currency called the Brixton pound from special cash machines. This
can be spent with 150 local shopkeepers. Similar schemes are found in towns in the US, Italy and
France.

Should Brixton pounds be considered money?

A no, because it is not possible to have two currencies in a country

B no, because they are not generally acceptable outside of Brixton
C yes, because some shopkeepers are willing to accept them
D yes, because they fulfil all the functions of money

© UCLES 2021 9708/13/M/J/21

 3

5 When stating the law of demand for a good, economists use the phrase ‘all other things being
equal’.

What is not one of these ‘all other things’?

A the income of the consumer

B the price of other goods
C the price of the good
D the tastes of the consumer

6 What will not cause a shift in the market supply curve of a commodity?

A a change in technology
B a rise in the price of a factor input
C a rise in the price of the commodity
D the introduction of a specific tax on the commodity

7 A product has a low price elasticity of supply.

What might explain this?

A The product has a low opportunity cost.

B The product is highly perishable.
C The product is classed as an inferior good.
D The product is considered to be a necessity.

8 A car manufacturer estimates that the price elasticity of supply of its cars is +2.5.

What will be the impact of a 10% increase in price?

A a 2.5% fall in total revenue

B a 25% rise in total revenue
C a 2.5% fall in quantity supplied
D a 25% rise in quantity supplied

© UCLES 2021 9708/13/M/J/21 [Turn over

 4

9 The diagram shows the original demand curve D1 and supply curve S1 for diesel cars in
Europe. Point X is the initial equilibrium.

There is a successful advertising campaign by electric car producers and a new unit tax on
diesel cars.

What will be the new equilibrium?

price S2
S1
A S3

D X B

C
D1 D3
D2
O quantity

10 A UK based food company wishes to diversify its product range. To finance this, it has obtained a
$10m loan from a bank to buy land, build and equip a bakery.

What would not be classified by an economist as a factor of production?

A the $10m loan used to finance the project

B the land on which the bakery will be built
C the ovens required to bake the bread
D the soya used in the making of the bread

11 A country’s central bank has commissioned a report on the demand for and price of houses.

What might be the most likely combination of reasons for an increase in the price and quantity
demanded of houses?

wages of
incomes interest rates
bricklayers

A down unchanged up
B down up unchanged
C unchanged up down
D up down unchanged

© UCLES 2021 9708/13/M/J/21

 5

12 The diagram shows the outcome when a landowner, who had allowed motorists to park on his
field at no cost, introduces a parking charge of $1.

supply
charge

X
$1

Y
Z demand
0 parking spaces

What happens as a result of the change?

A The landowner gains a surplus of Y + Z.

B The motorist gains a surplus of X + Y.
C The ownership of surplus Y changes.
D There is a total surplus of X + Y + Z.

13 The table gives information about the market for two models of car.

number of cars sold cross elasticity of demand with

model
per week respect to the price of petrol

1200 cc 10 000 –0.25

2000 cc 5 000 –0.50

If the prices of the cars remain unchanged, but the price of petrol increases by 100%, what will be
the effect on the number of cars sold per week?

A increase by 5000
B no change
C decrease by 5000
D decrease by 15 000

14 In many countries there are goods that must be provided directly by the government.

What would be the most convincing argument for such provision?

A The consumption of these products may be beneficial.

B The production of these products may be harmful.
C The production of these products have high opportunity costs.
D These products are non-rival in consumption and non-excludable.

© UCLES 2021 9708/13/M/J/21 [Turn over

 6

15 The provision of rail services is switched from the private sector to the public sector.

What is necessarily correct?

A The average fare charged for the service will fall.

B The profitability of the service will fall.
C The rail service’s management will be responsible to different owners.
D There will be an increase in the number of workers employed.

16 The diagram represents the original demand curve D1 and the original supply curve S1 for electric
cars. The government decides to provide a subsidy to electric car manufacturers.

price of
electric S1
cars S2
R
E
F M
G N
H T

D1
O X Y
quantity of
electric cars

Which area represents the total revenue of the car manufacturer after receiving the subsidy from
the government?

A OERY B OFMX C OGNY D OHTX

17 A government decides to build additional public sector housing to be rented to people receiving
low incomes.

What is most likely to fall as a result of this increase in public sector housing?

A employment in the construction industry

B land prices in towns and cities
C rents of houses in the private sector
D total government spending

© UCLES 2021 9708/13/M/J/21

 7

18 Government spending for a year includes these items.

$m

pensions for elderly people 200

welfare payments to sick people 200
spending on hospitals 150
payment to unemployed workers 100
defence spending 100
teachers’ salaries 50

What is the total of transfer payments by this government in $m?

A 50 B 500 C 750 D 800

19 What would be certain to cause a fall in a country’s cost of living?

A a fall in real incomes

B a fall in the inflation rate
C a negative inflation rate
D a reduction in direct tax rates

20 What is not an aim of protectionism?

A to improve balance of trade

B to increase price of exports
C to protect infant industries
D to reduce the volume of imports

21 A country with a fixed exchange rate experiences a higher rate of inflation than its trading
partners.

What is the likely effect on the country’s volume of exports and imports?

exports imports

A decrease decrease
B decrease increase
C increase decrease
D increase increase

© UCLES 2021 9708/13/M/J/21 [Turn over

 8

22 A sudden rise in the price of imported oil caused the annual rate of inflation in a given period to
be higher than expected.

What might be a likely result of this?

A Borrowers would gain.

B Real wages would rise.
C The balance of trade would improve.
D Unemployment would fall.

23 What may increase the benefits a country gains from international trade?

A a reduction in transportation costs because of a fall in world oil prices

B domestic wage rates increase at a faster rate than output per worker
C the domestic labour force becomes more occupationally immobile
D trading partners increase tariffs on imported goods

24 The world trade price of cars in country Y is US$10 000. At this price domestic car producers
supply 100 000 cars to the market and domestic consumers purchase 200 000 cars. The
government of country Y imposes a 10% tariff on imported cars.

Under which conditions will this tariff raise the most revenue for the government?

price elasticity
price elasticity of
of supply of car
demand for cars
producers in
in country Y
country Y

A +0.5 –0.5
B +0.5 –1.5
C +1.5 –0.5
D +1.5 –1.5

25 A country has a balance of trade deficit.

When will this be least likely to be improved as a result of a depreciation of its currency?

A if it is currently operating with a significant amount of unused resources

B if the sum of the price elasticities of demand for exports and imports is less than 1
C if in the long term, the price elasticity of demand for exports should increase
D if the country uses a relatively small proportion of imports in their production process

© UCLES 2021 9708/13/M/J/21

 9

26 Which statement about trade protection is correct?

A A tariff results in a greater decrease in demand for an import the lower is its price elasticity of
demand.
B Embargoes are only an effective trade barrier when the demand for imports is price-elastic.
C Export subsidies to domestic firms will prevent the dumping of foreign products in the
domestic market.
D Quotas are less effective than tariffs for raising government revenue.

27 Which type of policy would have the most immediate effect in dealing with a deflationary
economic downturn?

A increasing the government’s budget surplus

B increasing borrowing by assisting banks to lend more
C investing in long-term projects to improve transport networks
D switching the burden of taxation from earning to spending

28 Which combination identifies a main aim of supply-side policy and a measure used to achieve
this target?

main aim policy measure

A economic growth deregulation

B full employment increasing the money supply
C income equality more progressive taxation
D stable prices decreasing interest rates

29 Deflation is associated with persistent falling price levels.

Which government policy would be most effective to prevent deflation?

A imposing maximum price levels on basic foodstuffs

B improving consumer confidence by reducing sales taxes
C increasing income tax rates and increasing government borrowing
D removing economic uncertainty and encouraging business investment

© UCLES 2021 9708/13/M/J/21 [Turn over

 10

30 The graph shows inflation rates over 10 years for selected emerging economies.

7
inflation %
year on year
6

W
5

X
4
Y
Z
3

2
09
10
11
12
13
14
15
16
17
18
20
20
20

20
20
20
20
20
20
20
year

Government central banks set target minimum inflation rates before readjusting interest rates to
stabilise the economy.

If the minimum inflation rate target set by central banks was 4% per year, at which points would
they allow interest rates to fall?

A W and X B X and Y C Y and Z D Z and W

© UCLES 2021 9708/13/M/J/21

 11

BLANK PAGE

© UCLES 2021 9708/13/M/J/21

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9708/13/M/J/21

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 Multiple Choice May/June 2021
1 hour

You must answer on the multiple choice answer sheet.

*9763793538*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 06_9708_12/2RP
© UCLES 2021 [Turn over
 2

1 A tourist visits the coast for a holiday.

On her first day, she visits the local tourist office for information, goes for a swim in the sea,
spends the evening enjoying the view of the coastline and rents a campsite for an overnight stay.

Which activities involve economic goods and which involve free goods?

economic goods free goods

A camping and information swimming and sightseeing

B information and swimming sightseeing and camping
C sightseeing and camping information and swimming
D swimming and sightseeing camping and information

2 Which aspect of a planned economy might be viewed unfavourably by a consumer but favourably
by a producer?

A a bureaucratic system of decision-making

B a long response time to changing economic events
C an absence of incentives to work and to produce
D an emphasis on the production of capital goods

3 If the rate of inflation rises from 2% to 20%, which function of money is likely to be most affected?

A medium of exchange
B standard for deferred payment
C store of value
D unit of account

4 Which statement would be classified by an economist as a positive statement?

A Balancing the budget cannot be more important than reducing inflation.

B Maintaining the real income of pensioners needs to be a priority.
C The government should increase indirect taxation.
D The government will not increase direct taxation.

5 Which statement about price elasticity of supply is correct?

A It cannot change in the short run.

B It increases as the time period lengthens.
C It is infinite in the momentary time period.
D It is zero in the long run.

© UCLES 2021 9708/12/M/J/21

 3

6 The price elasticity of demand for a firm’s product is equal to one for all price changes.

What would be the result of this?

A A percentage increase in price will cause demand to fall by a larger percentage.

B A percentage increase in price will cause demand to increase by the same percentage.
C Quantity demanded will always be the same whatever the price.
D The firm’s revenue will always be the same whatever the price.

7 What leads to a downward shift of a normal supply curve?

A a rise in the cost of transporting goods

B a rise in the productivity of the labour force
C a rise in the rate of sales tax on the good
D a rise in the wage rate paid to workers

8 A market is in equilibrium with 100 units of the product sold at a price of US$10 each. The price
elasticity of supply for the product is +2.0 and the price elasticity of demand is –1.0.

What will be the state of the market if a minimum price of US$11 is imposed?

A an excess demand of 10 units

B an excess demand of 30 units
C an excess supply of 20 units
D an excess supply of 30 units

© UCLES 2021 9708/12/M/J/21 [Turn over

 4

9 The diagram shows the market for meat in equilibrium at X.

The cost of producing meat rises and there is a trend for consumers to change from meat to a
vegan (non-animal) diet.

What is the new market equilibrium?

S2
S1
price
B S3

X C
A

D
D3
D1
D2
O quantity

10 Goods X and Y are complements.

What will be the effect on the equilibrium price and quantity of good X of an increase in the supply
of good Y?

equilibrium equilibrium
price of X quantity of X

A decrease decrease
B decrease increase
C increase decrease
D increase increase

11 A private company achieves a producer surplus at the market equilibrium price.

What might reduce the size of the private company’s producer surplus?

A Private companies choose to prioritise profits over customer needs.

B Private companies start to pay dividends out of profits.
C The government fixes the price of electricity below the market price.
D The private company supply curve becomes more elastic.

© UCLES 2021 9708/12/M/J/21

 5

12 How would an economist establish the market demand curve for a private good?

A by adding consumer surplus to total expenditure

B by combining individual demand curves horizontally
C by combining the price elasticity of individual demands
D by multiplying price by quantity demanded

13 Knowledge of which combination of demand elasticities would be relevant to a firm trying to

increase its revenue?

price elasticity cross elasticity income elasticity

of demand of demand of demand

A
B
C
D

14 What will definitely stop, following the nationalisation of an industry?

A dividend payments to the industry’s shareholders

B job losses among the industry’s workforce
C price increases for the industry’s product
D the closure of unprofitable factories in the industry

© UCLES 2021 9708/12/M/J/21 [Turn over

 6

15 The diagram shows the effect of the government introducing a subsidy on a product.

price S1
(US$) S2
12
10
8

D
0 100 120
quantity
(million units)

What are the effects of the subsidy on government spending and consumer spending?

government spending consumer spending

A increases by US$240 million decreases by US$40 million

B increases by US$240 million decreases by US$200 million
C increases by US$480 million decreases by US$40 million
D increases by US$480 million decreases by US$200 million

16 In the diagram, S1 and D1 are the initial supply and demand curves of a product.

What would be the new supply curve following the removal of an ad valorem tax on the product?

A B S1
price C
D

D1
O quantity

© UCLES 2021 9708/12/M/J/21

 7

17 The table shows sources of government revenue in a fiscal year for an economy.

source of revenue $ billions

sale of government assets 100

tax on self employed 1000
carbon tax on goods produced 100
corporate taxes 500
capital gains tax 100
goods and services tax 1000
air passenger tax 100

What is the total amount, in $ billions, of tax revenue raised by indirect taxes?

A 1200 B 1300 C 1400 D 1600

18 Education from 4 to 16 years of age in most developed economies is provided at zero price,
financed from taxation.

Why should the government do this?

A In a free market, consumers have imperfect information so do not realise the full
personal benefit of education.
B In a free market, education is not considered to be a private good.
C In a free market, consumers will be unwilling to pay for education.
D In a free market, education is non-rival and non-excludable in consumption so zero
output would be produced.

19 What will cause a movement along an aggregate supply curve?

A a rise in the demand for exports

B a rise in the price of raw materials
C a rise in the productivity of labour
D a rise in the rate of sales tax

20 A government devalues its fixed exchange rate.

What is most likely to be its aim?

A to improve the terms of trade

B to increase the level of aggregate demand
C to reduce a current account surplus
D to reduce demand-pull inflation

© UCLES 2021 9708/12/M/J/21 [Turn over

 8

21 As part of its trade policy, a government subsidises the cost of machinery used to manufacture
goods for export.

How will this affect the balance of payments?

A decrease the deficit on the capital account

B decrease the deficit on the current account
C increase the deficit on the capital account
D increase the deficit on the current account

22 What is correct about the causes of inflation?

A Cost-push inflation can be caused by a rising exchange rate.

B Cost-push inflation can be caused by lower indirect taxes.
C Demand-pull inflation can be caused by a rising exchange rate.
D Demand-pull inflation can be caused by lower direct taxes.

23 The figures shown are from New Zealand’s balance of payments for 2017 according to data
published by Stats NZ in September 2018.

NZ$m

capital account balance 1300

current account balance –7000
financial account balance 7600
goods balance –3000
services balance 5000

What was the value of the balancing item (net errors and omissions) in NZ$m?

A –3900 B –2000 C –1900 D 5700

© UCLES 2021 9708/12/M/J/21

 9

24 Two statements are shown.

1 A country can produce a good at a lower opportunity cost than another country.
2 A country can produce a greater quantity of a good for the same quantity of inputs
than another country.

What do these two statements describe?

1 2

A absolute advantage comparative advantage

B absolute advantage the terms of trade
C comparative advantage absolute advantage
D the terms of trade comparative advantage

25 The diagram shows the effect of the introduction of a tariff on good X by country Y.

SX domestic
price of X
(US$)

20 SX world + tariff
10 SX world
DX domestic
0 80 100 170 200
quantity of X
(millions)

What is the revenue, in US$ million, received by producers of good X in country Y after the tariff
is introduced?

A 400 B 800 C 1000 D 2000

26 Between 2011 and 2013, retailers reported that expenditure on domestically-produced and
imported goods had reduced. This was because consumers did not take out loans as the
economy was in a recession.

What is the likely result of this?

A a decline in the deficit in the trade account

B a decline in the level of savings
C a decline in the terms of trade
D a decline in unemployment

© UCLES 2021 9708/12/M/J/21 [Turn over

 10

27 Increased international competition leads to a worsening in a country’s current account balance.

In the absence of any offsetting factors, how is this likely to affect the exchange rate and
domestic cost-push inflation?

cost-push
exchange rate
inflation

A appreciate decrease
B appreciate increase
C depreciate decrease
D depreciate increase

28 Why are higher interest rates together with increased taxation on expenditure likely to cause
domestic deflation?

A because the contractionary monetary policy will over-ride the expansionary fiscal policy
B because the monetary and fiscal policies involved will reinforce each other
C because the expansionary monetary policy will over-ride the contractionary fiscal policy
D because the monetary and fiscal policies involved will cancel each other out

29 Which policy aimed at correcting a balance of trade deficit is an expenditure-reducing policy?

A depreciation of the currency

B increased direct taxation
C tax incentives for exporters
D the imposition of protectionist tariffs

30 Which policy will not cause a reduction in the rate of inflation?

A increasing income tax

B reducing government spending
C reducing interest rates
D removing subsidies

© UCLES 2021 9708/12/M/J/21

 11

BLANK PAGE

© UCLES 2021 9708/12/M/J/21

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9708/12/M/J/21

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 Multiple Choice February/March 2021
1 hour

You must answer on the multiple choice answer sheet.

*0597888442*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 03_9708_12/4RP R
© UCLES 2021 [Turn over
 2

1 An American family is choosing between four holiday destinations in Europe, each at the same
price. The table shows the family’s order of preference for these holiday destinations.

holiday order of
destination preference

Barcelona 1st
London = 3rd
Paris 2nd
Venice = 3rd

If the family goes to Barcelona, what is the opportunity cost of this choice?

A Barcelona
B London and Venice
C Paris
D London, Paris and Venice

2 The diagram shows two production possibility curves for an economy.

services
N
L

M
K

O goods

Which combination of movements correctly illustrates these changes in production?

short-run long-run no
economic growth economic growth economic growth

A K to L L to M M to N
B K to L M to N L to M
C M to N K to L L to M
D M to N L to M K to L

© UCLES 2021 9708/12/F/M/21

 3

3 What distinguishes the very long run from the long run?

A the ability to change resource allocation

B the ability to change the state of technology
C the absence of government market intervention
D the existence of variable factors of production

4 Which statement is a positive statement?

A The distribution of income and wealth in most western European countries is unequal.
B The government ought to increase income tax on high earners.
C There should be more legal rights given to workers to protect their status in the workplace.
D Wages of those on low incomes should be increased.

5 What could not cause a shift in an individual’s demand curve for good Z?

A a change in advertising expenditure on Z

B a change in the individual’s income
C a change in the individual’s tastes
D a change in the price of Z

© UCLES 2021 9708/12/F/M/21 [Turn over

 4

6 The diagram shows the market for sugar which is initially in equilibrium at a price of OP.

S
price

R
P
P1 S U
T

D
P2
O L M N
quantity

A government then fixes a maximum price of OP1.

What will happen as a result?

A a reduction in farmers’ revenue equal to PRSP1

B expenditure on sugar will be equal to PRMO
C farmers’ revenue would be P1UNO
D producer surplus will be P1SP2

7 The table shows a competitive market in equilibrium in two periods.

market price
period quantity traded
(cents)

1 50 10 000
2 60 12 000

What could explain the change from period 1 to period 2?

A an increase in the price of a complement

B an increase in the price of a substitute
C the imposition of a minimum price of 60 cents by a government
D the imposition of an indirect tax on suppliers

© UCLES 2021 9708/12/F/M/21

 5

8 Which example of consumer behaviour would create consumer surplus?

A when a consumer does not spend all of her income each month
B when a consumer pays less than they are willing to pay for a good
C when a consumer throws away vegetables because they bought too much
D when a good is purchased in order to resell it at a higher price

9 A manufacturer reduces the price of its goods after developing a more efficient manufacturing
process. It makes leather belts that compete against belts made of artificial material.

What are the likely outcomes of the change in the manufacturing process?

supply of price of
leather belts artificial belts

A decreases decreases
B decreases increases
C increases decreases
D increases increases

10 What is the likely price elasticity of supply of highly perishable goods and goods that have low
stocks?

highly goods that

perishable have low
goods stocks

A elastic elastic
B elastic inelastic
C inelastic elastic
D inelastic inelastic

© UCLES 2021 9708/12/F/M/21 [Turn over

 6

11 The diagrams show the initial demand curve D1 and supply curve S1 for steel in the European
Union (EU). In 2018 European steel firms experienced rising energy prices.

Which diagram shows the likely impact of this?

A B

S1 S1
price price

D2 D1
D1 D2
O quantity O quantity

C D
S1 S2
price S2 price S1

D1 D1
O quantity O quantity

12 The market for wheat is in equilibrium at price P with supply at 40 million tonnes. Due to a
drought in the growing season, supply falls to 20 million tonnes.

S
price of
wheat P2
per tonne
P

P1
D
O 20 40 60
quantity of wheat
(million tonnes)

Which immediate action should be taken to maintain the equilibrium price of P?

A grant a subsidy to farmers equivalent to PP1

B impose an indirect tax equivalent to PP2
C plant more wheat to increase supplies to 40 million tonnes
D use existing stocks of wheat to increase supplies by 20 million tonnes

© UCLES 2021 9708/12/F/M/21

 7

13 What is used to calculate the price elasticity of demand?

change in price
A
change in quantity demanded

change in quantity demanded

B
change in price

percentage change in price

C
percentage change in quantity demanded

percentage change in quantity demanded

D
percentage change in price

14 After a series of poor harvests, a government imposes an effective maximum price on cereals.

What would be a consequence of this policy?

A Both rich and poor people would satisfy their demands equally.
B Illegal buying and selling through a black market would be prevented.
C Rationing would be necessary to ensure a fair distribution of cereals.
D The market would fail to clear leaving a surplus of cereals.

15 What would be a transfer payment?

A the payment made by a company to its shareholders out of its profits

B the payment made for a legal document to transfer ownership of a house
C the payment made to a retired person in the form of a pension
D the payment made to a professional sports team for the transfer of a player

16 The government redistributes income by raising the top rate of income tax and using the money
raised to finance additional benefits to students and the unemployed.

Under which conditions will total spending in the economy increase the most?

income elasticity income elasticity

of demand of top of demand of
rate income students and the
taxpayers unemployed

A >1 >1
B >1 <1
C <1 >1
D <1 <1

© UCLES 2021 9708/12/F/M/21 [Turn over

 8

17 A government wishes to increase the supply of houses. It pays a subsidy to brick manufacturers
to increase supplies of bricks to S2.

The diagram shows the supply of and demand for bricks.

price of S1
bricks
P1 S2

P2
P3

D1
O
quantity of bricks

Which size of subsidy per unit is required to increase supply to S2?

A OP3 B P1P2 C P1P3 D P2P3

18 Why is national defence provided by the government?

A In a free market it is excludable and rival in consumption.

B In a free market it is non-excludable and non-rival in consumption.
C The government has perfect information, so it can set the correct quantity required.
D The private sector firm would charge a high price for its use as it is a necessity.

19 Which statement about a rise in the general price level in a country is correct?

A It is likely to create economic winners and losers in the country.

B It is never acceptable to modern governments.
C It means that no goods have fallen in price.
D It must make the average citizen poorer.

20 A country’s terms of trade changed from 100 to 95.

What is most likely to have caused this change?

A a depreciation of the country’s currency

B a reduction in import tariffs
C a rise in the price of exported goods
D an improvement in the balance of trade

© UCLES 2021 9708/12/F/M/21

 9

21 A country replaces a floating exchange rate system with a managed floating exchange rate
system.

Which statement is correct?

A Its central bank would have to intervene more frequently in the foreign exchange market.
B Its central bank would need to hold fewer foreign currency reserves.
C The value of its currency would be determined by its major trading partners.
D The value of its currency would be determined by the value of the US dollar.

22 What will be the immediate effect of a devaluation of an economy’s foreign exchange rate?

A The price of imported goods in the domestic currency will fall.

B The price of imported goods in the domestic currency will rise.
C The price of imported goods in the foreign currency will fall.
D The price of imported goods in the foreign currency will rise.

23 A country has a deficit on the current account of its balance of payments.

What might help the country to reduce its deficit?

A a decrease in its rate of income tax

B a decrease in its tariffs
C an increase in its level of employment
D an increase in its subsidies to exporters

24 The diagram shows the effect of removing a tariff on imports of good X into country Y.

SX domestic
price of X
(US$)

20 SX world + tariff
10 SX world
DX domestic
0 8 10 17 20
quantity of X
(millions)

What is the volume, in million units, of the extra international trade created by removing the tariff?

A 3 B 5 C 10 D 12

© UCLES 2021 9708/12/F/M/21 [Turn over

 10

25 Which item should be recorded in the financial account of a country’s balance of payments?

A foreign aid by China to assist in infrastructure projects in African countries

B investments by Middle Eastern oil producing countries through the purchase of land and
property assets in Europe
C payments by the USA to other countries which house American military bases
D profits and dividends paid by multinational companies based in Indonesia to shareholders in
Asia

26 The table shows a country’s consumer prices index (CPI) for March and April 2018.

CPI

March 2018 151.3

April 2018 148.6

Which statement correctly describes what happened between these two months?

A There was a decrease in the annual rate of inflation.

B There was a decrease in real interest rates.
C There was an increase in the purchasing power of money.
D There was an increase in the standard of living.

27 The diagram shows the rate of inflation over time in four countries.

Which country has a rising real value of money over time?

A
inflation
rate
B

+ C
0
– time
D

© UCLES 2021 9708/12/F/M/21

 11

28 The table shows the consumer prices index (CPI) for an economy expressed as an index
number.

year CPI

2016 100
2017 103
2018 101
2019 97

Which action is the government most likely to take to achieve price stability?

A appreciate the exchange rate

B decrease the budget deficit
C increase the money supply
D increase the rate of interest

29 Other things being equal, what is most likely to be reduced by falling labour productivity?

A the balance of trade deficit

B the internal value of money
C the level of unemployment
D the rate of domestic inflation

30 A government spends money building more schools.

How might this be classified?

fiscal supply-side monetary

policy policy policy

A
B
C
D

© UCLES 2021 9708/12/F/M/21

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9708/12/F/M/21

 Cambridge International AS & A Level

ECONOMICS 9708/13
Paper 1 Multiple Choice October/November 2022
1 hour

You must answer on the multiple choice answer sheet.

*2400838335*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages.

IB22 11_9708_13/2RP
© UCLES 2022 [Turn over
 2

1 Which action would not raise the quality of the particular factor of production?

A capital – operating a machine continuously at full capacity

B enterprise – providing risk management advice
C land – increasing the use of fertilisers
D labour – making apprenticeships and training compulsory

2 During a period of deflation an economy’s aggregate monetary demand falls.

Which function of money explains this fall?

A a measure of value
B a medium of exchange
C a standard for deferred payment
D a store of value

3 What will usually result if production is divided into separate processes that are assigned to
different people?

lower output more repetitive

lower costs
per worker tasks

A no no no
B no yes yes
C yes no no
D yes yes yes

© UCLES 2022 9708/13/O/N/22

 3

4 The diagram shows a production possibility curve.

good Y

O
good X

Which combination is correct?

opportunity cost of opportunity cost of

producing more of producing more of
good Y good X

A decreases decreases
B decreases increases
C increases decreases
D increases increases

5 A government wishes to ensure adequate flood defences are provided in its coastal areas.

Which action is most likely to be undertaken only by the government?

A building the defences

B designing the defences
C financing the defences
D maintaining the defences

6 Consumer surplus exists in the market for rice.

What does this mean?

A Consumers benefit from rice production more than producers.

B Consumer demand for rice exceeds supply.
C Some consumers would be willing to pay more than the market price for rice.
D The production of rice exceeds the supply.

© UCLES 2022 9708/13/O/N/22 [Turn over

 4

7 The diagram shows the demand curve and supply curve for a product.

S
X
price

Y
W

O Z
quantity

Which area represents producer surplus?

A OWYZ minus OWY

B OWYZ minus OYZ
C OXYZ minus OYZ
D OXYZ minus WXY

8 The diagram shows the relationship between total expenditure and price for three products, 1, 2
and 3.

1
2
price

3
O
total expenditure

Which curves represent the products with price-elastic and unitary price-elastic demand?

elastic unitary

A 1 2
B 2 3
C 3 1
D 3 2

© UCLES 2022 9708/13/O/N/22

 5

9 What causes an inelastic market supply curve for an agricultural crop such as wheat?

A a government decision to import crops at times of shortage

B an efficient use of fertilisers causing crop production to rise
C the storage of excess production for future sale
D the very long time required to produce additional output

10 The diagrams show the effect of a change in the market for good X on the market for good Y.

S1 S2
S1
price price

D1 D2 D1
O quantity O quantity
good X good Y

What can be concluded about the goods?

A X and Y are complements.

B X and Y are in joint supply.
C X and Y are substitutes.
D Y is a derived demand from X.

© UCLES 2022 9708/13/O/N/22 [Turn over

 6

11 The final of a major sports event is held in a stadium which has a fixed capacity of 40 000 people.
The price for a seat is set at PF, but when the tickets go on sale all tickets are sold very quickly
with many disappointed people unable to buy a ticket.

Which diagram best represents this?

A B

S S
price price
PF

PF
D D

O O
40 000 40 000
quantity quantity

C D
S
S
PF
price price

PF
D D

O O
40 000 40 000
quantity quantity

12 Which product has the lowest price elasticity of demand?

quantity demanded
price rises by
falls by
(%)
(%)

A 0 10
B 5 5
C 10 5
D 10 0

© UCLES 2022 9708/13/O/N/22

 7

13 The market for a product is initially in equilibrium.

Which combination of changes will cause the price of the product to rise and the quantity sold
to fall?

A a decrease in demand that is larger than a decrease in supply

B a decrease in demand that is smaller than a decrease in supply
C an increase in demand that is larger than an increase in supply
D an increase in demand that is smaller than an increase in supply

14 The diagram shows two demand curves and two supply curves. The initial equilibrium is at H.

price

H K

O quantity

Which combinations of shifts in the demand and supply curves would result in a change in the
equilibrium position from H to K?

A an increase in demand and an increase in supply

B an increase in demand and a decrease in supply
C a decrease in demand and an increase in supply
D a decrease in demand and a decrease in supply

15 In 2009, the Australian Government made a payment of $900 to those who earned less than
$100 000 per year.

How would this payment best be described?

A neutral
B progressive
C proportional
D regressive

© UCLES 2022 9708/13/O/N/22 [Turn over

 8

16 The market for good Z is in equilibrium with 1000 units sold at a price of $10. The government
pays a subsidy of $2 per unit to producers of good Z.

Under which conditions will the total spending by the government on the subsidy be smallest?

price elasticity of price elasticity of

demand for good Z supply for good Z

A <1 <1
B <1 >1
C >1 <1
D >1 >1

17 If an industry is currently state-owned and state-run, what does not represent a reason for it
being privatised?

A Decisions will no longer be taken with political considerations in mind.

B The benefits of merit goods will be taken into account in decision-making.
C Its owners would have more incentive to make it operate profitably.
D There will be greater incentives for managers to introduce modern technology.

18 What does the incidence of an indirect tax on a product refer to?

A the proportion of the tax paid by the consumer relative to the producer
B the reduction in output as a result of the imposition of the tax
C the revenue the tax generates for the government
D the increase in the hidden economy as a result of tax evasion after the tax is imposed

© UCLES 2022 9708/13/O/N/22

 9

19 A government wishes to influence the price of a good. It introduces a maximum price, Pmax, and a
minimum price, Pmin.

The diagram shows these prices relative to the current market price P.

S
price

Pmax
Pmin
D

O quantity

What can be concluded from the diagram?

A Both the maximum and the minimum price will be effective.

B Only the maximum price will be effective.
C Only the minimum price will be effective.
D The market price will continue to operate.

20 A government removes the tariff on a product, as shown.

D domestic supply
price

P
P1 world supply with tariff
P2 world supply without tariff

S domestic demand

O V W X Y Z
quantity

What will be the change in domestic production?

A a reduction of W V
B a reduction of XV
C a reduction of XW
D a reduction of ZY

© UCLES 2022 9708/13/O/N/22 [Turn over

 10

21 An economy is initially in equilibrium.

Which combination of events will definitely cause an increase in the general price level of the
economy and a decrease in its real output?

aggregate short-run
demand aggregate supply

A decreases decreases
B decreases unchanged
C increases decreases
D unchanged decreases

22 The government of a country changes from a balanced budget to a budget deficit.

From which point along the country’s long-run aggregate supply curve (LRAS) will this change
cause the largest increase in employment without creating inflationary pressure?

LRAS
price
level

D
C
A B

O real output

23 The price and volume indexes of a country’s imports and exports are shown in the table, for
year 2 [year 1 = 100].

year 2 price index year 2 volume index

imports exports imports exports

110 121 90 80

What is the country’s terms of trade index for year 2?

A 90.9 B 97.8 C 110.0 D 111.0

© UCLES 2022 9708/13/O/N/22

 11

24 What is a certain outcome on an aggregate demand and aggregate supply diagram of an

increase in factor productivity?

A downward shift of the aggregate demand curve

B downward shift of the aggregate supply curve
C an upward shift of the aggregate demand curve
D an upward shift of the aggregate supply curve

25 Trade in services is a component of the current account of the balance of payments.

What is an example of a trade in services?

A development aid for foreign countries

B export revenue from primary commodities
C income from foreign tourists
D income from overseas investments

26 Which statement about changing price levels is correct?

A Anyone on a fixed income has rising real income during deflation.

B Government revenue from indirect taxes falls during inflation.
C Producers prefer deflation to inflation.
D Savers prefer index-linked savings when there is deflation rather than inflation.

27 What would be likely to decrease inflation in an economy?

A a decrease in consumer saving

B a decrease in unemployment
C an increase in labour productivity
D an increase in taxes on imports

28 Which change in economic circumstances is most likely to lead to a reduction in the rate of
domestic inflation in an economy?

A a depreciation in the currency

B a reduction in the productivity of labour
C a worldwide recession
D an increase in direct taxes to finance increased welfare payments

© UCLES 2022 9708/13/O/N/22 [Turn over

 12

29 A country is currently experiencing deflation. It has a large national debt that is greater than its
annual real income.

Which combination of policies is most likely to increase the general price level without adding to
the national debt?

fiscal policy monetary policy

A decrease the budget deficit decrease the money supply

B decrease the budget deficit increase the money supply
C increase the budget deficit decrease the money supply
D increase the budget deficit increase the money supply

30 Which government action will conflict with the named economic target?

target action

A lower price inflation lower exchange rate

B more consumer spending lower interest rates
C more equal incomes lower indirect tax rate
D reduced import levels smaller trade quotas

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/13/O/N/22

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 Multiple Choice October/November 2022
1 hour

You must answer on the multiple choice answer sheet.

*9806850293*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 11_9708_12/RP
© UCLES 2022 [Turn over
 2

1 What is a function of money?

A to act as a medium of exchange

B to be divisible into small units
C to enable bartering to take place
D to maintain its value when inflation is high

2 In a planned economy, what will determine the allocation of scarce resources?

A a mixture of private and central decision making

B the decisions of central government
C the forces of demand and supply
D the revenue generated from direct and indirect taxes

3 A key concept in classifying goods is whether a good is rival or non-rival.

Which good is rival in consumption?

A an ice cream
B street lighting
C a radio broadcast
D the internet

4 What is a normative statement?

A A firm receiving a government subsidy will increase the supply of a good.

B Negative externalities are the most serious market failure.
C A rise in incomes will lead to a rise in demand for normal goods.
D A rise in the additional rate of income tax will decrease the incentive to work.

© UCLES 2022 9708/12/O/N/22

 3

5 The diagram shows an economy’s production possibility curve (PPC). The economy has moved
from X to Y.

capital Y
goods P

X
Q

O R S
consumer goods

What can be deduced from the diagram?

A Current living standards have fallen.

B The economy has become more efficient.
C There has been a rise in unemployment.
D There has been an opportunity cost of OR consumer goods.

6 An indirect tax is imposed on a product, causing total expenditure by consumers to increase.

Which row identifies this situation?

price
price
elasticity

A decreases elastic
B decreases inelastic
C increases elastic
D increases inelastic

7 The price elasticity of the supply of yoghurt is +1.5.

If the demand for yoghurt rises and price rises by 20%, how much more will be supplied to the
market?

A 0.3% B 3.0% C 13.3% D 30%

© UCLES 2022 9708/12/O/N/22 [Turn over

 4

8 The diagram shows the market demand for and supply of a good.

D1 S1
price
U V
P1

W
P2

Y X
P3
D1
S1
O
quantity

Which statement is not valid?

A At price OP1, UV represents the market surplus.

B At price OP3, P3X represents the quantity that consumers are able and willing to buy.
C If price were to fall from OP1 to OP3, the extra quantity demanded would be equal to the extra
quantity supplied.
D Price OP2 is the market equilibrium price.

9 The diagram shows two linear supply curves labelled S1 and S2, where S2 is a 45 line.

S1
S2
price

O quantity

Which statement about the price elasticity of supply is correct?

A The price elasticity of supply is different at every point along both S1 and S2.
B The price elasticity of supply of S1 is elastic and S2 is unit elastic.
C The price elasticity of supply of S1 is inelastic and S2 is unit elastic.
D The price elasticity of supply is unit elastic at every point along both S1 and S2.

© UCLES 2022 9708/12/O/N/22

 5

10 A country has health care provided by the free market. This is replaced by the government
provision of Sg free health care.

D Sg
price $
S
1

p
2

3 4
5
O quantity

What is the change in consumer surplus?

A from 1 to (1 + 2)
B from 1 to (1 + 2 + 3 + 4)
C from (1 + 2) to (1 + 2 + 3)
D from (1 + 2) to (2 + 3 + 4 + 5)

11 What is an example of a product in joint demand with a smartphone?

A an alternative brand of smartphone

B a personal computer (PC)
C headphones that can be used with a smartphone
D the metals used in the manufacture of a smartphone

12 A product has a high price elasticity of supply.

What might explain this?

A It has a high opportunity cost.

B It has a non-perishable nature.
C It is classed as an inferior good.
D It is classed as a luxury good.

© UCLES 2022 9708/12/O/N/22 [Turn over

 6

13 What is likely to affect the position of the demand curve for tickets to pop concerts but not the
position of the supply curve?

A a change in incomes of potential customers

B a change in price of tickets to the concerts
C a change in rents charged by venue owners
D a change in seating capacity of concert venues

14 The table shows Lee’s and Yim’s price elasticity of demand for restaurant meals and cinema
tickets.

Lee Yim

restaurant meals –1.2 –0.8

cinema tickets –0.7 –0.3

There is a rise in the price of both products.

What can definitely be concluded after these price changes?

A Restaurant owners will receive more income.

B Lee will spend more money on both products.
C Yim will spend more money on both products.
D Cinema owners will receive less income.

15 A government fixes a maximum price for a product in order to increase its consumption.

What would be the likely outcome of such a policy?

A Consumption will fall if the maximum price is above the current equilibrium price.
B Consumption will rise if the maximum price is below the current equilibrium price.
C Production will fall if the maximum price is above the current equilibrium price.
D Production will fall if the maximum price is below the current equilibrium price.

© UCLES 2022 9708/12/O/N/22

 7

16 The diagram shows demand and supply curves for a good. S1 is the original supply curve, S2 is
supply after a tax is added.

S2

16
price S1
($)
8
6
D
0
0 20 28
quantity

How much tax revenue is earned by the government?

A $40 B $160 C $200 D $320

17 What is a transfer payment?

A the advertising expenditure of a firm

B the allowance given by a parent to their child while at school
C the rent paid to a land owner by a tenant farmer
D the wage paid to a worker in the government service

18 What best illustrates the process of privatisation?

A a single private shareholder acquires complete control of an organisation

B the purchase of government bonds by private sector commercial organisations
C the purchase of shares in a private company
D the transfer of public sector assets to the private sector

19 What defines a progressive tax?

A Low-income earners pay the same proportion of income in taxes as high-income earners.
B Low-income earners pay a lower proportion of income in taxes than high-income earners.
C Low-income earners pay less in taxes than high-income earners.
D Low-income earners pay more in taxes than high-income earners.

© UCLES 2022 9708/12/O/N/22 [Turn over

 8

20 An increase in what will shift the aggregate demand curve in an economy to the right?

A budget deficit
B consumer savings
C general price level
D interest rate

21 Which effect of inflation is described as redistributive?

A the improvement in the terms of trade

B the deterioration in the balance of trade
C the inconvenience of frequently changing prices
D the loss of purchasing power for people on fixed incomes

22 In which situation will a country’s terms of trade improve?

A Its total value of imports rises less than its total value of exports.
B Its volume of imports rises less than its volume of exports.
C The prices of its imports rise by less than the prices of its exports.
D The value of its external payments rises by less than the value of its external receipts.

23 Country X joins a customs union with country Y and will remove the tariff on its imports of good M
from country Y.

Under which conditions will trade creation in country X be the largest?

existing size of price elasticity

country X’s tariff on of demand for
imports of good M good M in country X

A large –0.8
B large –1.4
C small –0.8
D small –1.4

24 What is likely to happen if there is a fall in the international value of a country’s currency?

A a rise in the foreign currency price of its exports

B a rise in the volume of its exports
C a fall in the domestic currency price of its imports
D a fall in the domestic price level

© UCLES 2022 9708/12/O/N/22

 9

25 From the same quantity of factors of production, country X and country Y each produce the
following units of output.

country sugar textiles

X 30 20
Y 40 10

Which statement is correct?

A Country X has absolute advantage in the production of both goods.

B Country X has comparative advantage in the production of sugar.
C Country Y has absolute advantage in the production of textiles.
D Country Y has comparative advantage in the production of sugar.

26 Following a 10% depreciation in the $ value of the £ sterling, a UK exporter leaves the $ price of
the goods it sells in the US market unchanged.

Other things being equal, what will be the effect on the revenue measured in sterling obtained by
the manufacturer from its sales in the US?

A It will increase.
B It will decrease.
C It will be unchanged.
D It will depend on the elasticity of demand for the manufacturer’s good in the US.

© UCLES 2022 9708/12/O/N/22 [Turn over

 10

27 The diagram shows the effect of introducing a tariff on a product.

price domestic supply

P2 world supply plus tariff

P1 world supply

domestic demand

O quantity

What determines the producer surplus that the tariff generates for domestic producers?

A the price elasticities of domestic supply and demand

B the tariff rate and the price elasticities of both domestic demand and supply
C the tariff rate and the price elasticity of domestic demand
D the tariff rate and the price elasticity of domestic supply

28 Which government policy is most likely to cause expenditure switching that will benefit a country’s
current account?

A increasing import quotas

B increasing income tax allowances
C increasing spending on unemployment benefits
D increasing subsidies to domestic firms

29 Which type of economic policy is likely to be considered the most effective by a government that
has greater income equality as its primary aim?

A fiscal policy
B international trade policy
C monetary policy
D supply side policy

© UCLES 2022 9708/12/O/N/22

 11

30 The diagram shows four possible aggregate supply curves and an equilibrium point X. A
government employs deflationary fiscal policy in order to reduce the rate of inflation in its
economy. This shifts aggregate demand to AD2.

With which AS curve would this policy be most effective?

A B
C
price D
level

AD1
AD2
O
national income

© UCLES 2022 9708/12/O/N/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/12/O/N/22

 Cambridge International AS & A Level

ECONOMICS 9708/11
Paper 1 Multiple Choice October/November 2022
1 hour

You must answer on the multiple choice answer sheet.

*6155352026*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 16 pages. Any blank pages are indicated.

IB22 11_9708_11/2RP
© UCLES 2022 [Turn over
 2

1 An economy is changing from a planned economy to a market economy.

Which action would be expected during this change?

A the replacement of fiscal policy by monetary policy

B the replacement of multinational companies by national companies
C the replacement of nationalisation by privatisation
D the replacement of private property rights by common ownership

2 A local council provides a tap for drinking water in a town.

Would this make drinking water a free good?

A No, because it is possible to exclude some people from using the tap.
B No, because it requires the use of scarce resources.
C Yes, because it is available to all passers-by.
D Yes, because it is impossible to charge for it.

3 Food prices in a country increased by 20% in three months due to an infectious virus.

Which statement about the cause of this rise in food prices is normative?

A Consumers were scared of running out of food.

B Farm workers demanded higher wages to cover extra hours worked.
C Supply of foreign food was reduced because of closed borders.
D Transport costs increased by 10%.

4 A doctor has very long working hours and a high level of stress. She can become a teacher
instead of continuing as a doctor.

What is the opportunity cost of choosing to continue as a doctor?

A the risk of mistakes caused by tiredness

B the possible costs of illness caused by high stress levels
C the potential salary as a teacher
D the retraining costs of becoming a teacher

© UCLES 2022 9708/11/O/N/22

 3

5 When will the demand curve for motorcycles shift to the left?

A when the price of cars falls

B when the price of motorcycles falls
C when the tax on motorcycles rises
D when the price of public transport rises

6 The diagram shows the demand curve for housing.

price

O
quantity

What is not assumed to remain constant when drawing this curve?

A consumer incomes
B expectations about future house prices
C the price of houses
D the rate of interest charged on loans for house purchase

7 Which statement defines the price elasticity of supply?

A It is a measure of how the price of a good responds to a change in the quantity supplied.
B It is a measure of how the quantity supplied of a good responds to a change in its price.
C It is a measure of how the supply of a good responds to a change in its cost of production.
D It is a measure of how the supply of good X responds to a change in the price of good Y.

8 Which products are likely to have a positive cross-elasticity of demand with tea?

A biscuits and cakes

B coffee and hot chocolate
C cups and saucers
D sugar and milk

© UCLES 2022 9708/11/O/N/22 [Turn over

 4

9 What does not cause a shift in the supply curve of cars?

A a change in the car producers’ costs of production

B a change in the price of fuel used by car owners
C a change in the rate of sales tax on cars
D a change in the wage rate of workers in the car industry

10 The diagram shows the market for pineapples. X is the original equilibrium point. Pineapple
producers benefit from improved technology. At the same time, a new diet book suggests that
eating pineapples helps weight loss.

Which point is the new equilibrium?

price
S2
A S1
B S3
X
C
D

D2 D1 D3
O quantity of
pineapples

© UCLES 2022 9708/11/O/N/22

 5

11 The diagram shows the impact of a fall in the price of oil that will lead to a fall in energy costs for
many manufacturers.

S1
price
S2
L
J
M
K
G

H
D1
O E F
quantity

What will be the impact of this change on consumer and producer surplus?

consumer producer
surplus surplus

A falls falls
B falls rises
C rises falls
D rises rises

12 When is the supply curve for a car manufacturing firm most likely to be price elastic?

A when the firm finds it difficult to recruit new labour

B when the firm has a large quantity of stock
C when the firm is operating in the short run
D when the firm is operating near to full capacity

© UCLES 2022 9708/11/O/N/22 [Turn over

 6

13 The diagram shows the market for electric steel-plated switches used in new houses.

S1
price
Y

D2

D1

O quantity

What could not have caused the market equilibrium position to have changed from X to Y?

A increasing the availability of loans for buying houses

B granting a subsidy for producers of bricks
C removing sales tax on electric switches
D removing tariffs on imports of wood

14 In mixed economies, what explains why the provision of certain goods and services will remain
under government control?

A The market system fails to provide public goods.

B Management ideas are hampered by excessive bureaucracy.
C Ownership of companies depends on the ease of buying shares.
D The profit motive tends to improve efficiency in organisations.

© UCLES 2022 9708/11/O/N/22

 7

15 The diagram shows the percentages of those on low pay and those on extremely low pay in a
country from 1976 to 2012. A national minimum wage was introduced in 1999.

25
% low paid
20

15 introduction of
minimum wage
10
extremely low paid
5

0
1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
year

Which conclusion is consistent with the diagram?

A The minimum wage helped the low paid more than the extremely low paid.
B The minimum wage reduced the numbers of both low paid and extremely low paid.
C The minimum wage reversed the trend in low pay of the previous 20 years.
D The minimum wage was responsible for the largest reduction of low pay in the period.

16 The government has decided to guarantee manufacturers a price OPa for a product and to
provide a subsidy to ensure that the market clears.

In the diagram, QePe was the original equilibrium before the policy changes.

S
U
price Pa W
V
Pe X
Pb Y
Z
D

O Qe Qa
quantity

Which area represents the total cost to the government of this subsidy?

A PaUZPb B PaWYPb C PeXYPb D VWYZ

© UCLES 2022 9708/11/O/N/22 [Turn over

 8

17 A concert arena has a fixed capacity that allows it to sell 10 000 tickets for a concert. The current
equilibrium price for a ticket is $10. The owners of the arena decide to set a minimum price for a
ticket.

Under which conditions will there be the most unsold tickets?

minimum ticket price elasticity of

price ($) demand for tickets

A 11 inelastic
B 11 elastic
C 12 inelastic
D 12 elastic

18 A government announces its intention to reduce the level of transfer payments in the economy.

Which statement made by the government is consistent with this intention?

A There need to be more incentives for unemployed workers to seek jobs.

B State pensions need to be increased.
C The level of income tax needs to be raised.
D The level of government expenditure needs to be increased.

19 Assuming the demand for oil is price-inelastic, what will be the effect on demand-pull inflation and
on cost-push inflation in an oil-importing country of an increase in the world price of oil?

effect on demand-pull effect on cost-push

inflation inflation

A increase increase
B increase reduce
C reduce increase
D reduce reduce

© UCLES 2022 9708/11/O/N/22

 9

20 Assume the Chinese monetary authorities are committed to maintaining the exchange rate of
China’s currency, the Yuan, against the US$ between P1 and P2 on the diagram.

S1
price of Yuan
(in US$) S2
P2

P1

D
O
quantity of Yuan

What might they do if supply changed from S1 to S2?

A introduce controls on Chinese investment overseas

B lower interest rates
C remove tariffs on imports from USA
D sell Yuan on the foreign exchange markets

21 The diagram shows the demand and supply curves for solar panels in the US. In 2018, the US
put a tariff on imported solar panels.

price of
solar domestic supply
panels

Pt world supply and tariff

Pe world supply

domestic demand
O M N X P R
quantity of solar panels

What is the quantity of imported solar panels after the imposition of the tariff?

A MN B MX C NP D XP

© UCLES 2022 9708/11/O/N/22 [Turn over

 10

22 The diagrams show initial equilibrium positions at Y1P1.

Which diagram reflects the impact on an economy of higher unit wage costs and an improvement
in the balance of trade?

A B

SRAS2 SRAS2
price price
level level
SRAS1 P2 SRAS1
P2
P1
AD1 AD2
P1
AD2 AD12
O Y2 Y1 O Y2 Y1
real real
GDP GDP

C D

SRAS1 SRAS1
price price
SRAS2
level level
P1 SRAS2
P1
P2

AD2 AD1
P2
AD1
AD2 AD2
O Y1 Y2 O Y1 Y2
real real
GDP GDP

© UCLES 2022 9708/11/O/N/22

 11

23 The table shows information from the current account of the balance of payments for Canada and
Singapore in 2019.

Canada Singapore
(US$ million) (US$ million)

exports of goods 448 360 440 800

imports of goods 462 105 342 805
exports of services 100 350 204 810
imports of services 115 270 119 050
primary income balance –3 475 –34 340
secondary income balance –2 060 –6 280

What can be concluded from the table?

A Canada exported more goods than Singapore.

B Canada and Singapore had current account deficits.
C Singapore had a surplus on its trade in goods and services.
D Singapore imported cheaper goods than Canada.

24 What is a measure of a country’s terms of trade index?

price index of exports

A × 100
price index of imports

price index of imports

B × 100
price index of exports

total value of exports

C × 100
total value of imports

D total value of exports – total value of imports

25 What is likely to cause an increase in the exchange rate of an economy?

A an increase in demand-pull inflation

B an increase in national income
C a decision of the central bank to raise money supply
D a discovery of a natural resource that replaces imports

© UCLES 2022 9708/11/O/N/22 [Turn over

 12

26 What is likely to explain an increase in the deficit on a country’s current account of the balance of
payments?

A an increase in government foreign aid to countries abroad

B an increase in government tax rates
C an increase in other countries’ exchange rates
D an increase in the proportion of income saved by the country’s residents

27 What does the Marshall–Lerner condition state must be present for a depreciation of a currency
to cause an improvement in the current account balance?

A The price elasticity of demand for exports and the price elasticity of demand for imports are
both greater than one.
B The price elasticity of demand for exports and the price elasticity of demand for imports are
both less than one.
C The sum of the price elasticity of demand for exports and the price elasticity of demand for
imports is greater than one.
D The sum of the price elasticity of demand for exports and the price elasticity of demand for
imports is less than one.

28 To encourage people to work, a government increases the minimum income level at which
people start to pay income tax.

Which types of macroeconomic policy are being followed?

fiscal monetary supply side

policy policy policy

A
B
C
D

29 Raising interest rates is proposed to reduce a balance of payments deficit.

Which justification for this action is not valid?

A It will attract more foreign currency inflows.

B It will encourage exporters to find new foreign markets.
C It will lower the level of imported consumer goods.
D It will put downward pressure on the exchange rate.

© UCLES 2022 9708/11/O/N/22

 13

30 Which combination of changes is most likely to result in a fall in a country’s inflation rate?

exchange interest money

rate rate supply

A lower higher higher

B higher higher lower
C higher lower lower
D lower lower higher

© UCLES 2022 9708/11/O/N/22

 14

BLANK PAGE

© UCLES 2022 9708/11/O/N/22

 15

BLANK PAGE

© UCLES 2022 9708/11/O/N/22

 16

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/11/O/N/22

 Cambridge International AS & A Level

ECONOMICS 9708/14
Paper 1 Multiple Choice May/June 2022
1 hour

You must answer on the multiple choice answer sheet.

*5350687585*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_9708_14/FP
© UCLES 2022 [Turn over
 2

1 What will result from a government’s decision to allow health care to be provided entirely by
market forces?

A There will be a reduction in the provision of a public good.

B All consumers will receive better health care.
C Market failure will be eliminated in the health care market.
D The health care market will reach an equilibrium.

2 A farmer with a fixed area of land grows two crops, wheat and barley. Some land used for barley
is flooded and cannot be used. The farmer then starts to plant genetically modified (GM) wheat
that produces wheat more efficiently on the land that is not flooded.

Which diagram shows the most likely effect of these changes on the farmer’s production
possibility curve (PPC) as it moves from XX to YY?

A B

wheat wheat
output X output X

Y Y

Y X X Y
O barley output O barley output

C D

Y Y
wheat wheat
output X output X

Y X X Y
O barley output O barley output

3 What would make online payment methods less acceptable as a medium of exchange?

A a fee charged for use of the online payment service

B both high and low priced goods can be paid for using the online service
C payments can be made at any time of day and night
D the online payment service can be accessed through a smartphone

© UCLES 2022 9708/14/M/J/22

 3

4 Professional gardeners now use power tools instead of hand tools to maintain their customers’
gardens.

What can be concluded from this information?

A Capital has replaced all labour for maintaining gardens.

B Gardening has become more labour-intensive.
C Land has become more productive.
D New technology has been introduced.

5 Goods X and Y are complements and have upward-sloping supply curves.

What will be the effect on the equilibrium price and quantity of good X of an increase in the supply
of good Y?

price of X quantity of X

A decrease decrease
B increase decrease
C decrease increase
D increase increase

6 A change in which factor will be least likely to alter a consumer’s ability to pay for a product?

A a consumer’s income
B a consumer’s tastes
C a change in the price of the product
D a fall in the tax on goods and services

7 What is likely to decrease the price elasticity of supply (PES) of a product?

A an increase in advertising the product

B an increase in the firm's ability to substitute capital for labour
C an increase in the time during which the product can be stored
D an increase in the time required to produce the product

© UCLES 2022 9708/14/M/J/22 [Turn over

 4

8 SX, SY and SZ are the supply curves of goods X, Y and Z.

SX SY SZ
10
price
($)

0 2.5 5 10 20
quantity supplied

If the price of all three goods rises from $5 to $10, what are their price elasticity of supply values?

good X good Y good Z

A equal to 1 equal to 1 equal to 1

B equal to 1 greater than 1 greater than 1
C less than 1 equal to 1 greater than 1
D less than 1 greater than 1 greater than 1

9 Each day there are hundreds of airline flights.

Which combination would make the demand for flights most price-inelastic?

distance of purpose of income of

flight flight traveller

A long business high

B long leisure low
C short business low
D short leisure high

© UCLES 2022 9708/14/M/J/22

 5

10 The diagram shows the demand for and supply of tickets for a music festival.

X S
price of
tickets
P1 X1
P2 X2

O Q1 Q2
quantity
(thousands)

If tickets are priced at P1, it is anticipated that demand will be Q1. There is a discount for those
that buy tickets in the first hour, who will pay P2. All tickets are sold in the first hour.

Which area on the diagram shows how much consumer surplus was increased by buying the
tickets in the first hour?

A P2X2Q2O B P1X1Q1O C P1X1X2P2 D XX1Q1O

11 The price elasticity of demand for a high-quality smartphone is elastic. The price of the
smartphone decreases.

Which combination describes the impact of a fall in the smartphone’s price on the quantity
demanded and total revenue?

quantity demanded total revenue

A rises by a greater percentage than the price fall falls

B rises by a greater percentage than the price fall rises
C rises by a smaller percentage than the price fall falls
D rises by a smaller percentage than the price fall rises

© UCLES 2022 9708/14/M/J/22 [Turn over

 6

12 When the price of good X rises, total spending on good X rises, but the demand for good Y falls.

What can be concluded about good X and good Y?

cross-elasticity of
price elasticity of demand for good Y
demand for good X with respect to the
price of good X

A >1 >0
B >1 <0
C <1 >0
D <1 <0

13 In the diagram, D1 and S1 represent the demand for and supply of luxury watches. Equilibrium is
initially at point X.

The cost of raw materials for manufacturing watches rises. At the same time, the incomes of the
rich increase.

Which point on the diagram is most likely to represent the new equilibrium?

S2
B
price S1
A
S3
X C

D D3

D1
D2
O
quantity

14 Money is paid by the government to an unemployed worker in the form of a benefit.

Why is this called a transfer payment?

A The payment comes from taxes paid by employed workers.

B The payment comes from government savings, not current income.
C The payment is made without the production of goods and services taking place.
D The payment must be spent as directed by the government.

© UCLES 2022 9708/14/M/J/22

 7

15 What would be a valid objection to the government provision of goods and services?

A There will be an increase in consumer sovereignty.

B Only the private sector can provide merit goods.
C Tax rates and tax income are likely to fall.
D Investment in the private sector might be reduced.

16 What will be the result of a subsidy that is given to the producers of a good with an inelastic
demand curve?

A The equilibrium price of the good will fall by a larger percentage than the fall in equilibrium
quantity.
B The equilibrium price of the good will fall by a larger percentage than the rise in equilibrium
quantity.
C The equilibrium price of the good will fall by a smaller percentage than the fall in equilibrium
quantity.
D The equilibrium price of the good will fall by a smaller percentage than the rise in equilibrium
quantity.

17 The market for good X is in equilibrium. A government then introduces an effective minimum
price on good X.

What will decrease as a result of this minimum price?

A the excess supply of the product

B the market price of the product
C the quantity of the product supplied
D the size of the consumer surplus

18 A government introduces taxes on company profits. A 5% tax rate is levied on all profits up to the
first $10 000 and a 10% rate is levied on all profits above $10 000.

How would these taxes be described?

up to $10 000 above $10 000

A progressive progressive
B progressive proportional
C proportional progressive
D proportional proportional

© UCLES 2022 9708/14/M/J/22 [Turn over

 8

19 Which change will not affect the balance of payments current account?

A a rise in export and import prices

B a rise in foreign aid flows
C a rise in international exchange rates
D a rise in foreign direct investment

20 Which statement correctly describes how an import quota works?

A It is a ban on the import of demerit goods.

B It imposes strict product regulations on imports.
C It is a unit tax that raises the price of imported goods.
D It limits the quantity of certain imported goods.

21 Country X conducts 60% of its trade with country Y and 40% of its trade with country Z. The initial
value of the trade-weighted exchange rate index of country X is 100.

What will be its new trade-weighted exchange rate index value if its currency falls in value by
20% against the currency of country Y and rises by 10% against the currency of country Z?

A 84 B 90 C 92 D 116

22 The diagram shows a freely floating foreign exchange market in the United Kingdom (UK) for the
demand and supply of pounds sterling (£) in exchange for United States (US) dollars ($).

S£ 1
$ per £ S£ 2

D£
O quantity of £

What could cause the downward shift shown?

A UK interest rate falls below US interest rate.

B The demand for UK exports is price-elastic and prices increase.
C The demand for US exports is price-elastic and prices decrease.
D People believe that sterling will appreciate.

© UCLES 2022 9708/14/M/J/22

 9

23 What is a likely consequence of inflation?

A Fixed-income earners gain more than those whose income is gained from the ownership of
property.
B Real wages rise more than money wages.
C The assets of creditors decrease in value at the expense of those of debtors.
D The domestic purchasing power of money increases.

24 The diagram shows an aggregate demand (AD) and an aggregate supply (AS) curve.

AS
price
level

AD

O national
output

There is a sustained rise in the prices of imported raw materials on which the economy depends.

Assuming AD remains independent of AS, what are the most likely effects on the economy?

AS price level

A decreases falls
B increases falls
C decreases rises
D increases rises

25 The currency of country X has a floating exchange rate against other currencies.

Under which circumstances will the value of country X’s currency fluctuate the most against other
currencies on the foreign exchange market?

price elasticity of price elasticity of

demand for the supply for the
currency of country X currency of country X

A elastic elastic
B inelastic elastic
C elastic inelastic
D inelastic inelastic

© UCLES 2022 9708/14/M/J/22 [Turn over

 10

26 A country has a floating exchange rate.

An increase in which variable in the country will cause its currency to appreciate?

A the budget deficit

B the general price level
C the interest rate
D the trade deficit

27 What is an accurate statement about possible causes and/or consequences of a worsening in a

country’s terms of trade?

A It will result from a fall in the demand for its exports.

B It will result from an increase in consumers’ incomes in its major trading partners.
C It will result in a decrease in interest rates by its major trading partners.
D It will result in an improvement in its balance of trade.

28 An economy has a balance of payments surplus, which it wishes to eliminate.

In order to achieve this objective, which combination of policies would be most appropriate?

A a depreciation of the currency and an increase in government spending

B an appreciation of the currency and a cut in interest rates
C an increase in the money supply and a pay freeze
D increases in both direct and indirect taxation

29 What would be increased by an expansionary fiscal policy?

A budget deficit
B exchange rate
C money supply
D rate of direct taxation

© UCLES 2022 9708/14/M/J/22

 11

30 A government decides to borrow from the general public in order to finance its extra spending on
apprenticeship training schemes.

Which types of macroeconomic policy are being used?

fiscal monetary supply side

A
B
C
D

© UCLES 2022 9708/14/M/J/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/14/M/J/22

 Cambridge International AS & A Level

ECONOMICS 9708/13
Paper 1 Multiple Choice May/June 2022
1 hour

You must answer on the multiple choice answer sheet.

*8426086671*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_9708_13/2RP
© UCLES 2022 [Turn over
 2

1 Which statement about money is correct?

A Deflation reduces the internal purchasing power of money.

B Most financial assets are more liquid than physical assets.
C When money acts as a medium of exchange, it requires a double coincidence of wants.
D When money acts as a store of value, it must be unlimited in supply.

2 The table shows the amount of direct taxes that different households in the UK paid in
2017–2018.

bottom second middle fourth

top 20% of
20% of 20% of 20% of 20% of
households
households households households households

average
15 300 25 000 34 600 47 600 90 600
income (£)
direct tax
2 000 3 500 6 000 9 500 21 200
paid (£)

Which positive economic statement can be made from the table?

A Direct tax is unfair on the richer households in the UK.

B Direct tax in the UK is a proportional tax.
C Poorer households do not pay enough direct tax in the UK.
D Rich households pay more direct tax than poor households in the UK.

3 What does opportunity cost measure?

A the benefits of a good compared with the next choice

B the benefits given up by not consuming the next best alternative
C the costs of any good not chosen
D the financial costs of consuming a good

4 Which term assumes the existence of ‘qualities, knowledge and skills’ that allow an individual to
be more productive?

A enterprise investment
B human capital
C mechanisation
D specialisation

© UCLES 2022 9708/13/M/J/22

 3

5 The diagrams relate to the markets for four different products.

In which market would a 10% decrease in demand and simultaneously a 10% increase in supply
definitely result in both a fall in equilibrium price and a rise in equilibrium quantity?

A B

S
S
price price

D
D
O quantity O quantity

C D

D
S
price price

D
O quantity O quantity

6 The supply of a new drug to relieve muscle pain is very inelastic over a short period of time. The
supply of printed newspapers is much more elastic over the same time period.

What could explain the difference in elasticity of supply of the drug and printed newspapers in this
time period?

new drug printed newspapers

A cost per unit is low cost per unit is high

B discovery is by chance takes longer to produce
C research and development essential excess capacity in printing
D similar products available similar products unavailable

7 Which change would cause the supply curve of sugar-sweetened drinks to shift to the right?

A a fall in the price of sugar

B a removal of a subsidy on sugar
C an increase in consumer income
D an increase of a specific tax on sugar

© UCLES 2022 9708/13/M/J/22 [Turn over

 4

8 The demand for tablets increases, while the cost of producing them decreases.

What will be the effect on the price of tablets and on the quantity supplied?

price quantity

A fall uncertain
B rise increase
C uncertain increase
D uncertain uncertain

9 What is necessary to achieve the best allocation of resources using the price mechanism?

A Producers can maximise their collective interest.

B Consumers and producers must have perfect knowledge.
C The government must be able to apply maximum and minimum prices.
D The value of the price elasticity of supply must be greater than one.

10 Goods X, Y and Z all have downward-sloping demand curves and upward-sloping supply curves.
Good X is in joint supply with good Y and in joint demand with good Z.

There is an increase in the demand for good X.

What will happen to the prices and sales of goods Y and Z?

good Y good Z
price sales price sales

A fall fall rise rise

B fall rise rise rise
C rise fall fall rise
D rise rise fall fall

11 What is meant by consumer surplus?

A It is the amount by which the price consumers are willing to pay exceeds the market price.
B It is the difference between the price consumers are willing to pay and the price producers
are willing to supply.
C It is the discount firms offer to the consumers for buying goods in bulk.
D It is the excess of quantity demanded of a product over its quantity supplied at a given price.

© UCLES 2022 9708/13/M/J/22

 5

12 What does the assumption ‘ceteris paribus’ mean when economists analyse the way in which the
quantity demanded of a good changes?

A Changes in quantity demanded can cause changes in any of the other variables.
B Consumer preferences are always assumed to remain unchanged.
C Only one variable is assumed to change while the others remain the same.
D Several variables change simultaneously.

13 The diagram shows the demand curve for a normal product.

price
W

X
demand

Z
O quantity

Which two points indicate a move from a price inelastic point to a less price inelastic point?

A W to X B X to W C Y to Z D Z to Y

14 The diagram shows the effect on the market for rice of a change in government policy that
causes a shift in the supply curve from S1 to S2.

price S1
S2

L
K

J M

D
O quantity

What does the area JKLM represent?

A the cost to the government of a subsidy to rice growers

B the extra saving to importers of the removal of a tariff on rice
C the increase in consumer surplus from the introduction of a maximum price for rice
D the loss in government revenue from the reduction in a lump sum tax on rice

© UCLES 2022 9708/13/M/J/22 [Turn over

 6

15 The table shows four categories of government expenditure over two time periods.

period 1 period 2
category
($000) ($000)

building of new roads 200 350

welfare benefits 600 450
pay of armed forces 500 550
state pensions 1100 1350

By how much had transfer payments changed between periods 1 and 2?

A 0 B +100 C +150 D +300

16 Which type of tax used in different countries is a direct tax?

A corporation tax in India that is imposed on the profits of companies

B import duties in Brazil that are imposed on imported goods
C specific tax in South Africa imposed on the purchase of cigarettes
D stamp duty in Malaysia that is the tax on the purchase of a residential property

17 A government imposes a maximum price on medical face masks, below the market equilibrium.

What is the most likely effect of this?

A Some consumers will be unable to buy face masks at the maximum price.
B Firms will produce more masks to meet the excess demand at the maximum price.
C Poorer consumers will be able to obtain all the masks they need at the maximum price.
D The market will clear at the maximum price.

18 What is not a producer subsidy?

A a grant given to cover losses in an essential industry, such as the rail industry
B a guaranteed minimum price paid to farmers to ensure the long run supply of food
C financial assistance given to a pharmaceutical company to develop a new vaccine
D a payment made to the unemployed to allow them to buy essential goods and services

© UCLES 2022 9708/13/M/J/22

 7

19 The diagram shows an aggregate demand (AD) curve.

AD
O X

What is measured on the horizontal (X) axis and the vertical (Y) axis?

horizontal axis X vertical axis Y

A money national output real disposable income

B price level real GDP

C real GDP price level
D real disposable income money national output

20 What could explain an improvement in the terms of trade for a country?

A an increase in tariffs on imports

B a decrease in the volume of imports sold
C an increase in the prices of exports
D a decrease in the volume of exports sold

21 What is a correct description of an aggregate demand (AD) curve?

A It is a curve obtained by adding the market demand curves of all consumer goods traded in
an economy.
B It is a curve determined by the horizontal summation of all individual consumer demand
curves for a product.
C It is a curve that shows the total amount of goods and services firms are willing to buy at a
given price in an economy.
D It is a curve that shows the total demand of all goods and services produced at all price
levels in an economy.

© UCLES 2022 9708/13/M/J/22 [Turn over

 8

22 The data in the table is extracted from the Singapore Balance of Payments for 2019.

$m

goods balance +134 000

services balance +8 000
capital and financial account (net) +95 000
balancing item –3 000

What was the value ($m) of the trade balance on the current account in 2019?

A 126 000 B 142 000 C 234 000 D 237 000

23 A household’s income increased by 3%. Over the same period, the rate of inflation was also 3%.

Which statement is correct?

A Both the nominal income of the household and the real income of the household increased
by 3%.
B The nominal income of the household remained unchanged while the real income of the
household increased by 3%.
C The nominal income of the household increased by 3% while the real income of the
household remained unchanged.
D The nominal income of the household increased by 3% while the real income of the
household increased by 6%.

24 A country operates a fixed exchange rate.

There is a major fall of international confidence in its government’s economic policies.

What is likely to be the result?

A a fall in its foreign exchange rate

B a fall in its foreign exchange reserves
C a rise in its capital inflows
D a rise in its terms of trade

© UCLES 2022 9708/13/M/J/22

 9

25 In 2018, the inflation rate in Argentina was over 100%.

Which combination correctly identifies the winners and losers during this period?

winners losers
A firms selling goods households paying back
abroad loans
B firms unable to decrease firms paying back loans on
real wages fixed monthly repayments
C individuals with a high amount households that hold most
of debt at a fixed rate of interest of their assets in cash
D workers on fixed the retired on fixed
wage contracts incomes

26 The diagram shows the aggregate demand (AD) and aggregate supply (AS) for a country. The
initial equilibrium is at point E.

The sum of the price elasticities of demand for imports and exports for this country exceeds one.

A devaluation of the country’s exchange rate will cause aggregate demand to change.

What will be the new equilibrium?

AS
price
level
A B

D C

AD

O real output

27 In 2000, Japan was Asia’s largest exporter of electrical components, but by 2018 it was ranked
8th.

What might explain this change?

A Japan has a lower opportunity cost in electrical component production than its Asian
competitors.
B Japan has experienced greater deflation than its Asian competitors.
C Japan has imposed tariffs on the import of electrical components from its Asian competitors.
D The Japanese Yen has appreciated against the currencies of its Asian competitors.

© UCLES 2022 9708/13/M/J/22 [Turn over

 10

28 Which measure to correct a balance of payments current account deficit would be classified as
an expenditure-reducing policy?

A a reduction in interest rates

B a revaluation of the currency
C an increase in direct taxes
D an introduction of foreign exchange controls

29 The diagram shows the AD / AS curves for an economy.

AS1
price
level AS2
X Y

AD2

AD1

O real GDP

Which government action is most likely to cause the equilibrium position to move from X to Y?

A an increase in the exchange rate that makes locally produced goods less price-competitive,
both at home and abroad
B an increase in government spending on infrastructure that increases the production potential
of the economy
C an increase in interest rates that increases the cost of borrowing
D an increase in real wages of labour

30 A country is suffering from severe deflation.

What is most likely to prevent the deflation from worsening?

A increasing income tax to help reduce the government’s budget deficit

B increasing interest rates to encourage more saving
C increasing transfer payments to reduce inequality of income
D revaluing the currency to bring in more revenue from exports

© UCLES 2022 9708/13/M/J/22

 11

BLANK PAGE

© UCLES 2022 9708/13/M/J/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/13/M/J/22

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 Multiple Choice May/June 2022
1 hour

You must answer on the multiple choice answer sheet.

*0915082597*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_9708_12/2RP
© UCLES 2022 [Turn over
 2

1 Which list has the most words that are more likely to relate to a positive statement than to a
normative statement?

A describe, better, should, value, emotion

B bias, objective, ought, opinion, tastes
C contestable, is, motive, subjective, moral
D actual, ethics, fact, was, testable

2 What is the main characteristic of a planned economy?

A All goods and services are produced by privately-owned firms.

B All goods and services are produced by state-owned firms.
C Privately-owned firms produce private goods and state-owned firms produce public goods.
D The price mechanism allocates scarce resources through the actions of buyers and sellers.

3 An economy produces combinations of computers and food as shown on the diagram of a

production possibility curve (PPC).

computers W
Y

Z
X

O food

If all available resources were used, which two points on the PPC diagram show the maximum
combinations of computers and food that the economy can produce?

A W and X B X and Y C Y and Z D Z and W

4 Four students have to complete a table showing the functions of money.

Which student is correct?

medium of store of unit of

exchange value account

A
B
C
D

© UCLES 2022 9708/12/M/J/22

 3

5 In which situation is the price elasticity of supply for a product most likely to be relatively low?

A Demand for the product comes from a wide range of customers.

B Producers in closely related industries can easily switch to making the product.
C Manufacture of the product requires highly skilled labour.
D The main raw material used in the production of the product is in abundant supply.

6 The diagram shows supply and demand for a good.

price S
A
P2
B H
E
P1
F
C
G D
D
O quantity

If price increases from P1 to P2, what will happen to consumer surplus?

A It falls from ABE to A.

B It falls from CDFG to BCD.
C It increases from CF to BCEF.
D It increases from CF to BCEFH.

7 What can be concluded about the roles of demand and supply in a free market?

A They allocate resources to the greatest needs.

B They ensure that goods and services are distributed equally.
C They are both significant in setting the market price.
D They ensure that everyone can benefit from the good or service provided.

© UCLES 2022 9708/12/M/J/22 [Turn over

 4

8 A firm has a successful advertising campaign for a good.

Which combination shows the impact on demand or supply and the associated reason?

A a leftward shift in the good’s demand curve, as increased advertising cost raises the price of
the product and reduces its demand
B a rightward shift in the good’s supply curve, as the advertising cost of the firm increases
C a rightward shift in the good’s demand curve, as successful advertising increases demand
D a leftward shift in the good’s supply curve, as successful advertising enables firms to sell
more

9 What would be the most likely reason for a firm’s decision to calculate the price elasticity of
demand for its product?

A to provide retail statistics for the government

B to predict the change in its total revenue after it raises prices
C to calculate the firm’s competitive position
D to enable the firm to complete consumer satisfaction surveys

10 The cross-elasticity of demand of good S with respect to the price of good P is +1.5.
The cross-elasticity of demand of good S with respect to the price of good R is –1.5.
The cross-elasticity of demand of good P with respect to the price of good R is –1.5.

What can be concluded about goods P, R and S?

A S and P are complements; P and R are substitutes.

B S and P are complements; R is an inferior good.
C S and P are substitutes; P and R are complements.
D S and P are substitutes; R is an inferior good.

11 Which combination of events is most likely to leave the demand curve for a normal good in the
same position?

A a decrease in consumer incomes and an increase in the price of a substitute good

B a decrease in consumer incomes and an increase in the price of the good
C an increase in consumer incomes and an increase in the price of a substitute good
D an increase in consumer incomes and an increase in the price of the good

© UCLES 2022 9708/12/M/J/22

 5

12 What does not happen when price acts as a means to allocate resources?

A Price determines the supply of public goods.

B Price operates in the markets for both goods and factors of production.
C Price recognises consumers’ ability to pay rather than consumers’ needs.
D Price signals to producers which goods are most profitable.

13 Which statement about market disequilibrium is correct?

A Price is likely to change.

B Supply is equal to demand.
C The government must intervene.
D There must be shortages.

14 Which combination of tax changes is most likely to be regressive in a developed economy?

A increasing the rate of wealth tax and raising the rate of sales tax (VAT) on luxury products
B introducing a tax on owning property based on its sales value and increasing the rate of
income tax
C reducing the basic rate of income tax and increasing the duty on fuel
D removing the tax-free allowance for income tax and extending sales tax (VAT) to include all
food

15 The demand and supply functions for a product are quantity demanded = 1500 + 50P and
quantity supplied = 300P – 2000 where P = price. With government regulation, the current price
in the market is $15.

What can be concluded about the form of price regulation and the balance of demand and supply
in the market?

form of price regulation balance of demand and supply

A effective maximum price excess demand

B effective maximum price excess supply
C effective minimum price excess demand
D effective minimum price excess supply

© UCLES 2022 9708/12/M/J/22 [Turn over

 6

16 To improve the air quality for its citizens, a government introduces a subsidy for the producers of
cars powered by batteries charged from the electricity supply.

What are the likely effects of this subsidy on the price and sales of electricity?

price of electricity sales of electricity

A falls falls
B falls rises
C rises falls
D rises rises

17 What is definitely not involved when a transfer payment is made?

A bank deposits
B cash
C government
D production

18 What is unlikely to occur with an increase in the provision of public goods?

A consumer non-excludability
B improved use of resources
C opportunity cost
D reduction in tax

19 In 2020, shops reported a fall in sales as domestic demand in an economy fell. However, the
impact on the overall economy was not as unfavourable as was first feared.

What might have lessened the impact on the economy?

A Exports increased.
B Imports increased.
C Savings increased.
D Taxes increased.

© UCLES 2022 9708/12/M/J/22

 7

20 What does a trade-weighted exchange rate attempt to take account of?

A a country’s terms of trade

B international trade as a proportion of a country’s national income
C the relative value of international trade done with a country’s trading partners
D the size of a country’s current account surplus or deficit

21 What will lead to an improvement in the terms of trade?

A Export prices fall by 10% and import prices fall by 5%.

B Export prices fall by 10% and import prices rise by 5%.
C Export prices rise by 5% and import prices rise by 10%.
D Export prices rise by 10% and import prices rise by 5%.

22 The diagram shows the annual inflation rate in an economy.

the rate of 3
inflation (%) 2
1
0
–1
–2
2012 2013 2014 2015 2016 2017 2018
year

What can be deduced from the graph?

A The price of goods and services fell between 2013 and 2014.
B Disinflation took place between 2014 and 2015.
C The purchasing power of money increased between 2014 and 2015.
D The cost of living fell from 2016 onwards.

© UCLES 2022 9708/12/M/J/22 [Turn over

 8

23 A country operates a fixed exchange rate system.

What will put pressure on the country to devalue its currency?

A a decrease in the country’s inflation rate relative to the inflation rates of other countries
B a decrease in the tariffs on its products imposed by other countries
C an increase in its current account balance of payments deficit with other countries
D an increase in the country’s interest rate relative to the interest rates of other countries

24 The table gives different combinations of possible values for a country’s price elasticity of
demand for exports and price elasticity of demand for its imports.

Following the devaluation of the country’s currency, under which combination of elasticities would
the country’s balance of payments on the current account worsen?

price elasticity of price elasticity of

demand for exports demand for imports

A 0.3 0.3
B 0.2 0.9
C 0.6 0.5
D 1.2 1.2

25 A small country imposes no tariffs and has a perfectly elastic supply of smartphones from the rest
of the world.

Which statement is correct after the imposition of a tariff?

A The domestic demand for smartphones will rise.

B The domestic price of smartphones will rise.
C The government will lose tax revenue.
D The supply of imports will increase.

26 In a recent year, Japanese car manufacturers agreed to limit exports of cars to the USA.

Which form of protectionism is this?

A an embargo
B an export subsidy
C a quota
D voluntary export restraint

© UCLES 2022 9708/12/M/J/22

 9

27 The diagram shows a shift in a country’s short-run aggregate supply curve from SRAS1 to SRAS2.
The country imports oil.

price SRAS2
level
SRAS1

O real output

Why might an increase in the world price of oil have caused this shift?

A A rise in inflation is expected.

B Consumers face a fall in their disposable income.
C Domestic firms’ costs have increased.
D The government reduces tax on oil and petroleum products.

28 What, if decreased, will help to reduce the rate of inflation?

A budget deficit
B direct taxes
C exchange rate
D interest rate

29 What is an example of contractionary fiscal policy?

A an increase in the budget deficit

B an increase in the budget surplus
C an increase in the interest rate
D an increase in the money supply

30 A country with low unemployment and a managed floating exchange rate has a persistent current
account deficit on its balance of payments.

Which policy to reduce this deficit is most likely to keep unemployment low, but cause inflation?

A depreciating its currency

B higher direct taxation
C higher import tariffs
D higher interest rates

© UCLES 2022 9708/12/M/J/22

 10

BLANK PAGE

© UCLES 2022 9708/12/M/J/22

 11

BLANK PAGE

© UCLES 2022 9708/12/M/J/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/12/M/J/22

 Cambridge International AS & A Level

ECONOMICS 9708/11
Paper 1 Multiple Choice May/June 2022
1 hour

You must answer on the multiple choice answer sheet.

*9758226846*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_9708_11/RP
© UCLES 2022 [Turn over
 2

1 The diagram shows a production possibility curve for an economy that is producing at point P.

150
good Y P
100

50

0
0 50 100 150
good X

Which quantity of X is given up to produce the quantity of Y shown?

A 40 B 50 C 100 D 110

2 The Indian government operates a pension scheme.

Which statement about this scheme would be classed as normative?

A To be eligible, individuals must be above the age of 60 and live below the poverty line.
B In January 2020, eligible individuals aged over 70 received 500 rupees per month.
C In 2018, the Supreme Court said the government must review pension payments because
they are unrealistic.
D In January 2020, the Indian government announced that it might increase the payment to
1000 rupees per month.

3 Economics students have to fill in the gaps in the following passage.

‘The three basic questions arising from the economic problem of scarcity are ......1...... to
produce, ......2...... to produce, and ......3...... to produce.’

Which combination is correct?

1 2 3

A how when where

B how where for whom
C what how for whom
D what when where

© UCLES 2022 9708/11/M/J/22

 3

4 What is not a function of money?

A It is a medium of exchange.
B It is a store of value.
C It is a unit of account.
D It is a measure of satisfaction.

5 The producer of a good with a price-elastic demand observes that a rise in its price is
accompanied by a rise in total revenue.

What might explain this?

A The good is an inferior good.

B The rise in price was due to an increase in demand for the good.
C The supply of the good was inadequate to meet the demand.
D The supply of the good was price-inelastic.

6 What will increase the producer surplus of farmers that grow carrots?

A a decrease in the demand for carrots

B a decrease in the price of carrot seed
C a decrease in the price of cabbage
D a decrease in the subsidy on carrots

© UCLES 2022 9708/11/M/J/22 [Turn over

 4

7 A popular band is due to perform at a music concert in a venue that has a 5000-seat capacity.
Recent appearances and the release of a new album have made the band even more popular. D1
and S represent the original demand and supply curves for concert tickets and D2 the new
demand curve.

Which diagram best represents the likely outcome on the market for concert tickets?

A B
S D1 D2
S
price price
D2
D1

O 5000 O 5000
quantity quantity

C D
D1 D2 S D1 D2
price price

O 5000 O 5000
quantity quantity

8 Why does an individual’s demand curve generally slope downwards to the right?

A The additional satisfaction an individual gets from consuming most goods decreases as
consumption increases.
B The additional satisfaction an individual gets from consumption decreases as income rises.
C The individual has finite income which is used to attempt to satisfy many wants.
D For most goods the price charged by producers falls as the quantity purchased increases.

9 What is price elasticity of supply?

A the change in the quantity supplied when a price changes

B the change in the quantity supplied when demand changes
C the comparison of the proportionate change in supply to the proportionate change in demand
D the comparison of the proportionate change in supply to the proportionate change in price

© UCLES 2022 9708/11/M/J/22

 5

10 What is necessary for consumer surplus to be zero?

A Demand is perfectly elastic.

B Demand is perfectly inelastic.
C Supply is perfectly elastic.
D Supply is perfectly inelastic.

11 When will the price mechanism not function as a system for allocating goods?

A when the government bans advertising

B when the government maintains an effective maximum price
C when there is a limited supply of the good
D when there is a powerful company able to set the market price

12 The price of a product is above the market equilibrium price.

Which combination of changes is certain to result as the market adjusts towards equilibrium?

quantity demanded quantity supplied

A falls falls
B falls rises
C rises falls
D rises rises

13 What can be concluded about a good with a positive cross-price elasticity of demand?

A Its price will be sensitive to changes in prices of close substitutes.

B Its price will be sensitive to changes in quantity demanded of close substitutes.
C The quantity demanded for this good will be sensitive to changes in prices of close substitutes.
D The quantity demanded for this good will be sensitive to changes in quantity demanded of
close substitutes.

© UCLES 2022 9708/11/M/J/22 [Turn over

 6

14 Which row shows the effect of the maximum and minimum prices described in the headings of
the table?

maximum price maximum price minimum price

above below above
equilibrium price equilibrium price equilibrium price

A excess demand no effect no effect

B excess supply no effect no effect
C no effect excess demand excess supply
D no effect excess supply excess demand

15 A government decides to introduce tolls (charges) to drive on all major roads.

What is most likely to happen to the number of journeys made on major roads and on minor
roads?

journeys on journeys on
major roads minor roads

A reduce increase
B reduce no change
C no change increase
D no change no change

16 The table shows data from a bus company that was privatised in 2013.

passenger journeys
revenue
year percentage change
$000
from previous year (%)

2012 470 +5
2013 495 +2
2014 430 –2
2015 440 –1

What is the most likely conclusion that can be made from the data?

A Average prices were higher in 2012 than 2015.

B Average prices were higher in 2015 than 2014.
C The number of passenger journeys remained the same since privatisation.
D Profits have increased since privatisation.

© UCLES 2022 9708/11/M/J/22

 7

17 The diagram shows the market for electricity in a country that has a fixed supply of electricity and
introduces a maximum price to make it affordable for poorer households.

price of
electricity

market price

maximum price

D
O
quantity of electricity

What will be the effect of this?

A It will encourage producers to build more power stations in the future.

B It will encourage the development of renewable sources of electricity.
C It will increase producer surplus.
D It will increase the probability of power cuts.

18 What is an example of a transfer payment?

A government spending on hospitals

B government spending on motorways
C minimum wage
D welfare benefits

19 Turkey can produce a good but also imports some of the good from Egypt. The Turkish currency
depreciates against the Egyptian currency.

How is this most likely to affect production of this good in Egypt and in Turkey?

production in Egypt production in Turkey

A decrease decrease
B decrease increase
C increase decrease
D increase increase

© UCLES 2022 9708/11/M/J/22 [Turn over

 8

20 The table shows a country’s total output and its average price in each of three years.

output price
year
(millions) ($)

1 10 20
2 12 24
3 13 26

What can be concluded about output?

A Nominal output and real output increased at the same rate.

B Nominal output rose at a faster rate than real output.
C Nominal output rose at an increasing rate.
D Real output rose at a constant rate.

21 The diagram shows the change in the supply curve of imports, S–S1 to curve S–S2, after the
introduction by the government of a trade protection measure.

S2
price of
imports

S
S1

O quantity of imports

What is the form of protection?

A an ad valorem tariff
B an embargo
C a quota
D a specific tariff

© UCLES 2022 9708/11/M/J/22

 9

22 The aggregate demand (AD) and aggregate supply (AS) diagram shows an economy in
equilibrium at X.

In this economy, a severe shortage of raw materials causes a large rise in their price.

The effect of this change is shown by a move to which point?

AD3 AS2
AD1
general AD2 AS1
price level
C
B
D
A X

O
real national income

23 Why might a country’s government impose a tax on fuel exports?

A to encourage domestic refineries to increase production

B to improve the country’s trade balance
C to reduce fuel prices for domestic consumers
D to reduce the government’s budget surplus

24 What leads to a fall in a country’s terms of trade?

A a fall in the price of exports relative to the price of imports

B a fall in the price of imports relative to the price of exports
C a fall in the quantity of exports relative to the quantity of imports
D a fall in the quantity of imports relative to the quantity of exports

© UCLES 2022 9708/11/M/J/22 [Turn over

 10

25 The diagram has three lines that show the values of an economy’s exports, imports and trade
balance between 2011 and 2019.

$m

+ 1
2
3
0
–
2011 2015 2019
year

How should the lines be labelled?

line 1 line 2 line 3

A exports imports trade balance

B exports trade balance imports
C imports exports trade balance
D imports trade balance exports

26 What would be the best policy to increase the value of a currency?

A Impose tariffs on imported goods with price-inelastic demand.

B Increase interest rates.
C Reduce income tax.
D Sell the currency on the foreign exchange markets.

27 The central bank of an economy decides to raise interest rates in order to attract capital inflows
and improve the financial account of the balance of payments.

When is the central bank’s decision least likely to be effective?

A when the currency of the economy is expected to lose its value

B when the economy is politically and economically stable
C when the interest rate of the economy is higher than that of other countries
D when the reserves of foreign currencies held by the central bank are high and rising

© UCLES 2022 9708/11/M/J/22

 11

28 What could be described as an expansionary fiscal policy?

A a decrease in the budget deficit

B a decrease in the budget surplus
C a decrease in the exchange rate
D a decrease in the money supply

29 Why will a contractionary monetary policy reduce inflation?

A Banks will lend more.

B Consumers will have higher disposable income.
C Consumers will pay more tax.
D Consumers will save more.

30 The government of a country is worried about a large deficit on the current account of its balance
of payments and an increasing rate of inflation. The country has a fixed exchange rate for its
currency.

Which policy measure is most likely to help the government to reduce the current account deficit
and lower the rate of inflation?

A devaluation of the currency

B increasing government spending
C decreasing the direct taxes
D increasing the interest rate

© UCLES 2022 9708/11/M/J/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/11/M/J/22

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 Multiple Choice February/March 2022
1 hour

You must answer on the multiple choice answer sheet.

*8368177164*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages.

IB22 03_9708_12/2RP
© UCLES 2022 [Turn over
 2

1 A production possibility curve shows the combinations of outputs an economy can produce using
all available resources.

At which points on the diagram are all available resources used?

food
(units) 20 W
Z

Y
X

0 25
manufactures
(units)

A W and X only
B W, X and Z only
C W, X, Y and Z
D Z and Y only

2 What is a normative economic action based on?

A fact
B market forces
C opinion
D price changes

3 Which function of money overcomes the double coincidence of wants problem that exists in a
barter system?

A medium of exchange
B standard of deferred payment
C store of value
D unit of account

© UCLES 2022 9708/12/F/M/22

 3

4 The production possibility curves (PPCs) show the abilities of four economies to produce wheat
and rice.

Which PPC has the lowest opportunity cost for producing wheat?

6
wheat
(tonnes)
4

1 A B C D

0 40 80 120
rice (tonnes)

5 The diagram shows a supply curve for chicken.

price

O quantity

What explains why the supply curve for chicken slopes upwards?

A An increase in the demand for chicken will bring about a rise in supply.
B Farmers’ productivity rises as the price rises.
C Increased production leads to a reduction in costs.
D The cost of additional chicken production rises as output increases.

© UCLES 2022 9708/12/F/M/22 [Turn over

 4

6 The diagram shows the demand and supply curves for cars in India. The initial equilibrium is at X.

What will be the new equilibrium if there is a subsidy given to Indian car manufacturers and there
is also an increase in the price of train and bus journeys in India?

price S2
S1
A S3

X
D B
C

D1 D3
D2
O
quantity

7 Demand curves are drawn ceteris paribus.

Which ‘other things’ are not required to remain the same when an individual’s demand curve for
ice cream is constructed?

A the consumer’s income

B the consumer’s tastes and preferences
C the price of fresh fruit
D the price of ice cream

8 What is the measure of cross-elasticity of demand for good X in terms of good Y?

A the change in the demand for X divided by the change in the price of Y
B the change in the price of X divided by the change in the demand for Y
C the percentage change in the demand for X divided by the percentage change in the price
of Y
D the percentage change in the demand for Y divided by the percentage change in the price
of X

9 When will the price mechanism be least likely to reallocate resources to meet a change in
consumer preferences?

A when the government removes all price controls

B when the new preferences are for more public goods
C when the supply of factors of production is limited
D when there is a redistribution of income

© UCLES 2022 9708/12/F/M/22

 5

10 A firm estimates that the price elasticity of supply of its product is +1.5.

What does this indicate?

A The firm has available stock.

B The firm has no excess capacity.
C The firm operates in a competitive market.
D The firm raises its price by 10% and its total revenue increases by 15%.

11 A rise in the price of a good is accompanied by an increase in the quantity demanded.

What could explain this?

A Consumers spend a high proportion of disposable income on the good.

B The price of a complementary good has also increased.
C The price of the good is taken to be an indication of the level of quality.
D The substitute goods are all very much more expensive.

12 What causes the demand curve for an inferior good to shift to the right?

A a decrease in consumer incomes

B a decrease in income tax
C a decrease in the price of a substitute good
D a decrease in the price of the good

© UCLES 2022 9708/12/F/M/22 [Turn over

 6

13 The diagrams show the effect of a change in the market for good X on the market for good Y.

S1
price S2 price S1

D2
D1
D1
O quantity O quantity
good X good Y

What is the most likely relationship between the two goods?

A X and Y are complements.

B X and Y are demerit goods.
C X and Y are in joint supply.
D X and Y are substitutes.

14 To improve its financial position, a government decided to reduce expenditure on investment in

the public sector. There was not a fall in economic growth.

What was the most likely effect of the government’s action?

A An original budget deficit was reduced.

B An original budget surplus was reduced.
C Consumer expenditure decreased.
D Public sector productivity decreased.

15 What are the effects of a government imposing a maximum price below the equilibrium price?

demand supply

A falls falls
B falls rises
C rises falls
D rises rises

© UCLES 2022 9708/12/F/M/22

 7

16 The National Library Board of Singapore is a public sector organisation that finances and
manages the state libraries.

What is the most likely reason for this?

A Libraries are public goods.

B Libraries are merit goods.
C The cost of providing library services would be greater in the private sector.
D The opportunity cost to the public sector of providing library services is zero.

17 Three types of tax are listed.

 a sales tax (VAT) on fuel

 a specific tax of 10% on cigarettes

 the percentage of income tax on individual earnings increases as taxable income

increases

Which combination describes the effect of each of these types of tax?

VAT specific tax income tax

A progressive progressive regressive

B progressive regressive progressive
C regressive progressive regressive
D regressive regressive progressive

© UCLES 2022 9708/12/F/M/22 [Turn over

 8

18 The bus fare in a rural area is $5 per journey. The government decides to improve local transport
by giving bus firms a subsidy of $2 per journey. The diagram shows the possible changes in
demand and supply.

S
S
bus fare per 7 S
journey ($)
6
5
4
3
2 D
1 D
D
0
950 1050
quantity of
journeys per week

What is the new quantity of journeys and the bus fare for a journey?

quantity of bus fare

journeys ($)

A 950 3
B 950 7
C 1050 4
D 1050 6

© UCLES 2022 9708/12/F/M/22

 9

19 The diagram shows the annual consumer prices index for Japan over the years 1990–2010
inclusive.

5
consumer 4
prices 3
index (%) 2
1
0
–1
–2
–3
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

year

In which period did Japan experience both inflation at a rate of approximately 2% and deflation at
a rate of approximately 2.5%?

A 1992–1994 B 1996–1998 C 2006–2008 D 2008–2010

20 A government removes its quota on imported laptops.

Assuming a normal demand curve and upward-sloping supply curve for laptops, what are the
likely effects on domestic laptop manufacturers?

change in price change in income

received by domestic received by domestic
manufacturers manufacturers

A decrease decrease
B increase increase
C decrease uncertain
D increase uncertain

21 The terms of trade index for Mauritius fell from 111.2 in the first quarter of 2018 to 106.1 in the
second quarter.

Which combination could have produced this outcome?

export prices import prices

A rose fell
B rose rose
C rose unchanged
D unchanged fell

© UCLES 2022 9708/12/F/M/22 [Turn over

 10

22 From the initial position of equilibrium shown, there is an increase in government expenditure on
goods and services and simultaneously an increase in the costs of production of goods and
services.

full employment
price AS
level

AD

O real output

What best describes the likely impact on the economy?

equilibrium level equilibrium level

of national income of prices

A falls uncertain
B no change no change
C rises rises
D uncertain rises

23 The diagram shows a shift in an economy’s aggregate demand curve from AD1 to AD2.

general
price
level

AD2
AD1
O real output

What could not be a cause of the shift?

A a decrease in income tax

B a decrease in the price of goods
C an increase in money wage rates
D an increase in the money supply

© UCLES 2022 9708/12/F/M/22

 11

24 Which item is not included in the current account on the balance of payments statement?

A the balancing item

B the export of services
C the import of goods
D the interest received from investment overseas

25 The prices of a country’s exports rise by 5% while the prices of its imports fall by 5%.

What will definitely improve in the country as a result of these changes?

A balance of trade
B current account balance
C exchange rate
D terms of trade

26 What is not a form of protectionism?

A embargoes
B increase in sales tax (VAT)
C subsidies on goods for export
D voluntary export restraints

27 Two countries, X and Y, produce food and drink. The table shows how many hours it takes them
to produce one unit of each.

food drink

X 10 2
Y 20 12

What will be the result if country Y doubles its productivity in the output of drink and both
countries produce only one good according to comparative advantage?

A X will continue to produce drink.

B Y will produce drink instead of food.
C World drink production will rise.
D World food production will fall.

© UCLES 2022 9708/12/F/M/22 [Turn over

 12

28 ‘Reducing the exchange rate helps to decrease a country’s balance of payments deficit because
it makes imports more expensive and exports cheaper.’

What does this statement describe?

A a deflationary policy
B a policy of direct controls
C an expenditure-reducing policy
D an expenditure-switching policy

29 An increase in which variable is a contractionary monetary policy?

A the budget deficit

B the budget surplus
C the interest rate
D the money supply

30 What are government monetary policies that would be the most effective in a global recession?

A allowing the rate of interest to fluctuate and increasing business taxation

B increasing the budget surplus and raising tariffs on imports
C keeping the rate of interest very low and increasing the money supply
D raising the rate of interest and restricting the money supply

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/12/F/M/22

 Cambridge International AS & A Level

ECONOMICS 9708/13
Paper 1 AS Level Multiple Choice October/November 2023
1 hour

You must answer on the multiple choice answer sheet.

*1048207279*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 11_9708_13/5RP
© UCLES 2023 [Turn over
 2

1 A factory introduces an automated production line to take advantage of division of labour.

What is most likely to increase?

A average cost of production

B job satisfaction of workers
C range of skills of each worker
D worker productivity

2 Consumers do not use enough of a product to maximise their private benefit because they have
imperfect information about the product.

How would an economist classify this product?

A demerit good
B free good
C merit good
D public good

3 The table shows different combinations of rings and bracelets that can be produced by Luke and
Zoe in the same time period.

Luke Zoe
rings bracelets rings bracelets

18 0 20 0
12 6 16 8
6 12 12 16
0 18 8 24

Which statement is not correct?

A Luke has a larger opportunity cost than Zoe for making bracelets.
B The opportunity cost of producing rings is constant for both Luke and Zoe.
C Zoe should specialise in making rings.
D Zoe’s opportunity cost for each bracelet is 2 rings.

© UCLES 2023 9708/13/O/N/23

 3

4 What is an example of a free good?

A a government sponsoring a free vaccination programme for its citizens

B a hospital providing free treatment to the poor
C a school providing free education to outstanding students
D anything that provides free utility but is not scarce

5 The diagram shows the market for computers in Pakistan.

W supply
price

Y
X

demand
O Z
quantity

Which areas represent consumer surplus and consumer expenditure?

consumer consumer
surplus expenditure

A WXY OXY
B WXY OXYZ
C WYO OXYZ
D WYO OYZ

6 The supply curve for a firm is a horizontal straight line.

What can be concluded from this statement?

A Quantity supplied is infinite at the given price.

B Quantity supplied is infinite below the given price.
C Quantity supplied remains constant at all prices.
D Quantity supplied is perfectly inelastic.

© UCLES 2023 9708/13/O/N/23 [Turn over

 4

7 When the incomes of consumers of good X fall by 5%, under which conditions will the demand
curve shift furthest to the right?

income elasticity of
nature of good X
demand for good X

A inferior good –0.8

B inferior good –1.2
C normal good +0.9
D normal good +1.5

8 Good P and good Q are substitutes. There is a decrease in supply of good P because of a
shortage of materials.

Which row describes what will happen to demand?

good P good Q

A contraction extension
B contraction shift to right
C shift to left shift to left
D shift to left shift to right

9 The pressure to reduce the use of fossil fuels has led to oil companies reducing the level of
investment in the exploration of new reserves.

What will be the long-run effect of such a policy on the market for oil?

market change price change

A upward movement price decreases
along the demand curve
B downward movement price increases
along the demand curve

C supply shifts to the left price increases

D supply shifts to the left price decreases

© UCLES 2023 9708/13/O/N/23

 5

10 The price elasticity of demand for a product is –0.6.

The supplier wants to clear all surplus stock of a product and reduces the price of a good by 50%.

What is the effect of this price change on the quantity purchased and the expenditure on the
good?

quantity
expenditure
demanded

A rises by 30% falls

B rises by 30% rises
C rises by 60% falls
D rises by 60% rises

11 A firm is producing 100 units at a price of $10. The price elasticity of supply is 0.5 and the price is
raised to $12.

What is the new level of output?

A 75 B 110 C 125 D 150

12 In a town, bus fares fall by 50% and this leads to an increase in bus use by 30%. The effect on
car use is very low with only a 1% reduction.

What is the value of the cross-elasticity of demand between car travel and bus travel?

A –0.60 B –0.02 C +0.02 D +0.60

13 In the diagram, the demand and supply curves for wheat in Australia are shown. Initial equilibrium
is at X. The government imposes a sales tax on wheat at the same time as increasing the rate of
income tax.

Which point could represent the new equilibrium?

S1
price A S
S2

D X
B

D1
C D
D2
O quantity

© UCLES 2023 9708/13/O/N/23 [Turn over

 6

14 A free market is currently experiencing excess supply at a price of P1.

What will be the effect on the current market situation if a maximum price is set above P1?

A The excess supply will increase.

B The market will move into an equilibrium position.
C There will be no effect.
D There will be excess demand.

15 What is a likely disadvantage of a government’s provision of transfer payments to the

unemployed?

A decrease in the standard of living

B disincentive to accept paid work
C increase in inequality
D increase in poverty

16 Which combination of policies would increase the inequality of the distribution of income and
wealth?

progressive minimum transfer

taxes wage payments

A decrease increase reduce

B decrease reduce reduce
C increase increase increase
D increase reduce increase

17 Which changes will increase the circular flow of income?

higher higher higher

imports investment taxation

A yes no no
B yes yes no
C no yes yes
D no yes no

© UCLES 2023 9708/13/O/N/23

 7

18 An economy in equilibrium has a trade deficit of $20bn and a budget surplus of $20bn.
Investment spending is $50bn.

What is the total saving?

A $5bn B $10bn C $15bn D $20bn

19 A finance company incurs heavy losses and makes an accountant redundant.

The accountant seeks a new job through an employment agency which specialises in jobs in
accounting.

What describes the type of unemployment of the accountant who is seeking a new job?

A frictional
B seasonal
C structural
D technological

20 An aggregate demand curve slopes downwards from left to right.

One reason for this is that a reduction in the average price level will lead to

A a decline in the country’s international competitiveness.

B an increase in interest rates.
C an increase in the real value of money balances.
D the expectation of further price falls.

21 Which components are included as primary income in the current account of the balance of
payments?

employment
trade current
income from
in goods transfers
abroad

A key
B = included
C = not included
D

© UCLES 2023 9708/13/O/N/23 [Turn over

 8

22 What is not included in the measurement of national income?

A dividends paid to shareholders

B overtime payments
C rents from government-owned houses
D welfare benefit payments

23 The graph shows the rate of inflation for seven countries for 2015 and 2016.

3 key
2015
2
2016
1

0
Costa Ecuador India Japan Malaysia Mauritius Thailand
Rica
–1

–2

What can be concluded from this graph?

A Prices in Costa Rica rose in 2015 but remained constant in 2016.

B Prices in Ecuador and Mauritius were lower in 2016 than in 2015.
C Prices in India and Malaysia remained constant in 2016 and 2015.
D Prices in Thailand and Japan were lower in 2016 than in 2015.

© UCLES 2023 9708/13/O/N/23

 9

24 Country R and country S are going to trade 1 unit of product X for 1 unit of product Y.
2

With a given amount of resources:

 country R can produce either 30 units of product X or 50 units of product Y

 country S can produce either 20 units of product X or 25 units of product Y.

Which statement is correct, according to the theory of comparative advantage?

A Free trade will benefit both R and S.

B Free trade will benefit neither R nor S.
C Free trade will benefit R but not S.
D Free trade will benefit S but not R.

25 What is the most likely cause of a current account deficit on the balance of payments?

A an undervalued exchange rate

B a relatively low rate of inflation
C a shrinking domestic economy
D a general fall in national productivity

© UCLES 2023 9708/13/O/N/23 [Turn over

 10

26 The diagram shows the long-run aggregate supply (LRAS) and aggregate demand (AD) curves
for an economy.

LRAS

price
level

Y
X

AD

O
real output

The initial equilibrium is at point X.

Which combination of monetary policies will shift the equilibrium position to point Y?

money rate of
supply interest

A increase increase
B decrease increase
C increase decrease
D decrease decrease

27 The government undertakes a policy of financing training and retraining for unemployed workers.

Which terms are most likely be used to classify this policy?

demand-side supply-side fiscal monetary

A yes no yes no
B yes no no yes
C no yes no yes
D no yes yes no

© UCLES 2023 9708/13/O/N/23

 11

28 Which combination of initial equilibrium and supply-side policy is likely to be least effective when
attempting to increase the real output of an economy?

initial equilibrium real output supply-side policy measure

A below full employment abolition of national minimum wage

B below full employment extra spending on training
C full employment extra investment in infrastructure
D full employment reduction in the rate of income tax

29 A government aims to reduce unemployment through expansionary fiscal policy and borrows
more from the commercial banks, increasing its borrowing requirement.

What will be the result?

A a decrease in the budget deficit

B a decrease in the national debt
C an increase in the balance of payments deficit on the current account
D an increase in the interest rates

30 A government wants to use an expansionary monetary policy.

What should the government increase?

A credit regulations
B the exchange rate
C the interest rate
D the money supply

© UCLES 2023 9708/13/O/N/23

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9708/13/O/N/23

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 AS Level Multiple Choice October/November 2023
1 hour

You must answer on the multiple choice answer sheet.

*3642503639*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 11_9708_12/4RP
© UCLES 2023 [Turn over
 2

1 PPC is the production possibility curve in country T.

PPC
1
good Y 2
3
4

O good X

Which changes take place in country T’s opportunity costs of producing X as it increases
production of X?

A Opportunity costs are constant between points 1 and 2, and between points 3 and 4.
B Opportunity costs decrease between points 1 and 2, and increase between points 3 and 4.
C Opportunity costs decrease between points 1 and 2, and between points 3 and 4.
D Opportunity costs increase between points 1 and 2, and between points 3 and 4.

2 What is considered the essential requirement for all entrepreneurs?

A attracting customers
B buying stock
C managing staff
D taking risks

3 A new section of a road is provided toll-free by the government.

What best describes this good?

A a demerit good
B a free good
C a private good
D a public good

© UCLES 2023 9708/12/O/N/23

 3

4 Eastern European nations have changed from planned to market economies.

Which policy was least likely to have been adopted?

A allowing prices to fluctuate

B keeping established economic organisations
C privatising essential industries
D permitting changes in the money supply

5 Rice and pasta are both basic foods in a country.

How would a health scare concerning rice affect the market for pasta?

A There will be a shift of demand and a contraction of supply.

B There will be a shift of demand and an extension of supply.
C There will be a shift of supply and a contraction of demand.
D There will be a shift of supply and an extension of demand.

6 Some goods are over-consumed in a market economy.

What is likely to be the cause of this?

A Consumer surplus exceeds producer surplus.

B Consumers undervalue the benefits of consuming the goods.
C There is excess supply in the market for the goods.
D There is imperfect information in the market.

7 A family is willing to pay a maximum of $600, $500 and $400 for air tickets for the mother, father
and daughter to attend a wedding in another city. The airline announces a promotional air fare of
$450 per ticket, provided at least three tickets are purchased.

What will be the consumer surplus gained by the family if they use the promotional offer?

A $100 B $150 C $200 D $250

8 After a 10% decrease in a consumer’s income, the consumer’s demand for a good rises from 100
to 105.

What is the value of the consumer’s income elasticity of demand for this good?

A –2.0 B –0.5 C +0.5 D +2.0

© UCLES 2023 9708/12/O/N/23 [Turn over

 4

9 In 2010, poor harvests reduced fruit crops and furniture producers gave big discounts on furniture
products.

How might these changes have affected the position of the supply curve for the products?

fruit furniture producers

A no change shift to the left

B shift to the left no change
C shift to the left shift to the left
D shift to the right no change

10 In the diagram, D and S represent the demand for and supply of smartphones. Many components
used in the production of smartphones are imported. The initial equilibrium is at point X.

The exchange rate has depreciated at the same time as the price of a complementary good
decreased.

Which point in the diagram could represent the new equilibrium?

S1
S
price S2
B

A X D

C D1
D
D2

O quantity

© UCLES 2023 9708/12/O/N/23

 5

11 The diagrams show the demand for and the supply of houses.

In the short run, the stock of houses for sale, S1, is fixed. A government decides to allow some
agricultural land to be used for building houses and subsidises lower-income buyers of the new
houses.

Which diagram shows the long-run situation?

A B

S1 S1
price of price of
houses houses
$ $

D2
D1 D1
O quantity O quantity

C D
S1 S1
price of price of
houses houses
$ $

D2
D1 D1
O O
quantity quantity

12 The equation for the quantity demanded, QD, for a product is

QD = 400 – 20P

where P = price in $. The quantity supplied, QS, is given by QS = 100 + 40P.

Which change will occur if the price rises from $5 to $6?

A The market will move from equilibrium to shortage.

B The market will move from equilibrium to surplus.
C The market will move from shortage to surplus.
D The market will move from surplus to shortage.

© UCLES 2023 9708/12/O/N/23 [Turn over

 6

13 What is the most likely cause of the continuous increase in prices of famous paintings by now
dead artists?

A the increasing technological ability to copy famous paintings perfectly

B the popular view that famous paintings are an appreciating asset
C the totally inelastic supply of famous paintings by dead artists
D the wish of governments to treat art galleries as merit goods

14 What is most likely to be regressive?

A corporate profit taxes

B state pension benefits
C specific tax on cigarettes
D unemployment benefits

15 What is necessary for an action to be classed as a transfer payment?

A It must include a cash payment.

B It must involve a banking transaction.
C It must originate from government activity.
D It must relate to a non-productive activity.

16 The government imposes a specific indirect tax of $1 on each unit of a good sold.

How does the imposition of the tax shift the demand or supply curve of the good?

A The demand curve of the good will shift vertically downwards by $1.
B The demand curve of the good will shift vertically upwards by $1.
C The supply curve of the good will shift vertically downwards by $1.
D The supply curve of the good will shift vertically upwards by $1.

17 Which term relates to a fall in the domestic real value of a currency?

A deflation
B depreciation
C appreciation
D inflation

© UCLES 2023 9708/12/O/N/23

 7

18 What must be the result for a country of a rise in its export prices relative to its import prices?

A a deficit in its trade in goods

B an improvement in its terms of trade
C an increase in its inflation rate
D a rise in its exchange rate

19 Country X can produce a product at a lower opportunity cost than country Y.

Which term best describes this statement?

A absolute advantage
B comparative advantage
C specialisation
D terms of trade

20 For a given year, economy X publishes the following.

$bn
Gross Domestic Product (GDP) 100

factor income earned by residents of 10

economy X working in foreign countries

factor income earned in 25

economy X by non-residents

What is the size of the Gross National Income (GNI) for country X?

A $75bn B $85bn C $110bn D $115bn

21 Which combination is possible for an economy experiencing zero inflation?

average average
nominal wages real wages

A falling falling
B falling rising
C rising falling
D unchanging rising

© UCLES 2023 9708/12/O/N/23 [Turn over

 8

22 The graph shows the rate of inflation in Japan from April 2020 to February 2021.

0.4 0.3
0.2
inflation 0.2 0.1 0.1 0.1
rate 0
0
–0.2
–0.4
–0.4 –0.4
–0.6
–0.6
–0.8
–1 –0.9
–1.2
–1.2
Apr May June July Aug Sept Oct Nov Dec Jan Feb
2020 2021

Over which period did disinflation occur in Japan?

A July 2020 to February 2021

B July 2020 to September 2020
C October 2020 to December 2020
D October 2020 to February 2021

23 The diagram shows three production possibility curves (PPC) for a country, labelled 3, 2 and 1.
The original PPC for the country is 2.

This country experiences a fall in its working population and then this is followed by a long period
of recession.

consumer
goods

s t u

3 2 1
O capital goods

If an increase in GDP then takes place, what is the increase in production?

A r to s B r to u C s to t D t to u

© UCLES 2023 9708/12/O/N/23

 9

24 A government increases the rate of income tax.

What is the effect, in the short run, on the aggregate demand curve or the aggregate supply
curve?

A The aggregate demand curve shifts left.

B The aggregate demand curve shifts right.
C The aggregate supply curve shifts left.
D The aggregate supply curve shifts right.

25 A country’s current account deficit is larger this year than last.

What is the most likely reason for this increase?

A Demand for domestically produced goods has risen.

B Domestic inflation has risen faster than the inflation of its major trading partners.
C Domestic unemployment has risen.
D The exchange rate has depreciated.

26 Which supply-side measure is most likely to produce short-run growth in a country’s aggregate
supply?

A easing of controls on immigration of workers

B expenditure on primary education
C expenditure on research and development
D privatisation of public utilities

27 Which tax may a government use to reduce inequality?

A progressive income tax

B proportionate income tax
C proportionate indirect tax
D specific indirect tax

© UCLES 2023 9708/12/O/N/23 [Turn over

 10

28 A foreign government pays a UK university to educate its students.

How would this be recorded on the balance of payments current account of the UK?

current account
money flows
component

A secondary income inflow

B secondary income outflow
C trade in services inflow
D trade in services outflow

29 A government wants to reduce inflation. It has decided to cut government spending by $1bn. The
diagram shows different starting positions for the country’s aggregate demand (AD) curve.

AS
price
level

AD4
AD3
AD2
AD1
O real GDP

Which starting position for the aggregate demand curve would make this policy least effective?

A AD1 B AD2 C AD3 D AD4

30 A government reduces the rate of tax firms are charged on their land and buildings.

How is this likely to affect the economy’s price level and real output?

price level real output

A fall fall
B fall rise
C rise fall
D rise rise

© UCLES 2023 9708/12/O/N/23

 11

BLANK PAGE

© UCLES 2023 9708/12/O/N/23

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9708/12/O/N/23

 Cambridge International AS & A Level

ECONOMICS 9708/11
Paper 1 AS Level Multiple Choice October/November 2023
1 hour

You must answer on the multiple choice answer sheet.

*6471966496*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages.

IB23 11_9708_11/4RP
© UCLES 2023 [Turn over
 2

1 What will help solve the basic economic problem?

A the control of the market system

B the efficient allocation of scarce resources
C the preservation of a healthy environment
D the elimination of hunger

2 Country Z operates with a production possibility curve (PPC). Currently, output is at

combination 1.

PPC
good Y 2

3
1
4

O good X

Which movement has zero opportunity cost in terms of the goods produced?

A 1 to 2 B 1 to 3 C 2 to 3 D 3 to 4

3 A country’s health care is funded by taxation but can be used free of charge by patients.

Which type of good is health care in this country?

A demerit good
B free good
C private good
D public good

4 What is least likely to increase as a result of a transition from a planned economy to a free
market economy?

A prices of goods and services

B privately owned resources
C provision of merit goods
D structural unemployment

© UCLES 2023 9708/11/O/N/23

 3

5 Which statement correctly describes the area of producer surplus on a demand and supply
diagram?

A It is above the supply curve and below the equilibrium price line.
B It is above the supply curve and below the demand curve.
C It is below the demand curve and above the equilibrium price line.
D It is below the supply curve and above the horizontal axis.

6 The diagram shows a demand curve for pineapples.

2
price
($) X
1.5

1
Y
0.5

0 D
0 3 6 9 12
quantity (000s)

What happens to the value of price elasticity of demand (PED) when there is a movement from
point X to point Y and what describes the value of PED at point Y?

effect on value of
value of PED PED at Y

A fall elastic
B fall inelastic
C rise elastic
D unchanged unitary

7 In a free market, there is a surplus of a good.

Which change would cause the market to come to an equilibrium?

A a decrease in demand
B a fall in price
C a government minimum price
D an increase in supply

© UCLES 2023 9708/11/O/N/23 [Turn over

 4

8 The cross-elasticity of demand between good P and good Q is –0.4.

The cross-elasticity of demand between good P and good R is +0.6.

Which combination of goods is most likely to be represented by this information?

good P good Q good R

A cream yoghurt raspberry

B yoghurt strawberry raspberry
C strawberry cream raspberry
D strawberry raspberry cream

9 The supply, S, of a product is determined by the equation

S = 10 + 10P

where P is the price of the product in $.

What is the product’s price elasticity of supply when its price rises from $1 to $2?

A 0.5 B 1.0 C 2.0 D 5.0

10 In the diagram, the supply curve shows the number of spaces in a car park and the demand
curves show the demand for spaces on four different days, D1, D2, D3 and D4.

S
price
P4
P3 D4
P2 D3
P1 D2
D1
O
quantity

The owner wishes to charge a parking fee on each of these days to allocate the spaces
according to the market mechanism.

Which pricing policy should the owner use?

A set a fixed price at P1

B set a fixed price at P4
C vary prices between P2 and P3
D vary prices between P1 and P4

© UCLES 2023 9708/11/O/N/23

 5

11 The table shows the demand schedule for textbooks.

price quantity
$ demanded

50 0
40 100
30 200
20 300
10 400
0 500

What can be concluded from this information?

A Profit would be maximised at a price of $30.

B Profit would not change if the price rose from $20 to $30.

C Revenue would increase if the price was decreased from $40 to $30.

D Revenue would be maximised at a price of $40.

12 Which event is most likely to enable firms to respond to an increase in demand by increasing
supply rather than by raising price?

A Firms reduce their expenditure on the training of workers.

B Import duties are increased on machines that increase the speed of production.
C The government introduces buffer stock schemes for the goods produced by the firm.
D Trade unions become strong, leading to poor labour productivity.

© UCLES 2023 9708/11/O/N/23 [Turn over

 6

13 In the diagram, S1 is the supply curve and D1 is the initial demand for facemask X. A rival firm
produces facemask Y, which is a close substitute.

price of S1
facemask X

D2
D1

O
quantity of facemask X

What would cause the demand curve to shift to D2?

A a decrease in the costs of the materials to make facemask X

B a decrease in the costs of the materials to make facemask Y
C an increase in the price of facemask X
D an increase in the price of facemask Y

14 A government introduces charges for vehicles using the roads in its capital city.

Which characteristic must the roads have for this to be successful in reducing congestion?

A The roads must be excludable.

B The roads must be merit goods.
C The roads must be non-rivalrous.
D The roads must be public goods.

© UCLES 2023 9708/11/O/N/23

 7

15 The table shows the tax an individual would pay at different levels of income.

annual income tax paid

($) ($)

20 000 1 000
30 000 3 000
40 000 6 000
50 000 8 000
60 000 12 000

What is the average rate of taxation and the marginal rate of taxation for an individual with an
annual income of $50 000?

average rate marginal rate

of taxation of taxation
% %

A 15 16
B 16 20
C 16 28
D 20 20

16 A government has increased output with no effect on the price level.

AS
price
level

AD1 AD2 AD3 AD4

O output

What must have been the initial level of aggregate demand (AD)?

A AD1 B AD2 C AD3 D AD4

© UCLES 2023 9708/11/O/N/23 [Turn over

 8

17 What is not included in the measurement of national income?

A benefits paid to the unemployed

B dividends paid to shareholders
C profits retained by companies
D rent paid to landlords

18 Four students have to fill in the gaps in the sentence shown.

‘A person is defined as unemployed if they are ......1...... to work at ......2...... wage rate, but
cannot find a job despite an active search for work.’

Which student fills gaps 1 and 2 correctly?

1 2

A able below the current

B able the current
C able, available and willing above the current
D able, available and willing the current

19 Which statement best describes the consumer prices index (CPI)?

A It is a measure of changes in the spending patterns of the average household.

B It is a measure of changes in the standard of living of the average household.
C It is a measure of the average change in prices of a basket of goods and services over time.
D It is a measure of the level of prices of all goods and services.

© UCLES 2023 9708/11/O/N/23

 9

20 The diagram shows the production possibility curves (PPCs) for country X and country Y, the only
two countries in the world. Both countries produce just two goods, M and N.

200
output of
good M

PPCY
100
PPCX

0
0 100 150
output of good N

Under which terms of trade will both country X and country Y benefit from trading with each
other?

A 1M for 0.75N
B 1M for 0.8N
C 1M for 1N
D 1M for 2N

21 Why is increased government provision of education most likely to shift the aggregate demand
curve to the right?

A It will increase aggregate supply.

B More schools will be built.
C The government will have to raise taxes.
D Workers will be more highly skilled.

22 Which item is not included in the current account of a country’s balance of payments?

A exports of services
B interest on foreign loans
C profits from foreign investments
D the purchase of foreign assets

© UCLES 2023 9708/11/O/N/23 [Turn over

 10

23 Under which conditions will nominal GDP and real GDP increase at the same rate in an
economy?

rate of change of rate of change of

national output general price level
(% per annum) (% per annum)

A 0 –2
B 0 +2
C +2 0
D +2 +2

24 General equilibrium in the macroeconomy is achieved when total injections are equal to total
leakages.

What is most likely to cause disequilibrium in the macroeconomy in the short run?

A an increase in government spending of $10bn and a decrease in exports of $10bn

B an increase in investment of $30bn and a decrease in household savings of $30bn
C an increase in spending on imports of $40bn and an increase in government spending of
$40bn
D an increase in taxation of $40bn and a decrease in spending on imports of $40bn

25 What would be the most likely reason for a decrease in frictional unemployment?

A more capital-intensive manufacturing

B more demand for public sector workers
C more government spending on education
D more information on labour market vacancies

26 A Kenyan banker who lives and works in India sends 15% of their wage back to Kenya every
month.

What would be the change in the current account components for either country?

A a fall in secondary income for India

B an increase in the balance of trade in services for Kenya
C an increase in the current account surplus for India
D an increase in primary income for Kenya

© UCLES 2023 9708/11/O/N/23

 11

27 Over a period of a year, the annual rate of inflation becomes negative.

Which statement must be correct?

A The cost of living has fallen.

B The purchasing power of money has fallen.
C The standard of living has increased.
D There has been an increase in the Consumer Price Index.

28 The government of a country plans to raise income tax rates. The initial equilibrium for the
country is represented by point X on the diagram.

Which new equilibrium point would an economist predict as the result?

price
level AS1

A AS2

X B
D
AD3

C AD1
AD2

O
real national income

29 Which combination would represent the most expansionary set of monetary policies?

credit availability interest rates money supply

A increased up reduced
B increased down increased
C reduced up increased
D reduced down reduced

© UCLES 2023 9708/11/O/N/23 [Turn over

 12

30 An economy is experiencing accelerating cost-push inflation.

Which group is likely to be least concerned by this?

A borrowers
B consumers
C creditors
D exporters

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9708/11/O/N/23

 Cambridge International AS & A Level

ECONOMICS 9708/13
Paper 1 AS Level Multiple Choice May/June 2023
1 hour

You must answer on the multiple choice answer sheet.

*4561763025*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 06_9708_13/3RP
© UCLES 2023 [Turn over
 2

1 People plant flowers in a local park.

Which statement is correct?

A Flowers in parks are a public good because people can enjoy them at no charge.
B Flowers in parks are a public good because they are owned by local people and are not for
profit.
C Flowers in parks are not a public good if local people can limit the number of visitors to the
parks.
D Flowers in parks are not a public good if they are individual, not identical, in nature.

2 A government decides that all non-essential businesses must close for three months due to a
disease pandemic.

What is an opportunity cost of this policy?

A increased leisure time for employees

B lives that are saved due to reduced disease levels
C the production of goods by essential businesses
D the loss of goods from the closed businesses

3 The diagram shows an economy’s production possibility curve. The economy produces
combinations of goods and services using all available resources.

services

O goods

What does the production possibility curve indicate for goods and services?

A constant returns to scale in the production of both goods and services

B diminishing returns to scale in the production of both goods and services
C increasing returns to scale in the production of both goods and services
D infinite returns to scale in the production of both goods and services

© UCLES 2023 9708/13/M/J/23

 3

4 Which economic conditions are likely to encourage an increase in enterprise?

consumer
interest rates profit tax unemployment
confidence

A high high high high

B high low low high
C low low high low
D low low low low

5 When is the price elasticity of demand for a product most likely to be price elastic?

A A large percentage of income is spent on the product.

B It is measured in the short run.
C It is a necessity product.
D There are few substitutes available.

6 What is most likely to cause a shift in the supply curve for rice?

A a change in the price of the rice

B a change in the price of meat
C a change in the size of the rice industry
D a change in tastes and preferences for rice

7 A free market is in disequilibrium with a shortage of a product.

As the market moves towards equilibrium, what will happen to the price, the quantity demanded
and the quantity supplied?

quantity quantity
price
demanded supplied

A decrease decrease increase

B decrease increase decrease
C increase decrease increase
D increase increase decrease

© UCLES 2023 9708/13/M/J/23 [Turn over

 4

8 What would not cause a shift in the demand curve for a good?

A a change in the price of a complement

B a change in the price of a substitute
C a change in the price of the good itself
D a change in consumers’ incomes

9 What does joint supply mean?

A A firm can choose between producing a range of different goods.

B A good has multiple uses.
C A good is a by-product of the production process of another good.
D Consumers consider two goods as complements.

10 When the price of a firm’s product falls by 5%, its total revenue also falls by 5%.

What describes the product’s price elasticity of demand?

A elastic
B infinite
C unitary
D zero

11 The table shows how an individual’s weekly consumption of biscuits and coffee varies with
income.

income biscuits coffee

($) (packs) (cups)

100 0 5
150 5 10

Which statement about the income elasticity of demand over the range of income shown is
correct?

A For biscuits it is greater than 1.

B For biscuits it is zero.
C For coffee it is less than 1.
D For coffee it is unitary.

© UCLES 2023 9708/13/M/J/23

 5

12 The diagram shows four supply curves.

W X
price
Y

O quantity

Which statement about the price elasticity of these supply curves is correct?

A W has elasticity of 0 that will rise as price rises.

B X has elasticity greater than 1 that will be constant as price rises.
C Y has elasticity greater than 1 that will fall as price rises.
D Z has elasticity of 0 that is constant as quantity rises.

13 Product X has a price elasticity of supply (PES) of +2, whilst product Y has a PES of +0.2.

Which statement about products X and Y is correct?

A X has more substitutes than Y.

B A 20% price fall would lead to a greater decrease in production of Y than of X.
C After a price rise, it is more difficult to increase Y’s output than X’s.
D After a price fall of 10%, more people would buy X than would buy Y.

14 There are 10 000 tickets available to watch a sports final at a national stadium. The initial market
equilibrium ticket price is $20. The government decides to fix an effective minimum price for the
tickets.

Under which conditions will the consumer surplus for the tickets decrease the most as a result of
the minimum price?

minimum price elasticity

price level of demand
$ for tickets

A 18 –0.5
B 18 –1.5
C 22 –0.5
D 22 –1.5

© UCLES 2023 9708/13/M/J/23 [Turn over

 6

15 The diagram shows the impact of a government imposing a unit tax on a demerit good. S is the
supply curve before the tax and S1 is the supply curve after the tax.

price
$ S1
S
50
40
30
20

D
0
0 5 10
quantity

What is the after-tax revenue of the firm producing the demerit good?

A $100 B $200 C $300 D $500

16 A government has a policy aim of reducing income inequality. It considers three policies.

Which combination of policies would be most effective?

a subsidy on
an increase in the
an increase in the battery-powered
marginal rate of tax
minimum wage cars which cost
from 40% to 50%
over $40 000

A yes no no
B yes yes no
C yes no yes
D no yes no

17 A Bangladeshi citizen is employed as a construction worker in Qatar. He sends some of his

wages to his family in Bangladesh.

How will this be recorded on Qatar’s balance of payments?

A as part of the balance of trade in services

B as part of net primary income
C as part of net secondary income
D as part of the financial account

© UCLES 2023 9708/13/M/J/23

 7

18 The table gives data for an economy.

2010 2011 2012 2013 2014

Gross Domestic Product (GDP)
200 220 240 300 320
at current prices ($ billion)
GDP deflator (price index) 100 109 125 149 154

In which year did real GDP decline compared with the previous year?

A 2011 B 2012 C 2013 D 2014

19 Which policy is most likely to help to correct an adverse balance on the current account of the
balance of payments?

A abolishing tariffs
B depreciating the currency
C reducing direct taxes
D reducing indirect taxes

20 In year 1, a country’s real GDP was $500 billion. In year 2, nominal GDP rose to $577.5 billion
and the prices increased by 5%.

What is the real GDP in year 2?

A $4.76 billion B $5 billion C $476 billion D $550 billion

21 The table gives details of national income statistics for an economy.

US$bn

consumption 2000
investment 500
government expenditure 600
net exports –100
net foreign factor income –200
depreciation 100

What is the net national income for this economy?

A US$2700bn B US$2800bn C US$2900bn D US$3000bn

© UCLES 2023 9708/13/M/J/23 [Turn over

 8

22 The table shows the relative price of exports compared with imports expressed as an index
number for an economy (2013 = 100).

date index

2013 100
2014 97
2015 95

Which statement about the period 2013–2015 is correct?

A Export prices have increased each year.

B The general level of prices has fallen.
C The terms of trade have deteriorated.
D The volume of imports increasingly exceeds the volume of exports.

23 Country X and country Y each allocate half of their resources towards the manufacturing of
shoes, and the other half towards the manufacturing of t-shirts. Resources can be used equally
effectively in the production of both products in both countries.

The table shows the output of shoes and t-shirts produced by both countries using half their
resources in each case, before specialisation.

country shoes t-shirts

X 4 000 12 000
Y 2 000 8 000
total 6 000 20 000

What can be concluded from the data?

A The opportunity cost of country Y producing two shoes is four t-shirts.

B The opportunity cost of country X producing one t-shirt is four shoes.
C The total output of shoes and t-shirts after specialisation would be 24 000.
D The total output of shoes and t-shirts after specialisation would be 28 000.

24 Which government action is least likely to prevent a fall in economic growth?

A additional controls on commercial banks’ lending

B relaxation of rules for immigration of adult population

C removal of trade barriers on import of raw materials

D training and education of workforce

© UCLES 2023 9708/13/M/J/23

 9

25 What is the most likely cause of an outward shift of a country’s aggregate demand curve?

A a decrease in the competitiveness of domestically produced products

B a decrease in the general price level
C a decrease in the money supply
D a depreciation of the country’s exchange rate

26 The diagram shows the macroeconomic equilibrium output and price level changing from Y and P
to Y1 and P1.

LRAS
price
level

P
P1
AD
AD1

O Y1 Y
real output

What could have caused this change?

A a decrease in exports
B a decrease in labour productivity
C an increase in the government’s spending
D an increase in the money supply

27 A country had a current account surplus of $141bn.

Which policy may its government implement to reduce this surplus in the short run?

A a decrease in direct taxes

B a decrease in regulations to encourage more foreign firms to locate in this country
C an increase of import duties
D an increase in interest rates

© UCLES 2023 9708/13/M/J/23 [Turn over

 10

28 The diagram shows aggregate demand (AD) and aggregate supply in the short run (SRAS) and
the long run (LRAS).

LRAS LRAS1
price
level

W
SRAS Y
SRAS1

AD

O real GDP

Which row is correct in causing a shift in the short run aggregate supply from SRAS to SRAS1
and the long run aggregate supply from LRAS to LRAS1?

shift from SRAS to SRAS1 shift from LRAS to LRAS1

A change in AD from W to Y increase in population

B decrease in raw material costs improvements in the education of workers
C decrease in wage rates decrease in immigration
D increase in availability of labour increase in labour productivity

29 The diagram shows that the imposition of a tariff raises a product’s world price from $10 to $14.

domestic supply
price
$

14

10
domestic
demand

0
0 20 30 70 100
quantity (millions)

By how much did domestic producers’ income increase as a result of the tariff?

A $120 million B $160 million C $220 million D $280 million

© UCLES 2023 9708/13/M/J/23

 11

30 Which approach would a government be most likely to use to eliminate deflation?

A an increase in direct taxes

B an increase in interest rates
C a reduction in indirect taxes
D a reduction in its budget surplus

© UCLES 2023 9708/13/M/J/23

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9708/13/M/J/23

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 AS Level Multiple Choice May/June 2023
1 hour

You must answer on the multiple choice answer sheet.

*9583964640*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages.

IB23 06_9708_12/2RP
© UCLES 2023 [Turn over
 2

1 Which factor of production is needed first in order to set up a new business?

A capital
B enterprise
C labour
D land

2 Assuming nothing else changes, which change in an economy’s labour market will cause the
production possibility curve to shift to the left?

A an increase in worker immigration

B an increase in the retirement age
C an increase in labour productivity
D an increase in the school leaving age

3 What is not a characteristic of a mixed economy?

A The government has no role in setting prices.

B The government manages taxation rights.
C The government prevents firms from earning excessive profits.
D The government provides services not provided by the private sector.

4 What is not likely to result from the use of division of labour?

A a decrease in average costs

B an increase in motivation
C an increase in productivity
D an improvement in quality of the final product

5 Price plays a number of functions in the allocation of resources.

Which statement best illustrates the function that relies upon consumer choice (sometimes known
as the incentivising function)?

A A price fall can show consumers that a good is becoming less popular.
B A price fall tends to persuade some producers not to stay in the market for the good.
C A price rise means consumers cannot afford to buy so much of a good.
D A price rise tends to reduce competitiveness in the market for a good.

© UCLES 2023 9708/12/M/J/23

 3

6 Which pair of products are substitutes both in consumption and production?

A barley and cotton

B gold and silver
C soap and toothpaste
D spinach and cabbage

7 There is a worldwide shortage of oil. The diagram shows the consumption and production of oil
(billion tonnes) for selected countries.

United
States
key
Japan consumption
production
Russia

Britain

0 0.2 0.4 0.6 0.8 1.0

billion tonnes

What can be concluded from the diagram?

A In Britain, oil has zero opportunity cost.

B In Japan, there is self-sufficiency in oil.
C In Russia, there is no shortage of oil.
D In the United States, rationing is the only solution to oil shortage.

8 The cross elasticity of demand between bus travel and rail travel is +2. A rise in the price of bus
fares caused the demand for rail travel to rise by 10%.

Which change in bus fares would have caused this?

from to
(cents) (cents)

A 20 21
B 30 33
C 40 45
D 50 60

© UCLES 2023 9708/12/M/J/23 [Turn over

 4

9 A change in the price of a good causes an increase in the quantity of the good demanded.

What would be the nature of the good and the direction of price change for this to be certain to
happen?

nature of good price change

A inferior fall
B inferior rise
C normal fall
D normal rise

10 A specific tax is placed upon each bottle of perfume sold. In the diagram, S is the supply curve
before tax, St is the supply curve after tax.

St
price
S
W
R
Q U
X
P T
D

O Y Z
quantity

Which area represents that part of the tax revenue paid by producers?

A ORWY B PQUT C PRWT D QRWU

© UCLES 2023 9708/12/M/J/23

 5

11 The diagram shows the supply curve of a firm.

price

O
quantity

Which statement about the price elasticity of supply (PES) along this curve is correct?

A PES is greater than unity at all points along the supply curve.
B PES is the same at all points along the supply curve.
C PES is elastic when the price is low and becomes more inelastic when the price rises.
D PES rises when the supply rises.

12 The diagram shows the market for electric cars with X as the initial equilibrium.

What will be the new equilibrium when the price of electric car batteries falls and consumers
become more environmentally aware?

D1 D D2
price
$
A S1

B S
X
C S2
D

O electric cars

© UCLES 2023 9708/12/M/J/23 [Turn over

 6

13 What would cause a market disequilibrium?

A when a decrease in the demand for a product leads to a price fall that results in some
producers leaving the market
B when a decrease in the demand for a product leads to some producers being unable to sell
products at the current price
C when a decrease in the supply of a product leads to a price rise that results in the market for
the product clearing
D when a decrease in the supply of a product leads to a price rise that makes it too expensive
for some poorer households

14 In the diagram, area OP1M1Q1 is equal to area OP2M2Q2.

price
P1 M1

P2 M2

D
O Q1 Q2
quantity

What is the value of the price elasticity of demand if the price is halved from P1 to P2?

A –1
B –0.5
C zero
D infinity

© UCLES 2023 9708/12/M/J/23

 7

15 The table shows changes in a consumer’s expenditure on various goods when her income
increases from $20 000 to $24 000.

income income
$20 000: $24 000:
good amount spent amount spent
on good on good
($) ($)

W 100 96
X 100 100
Y 200 224
Z 200 248

Assuming all else remains unchanged, for which goods is the consumer’s income elasticity of
demand greater than 1.0?

A W, Y and Z
B W and Z only
C W only
D Z only

16 Which combination of government measures is most likely to increase the consumption of a merit
good?

A setting an effective maximum price on the product and paying producers a subsidy
B setting an effective maximum price on the product and imposing an indirect tax on producers
C setting an effective minimum price on the product and paying producers a subsidy
D setting an effective minimum price on the product and imposing an indirect tax on producers

© UCLES 2023 9708/12/M/J/23 [Turn over

 8

17 The table contains some figures from the balance of payments account of the United States (US)
for a given year.

US$ million

exports of goods 1 632 639

balance of trade in goods –741 462
imports of services 477 428
balance of trade in services 233 138

What cannot be concluded about US trade from the table?

A Exported services were valued at over US$477 428.

B Imported goods were valued at over US$1 632 639.
C The value of exported services was less than the value of exported goods.
D There was an overall current account deficit.

18 Which change is shown directly by the use of aggregate demand and aggregate supply analysis?

A the nominal income level

B the price level
C the unemployment level
D the wage level

19 Why might aggregate demand increase when a country’s price level falls?

A Domestic interest rates will tend to fall.

B Imports become more price competitive.
C Real incomes fall.
D The purchasing power of savings falls.

20 What is used to convert nominal GDP to real GDP?

A exchange rates
B changes in the price level
C interest rates
D taxation

© UCLES 2023 9708/12/M/J/23

 9

21 The diagram shows a basic two-sector circular flow of income.

factor market

firms households

product market

What can be concluded about the direction of flows?

A Consumer expenditure flows anticlockwise.

B Goods and services flow clockwise.
C Incomes flow anticlockwise.
D Resources flow anticlockwise.

22 The table shows the types of unemployment and their possible solutions.

Which combination is not correct?

type of
possible solution
unemployment

A technological introduce minimum wage legislation

B cyclical raise government spending
C frictional increase advertising of job vacancies
D structural retrain workers

23 Which combination of policies would be most effective in reducing a balance of payments current
account surplus?

a decrease in a devaluation of the an expansionary

tariffs on imports exchange rate monetary policy

A no yes no
B no no yes
C yes no yes
D yes yes no

© UCLES 2023 9708/12/M/J/23 [Turn over

 10

24 If a country is experiencing a period of high inflation, which groups will benefit the most from this?

companies that
fixed income those with
export the majority
earners high debts
of their output

A yes yes no
B no yes yes
C yes no no
D no no yes

25 What will definitely change a country’s terms of trade?

1 when the price of imported raw materials increases

2 a change in inflation rates
3 an appreciation of the exchange rate

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

26 The world consists of two countries, M and N. The graphs show their production possibilities for
wheat and rice.

country M country N
100
rice rice
75

0 0
0 100 0 50
wheat wheat

Countries M and N operate on their production possibility curves and, before specialisation,
country M produces 60 units of wheat and country N produces 30 units of wheat.

What will be the change in the world output of rice if both countries decide to specialise
according to comparative advantage?

A It will fall by 5 units.

B It will fall by 30 units.
C It will rise by 5 units.
D It will rise by 30 units.

© UCLES 2023 9708/12/M/J/23

 11

27 The diagram shows the current equilibrium of an economy.

The government introduces a contractionary monetary policy.

AS
price
level

AD
O output

What is the most likely outcome?

A a fall in investment and a fall in inflation

B a fall in investment and a rise in inflation
C a rise in investment and a fall in inflation
D a rise in investment and a rise in inflation

28 A government wishes to reduce the deficit on the secondary income section of its current
account.

Which policy would be most effective?

A an increase in subsidies to exporters

B an increase in the tariffs on imports
C a reduction in the number of migrant workers allowed into the country
D a reduction in overseas aid donations

29 Supply-side policies can be used to correct cost-push inflation.

Which policy would best achieve this aim in the long run?

A allowing trade unions to maintain work practices irrespective of productivity

B encouraging workers to work extra hours for extra pay
C increasing total labour supply by employing more unskilled workers
D supporting the replacement of labour-manned machines by the use of robots

© UCLES 2023 9708/12/M/J/23 [Turn over

 12

30 Economic growth leads to increased levels of income and consumption per capita for the adult
population.

Which circumstances are needed for this to happen in an economy?

A a change in technology that maintains the same level of output

B an increase in economic efficiency through higher productivity of factor inputs
C a policy of progressive taxation to reduce inequalities
D a rise in the size of the working population due to immigration

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9708/12/M/J/23

 Cambridge International AS & A Level

ECONOMICS 9708/11
Paper 1 AS Level Multiple Choice May/June 2023
1 hour

You must answer on the multiple choice answer sheet.

*1230318777*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages.

IB23 06_9708_11/2RP
© UCLES 2023 [Turn over
 2

1 What is ‘a produced means of further production’?

A capital
B enterprise
C labour
D land

2 A hospital management board decides to reallocate $800 000 from its $1.2m new buildings
budget to spend on cancer care.

What is the opportunity cost of this decision?

A a cost of $400 000

B a cost of $800 000
C the cost of healthcare for cancer patients
D the loss of some new buildings

3 The diagram shows the change in a country’s production possibility curve from XX to YY.

Y
food
X

O Y X
drink

What would explain this change?

A Consumers chose to consume more food and less drink.

B Government taxed food production and subsidised drink production.
C Productivity rose in food production and fell in drink production.
D There were more imports of food and more exports of drink.

© UCLES 2023 9708/11/M/J/23

 3

4 A factory manufactures chairs. The manufacturing process is divided into a number of tasks.

What is a likely disadvantage of this division of labour?

A decrease in motivation
B decrease in output
C decrease in productivity
D decrease in quality of the final product

5 Which row correctly describes the relationship between two goods implied by the value of the
cross elasticity of demand?

value of the cross

description
elasticity of demand

A –2.0 weak complements

B –0.5 weak substitutes
C +0.5 weak substitutes
D +2.0 strong complements

6 What does consumer surplus measure?

A the excess profit earned by the producer of a good

B the opportunity cost to the consumer of not buying a good
C the price the marginal consumer is willing to pay for a good
D the consumer’s gain from purchasing a good at a price below what they are willing to pay

7 When the price of good X is $2.00, the quantity supplied is 100 000. The price elasticity of supply
of good X is 0.8 in the short run and 1.4 in the long run. The price of good X increases to $2.20.

What is the increase in the quantity supplied of good X between the short run and the long run?

A 6000 B 60 000 C 114 000 D 140 000

© UCLES 2023 9708/11/M/J/23 [Turn over

 4

8 The diagram shows the European market for diesel fuel and the original equilibrium is at M.

S1
price

M
G
H
N

J D1
D2
O RT
quantity

Europeans want low-emission cars and therefore the demand for diesel fuel has decreased from
D1 to D2.

Which area represents the new producer surplus for companies supplying diesel fuel?

A GMNH B JGM C JHN D JNR

9 In which situation is the demand for a product said to be price elastic?

A The quantity demanded responds to a change in price.

B An increase in price brings about a decrease in the quantity demanded.
C An increase in price induces consumers to spend more on the product.
D A decrease in price brings about an increase in revenue.

© UCLES 2023 9708/11/M/J/23

 5

10 Golf club membership fees in Singapore have risen as a result of restrictions on travel to cheaper
golf courses in neighbouring countries and the closure of some local courses. The supply of golf
club memberships is determined by the current number of courses.

If the original equilibrium was at X, which point shows the result of these changes?

S2 S1 S3
membership
fees B
$
C
A
D
X

D1 D2

O quantity of memberships

11 The diagram shows the demand and supply curves for solar energy in India. The initial
equilibrium point is at X.

The Indian government increases the subsidy to solar energy producers. At the same time,
there is a rise in the price of alternative sources of energy.

What is the new equilibrium position?

S2
price of A S1
solar
energy S3

D X
B

D2
C D1
D3
O quantity of solar energy

© UCLES 2023 9708/11/M/J/23 [Turn over

 6

12 A specific tax is placed on the sale of bottles of lemonade. In the diagram, S is the supply curve
before imposition of the tax and St is the supply curve after tax.

St
price
W S

U X

D
T

O
quantity

Which distance represents the specific tax on each bottle?

A UT B WT C WU D WX

13 Demand for medical face masks exceeds supply during a disease outbreak.

What is the most likely cause of this excess demand?

A Some consumers do not have effective demand.

B The demand for medical face masks is price inelastic in the short run.
C The price of medical face masks is fixed below the equilibrium price.
D The supply of medical face masks is inelastic in the short run.

© UCLES 2023 9708/11/M/J/23

 7

14 The diagram shows the demand and supply curves for a good.

S
price
P1

O Q1 Q Q2
quantity

The government fixes a maximum price of OP1.

What would happen?

A Consumers would have to be rationed to quantity OQ1.

B The government would have to introduce a subsidy of PP1.
C The market equilibrium quantity OQ would be demanded and supplied.
D The supply of quantity OQ2 would be guaranteed.

15 Which statement correctly describes absolute advantage?

A It is when a country has a higher opportunity cost in producing a good than another country.
B It is when a country has a lower wage cost in producing a good than another country.
C It is when the relative prices of exports of a country are greater than the relative prices of its
imports.
D It is when a country’s output of a good is greater per unit of resource than another country.

16 The table shows the income and wealth of Yasmin.

items $

children’s welfare benefits 1 000

dividends from shares 1 000
property owned 40 000
savings in bank 1 000
shares 2 000
wages 10 000

What is the value of Yasmin’s wealth?

A $41 000 B $43 000 C $44 000 D $45 000

© UCLES 2023 9708/11/M/J/23 [Turn over

 8

17 Which group is most likely to suffer during high inflation?

A borrowers
B importers
C producers
D fixed wage earners

18 Which statement explains why the aggregate demand curve is downward sloping?

A As prices fall, the demand for exports becomes more elastic.

B As prices fall, fewer goods are imported.
C As prices fall, the rate of interest will rise.
D As prices fall, real wealth rises and so spending increases.

19 The diagram shows the aggregate demand (AD) and aggregate supply (AS) for an economy.

AS2
general
price
AS1
level

AD

O real output

Which changes in subsidies and indirect taxes would have caused the change from AS1 to AS2?

A higher subsidies and higher indirect taxes

B higher subsidies and lower indirect taxes
C lower subsidies and higher indirect taxes
D lower subsidies and lower indirect taxes

© UCLES 2023 9708/11/M/J/23

 9

20 The graph gives the percentage unemployed for all people aged 16 and over, and for young
people aged 16–24.

30
percentage
25
unemployed aged 16–24
20

15
aged 16 and over
10

0
2010 2012 2014 2016 2018 2020
year

What is the consequence for consumer expenditure on products consumed by the 16–24 age
group over the period 2010–2020?

A a fall in consumer expenditure across the whole period

B an initial fall in consumer expenditure followed by a rise
C an initial rise in consumer expenditure followed by a fall
D a rise in consumer expenditure across the whole period

21 In the diagram, the intersection of AD and LRAS at point X represents the current
macroeconomic equilibrium.

Which point could represent the new equilibrium after the introduction of an increase in the
retirement age?

LRAS2 LRAS LRAS1

general
price
level B

C
D X AD1
A
AD
AD2

O real GDP

© UCLES 2023 9708/11/M/J/23 [Turn over

 10

22 The table shows data on the Japanese balance of trade in goods.

exchange rate exports imports

year
yen / dollar $bn $bn

2016 109 635 585

2017 111 689 645

What can be concluded from this data?

A The demand for Japanese exports was price inelastic.

B The Japanese current account was in surplus.
C The majority of Japanese imports were essential goods.
D The Marshall–Lerner condition for Japan is greater than 1.

23 The diagram shows production possibility curves for two countries, India and Japan.

600
rice
500 India
Japan

0
0 200
tea

Which combination of outputs would be achieved if each country specialised in the product in
which it has a comparative advantage?

rice tea

A 600 200
B 600 500
C 1200 200
D 1200 1000

© UCLES 2023 9708/11/M/J/23

 11

24 A country’s currency has depreciated against all the currencies of its main trading partners.

How will the depreciation affect its terms of trade?

A The terms of trade will improve.

B The terms of trade will not change.
C The terms of trade will worsen.
D The terms of trade will worsen only if the depreciation causes inflation.

25 A country with a floating exchange rate experiences a large surplus on the current account of its
balance of payments.

What is likely to decrease as a consequence?

A the exports of capital from the country

B the level of employment in the country
C the prices of imports into the country
D the value of the country’s currency

26 Which measure is aimed directly at promoting international trade?

A decreasing existing quotas

B increasing interest rates
C subsidies paid to export industries
D wage subsidy schemes during recessions

27 What would be classified as a supply-side policy measure?

A a law to reduce the power of trade unions

B a reduction in the government’s fiscal deficit
C an open market sale of securities
D the imposition of a tariff on imported goods

28 What is the equivalent of a country’s national debt?

A the accumulated borrowing of the government

B the difference between government spending and taxation
C the interest paid by the government on all the money it owes
D the total money owed by all households in the country

© UCLES 2023 9708/11/M/J/23 [Turn over

 12

29 A country experiences a fall in the value of exports and an increase in the value of imports of
goods and services.

What are the effects of these changes?

balance of
aggregate payments on
demand goods and
services

A fall improve
B fall worsen
C rise improve
D rise worsen

30 A government orders its central bank to buy its domestic currency on the foreign exchange
markets in the belief that this will improve the balance of payments.

What does this suggest?

A Demand for the country’s exports is price inelastic.

B The country’s Marshall–Lerner condition is greater than 1.
C The government has a budget deficit.
D The overall balance of payments is in surplus.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9708/11/M/J/23

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 AS Level Multiple Choice February/March 2023
1 hour

You must answer on the multiple choice answer sheet.

*9537279073*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 03_9708_12/2RP
© UCLES 2023 [Turn over
 2

1 A good is most suitable to be provided by the market if it is

A excludable and non-rival.

B excludable and rival.
C non-excludable and non-rival.
D non-excludable and rival.

2 What is the definition of long run?

A the time period when all factors of production are specialised

B the time period when all factors of production are variable
C the time period when all key inputs into production are variable
D the time period when at least one factor of production is fixed

3 The table states the consequences of two macroeconomic policies.

What correctly identifies whether the statements are normative or positive?

a depreciation of an
a rise in the minimum
exchange rate will
wage rate will cause
cause the balance of
unemployment to rise
payments to improve

A normative normative
B normative positive
C positive normative
D positive positive

© UCLES 2023 9708/12/F/M/23

 3

4 The diagram shows the production possibility curve for wheat and corn.

M
output
of wheat

N
O output of corn

What can be deduced from the diagram?

A As the price of corn falls, more of it is demanded.

B Resources used in producing corn are more efficient than in producing wheat.
C The opportunity cost of producing corn falls when moving from M to N.
D The opportunity cost of producing corn is constant when moving from M to N.

5 A supply curve is represented by the equation

quantity supplied = 10 + 5P
where P = the price of the product.

Which price rise would cause the quantity supplied to double?

A $1 to $2 B $1 to $3 C $1 to $4 D $1 to $5

© UCLES 2023 9708/12/F/M/23 [Turn over

 4

6 Which diagram illustrates unitary elasticity of supply?

A B
S S
price price

O quantity O quantity

C D
S
price price

O quantity O quantity

7 In which case is the price system not a possible method of allocating resources?

A in the distribution of foodstuff among the population

B in the hiring of workers by employers
C in the ownership of land for agricultural use
D in the provision of public goods by the government

8 A sports stadium has two prices of seats. The cheaper seats are $10 and the more expensive
seats are $20. When the prices of all seats are increased by 10%, the effects on demand are a
fall of 5% for the cheaper seats and a fall of 12% for the more expensive seats.

What describes the responsiveness of demand to the change in price?

more expensive
cheaper seats
seats

A elastic elastic
B elastic inelastic
C inelastic elastic
D inelastic unitary elasticity

© UCLES 2023 9708/12/F/M/23

 5

9 Which statement correctly describes the shape of the demand curve for a normal good?

A It shows an inverse relationship between income and quantity demanded.

B It shows an inverse relationship between the price of the good and quantity demanded.
C It shows a positive relationship between the price of the good and quantity demanded.
D It shows a positive relationship between income and quantity demanded.

10 Why does the basic economic problem of scarcity apply to both the rich and the poor?

A The choices people make are not dependent on income inequalities.

B Consumers pay the same prices for goods and services to satisfy their wants.
C Human wants exceed what can be produced from available resources.
D Natural resources are unevenly distributed amongst nations.

11 Butter and buttermilk are goods in joint supply. Supply curves in both markets slope upwards to
the right. Health concerns cause people to reduce their consumption of butter.

What are the initial consequences of this for supply in the markets for butter and buttermilk?

supply of butter supply of buttermilk

A move left along supply curve move left along supply curve
B move left along supply curve shift left of the supply curve
C shift left of the supply curve move left along supply curve
D shift left of the supply curve shift left of the supply curve

© UCLES 2023 9708/12/F/M/23 [Turn over

 6

12 The diagram shows the demand and supply of a good.

price
S
x

P
y

O Q
quantity

When the market is in equilibrium, which area measures the difference between what consumers
are willing and able to pay and what producers receive at that output?

A x B y C x+y D x–y

13 Why do some local governments subsidise the provision of bicycles to encourage their use?

A Consumers are afraid of having car accidents.

B Consumers are unable to afford bicycles.
C Consumers are not aware of the external benefits of using bicycles.
D Consumers ignore the external costs of using bicycles.

14 The table shows Gini coefficients for both income and wealth in two countries.

country P country Q

income 0.6 0.5

wealth 0.4 0.7

Which statement is correct?

A Gini coefficients are not comparable between income and wealth because one is a flow
concept and the other is a stock concept.
B Income inequality is greater in country P than in country Q.
C Wealth inequality is greater in country P than in country Q.
D Wealth inequality is greater than income inequality in both countries.

© UCLES 2023 9708/12/F/M/23

 7

15 A government is faced with rising inflation. It wishes to reduce inflationary pressure while avoiding
a fall in output.

Which action is most likely to meet its needs?

A an increase in laws to promote competition

B an increase in taxation
C an increase in the budget surplus
D an increase in the exchange rate

16 The table shows selected information from a country’s national accounts.

$ billion

GDP 28
net property income from abroad –3
capital consumption 6
national debt 2

What is the country’s net national income?

A $19 billion B $25 billion C $31 billion D $33 billion

17 The graphs show the changes in the exchange rates of the pound sterling (£) against the US
dollar (US$) and the euro (€) between the years 2001 and 2003.

US$ per £ £ per €

0.725
1.750 £
US$ 0.700
1.700
1.650 0.675
1.600 0.650
1.550
0.625
1.500
1.450 0.600
1.400 0.575
2001 2002 2003 2001 2002 2003
year year

What happened to the value of the £ between the years 2001 and 2003?

A The £ appreciated against the US$ and depreciated against the €.

B The £ appreciated against the US$ and the € .

C The £ depreciated against the US$ and appreciated against the €.

D The £ depreciated against the US$ and the € .

© UCLES 2023 9708/12/F/M/23 [Turn over

 8

18 Which statement about the circular flow of income is correct?

A Exports and imports do not affect the equilibrium level of national income because they
always cancel each other out.
B The greater the level of saving, the greater the level of injections in the form of investment
must be.
C When consumers use past savings to increase their spending, there will be a rise in national
income.
D When a government increases withdrawals by increasing the rate of income tax, there must
be an equivalent increase in injections to compensate.

19 The graph shows a country’s average annual inflation rate over a five-year period.

average annual
inflation rate (%)

0 year
1 2 3 4 5

What can be concluded about the general price level during the five years?

A It fell in only one year.

B It fell in only two years.
C It rose in only two years.
D It was constant in only one year.

20 In an economy, wages and prices are both rising but wages are rising faster.

Which features are likely to exist in this economy?

cost-push rise in real

inflation incomes

A no no
B no yes
C yes no
D yes yes

© UCLES 2023 9708/12/F/M/23

 9

21 The diagram shows the aggregate demand (AD) and long-run aggregate supply (LRAS)
curves for a country. X is the original equilibrium position.

In one year, over one million foreign workers left the country and at the same time the
country’s currency appreciated against the currencies of its major trading partners.

What will be the most likely new equilibrium position for this country?

LRAS3 LRAS1 LRAS2

general D
price
level A
X
AD2
C

B AD1

AD3
O real ouput

22 What is most likely to cause a rise in a country’s exchange rate?

A a fall in its direct taxes

B a fall in its export orders
C a rise in its interest rates
D a rise in its imports

23 Which change affecting the foreign exchange market for the US$ would be most likely to result in
a shift to the right of the demand curve and a movement along the supply curve?

A The US government reduces subsidies on exports to the EU.

B Foreign currency speculators in Switzerland believe that the US$ is undervalued and act
accordingly.
C The US government intervenes in the foreign exchange market so as to bring about a drop in
the value of the US$.
D US pharmaceutical companies experience a fall in demand for their products from the rest of
the world.

24 What can be best understood from a knowledge of a country’s terms of trade?

A its balance of payments performance

B the purchasing power of its exports
C the standard of living within the country
D the value of its real exchange rate

© UCLES 2023 9708/12/F/M/23 [Turn over

 10

25 A company produces goods for export only.

Which change could cause a rise in the price of its goods while the quantity sold is unchanged?

domestic foreign
workers’ consumers’
wages wages

A unchanged fall
B fall unchanged
C fall fall
D rise rise

26 Under which current conditions will supply-side policy measures be most likely to achieve a
country’s key macroeconomic goals?

unemployment
price level
level

A high stable
B high rising
C low stable
D low rising

27 Why might a government prefer to use floating exchange rates?

A It allows the government more independence in policy making.

B It encourages the government to build up its foreign exchange reserves.
C It eliminates the instability of free markets.
D It gives firms more confidence in future costs and prices.

28 What is least likely to rise as a result of the use of expansionary fiscal policy?

A aggregate demand
B budget surplus
C nominal income
D inflation

© UCLES 2023 9708/12/F/M/23

 11

29 The table shows GDP indices for a country over a three-year period.

year 1 year 2 year 3

real GDP 100 105 106

money GDP 100 107 115

Inflation and economic growth are two macroeconomic policy objectives.

Which row gives a correct assessment of the country’s achievement of these two objectives over
the period?

rate of
rate of inflation
economic growth

A cannot tell positive

B declining cannot tell
C positive declining
D rising negative

30 A government raises interest rates to improve the current account of the balance of payments.

What might reduce the effectiveness of this policy?

A a fall in domestic growth

B consumer pessimism
C increased domestic saving
D price-elastic demand for exports

© UCLES 2023 9708/12/F/M/23

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9708/12/F/M/23

 Cambridge International AS & A Level

ECONOMICS 9708/12
Paper 1 AS Level Multiple Choice February/March 2024
1 hour

You must answer on the multiple choice answer sheet.

*0085346597*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB24 03_9708_12/2RP
© UCLES 2024 [Turn over
 2

1 Why does a production possibility curve exist for every economy?

A Resources are unlimited.

B Resources have alternative uses.
C Some resources can be imported.
D Some resources may be unemployed.

2 Which statement is a normative statement?

A Aggregate demand will increase following a decrease in interest rates.

B A rise in unemployment will decrease inflationary pressures.
C The incentive to work will rise if benefit payments are reduced.
D Unsustainable economic growth is more harmful to the economy than hyperinflation.

3 Which combination best describes the basic economic problem?

resources wants

A limited limited
B limited unlimited
C unlimited limited
D unlimited unlimited

4 What is the main reason an economy is unlikely to rely completely on market forces to allocate
resources?

A Demerit goods will be over supplied.

B Merit goods will be under supplied.
C Private goods will not be supplied.
D Public goods will not be supplied.

5 What is the opportunity cost to a person of spending $20 on a new pair of sports shoes?

A all the other things the person could have bought

B the cost of getting to the sports shop
C the current value of the person’s old pair of shoes
D the next best thing that could have been bought with the $20

© UCLES 2024 9708/12/F/M/24

 3

6 What is the definition of effective demand?

A demand that is speculative

B demand that is supported by the ability to pay
C the relationship between price and quantity demanded
D the total amount demanded by consumers

7 The price elasticity of demand for good X is –2.4, its income elasticity of demand is –0.4 and the
cross elasticity of demand for good X with respect to good Y is +0.8.

What is the correct description of good X?

A inferior good, price-elastic demand and substitute for good Y

B inferior good, price-inelastic demand and complement to good Y
C normal good, price-elastic demand and complement to good Y
D normal good, price-inelastic demand and substitute for good Y

8 The diagram shows two straight line demand curves, X and Y.

price

X Y
O quantity

What is correct about curves X and Y?

A Both X and Y are unit price elastic over their whole length.
B Both X and Y have the same elasticity at every price.
C X has a higher price elasticity than Y at every price.
D Y is more likely to have substitutes than X.

9 The price elasticity of the supply of yoghurt is estimated to be +1.5.

If the demand for yoghurt rises and price rises by 20%, how much more will be supplied to the
market?

A 0.3% B 3.0% C 13.3% D 30%

© UCLES 2024 9708/12/F/M/24 [Turn over

 4

10 Butter is a normal good. It is in joint demand with bread and in joint supply with buttermilk. The
demand for butter increases because of a rise in consumer incomes.

What are the effects of this increase on the prices of bread and buttermilk?

price of
price of bread
buttermilk

A decreases decreases
B decreases increases
C increases decreases
D increases increases

11 The diagram shows a competitive market in equilibrium with price P and quantity Q sold.

V
S
price

P W

U D
O Q
quantity

Which area represents the producer surplus?

A PWU B PVW C OUWQ D OPWQ

12 A policy that aims to reduce the degree of inequality of income will also reduce the level of
employment in a country.

What is most likely to be such a policy?

A The effective minimum wage is increased by 25%.

B The rate of income tax paid by the lowest band of earners is reduced.
C The government increases the level of subsidies given to producers of some merit goods.
D The government provides more goods that are regarded as essential.

© UCLES 2024 9708/12/F/M/24

 5

13 What explains the underconsumption of merit goods?

A Their value is not fully understood by consumers.

B They are unproductive goods and services.
C They can only be provided by the government.
D They are only provided by private sector businesses.

14 A country uses an income tax under which the first $10 000 of income is tax-free, the next
$20 000 is taxed at 20% and any income over $30 000 is taxed at a top rate of 40%. It also levies
a sales tax of 10% on most products.

Which combination of tax changes is most likely to create a more equal distribution of income in
the country?

income tax sales tax

A a higher tax-free allowance a higher rate of tax

B a higher top rate of tax a lower rate of tax
C a lower tax-free allowance a higher number of exempt goods
D a lower top rate of tax a lower number of exempt goods

15 The table shows real GDP expressed as an index number in each quarter of 2021.

index of GDP
2021 in real terms
(2020 = 100)

Q1 99.4
Q2 99.3
Q3 100.1
Q4 100.4

What can be concluded from the table?

A Inflation reduced the real value of GDP in the first six months of 2021.
B Real GDP was lower at the end of 2021 than 2020.
C The economy was in recession at the end of the first six months of 2021.
D The standard of living was higher at the end of 2021 than in 2020.

© UCLES 2024 9708/12/F/M/24 [Turn over

 6

16 What is least likely to cause a simultaneous increase in demand-pull and cost-push inflation?

A depreciation of currency
B increased import tariffs
C decreased spending on infrastructure
D increased wages

17 According to the circular flow of income, what would be the immediate result of an increase in the
value of a country’s exports?

A imports would increase

B national income would increase
C savings would increase
D taxes would increase

18 To calculate the unemployment rate, the number unemployed is related to

A the total adult population aged 18–65.

B the number of unemployed who are seeking work.
C the total number in full-time employment.
D the total population in the labour force.

19 Aggregate demand in an economy may decrease as a result of an increase in

A consumption expenditure.
B government expenditure.
C import expenditure.
D investment expenditure.

20 A government has a balanced budget. It decides to increase its spending by 10%.

Which increase in government revenue would produce a budget surplus?

A –10% B 0% C +10% D +20%

© UCLES 2024 9708/12/F/M/24

 7

21 An economy has an unemployment rate of 8%, an increase of 2% from the previous year. At the
same time, the current account deficit rose from 3% of GDP to 4% of GDP.

What would be most likely to reduce both unemployment and the current account deficit?

A decrease government spending

B depreciation of the currency
C increase indirect taxation
D increase interest rates

22 The diagram shows aggregate demand (AD) curves for an economy.

price
level

AD1
AD2
O real output

Which combination is most likely to have caused the shift from AD1 to AD2?

income tax sales tax

A decrease decrease
B decrease increase
C increase decrease
D increase increase

23 What can be considered an expansionary supply-side policy?

A an increase in government expenditure on training

B an increase in sales tax
C an increase in the rate of interest
D an increase of the exchange rate

© UCLES 2024 9708/12/F/M/24 [Turn over

 8

24 The table indicates the factor inputs required to produce wheat and cars in countries X and Y.

units of factor units of factor

inputs to produce inputs to produce
one tonne of wheat one car

country X 4 2
country Y 8 6

What makes it possible for both countries to benefit from trade?

A Country X has an absolute advantage in wheat and car production.

B Country Y has an absolute advantage in wheat and car production.
C Country Y has a comparative advantage in wheat production.
D Opportunity cost of wheat and car production is the same between countries.

25 A government decides to allow the country’s currency to depreciate to remove the deficit on its
current account of the balance of payments.

What is the most likely reason why this would not work?

A The country gains a competitive advantage from the depreciation.

B The country has a surplus on its capital and financial accounts.
C The price elasticities of demand for the country’s exports and imports are greater than one.
D There are high trade barriers with the country’s main trading partners.

26 When must the terms of trade of a country change?

A when the volume of exports falls and the volume of imports rises
B when the total value of exports falls and the total value of imports rises
C when the balance of trade in goods moves from deficit to surplus
D when the average price of exports rises and the average price of imports falls

© UCLES 2024 9708/12/F/M/24

 9

27 The table shows an extract from a country’s balance of payments.

exports imports
$ billion $ billion

trade in goods 150 200

trade in services 70 50
primary (investment) income 120 100
secondary (transfer) income 15 20

What is the current account balance?

A –$10bn B –$15bn C –$30bn D –$50bn

28 The table shows the goods balance and services balance for a country in selected years.

goods balance services balance

year
$ billion $ billion

2015 +120 –30

2016 +110 –30
2017 +50 –10
2018 +130 –60
2019 +140 –50

Between which years did the overall goods and services balance change the most?

A 2015–2016 B 2016–2017 C 2017–2018 D 2018–2019

© UCLES 2024 9708/12/F/M/24 [Turn over

 10

29 The diagram shows the market for both domestic and imported computers for an economy. The
world price is p1.

price
Sdom
S2
Sdom + imp

p2
p1

D
O q 2 q1
quantity

Which government policy would lead to a price of p2?

A an embargo on imports
B an exchange rate appreciation
C a subsidy to domestic producers
D a tariff on imports

30 What is not a likely cause of a deficit in the current account of the balance of payments?

A Consumer spending is low.

B Primary incomes in the form of investment income are low.
C The rate of exchange is high.
D Wage costs of production are high.

© UCLES 2024 9708/12/F/M/24

 11

BLANK PAGE

© UCLES 2024 9708/12/F/M/24

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 9708/12/F/M/24