UNIT 1 (Micro)

1.
44 The
The diagram
diagram shows an economy’s
shows an economy’sproduction
productionpossibility
possibilityfrontier.
frontier.
Capital
Capital goods
goods

100 U
U
100

80 VV WW

XX YY
50

ZZ
0
0
80
80 90
90 100
100 Consumer
Consumergoods
goods

Which one
Which one of
of the
the following
following movements
movementshas
hasan
anopportunity
opportunitycosts
costsofof3030capital
capitalgoods?
goods?
A U
A U to
to V
V

B V
B V to
to Y
Y

C
C W to
W to Z
Z
D Y to Z
D Y to Z
(Total for Question 4 = 1 mark)
(Total for Question 4 = 1 mark)
2.
5 The price of a litre of rapeseed oil increased by 7% in August 2016. Over the same
5 The price
period theofquantity
a litre ofdemanded
rapeseed oil increasedoil
of rapeseed bydecreased
7% in August 2016.
by 5% andOver the same
the quantity
period the quantity demanded of rapeseed
demanded of sunflower oil increased by 3%. oil decreased by 5% and the quantity
demanded of sunflower oil increased by 3%.
Ceteris paribus, the cross-elasticity of demand for sunflower oil following a price
Ceteris
changeparibus, the cross-elasticity
in rapeseed oil is equal to: of demand for sunflower oil following a price
change in rapeseed oil is equal to:
A 0.43
A 0.43
B 0.71
B 0.71
C 1.40
C 1.40
D 2.33
D 2.33
(Total for Question 5 = 1 mark)
(Total for Question 5 = 1 mark)

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics 3

7
 3.
6 The table below shows the estimated price elasticity of demand for various food
items in the USA.

Estimates of price
Food item
elasticity of demand

Cheese -0.70

Ice cream -0.23

Milk -0.10

Other dairy products -1.04

(Source: http://www.ers.usda.gov/media/875267/err139.pdf )

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

A Cheese is an inferior good.

B Ice cream has perfectly price inelastic demand.

C An increase in the price of milk will cause a less than proportionate decrease
in quantity demanded.

D A decrease in the price of other dairy products will cause a more than
proportional decrease in quantity demanded.

(Total for Question 6 = 1 mark)

TOTAL FOR SECTION A = 6 MARKS

4
 SECTION A

Answer ALL questions in this section.

Questions must be answered with a cross in a box . If you change your mind about
an answer, put a line through the box and then mark your new answer with a cross .
4.
1 The diagrams show the production possibility frontiers for Singapore’s economy. It is
operating at point X on the production possibilit y frontier LL.
Singapore’s population is expected to increase by 90 000 next year.
In which one of the diagrams does the movement from X to Y illustrate this expected
increase in population if the economy still operates at its maximum productive
potential?

A B
Capital Capital
goods M goods
L
Y X
L M
X Y

L M M L
0 0
Consumer Consumer
goods goods

C D
Capital Capital
goods L goods L
Y
X
X

L L
0 0
Consumer Consumer
goods goods

5. (Total for Question 1 = 1 mark)

2 Which one of the following is a function of the price mechanism?

A To create an incentive for producers to decrease the quantity supplied

when the price increases.
B To encourage government intervention to allocate scarce resources.

C To provide a signal to producers and consumers about changes in supply

and demand when prices change.
2 D To ration scarce resources by allowing prices to decrease when demand
increases. * P59786A0228*
(Total for Question 2 = 1 mark)

3 Which one of the following is a cause of government failure?

A Excessive administrative costs involved in meeting environmental regulations.

 6.
4 The diagram shows the market for wheat in the European Union after the
introduction of a subsidy.

Price of
wheat, euros S
per tonne

S+subsidy
194

165

135

0 Quantity of
1 550 2 100
wheat per
month
(tonnes)

Which one of the following is the consumer incidence of the subsidy?

A €60 900
B €63 000

C €123 900
D €283 500

(Total for Question 4 = 1 mark)

 7.
5 The diagram shows a demand curve for rice.
Price of
rice per
tonne A

SECTION A
Answer ALL questions in this section.
C
Questions must be answered with a cross in a box . If you change your mind about
an answer, put a line through the box and then mark your new answer with a cross .
Demand
1 Statement 1: Countries should impose indirect taxes of 20% on sugary drinks.
Statement 2: 39% of adults worldwide were overweight in 2014. 11% of menDand
15% of women
0 were classified as obese.
Quantity of rice per
Which one of the following best describes the two statements above? month, tonnes

At which point on the demand curve will the price elasticity of demand be unitary?
A Both statements are normative.
A
B Statement 1 is normative and statement 2 is positive.
B
C Both statements are positive.
C
D Statement 1 is positive and statement 2 is normative.
D
(Total for Question 1 = 1 mark)
(Total for Question 5 = 1 mark)
8.
2 Which one of the following is an example of market failure?

A The price of a commodity falling in response to falling demand

B A tradeable pollution permit scheme aimed at reducing external costs
C A market bubble caused by speculators, which leads to house prices rising
D Excessive administrative costs resulting from the introduction of regulation

(Total for Question 2 = 1 mark)

3 In the UK, gas and electricity customers could save over £300 by moving to a 5

suppliers. * P59786A0528*
different supplier. However, 70% of customers have never switched gas and electricity
Turn over
 SECTION A
Answer ALL questions in this section.
9.
6 TheQuestions
table showsmust
thebe answered
estimated withelasticity
income a cross inofademand
box . Iffor
you change
various yourand
goods mind about
an answer, put a
services in the USA.line through the box and then mark your new answer with a cross .
1 Statement 1: Countries should impose indirect taxes of 20% on sugary drinks.
Estimates of income
Item
elasticity
Statement 2: 39% of adults worldwide were overweight of demand
in 2014. 11% of men and
15% of women were classified as obese.
Cheese -0.51
Which one of the following best describes the two statements above?
Public transport -0.36
A Both statements are normative.
Ice cream +0.83
B Statement 1 is normative and statement 2 is positive.
Motor cars +2.56
C Both statements are positive.
(Source: http://digitalcommons.unl.edu/cgi/viewcontent.
D Statement 1 is positive and statementcgi?article=1102&context=agecon_cornhusker)
2 is normative.

(Total for Question 1 = 1 mark)

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

A one
2 Which Cheese
of thehas relatively
following is price inelastic
an example ofdemand.
market failure?
B
A Public transport
The price is a normalfalling
of a commodity good.in response to falling demand

C
B An increase in
A tradeable real income
pollution willscheme
permit result in a lessatthan
aimed proportionate
reducing external decrease
costs in
demand for ice cream.
C A market bubble caused by speculators, which leads to house prices rising
D A decrease in real income will result in a more than proportionate decrease
D in
Excessive administrative
the demand for motor costs
cars. resulting from the introduction of regulation

(Total for
(Total for Question
Question62== 11mark)
mark)
10.
TOTAL
3 In the UK, gas and electricity customers could save over £300FOR SECTION
by moving to A
a = 6 MARKS
different supplier. However, 70% of customers have never switched gas and electricity
suppliers.
Which one of the following explains this behaviour?

A Customers being good at computation

B Customers maximising utility
C Customers not feeling valued by current suppliers
D Customers exhibiting habitual behaviour

(Total for Question 3 = 1 mark)

2 Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics

6
* S57251A0221*
Sample Assessment Materials – Issue 2 – June 2018 © Pearson Education Limited 2018

6
 SECTION A
SECTION A
Answer ALL questions
SECTIONinAthis section.
Answer ALL questions in this section.
Questions must be answered withALL
Answer a cross in a box
questions . If section.
in this you change your mind about an
Questions
answer, put must bethrough
a line answered thewith
boxa cross
andin a box
then mark. Ifyour
younewchange yourwith
answer mind about an
a cross .
Questions must be answered
answer, put a line through the box with a cross
and in a box . If you change your mind
then mark your new answer with a cross . about an
UNIT 2 (Macro)
1 Which one of
answer, the
put following
a line is a the
through withdrawal
box and fromthen
the circular
mark your flownew
of income?
answer with a cross .
1 1.Which one of the following is a withdrawal from the circular flow of income?
1 Which one of the following is a withdrawal from the circular flow of income?
A Investment
A Investment
BA Exports
Investment
B Exports
CB Imports
Exports
C Imports
DC Government
Imports expenditure
D Government expenditure
D Government expenditure (Total for Question 1 = 1 mark)
(Total for Question 1 = 1 mark)
(Total for Question 1 = 1 mark)
2 2.
In July 2016, the unemployment rate in Greece was 23.2%.
2 In July 2016, the unemployment rate in Greece was 23.2%.
2 In Julyone
Which 2016,
of the
the unemployment
following is mostrate in Greece
likely to reducewasunemployment
23.2%. in Greece?
Which one of the following is most likely to reduce unemployment in Greece?
WhichA one of the following
An increase is most
in interest rateslikely to reduce unemployment in Greece?
A An increase in interest rates
BA An Anincrease
increaseininindirect
interesttaxation
rates
B An increase in indirect taxation
CB An Anincrease
increaseinindirect
indirect taxation
taxation
C An increase in direct taxation
DC An Anincrease
increaseiningovernment
direct taxationspending
D An increase in government spending
D An increase in government spending (Total for Question 2 = 1 mark)
(Total for Question 2 = 1 mark)
3. (Total for Question 2 = 1 mark)
3 The World Bank calculates a ‘PPP-adjusted level of GDP’ for different countries.
3 The World Bank calculates a ‘PPP-adjusted level of GDP’ for different countries.
3 The World
What Bank calculates
is compared a ‘PPP-adjusted
to calculate Purchasing Powerlevel of GDP’(PPP)?
Parity for different countries.
What is compared to calculate Purchasing Power Parity (PPP)?
WhatAis The
compared
price oftoacalculate
basket ofPurchasing
comparable Power
goods Parity (PPP)? in different countries
and services
A The price of a basket of comparable goods and services in different countries
BA TheThevalue
priceofof the
a basket of comparable
currency of one country goods andUS
to the services
dollar in different countries
B The value of the currency of one country to the US dollar
CB Life
Theexpectancy
value of theandcurrency of oneattainment
educational country to in thedifferent
US dollar countries
C Life expectancy and educational attainment in different countries
DC Inflation
Life expectancy and educational
rates in different countries attainment
over a givenin different
time period countries
D Inflation rates in different countries over a given time period
D Inflation rates in different countries over a given(Total time period
for Question 3 = 1 mark)
(Total for Question 3 = 1 mark)
(Total for Question 3 = 1 mark)

2 Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics

246
46 ** S57253A0221*
Pearson
Sample Edexcel
Assessment International
Materials – IssueAdvanced Subsidiary/Advanced
2 – June 2018 Level Limited
© Pearson Education in Economics
2018

* S57253A0221*
2 Sample Assessment
Pearson Materials
Edexcel – IssueAdvanced
International 2 – June 2018 © Pearson Education
Subsidiary/Advanced LevelLimited 2018
in Economics
46
S57253A0221*
Sample Assessment Materials – Issue 2 – June 2018 © Pearson Education Limited 2018
 4.
4 The chart shows the Business Confidence Indicator for Chile.
103
102.27
102
100.94
101 100.73
Business con dence indicator

100.31
100

99
98.08
98
97.42 97.23
97

96

95

0
2010 2011 2012 2013 2014 2015 2016

(Source: https://data.oecd.org/leadind/business-confidence-index-bci.htm#indicator-chart)

The Business Confidence Indicator is a measure of how confident businesses are

about future sales.

Which one the following is most likely to result from the change in business
confidence in Chile between 2010 and 2015?

Real output Price level

A Fall Rise

B Fall Fall

C Rise Rise

D Rise Fall

(Total for Question 4 = 1 mark)

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics 3

47
5 The chart shows the balance of trade between 2010 and 2015 for Lebanon.
10
5.
4.87of trade between 2010 and 2015 for Lebanon.
5 The chart shows the balance
5 3.64 3.30 3.16
10 2.51 2.23

0 4.87
5 3.64 3.30 2012 3.16
2010 2011 2013 2.51 2014 2.23 2015
$ billion $ billion

-5
0
2010 2011 2012 2013 2014 2015
-10
-5

-10
-15 -13.19 -13.00
-14.61 -15.23
-15.91 -15.73
-15 -13.19 -13.00
-20 -14.61 -15.23 -15.91 -15.73
Exports Imports
-20
(Source: http://blog.blominvestbank.com/lebanons-balance-of-trade-continued-
Exports Imports
to-show-a-decline-in-its-trade-deficit-by-september/)
(Source: http://blog.blominvestbank.com/lebanons-balance-of-trade-continued-
Which one of the following can be deduced from the chart?
to-show-a-decline-in-its-trade-deficit-by-september/)

WhichAone of the following

Lebanon’s can bewas
fiscal deficit deduced from in
$12.75bn the2013.
chart?

A
B Lebanon’s
Lebanon’sfiscal
net deficit was $12.75bn
trade balance in 2013. in 2015.
was -$10.77bn
B
C Lebanon’s
Lebanon’snet
nettrade balance
trade wasworsened
balance -$10.77bneach
in 2015.
year between 2010 and 2015.
C Lebanon’s net trade balance worsened each year between 2010 and 2015.
D Lebanon had a fiscal deficit in each year between 2010 and 2015.
D Lebanon had a fiscal deficit in each year between 2010 and 2015.
(Total for Question 5 = 1 mark)
(Total for Question 5 = 1 mark)
6.
6 Donald Trump, the President of the USA, has proposed a reduction in the top rate of
6 income
Donald Trump, the39.6%
tax from President of the USA, has proposed a reduction in the top rate of
to 33%.
income tax from 39.6% to 33%.
What would be the effect of this change in the marginal rate of tax?
What would be the effect of this change in the marginal rate of tax?

A ItItwould
A woulddecrease
decrease wealth.
wealth.
B ItItwould
B wouldincrease
increase withdrawals.
withdrawals.
C
C ItItwould
woulddecrease
decreasethe value
the of the
value multiplier.
of the multiplier.
D
D ItItwould
wouldincrease the
increase value
the of the
value multiplier.
of the multiplier.
(Total(Total
for Question 6 = 1 mark)
for Question 6 = 1 mark)
TOTAL FOR SECTION A = 6 MARKS
TOTAL FOR SECTION A = 6 MARKS

4 Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics

48
4
48 * S57253A0421*
Sample Pearson
Assessment Materials
Edexcel – Issue 2 – Advanced
International June 2018 © Pearson Education Limited
Subsidiary/Advanced Level2018
in Economics
* S57253A0421*
Sample Assessment Materials – Issue 2 – June 2018 © Pearson Education Limited 2018
 SECTION A
SECTION A
Answer ALL questions in this section.
Answer ALL questions in this section.
Questions must be answered with a cross in a box . If you change your mind about an answer,
Questionsputmust bethrough
a line answered with
the boxa cross
andin a box
then mark. Ifyour
younew
change yourwith
answer mind about an
a cross . answer,
put a line through the box and then mark your new answer with a cross .
1 7.
In 2017 Turkey’s deficit on the current account of the balance of payments increased
1 to
In 2017 Turkey’s deficit on the current account of the balance of payments increased
$4.2 billion.
to $4.2 billion.
This increase in the deficit on the current account is most likely to have resulted from
This increase in the deficit on the current account is most likely to have resulted from
A an increase in the value of imports
A an increase in the value of imports
B an increase in the value of exports
B an increase in the value of exports
C a decrease in government spending
C a decrease in government spending
D a decrease in employment
D a decrease in employment
(Total for Question 1 = 1 mark)
8. (Total for Question 1 = 1 mark)
2 The table shows Malaysia’s rate of inflation between February 2017 and July 2017.
2 The table shows Malaysia’s rate of inflation between February 2017 and July 2017.
Month Rate of inflation
Month Rate of(%)
inflation
(%)
February 4.5
February 4.5
March 5.1
March 5.1
April 4.4
April 4.4
May 3.9
May 3.9
June 3.6
June 3.6
July 3.2
July 3.2
From this table it can be deduced that
From this table it can be deduced that
A there was deflation between April and May
A there was deflation between April and May
B there was disinflation between May and June
B there was disinflation between May and June
C the rate of inflation was at its highest in July
C the rate of inflation was at its highest in July
D inflation increased at a constant rate between May and July
D inflation increased at a constant rate between May and July
(Total for Question 2 = 1 mark)
(Total for Question 2 = 1 mark)

2
2 *P61316A0228*
*P61316A0228*
 9.
3 The Moroccan economy had a large negative output gap in 2017.
3 The Moroccan economy had a large negative output gap in 2017.
Which one of the following is usually associated with a negative output gap?
Which one of the following is usually associated with a negative output gap?
A Demand-pull inflation and decreasing unemployment
A Demand-pull inflation and decreasing unemployment
B Cost-push inflation and high employment rates
B Cost-push inflation and high employment rates
C Real GDP growth less than the long-term productive potential
C Real GDP growth less than the long-term productive potential
D Real GDP growth more than the long-term productive potential
D Real GDP growth more than the long-term productive potential
(Total for Question 3 = 1 mark)
10. (Total for Question 3 = 1 mark)
4 Between 2010 and 2016 Indonesia recorded a 44.4% fall in the value of its exports.
4 This
Between 2010
resulted anda2016
from Indonesia
decrease in therecorded
demand a for44.4% fall in the
Indonesian value of its exports.
clothing.
This resulted from a decrease in the demand for Indonesian clothing.
Ceteris paribus, which one of the following is likely to result from this situation?
Ceteris paribus, which one of the following is likely to result from this situation?

Rate of Rate of
Rate of
unemployment Rate of
inflation
unemployment inflation
A Falling Rising
A Falling Rising

B Falling Falling
B Falling Falling

C Rising Rising
C Rising Rising

D Rising Falling
D Rising Falling

(Total for Question 4 = 1 mark)

(Total for Question 4 = 1 mark)

3
3
 11.
5 The chart shows the current account of the balance of payments for Hong Kong,
quarter 2 2009 to quarter 3 2017 HK$ (billion).
60

40

20
HK$ (billion)
0

-20

-40
Q2 2009

Q4 2009
Q2 2010

Q4 2010

Q2 2011

Q4 2011

Q2 2012
Q4 2012

Q2 2013

Q4 2013

Q2 2014

Q4 2014
Q2 2015

Q4 2015

Q2 2016

Q4 2016
Q2 2017
(Source: http://www.censtatd.gov.hk/FileManager/EN/UTIL_STAT_CHART/041chart01.gif )

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

A There was a current account surplus in Q2 2013

B The current account surplus fell by HK$20 billion between Q4 2009

and Q2 2010
C The current account was in a deficit in Q2 2014
D There was a balanced government budget in Q2 2015

(Total for Question 5 = 1 mark)

4
*P61316A0428*
 12.
6 The chart shows the ILO unemployment rate for Greece between January 2017 and
October 2017.

23.5
23.1
23
22.5
22.5
22.1
22 21.8 21.7
%
21.5 21.3
21.0 20.9
21 20.8 20.8

20.5

0
Jan 2017 Apr 2017 Jul 2017 Oct 2017

(Source: https://tradingeconomics.com/greece/unemployment-rate)

Which one of the following is the percentage change in the unemployment rate for
Greece between January 2017 and October 2017?

A –2.2
B –9.52

C –10.53

D –10.7

(Total for Question 6 = 1 mark)

TOTAL FOR SECTION A = 6 MARKS