2021 Level L Economics Exam Related Materials T2 Wk5

Economics Weekly Exam Material
Week: 5
Exam Timetable:
Sunday Monday Tuesday Wednesday Thursday
HW
Questions in bold are Grid Questions

Questions in italic are Poorly Answered Questions in past exam(s).
HW Material: 2021-NLH26
Sample Questions Exam
1. Unlike barter, which involves the_______________, money had a considerable impact on

modern commerce or trade.
2. Define money.
3. What are the characteristics of money?
4. What are the functions of money?
5. Financial institutions are organizations that provide ___________________ to customers

or businesses.
6. Which bank acts as an agent of payment for the government?
7. Describe commercial banks.
8. Give one difference between overdraft and bank loan.
Date 27-01-21 | Level L | 1

9. What is the difference between credit cards and debit cards?
10. What is the effect of bank lending on the economy?
13. What are the functions of commercial banks?
14. What are the functions of central banks?
15. Give a factor that lead to sustainable development.
16. Define transfer payments.
17. What is public expenditure?
18. Conflicts between conserving and exploiting resources (do / do not) exist
19. What is meant by market failure and when does it occur?
20. What are the benefits of high competition?
21. Why are merit goods under-produced and under-consumed in a market economy?
22. What do public goods involve, and how are they related to market failure?
23. Why are public goods an example of market failure?
24. How does the government attempt to correct market failure?
25. What are the relevant costs and benefits for a car rental company?
Date 27-01-21 | Level L | 2

26. A manufacturer changes to a less expensive production method that results in more
waste. Which of the costs and benefits would change following this?
27. What conflicts may occur when trying to allocate resources?
28. What is the difference between private expenditure and public expenditure?
Date 27-01-21 | Level L | 3

Answers:
1. Unlike barter, which involves the_______________, money had a considerable impact on
modern commerce or trade.
Sample question answer:
double coincidence of wants
2. Define money.
Money is anything that is generally accepted as a means of payment

 Acceptability
 Divisibility
 Scarcity
 Portability
 Durability

 Medium of exchange: Allows for the exchange of goods and services between consumers
and suppliers
 Measure of value: Allows for the comparison between several goods' values
 Store of economic wealth: Relied on for saving, storing, and retrieving
 Method of deferred payment: Allows for instant purchase and delayed payment
5. Financial institutions are organizations that provide ___________________ to customers

or businesses.
Financial services
6. Which bank acts as an agent of payment for the government?

The central bank
7. Describe commercial banks.

Commercial banks are private businesses that aim to make profit by accepting deposits from
individuals and businesses and making loans
Date 27-01-21 | Level L | 4

8. Give one difference between overdraft and bank loan.
 Overdraft: customers are allowed to withdraw more money than the amount existing in
their account but charged high interest rate
 Bank loan: It is when an individual borrows money to buy, for example, a car. The bank
will charge lower interest in case of presence of a collateral
9. What is the difference between credit cards and debit cards?

 Credit card: a method of deferred payment based on using an electronic plastic card
instead of cash
 Debit card: issued by banks to use against a customer's account
10. What is the effect of bank lending on the economy?

Bank lending will increase the spending power of consumers and will increase demand

Money is a medium of exchange used in transactions, it plays the role of unit of account,
standard of deferred payment, and store of wealth.

- Generally acceptable, homogenous, and scarce
- Divisible, durable, and portable
13. What are the functions of commercial banks?

· They are consumers’ and business’ banks.
· They accept deposits from individuals and businesses.
· They allow customers to deposit and receive payments.
(Note: commercial banks do not print notes and coins)
14. What are the functions of central banks?

· Control commercial banks and regulate their activities.
· Assist in implementing monetary policy.
· Hold the stock of foreign currencies.
· Act as lender of last resort.
Date 27-01-21 | Level L | 5

15. Give a factor that lead to sustainable development.
The conservation of nonrenewable and scarce resources
16. Define transfer payments.

They are payments that do not contribute to the creation of goods and services
17. What is public expenditure?

It is the government expenditure in the economy
18. Conflicts between conserving and exploiting resources (do / do not) exist
do
19. What is meant by market failure and when does it occur?

Market failure refers to the inefficient allocation of resources that occurs in a market
economy. It includes negative externalities, underproduction of merit goods, and lack of
production of public goods.
20. What are the benefits of high competition?

Competition is more likely to result in lower prices, more extensive variety of
goods/services for consumers, and better quality.
21. Why are merit goods under-produced and under-consumed in a market economy?
Consumers fail to acknowledge the true value to themselves and to others. For this
reason, these products would be under-consumed and hence under-produced, if left to
the market forces.
22. What do public goods involve, and how are they related to market failure?
Public goods involve non-excludable, non-rival, and non-rejectable goods, such as street
lighting, sea, and flood defenses and natural parks. These will not be provided by firms,
because they are unable to charge consumers a price according to how much they use
them or benefit from them, which will eventually lead to market failure.
Date 27-01-21 | Level L | 6

23. Why are public goods an example of market failure?
Pure public goods are not normally provided by the private sector because they would
be unable to supply them for a profit. It is up to the government to decide what output
of public goods is appropriate for society. To do this, it must estimate the social benefits
from making public goods available.
24. How does the government attempt to correct market failure?

- It imposes taxes on polluting firms to reduce negative externalities.
- It forces producers to provide accurate information and sets employment laws.
- It promotes competition to reduce the abuse of market power.
- It imposes taxes to increase equality.
- It provides public goods, encourages people to consume merit goods, and
discourages the consumption of demerit goods.
- It promotes the mobility of resources by giving firms financial grants.
- It promotes private investment by lowering taxes.
Still, the government might fail in correcting market failure.
25. What are the relevant costs and benefits for a car rental company?
The profits generated by the car rental company are private benefits, while the costs
incurred and wages paid to employees are private costs.
The pollution and congestion caused by the cars rented are external costs and the jobs
created by the company are external benefits.
26. A manufacturer changes to a less expensive production method that results in more
waste. Which of the costs and benefits would change following this?
Private and total costs decrease and external costs increase.
27. What conflicts may occur when trying to allocate resources?

The conflict between whether to use the resources or conserve them. If resources are
heavily exploited, they result in negative externalities and slow down sustainable future
development. Business that overuse resources aim to make as much profit as possible,
but when resources become depleted, output, employment and profit become affected
negatively. Firms must consider social costs and benefits when making the decision
about using or conserving resources.
28. What is the difference between private expenditure and public expenditure?
Public expenditure is financed by the government to provide goods and services to
society such as merit and public goods. Private expenditure include investment and
results in economic improvements. The government can control or influence the level of
Date 27-01-21 | Level L | 7

private spending through imposing taxes, giving subsidies and using other
macroeconomic policies.
Date 27-01-21 | Level L | 8

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Economics Weekly Exam Material

Sunday Monday Tuesday Wednesday Thursday

Questions in bold are Grid Questions

1. Unlike barter, which involves the_______________, money had a considerable impact on

3. What are the characteristics of money?

4. What are the functions of money?

5. Financial institutions are organizations that provide ___________________ to customers

6. Which bank acts as an agent of payment for the government?

7. Describe commercial banks.

8. Give one difference between overdraft and bank loan.

Date 27-01-21 | Level L | 1

10. What is the effect of bank lending on the economy?

11. What are the functions of money?

12. What are the characteristics of money?

13. What are the functions of commercial banks?

14. What are the functions of central banks?

15. Give a factor that lead to sustainable development.

16. Define transfer payments.

17. What is public expenditure?

19. What is meant by market failure and when does it occur?

20. What are the benefits of high competition?

23. Why are public goods an example of market failure?

24. How does the government attempt to correct market failure?

Date 27-01-21 | Level L | 2

27. What conflicts may occur when trying to allocate resources?

Date 27-01-21 | Level L | 3

3. What are the characteristics of money?

4. What are the functions of money?

5. Financial institutions are organizations that provide ___________________ to customers

6. Which bank acts as an agent of payment for the government?

7. Describe commercial banks.

Date 27-01-21 | Level L | 4

9. What is the difference between credit cards and debit cards?

10. What is the effect of bank lending on the economy?

11. What are the functions of money?

12. What are the characteristics of money?

13. What are the functions of commercial banks?

(Note: commercial banks do not print notes and coins)

14. What are the functions of central banks?

Date 27-01-21 | Level L | 5

16. Define transfer payments.

17. What is public expenditure?

19. What is meant by market failure and when does it occur?

20. What are the benefits of high competition?

Date 27-01-21 | Level L | 6

24. How does the government attempt to correct market failure?

27. What conflicts may occur when trying to allocate resources?

Date 27-01-21 | Level L | 7

Date 27-01-21 | Level L | 8

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