IGCSE Economics - Semester 1 Exam

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1. Given that Disposable Income = Consumption + Saving, if Cosumption > Disposeable income, what must be occuring?

  • Decrease in disposable income
  • Dissaving
  • Increase in disposable income
  • Saving
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2. Households and firms take do not take into account social costs. What is the equation for social costs?

  • Private cost + External cost
  • Private Cost - External Cost
  • External Cost - Private Cost

3. The public sector (Government, local government) spend via two ways: Exhaustive (buying goods directly) and Transfer payments (to consumers, firms who then decide on what products to buy)

  • True
  • False

4. Which of these is not an area that public expenditure may be used?

  • Covering losses by SOE
  • Demerit Goods
  • Grants + Subsidies to private sector firms
  • Supporting Vulnerable Groups (unemployed)
  • Pubic Goods

5. What is NOT a reason why a private firm may do a better job than a firm hired by the government/done by the government

  • Look at private costs
  • Profit-incentive
  • Competition
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