alevel economics test 1

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36 Terms

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Question
Option1
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Why must societies make choices about resource allocation?
Resources are abundant and wants are limited
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If the UK government spends more on healthcare, the opportunity cost is:
Increased taxes for businesses
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Which of the following is a normative statement?
Increasing interest rates reduces borrowing
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A point inside the PPF represents:
Efficient use of resources
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If the price of petrol rises, demand is likely to:
Increase
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Firms are willing to supply more at higher prices because:
Consumers demand less
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What happens if market price is above equilibrium?
Shortage
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A good with many close substitutes is likely to have:
Inelastic demand
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Luxury goods have a YED:
< 0
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If the price of butter rises and demand for margarine rises, XED is:
Negative
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Pollution is an example of:
Positive externality
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Which characteristic defines a public good?
Non-rival and non-excludable
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A subsidy is used to:
Reduce consumption
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Rent control can lead to:
Surplus housing
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Which is NOT a function of money?
Medium of exchange
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GDP includes:
Value of all imports
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Aggregate expenditure formula:
AD = C + I + G + (X – M)
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Real GDP adjusts for:
Population growth
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Index number formula:
New ÷ Base × 100
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PPP adjusts GDP to account for:
Interest rates
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Unemployment rate formula:
Unemployed ÷ Total population
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Why does AD slope downward?
Wealth, interest rate, and trade effects
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LRAS is vertical because:
Firms respond to prices
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Negative output gap means:
Economy overheating
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Inflation is:
Falling prices
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Demand-pull inflation is caused by:
Rising production costs
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Cost-push inflation is caused by:
Excess demand
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Imported inflation occurs when:
Exports increase
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Which is a negative effect of high inflation?
Increased purchasing power
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Which is a monetary policy tool to reduce inflation?
Cutting government spending
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