Ecs1601 Economics IB Test bank with fully explained
solutions
Which of the following is/are correct?
a) Households are confronted with unlimited wants, but with limited resources with which to satisfy
those wants
b) The scarcity of resources necessitates households to make choices
both a and b are correct
Which of the following is/are correct regarding the distinction between macroeconomics and
microeconomics?
a) The price of apples at the supermarket is an example of a macroeconomic variable.
b) An increase in the general price level (inflation) in the economy is an example of a macroeconomic
variable.
only b is correct
A flow variable is defined as a variable that is measured over a period. Which one of the following
variables is not an example of a flow variable?
[1] National income
[2] The balance on Sibahle's savings account
[3] Budget deficit
[4] Total production
[2] The balance on Sibahle's savings account
Which of the following is not an acceptable intervention by the public sector in a mixed economy?
[1] the provision of funds for public goods such as parks and streetlights
[2] regulation of the pricing behavior of monopoly industries
[3] stabilization of the economy during periods of economic instability
[4] regulation of the price increases that result from changes in patterns of demand and supply in the
competitive market
[4] regulation of the price increases that result from changes in patterns of demand and supply in the
competitive market
The factors of production in an economy are ...
[1] households, capital, land, entrepreneurship
[2] government, household, firms, natural resources
[3] natural resources (land), labor, capital, and entrepreneurship
[4] human capital, land, natural resources, technology
,[3] natural resources (land), labor, capital, and entrepreneurship
Which of the following are the remuneration of the factors of production?
[1] natural resources, rent, interest, labor
[2] rent, salaries and wages, interest, profit
[3] households, land, profit, capital
[4] entrepreneur, firms, capital, labor
[2] rent, salaries and wages, interest, profit
In the circular flow of income and spending ...
[1] savings, imports, taxes are leakages, while investment, government spending, exports are
injections.
[2] imports, taxes, investments are leakages, while exports, investments, government spending are
injections.
[3] savings, exports, taxes area leakages, while imports, investments, government spending are
injections.
[4] savings, government spending, imports are leakages, while investments, exports, taxes are
injections.
[1] savings, imports, taxes are leakages, while investment, government spending, exports are injections.
In the circular flow of goods and services ...
[1] firms sell factors of production on the goods market.
[2] goods and services offered for sale on the goods market are purchased by firms.
[3] households combine factors of production and produce consumer goods and services.
[4] households offer factors of production in the factor market.
[4] households offer factors of production in the factor market.
What does the letters A, B, C and D in the figure represent?
a) A represents factors of production
b) B represents goods and services
c) C represents foreign sector
d) D represents spending by firm
[1] only a is correct
[2] only b and c are correct
[3] only b and d are correct
[4] a and b are correct, while c and d are incorrect
[3] only b and d are correct
,Which of the following is not an injection into the economy of South Africa?
[1] A domestic company in South Africa sells leather to a client that is in Italy.
[2] A decision by Ruth to save a larger portion of her salary. [3] Spending by the department of health
on new hospital facilities.
[4] The local bakery bought a new machinery and equipment that will improve the capacity to produce
more bread.
[2] A decision by Ruth to save a larger portion of her salary.
The circular flow model reveals that an increase in South African exports will ...
[1] increase output and income in the rest of the world.
[2] increase revenue to South African firms.
[3] increase revenue to foreign firms.
[4] decrease South African imports.
[2] increase revenue to South African firms
Which of the following is not considered a macroeconomic issue?
[1] A surplus in the trade balance due to increasing output. [2] The increase in inequality in the
country of Botswana.
[3] The rise in general price level in Zimbabwe.
[4] The unemployment rate of a town in Limpopo province.
[4] The unemployment rate of a town in Limpopo province.
Which one of the following statements is true about correlation and causality?
[1] Correlation between variables occurs when two variables have a relationship.
[2] Correlation between two variables proves causation.
[3] The example of a correlation is when an increase in value of exports cause a fall in economic
growth.
[4] Causality between two variables always implies correlation.
[1] Correlation between variables occurs when two variables have a relationship.
Which one of the following statements is incorrect?
[1] Money is different from income and wealth
[2] Income refers to reward earned in exchange for offering factors of production in the production
process
[3] It is good to hold wealth in the form of money during periods of high inflation because the value is
protected
[4] Money functions as a medium of exchange because it is generally accepted in payment for goods
and services
, [3] It is good to hold wealth in the form of money during periods of high inflation because the value is
protected
Which of the following statements concerning money is correct?
[1] The value of money is not based on the confidence that financial intermediaries will be able to
control the supply to achieve stability and that the purchasing power does not fall.
[2] Paper money was developed since specialization between countries led to increases in trade,
causing the use of coins to be inconvenient as they were difficult to handle. [3] Credit cards are money
because they function as a medium of exchange.
[4] Electronic money is another form of money as it can be used as means of payments.
[2] Paper money was developed since specialization between countries led to increases in trade, causing
the use of coins to be inconvenient as they were difficult to handle.
Which of the following statements are correct?
a. The use of money eliminates the need for a double coincidence of wants associated with a barter
economy.
b. An economy in which goods are traded for other goods is called a barter economy.
c. Money consists of notes and coins only.
[1] All the statements are correct.
[2] a and b
[3] a and c
[4] b and c
[2] a and b
Which of the following forms of money is based solely on the function of money as a medium of
exchange?
[1] M1, M2, M3
[2] M1
[3] M2
[4] M3
[2] M1
Given the following information, which option is correct?
Coins = R50 000
Notes = R200 000
Demand deposits = R350 000
Quasi money = R500 000
M3 = R1 800 000
[1] Long-term deposits are R700 000
solutions
Which of the following is/are correct?
a) Households are confronted with unlimited wants, but with limited resources with which to satisfy
those wants
b) The scarcity of resources necessitates households to make choices
both a and b are correct
Which of the following is/are correct regarding the distinction between macroeconomics and
microeconomics?
a) The price of apples at the supermarket is an example of a macroeconomic variable.
b) An increase in the general price level (inflation) in the economy is an example of a macroeconomic
variable.
only b is correct
A flow variable is defined as a variable that is measured over a period. Which one of the following
variables is not an example of a flow variable?
[1] National income
[2] The balance on Sibahle's savings account
[3] Budget deficit
[4] Total production
[2] The balance on Sibahle's savings account
Which of the following is not an acceptable intervention by the public sector in a mixed economy?
[1] the provision of funds for public goods such as parks and streetlights
[2] regulation of the pricing behavior of monopoly industries
[3] stabilization of the economy during periods of economic instability
[4] regulation of the price increases that result from changes in patterns of demand and supply in the
competitive market
[4] regulation of the price increases that result from changes in patterns of demand and supply in the
competitive market
The factors of production in an economy are ...
[1] households, capital, land, entrepreneurship
[2] government, household, firms, natural resources
[3] natural resources (land), labor, capital, and entrepreneurship
[4] human capital, land, natural resources, technology
,[3] natural resources (land), labor, capital, and entrepreneurship
Which of the following are the remuneration of the factors of production?
[1] natural resources, rent, interest, labor
[2] rent, salaries and wages, interest, profit
[3] households, land, profit, capital
[4] entrepreneur, firms, capital, labor
[2] rent, salaries and wages, interest, profit
In the circular flow of income and spending ...
[1] savings, imports, taxes are leakages, while investment, government spending, exports are
injections.
[2] imports, taxes, investments are leakages, while exports, investments, government spending are
injections.
[3] savings, exports, taxes area leakages, while imports, investments, government spending are
injections.
[4] savings, government spending, imports are leakages, while investments, exports, taxes are
injections.
[1] savings, imports, taxes are leakages, while investment, government spending, exports are injections.
In the circular flow of goods and services ...
[1] firms sell factors of production on the goods market.
[2] goods and services offered for sale on the goods market are purchased by firms.
[3] households combine factors of production and produce consumer goods and services.
[4] households offer factors of production in the factor market.
[4] households offer factors of production in the factor market.
What does the letters A, B, C and D in the figure represent?
a) A represents factors of production
b) B represents goods and services
c) C represents foreign sector
d) D represents spending by firm
[1] only a is correct
[2] only b and c are correct
[3] only b and d are correct
[4] a and b are correct, while c and d are incorrect
[3] only b and d are correct
,Which of the following is not an injection into the economy of South Africa?
[1] A domestic company in South Africa sells leather to a client that is in Italy.
[2] A decision by Ruth to save a larger portion of her salary. [3] Spending by the department of health
on new hospital facilities.
[4] The local bakery bought a new machinery and equipment that will improve the capacity to produce
more bread.
[2] A decision by Ruth to save a larger portion of her salary.
The circular flow model reveals that an increase in South African exports will ...
[1] increase output and income in the rest of the world.
[2] increase revenue to South African firms.
[3] increase revenue to foreign firms.
[4] decrease South African imports.
[2] increase revenue to South African firms
Which of the following is not considered a macroeconomic issue?
[1] A surplus in the trade balance due to increasing output. [2] The increase in inequality in the
country of Botswana.
[3] The rise in general price level in Zimbabwe.
[4] The unemployment rate of a town in Limpopo province.
[4] The unemployment rate of a town in Limpopo province.
Which one of the following statements is true about correlation and causality?
[1] Correlation between variables occurs when two variables have a relationship.
[2] Correlation between two variables proves causation.
[3] The example of a correlation is when an increase in value of exports cause a fall in economic
growth.
[4] Causality between two variables always implies correlation.
[1] Correlation between variables occurs when two variables have a relationship.
Which one of the following statements is incorrect?
[1] Money is different from income and wealth
[2] Income refers to reward earned in exchange for offering factors of production in the production
process
[3] It is good to hold wealth in the form of money during periods of high inflation because the value is
protected
[4] Money functions as a medium of exchange because it is generally accepted in payment for goods
and services
, [3] It is good to hold wealth in the form of money during periods of high inflation because the value is
protected
Which of the following statements concerning money is correct?
[1] The value of money is not based on the confidence that financial intermediaries will be able to
control the supply to achieve stability and that the purchasing power does not fall.
[2] Paper money was developed since specialization between countries led to increases in trade,
causing the use of coins to be inconvenient as they were difficult to handle. [3] Credit cards are money
because they function as a medium of exchange.
[4] Electronic money is another form of money as it can be used as means of payments.
[2] Paper money was developed since specialization between countries led to increases in trade, causing
the use of coins to be inconvenient as they were difficult to handle.
Which of the following statements are correct?
a. The use of money eliminates the need for a double coincidence of wants associated with a barter
economy.
b. An economy in which goods are traded for other goods is called a barter economy.
c. Money consists of notes and coins only.
[1] All the statements are correct.
[2] a and b
[3] a and c
[4] b and c
[2] a and b
Which of the following forms of money is based solely on the function of money as a medium of
exchange?
[1] M1, M2, M3
[2] M1
[3] M2
[4] M3
[2] M1
Given the following information, which option is correct?
Coins = R50 000
Notes = R200 000
Demand deposits = R350 000
Quasi money = R500 000
M3 = R1 800 000
[1] Long-term deposits are R700 000
