Economics Preparation


Which of the following statements about investment appraisal is false?

A. If prices rise at a rate faster than the nominal interest rate, then real interest is negative.

B. If the risk-free interest rate rises, the projects whose net present values are most affected are those with short lives.

C. The internal rate of return on a project is the discount rate which would make its net present value zero.

D. The internal rate of return on a project is a percentage measure of its expected returns.


Which of the following statements is true?

A. Microeconomics is concerned chiefly with the economy as a whole.

B. Macroeconomics is concerned chiefly with individual markets.

C. Governments have no influence over market prices.

D. When economists study the price in a market, their chief aims are to understand why the price is what it is and why it may change.


Which of the following statements about the market demand curve for a product is false?

A. The market demand curve represents the individual demand curves of all consumers added together.

B. The market demand curve may shift if there is a change in the behaviour of some households which consume the product.

C. The market demand curve may shift if there is change in the price of the product.

D. The market demand curve may shift if there is a change in the number of consumers who buy the product.


Which of the following statements is true?

A. When Wimbledon's Centre Court has the legal maximum number of 15,000 spectators, watching a match there is non-rival because so many people are watching it.

B. A tennis racket is non-rival, because one person can use it today while another can use it tomorrow.

C. All motorways are excludable, because people could be charged tolls for using them.

D. National Health Service hospitals are non-excludable, because patients are not charged for using them.


Suppose you buy Economics by David King. What is the opportunity cost of your purchase?

A. The money you paid for the book.

B. Whatever you would have spent the money on if you had not bought the book.

C. The cost of producing the book.

D. The time you spend studying the book.


Which of the following types of economy describes the economy of the UK?

A. A command economy.

B. A market economy.

C. A mixed economy.

D. A planned economy.


Which of the following statements is false?

A. GDP measures the value of all the goods and services produced in the economy.

B. GDP stands for gross domestic product.

C. GDP excludes intermediate goods and services.

D. GDP equals wages plus trading profits.


Suppose a market is in equilibrium, and then the demand increases. Which of the following would be shown on a graph that illustrated the effects?

A. An excess demand at the initial equilibrium price.

B. An excess demand at the new equilibrium price.

C. An excess supply at the initial equilibrium price.

D. An excess supply at the new equilibrium price.


Which of the following statements about a fixed input is true?

A. Its price is fixed.

B. The quantity of it that a firm can use in the long run is fixed.

C. The quantity of it that a firm can use in the short run is fixed.

D. The quantity of output that the firm can produce with it is fixed.


Which of the following would cause a bank to lose reserves?

A. One of the bank?s depositors makes an internet payment to another of its depositors.

B. One of the bank's depositors pays out a cheque to another of its depositors.

C. One of the bank's depositors pays out a cheque to a depositor of another bank.

D. The bank raises the interest rate it pays on deposits.