Free GCE O Level Economics June 2015 Past Paper 1 Questions

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Subject Code	0525
Subject Title	O Level Economics
Session	June 2018 Paper 1

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Cameroon GCE O Level Economics Paper 1 Solution - June 2023

1. A persistent Balance of Payments Surplus can be corrected through:

A. Selling a country's gold reserves

B. Devaluation

C. Revaluation

D. Borrowing from friendly countries

The correct answer is "B. Devaluation." This makes exports cheaper and imports more expensive, correcting the surplus.

2. Which of the following is an indicator of economic growth?

A. High mobility of factors of production

B. Overpopulation

C. High birth rate

D. High per capita income

The correct answer is "D. High per capita income." It measures the average income of individuals, a key indicator of economic growth.

3. Full employment can best be defined as a situation in which:

A. All men and women of working age are employed

B. All those who are willing and able to work can find jobs

C. Only the disabled are not employed

D. All adults are effectively working

The correct answer is "B. All those who are willing and able to work can find jobs." It indicates no involuntary unemployment.

4. When the general price level falls in an economy, the economist says that:

A. The value of money rises

B. The value of money falls

C. The value of money remains stable

D. The real value of money remains stable

The correct answer is "A. The value of money rises." Falling prices (deflation) increase the purchasing power of money.

5. The sales manager of Guinness Company realized that the demand for their most popular drink is elastic. To increase total revenue for Guinness Company, he will:

A. Increase the price of the drink

B. Hold the price constant

C. Decrease the price of the drink

D. Decrease the supply of the drink

The correct answer is "C. Decrease the price of the drink." For elastic goods, lowering the price increases demand and total revenue.

6. Which of the following represents an injection into the circular flow of income?

A. Savings

B. Investments

C. Taxes

D. Imports

The correct answer is "B. Investments." Injections into the circular flow of income increase economic activity.

7. Industrial inertia refers to a situation:

A. Where firms are concentrated in one area

B. Where firms are operating at large scale

C. Where initial reasons for location have been attained

D. Where initial reasons for location have disappeared

The correct answer is "C. Where initial reasons for location have been attained." This implies that firms remain in an area despite no new advantages.

8. A farmer incurred the following costs in order to produce vegetables:

Items	Amount (in FCFA)
Land	15,000
Wages	30,000
Seedlings	10,000
Fertilizers	12,000
Truck	25,000

What is the value of the total fixed cost incurred by the farmer?

A. 40,000 FCFA

B. 52,000 FCFA

C. 45,000 FCFA

D. 15,000 FCFA

The correct answer is "D. 15,000 FCFA." Fixed costs include those that do not vary with production levels, such as land.

9. A country has a birth rate of 100 per thousand and a death rate of 70 per thousand. The population growth rate of this country is:

A. 30%

B. -30%

C. 3%

D. -3%

The correct answer is "C. 3%." Population growth is calculated as the difference between birth and death rates, expressed as a percentage.

10. When the government spends more than she receives from taxes, it is called:

A. Budget surplus

B. Budget deficit

C. Balanced budget

D. Budget disequilibrium

The correct answer is "B. Budget deficit." It occurs when expenditures exceed revenues.

11. In a public limited company, the greatest risk is borne by:

A. Preference shareholders

B. Debenture holders

C. The Board of Directors

D. Ordinary shareholders

The correct answer is "D. Ordinary shareholders." They are the last to receive payments during liquidation and thus bear the highest risk.

12. In which economic system can one find no freedom of choice and therefore loss of consumer's sovereignty?

A. Free enterprise economy

B. Command economy

C. Mixed economy

D. Traditional economy

The correct answer is "B. Command economy." In this system, decisions are made by the government, reducing consumer freedom.

13. Flour can be used for baking of bread, cake, chin chin, etc. This is an example of:

A. Composite demand

B. Competitive demand

C. Derived demand

D. Complementary demand

The correct answer is "C. Derived demand." Flour's demand depends on its use in producing other goods.

14. The imposition of high taxes on alcoholic drinks by the government to reduce the rate of alcoholism is known as:

A. A direct government intervention policy

B. A fiscal policy

C. A monetary policy

D. A physical policy

The correct answer is "B. A fiscal policy." This policy uses taxation to influence economic behavior.

15. Which is the most common form of money in a developing country?

A. Currency

B. Bank notes

C. Coins

D. Cheques

The correct answer is "A. Currency." It is widely used in developing countries as the primary medium of exchange.

16. A given economy has the following National Income Statistics:

Items	Amount ('000 FCFA)
Consumption expenditure	5,000
Investment expenditure	2,000
Government spending	1,000
Net Property income from abroad	300
Indirect taxes	100
Subsidies	50
Depreciation	50

What is the GNP of this economy?

A. 8,300,000 CFAF

B. 9,300,000 CFAF

C. 9,000,000 CFAF

D. 9,000,000 CFAF

17. When a tariff is imposed on a good imported:

A. The demand for the good increases

B. The demand for the good decreases

C. The supply of the good increases

D. The supply of the good decreases

18. Iron ore is an example of which factor of production?

A. Capital

B. Labour

C. Land

D. Entrepreneur

19. Which of the following is a preventive check proposed by Malthus to control population growth?

A. Earthquakes

B. Family planning

C. Famine

D. Occurrence of diseases

20. The debt of a certain country stands as follows:

Items	Amount (in FCFA)
National debt	10,000,000
External debt	6,500,000
Internal debt	3,500,000

What percentage of the debt constitutes a real burden to this country?

A. 65%

B. 3.5%

C. 6.5%

D. 35%

21. Identify the business unit where investors' debts are limited to the extent of their shareholdings:

A. Sole proprietorship

B. Ordinary partnership

C. Public Company

D. Public enterprise

22. This question is based on the diagram illustrating the concept of opportunity cost:

What is the opportunity cost of increasing the output of luxury goods from 25 to 35 units?

A. 10 units of luxury goods

B. 25 units of luxury goods

C. 95 units of basic goods

D. 8 units of basic goods

23. Study the diagram carefully and answer the question that follows:

From the diagram, identify B:

A. Optimum population point

B. Optimum population size

C. Overpopulation point

D. Overpopulation size

24. The main reason for a conglomerate is to:

A. Enjoy high output

B. Diversify output

C. Enjoy supernormal profits

D. Enjoy normal profits

25. The practice of mono-cropping over a large piece of land is known as:

A. Subsistence farming

B. Traditional farming

C. Plantation farming

D. Cooperative farming

26. One of the ways by which government can remedy cyclical unemployment is to:

A. Provide training centers

B. Increase occupational mobility of labour

C. Increase unemployment benefits

D. Increase aggregate demand

27. Which trade barrier reduces the volume of import but yields no revenue to the government?

A. Tariffs

B. Quotas

C. Subsidies

D. Embargoes

The correct answer is "B. Quotas." Quotas limit the quantity of goods imported without generating revenue.

28. A situation where payment is made and the goods are delivered on a later date is known as:

A. Hire purchase

B. Trade credit

C. Credit sales

D. Future market

The correct answer is "C. Credit sales." This refers to sales where the buyer pays later.

29. Which economic concept best describes a situation in which the value of money is persistently falling?

A. Deflation

B. Appreciation of currency

C. Inflation

D. Depreciation of currency

The correct answer is "C. Inflation." Inflation occurs when the purchasing power of money declines over time.

30. Which of the following is the formula for calculating per capita GDP?

A. Dividing real GDP by population

B. Dividing population by real GDP

C. Subtracting property income from GNP

D. Multiplying real GDP by population

The correct answer is "A. Dividing real GDP by population." This gives the average economic output per person.

31. From the diagram, the movement of the demand curve from D₀D₀ to D₂D₂ is:

A. An increase in quantity demanded

B. An increase in demand

C. A shift in demand

D. An extension in demand

The correct answer is "C. A shift in demand." A shift reflects a change in factors influencing demand other than price.

32. Which one of the following is an argument for protectionism?

A. Increase cost of production

B. Encouragement of scientific research

C. The protection of strategic industries

D. Foreign exchange control

The correct answer is "C. The protection of strategic industries." Protectionism helps safeguard critical industries from foreign competition.

33. Which one of the following institutions controls the banking activities in Cameroon?

A. BICEC

B. CEMAC

C. Treasury

D. COBAC

The correct answer is "D. COBAC." COBAC (Central African Banking Commission) oversees banking regulations in the CEMAC region.

34. Which of the following is a characteristic of wealth?

A. Portability

B. Transferability

C. Divisibility

D. Durability

The correct answer is "B. Transferability." Wealth is defined as assets that can be transferred or exchanged.

35. The revenue collected by taxation officials should be greater than the cost of collection. This statement explains:

A. The principle of flexibility

B. The principle of certainty

C. The principle of economy

D. The principle of convenience

The correct answer is "C. The principle of economy." This principle ensures tax collection is cost-efficient.

36. Everything being equal, the decision to consume more of one product will imply that:

A. Less of another product will be consumed

B. More of another product will be consumed

C. Enough resources are available to produce output

D. Less resources are available to produce output

The correct answer is "B. More of another product will be consumed." This refers to complementary consumption patterns.

37. What name is used to describe an industry that would prefer to locate near its source of raw materials?

A. Weight-gaining industry

B. Footloose industry

C. Industrial inertia industry

D. Weight-losing industry

The correct answer is "D. Weight-losing industry." These industries minimize costs by staying close to raw materials.

38. The main hindrance to large-scale farming in villages is:

A. Soil infertility

B. Land tenure systems

C. Traditional rulers

D. Rural exodus

The correct answer is "B. Land tenure systems." These systems often complicate access to land for large-scale farming.

39. A negative income elasticity of demand suggests that the good is:

A. A normal good

B. A Veblen good

C. An inferior good

D. A good of snob appeal

The correct answer is "C. An inferior good." Demand for these goods decreases as income rises.

40. Which of the following refers to the situation where the market is controlled by a single seller?

A. Monopolistic competition

B. Monopoly

C. Oligopoly

D. Perfect competition

The correct answer is "B. Monopoly." A monopoly exists when one seller dominates the market.

41. Which of the following instruments involve the buying from and selling of securities to the public?

A. Cash ratio

B. Open market operation

C. Funding

D. Moral suasion

The correct answer is "B. Open market operation." This involves the buying and selling of government securities to regulate money supply.

42. Assume that the cash ratio of a single bank is 20% and its total deposit is 1,500,000 FCFA. Calculate how much the bank has to keep to meet up with her customers' demand.

A. 1,200,000 FCFA

B. 1,700,000 FCFA

C. 300,000 FCFA

D. 180,000 FCFA

The correct answer is "C. 300,000 FCFA." The required reserve is calculated as 20% of 1,500,000 FCFA, which is 300,000 FCFA.

43. Which one of the following diagrams represents a contraction of the demand curve?

A. Diagram A

B. Diagram B

C. Diagram C

D. Diagram D

The correct answer is "B. Diagram B." A contraction occurs when there is a movement up along the demand curve due to a price increase.

44. The marginal cost of producing the 3rd unit of output is:

A. 7,000 FCFA

B. 11,000 FCFA

C. 9,000 FCFA

D. 5,333 FCFA

The correct answer is "B. 11,000 FCFA." The marginal cost is the change in total cost divided by the change in output (21,000 - 12,000 = 9,000 FCFA).

45. All indirect taxes are regressive because:

A. Higher and lower income levels pay the same percentage of price in taxation

B. The poor pay a lesser amount than the rich

C. As income increases a higher proportion is paid

D. Higher income brackets pay smaller amounts as taxes

The correct answer is "B. The poor pay a lesser amount than the rich." Indirect taxes often disproportionately impact lower-income individuals.

46. Study the nature of the setup of the authorized capital of a private company and answer the question that follows: 1,000 Ordinary shares at 5,000 FCFA each, 1,000 Preference shares at 10,000 FCFA each, 500 debentures at 25,000 FCFA each. What is the monetary value of debentures?

A. 5 million FCFA

B. 12.5 million FCFA

C. 10 million FCFA

D. 25 million FCFA

The correct answer is "D. 25 million FCFA." The value of debentures is calculated as 500 × 25,000 FCFA.

47. What is sunk capital?

A. Capital which can be used for any purpose

B. Capital used to satisfy any personal savings

C. Capital used to satisfy specific personal saving

D. Capital which has a specific purpose

The correct answer is "D. Capital which has a specific purpose." Sunk capital is invested and cannot be easily recovered.

48. Which financial institution is charged with the responsibility of issuing new bank notes and coins into circulation?

A. Treasury

B. Union Bank of Cameroon

C. Central Bank

D. Commercial Banks

The correct answer is "C. Central Bank." The Central Bank is responsible for issuing currency and managing monetary policy.

49. In managing his restaurant, John made a weekly budget of 180,000 FCFA. Of this amount, he allocates 90,000 FCFA for bread for breakfast. If a loaf of bread costs 300 FCFA, how many loaves of bread will he buy per week?

A. 600 loaves

B. 300 loaves

C. 400 loaves

D. 500 loaves

The correct answer is "B. 300 loaves." 90,000 FCFA ÷ 300 FCFA per loaf = 300 loaves.

50. Give another name for variable costs of production:

A. Prime costs

B. Overhead costs

C. Sunk costs

D. Supplementary costs

The correct answer is "A. Prime costs." Prime costs are directly associated with the production of goods or services.

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