Economics 9708 · AS & A Level
Oligopoly
100 practice questions on Oligopoly, with worked solutions and instant marking.
A country's central bank produces cash in order to buy government bonds from commercial banks. What is this known as?
Feb/March 2016
Explain what is used as money in a modern economy. Think about how a rise in the money supply can lead to inflation.
Feb/March 2017
When there is full employment, the Quantity Theory of Money indicates that, other things remaining the same, a rise in the velocity of circulation will cause an increase in
Feb/March 2017
Discuss whether a rise in a country's national income is a reliable sign that the standard of living for its people has improved.
Feb/March 2017
In what situation will the domestic money supply rise immediately?
Feb/March 2018
Distinguish between the transactions demand for money and the speculative demand for money. Decide which of these is likely to matter more for a consumer in a modern economy.
Feb/March 2018
A country’s central bank prints money in order to buy government bonds from commercial banks. What is this process known as?
Feb/March 2019
Which combination agrees with liquidity preference theory?
Feb/March 2021
Which function of money solves the double coincidence of wants problem that occurs in a barter system?
Feb/March 2022
Which statement is true of both a central bank and a commercial bank?
Feb/March 2023
Which change is most likely to cause a fall in the demand for money?
Feb/March 2024
Within the quantity theory of money equation, MV = PT, V is taken to mean the income velocity of circulation. Which change would be likely to lower the value of V?
Feb/March 2025
For what purposes do people demand money in an economy?
May/June 2008
Explain how division of labour can influence labour productivity.
May/June 2010
The diagram illustrates how broad and narrow measures of the money supply changed between 2004 and 2006. Which is the only region to have seen a fall in one of its money supply measures?
May/June 2010
The diagram displays the demand curves and supply curves for loanable funds. Which changes might cause the equilibrium in the loanable funds market to shift from E1 to E2?
May/June 2010
If the money supply remains unchanged, a fall in economic activity
May/June 2010
The diagram illustrates changes in broad and narrow measures of money supply from 2004 to 2006. Which area alone recorded a contraction in one of its money supply measures?
May/June 2010
The diagram illustrates the demand curves and supply curves for loanable funds. Which changes might lead the equilibrium in the market for loanable funds to shift from E1 to E2?
May/June 2010
The diagram illustrates changes in broad and narrow measures of money supply from 2004 to 2006. Which is the only area that experienced a decrease in one of its money supply measures?
May/June 2010
If the money supply remains unchanged, a fall in economic activity
May/June 2010
Explain the causes of unemployment in an economy.
May/June 2010
Explain the main causes of unemployment.
May/June 2010
What factor will cause the money supply to increase in an open economy?
May/June 2011
According to Keynesian theory, under what circumstance will the demand for money always rise?
May/June 2011
Which action would raise the money supply in an open economy?
May/June 2011
According to Keynesian theory, under what circumstance will there always be an increase in the demand for money?
May/June 2011
Which factor will increase the money supply in an open economy?
May/June 2011
According to Keynesian theory, under what circumstance will demand for money always rise?
May/June 2011
What counts as money if money is defined as anything that is always accepted when payment is made for goods and services?
May/June 2012
Assuming all other factors stay the same, the money supply in an open economy will rise if
May/June 2012
In Keynesian theory, under what circumstance would demand for money always rise?
May/June 2012
Within a banking system, every bank keeps 10% of deposits as cash. Customers take out $20 000 in cash. If there is no later net change in notes and coins in circulation, by what amount will the banks need to cut their net loans?
May/June 2012
According to monetarist theory, what would be the short-run impact of an unexpected rise in the money supply?
May/June 2012
What would cause the volume of bank deposits to rise?
May/June 2012
In a banking system, every bank keeps 10% of deposits in cash. Customers then take out $20 000 in cash. If there is no later net change in notes and coins in circulation, by how much must the banks cut their net loans?
May/June 2012
Assuming all other factors remain unchanged, the money supply in an open economy will rise if
May/June 2012
According to Keynesian theory, in what circumstance would the demand for money always rise?
May/June 2012
Once hyperinflation had occurred, the Zimbabwe dollar was no longer in use and the country used US dollars instead. A coin collector in Europe purchased an old Zimbabwe 100 trillion dollar note at an auction, hoping that it would later become scarce and rise in value. If this were to happen, which function of money would the Zimbabwe dollar note serve?
May/June 2013
The table sets out the functions of money and the main advantage that each one gives. Which function of money is paired correctly with its main advantage?
May/June 2013
Under which situation will a rise in the public sector deficit fail to cause any increase in the money supply, assuming all other factors remain unchanged?
May/June 2013
What does liquidity preference mean?
May/June 2013
How is a country’s central bank’s policy of quantitative easing (open market purchase of securities) intended to influence the quantity of narrow money and the quantity of broad money?
May/June 2013
If all other factors are unchanged, what is a likely consequence of a rise in net cash withdrawals from commercial banks?
May/June 2013
What does the term liquidity preference mean?
May/June 2013
Explain how a fall in interest rates might affect the level of investment and, as a consequence, national income.
May/June 2013
Explain how a fall in interest rates may affect the level of investment and, as a consequence, national income.
May/June 2013
Under what conditions will money lose its value?
May/June 2014
In 2013, an American purchased an English football club. The funds used for the acquisition were borrowed, so the resulting interest payments in the future were expected to be more than US $95 million. Which function of money is best shown by this transaction?
May/June 2014
Explain what is meant by the term ‘money’ and describe its characteristics in a modern twenty-first century economy.
May/June 2014
If the velocity of circulation of money remains constant, and real output increases by 2% while the money supply grows by 5%, what is the approximate change in the price level?
May/June 2014
The diagram illustrates three distinct levels of the supply of money (MS) together with three liquidity preference demand for money curves (LP). The starting equilibrium is at point X. Money income falls, while bank credit expands at the same time. Which point might be the new equilibrium point?
May/June 2014
In a closed economy, the banking system contains only one bank. The bank has a cash ratio of 10%. Customers place $20 000 in cash into deposits. If later net cash withdrawals from the banking system are zero, what is the largest value of loans that the bank is able to create?
May/June 2014
The diagram illustrates the market for loanable funds. It is initially in equilibrium at point X. What might the new equilibrium point be if business confidence fell and bank lending increased?
May/June 2014
If the income velocity of circulation of money stays constant, real output rises by 2%, and the money supply grows by 5%, what is the approximate change in the price level?
May/June 2014
The diagram illustrates three distinct levels of the supply of money (MS) together with three liquidity preference demand for money curves (LP). The starting equilibrium is located at point X. Money income falls while bank credit expands at the same time. Which point could be the new equilibrium point?
May/June 2014
During a recession, some people may worry that their jobs are not secure. Explain how, according to liquidity preference theory, this could change their demand for money.
May/June 2014
In a recession, some individuals may think that their jobs are less secure than before. Explain how this could influence their demand for money, according to liquidity preference theory.
May/June 2014
Which property of money is most important if it is to act effectively as a store of value?
May/June 2015
Explain what counts as money in a modern economy and what is likely to happen to the price level if the quantity of money increases significantly.
May/June 2015
The income velocity of circulation stands at 2.0. If the money supply grows by 8% and the average price level rises by 4%, what change will there be in real output (transactions)?
May/June 2015
In an open economy, which factor is most likely to make the money supply decrease?
May/June 2015
If all other factors stay the same, the money supply in an open economy will rise if
May/June 2015
Provided that the income velocity of circulation of money remains constant, if the price level rises by 5% and the money supply rises by 2%, what is the approximate percentage change in real output (transactions)?
May/June 2015
The diagram illustrates how the rate of interest is determined in the economy, with M standing for the money supply and LP standing for liquidity preference. What might lead to the increase in the rate of interest from r1 to r2?
May/June 2015
In a banking system, every bank holds 10% of deposits as cash. Bank customers take out $20 000 in cash. Assuming there is no later net change in the amount of notes and coins circulating, by how much must the banks cut their net loans?
May/June 2015
If the money supply remains unchanged, a rise in economic activity
May/June 2015
What are the probable effects on interest rates and bond prices if the demand for money falls?
May/June 2015
Within an economy, the volume of output decreases by 2% over a year, whereas the quantity of money increases by 3%. If the velocity of circulation of money stays unchanged, what are the approximate rises in the price level and the money value of national income?
May/June 2015
Not long ago, thousands of ancient Roman coins were unearthed in a field in the UK. A museum collected funds to purchase them. Which function of money did the coins continue to perform?
May/June 2016
Which is most likely to make the public’s ratio of cash to bank deposits fall?
May/June 2016
Which is most likely to reduce the public’s preferred ratio of cash to bank deposits?
May/June 2016
Four students are presented with this set of assets: a three bedroom house; banknotes and coins in a purse; money held in a bank savings account; shares in a public limited company. They must rank the assets from the most liquid to the least liquid, and the table gives their answers. Which student is correct?
May/June 2017
Explain how the functions of money are changed when an economy experiences a high rate of inflation.
May/June 2017
If higher government spending is funded by borrowing from the central bank, and all other things remain unchanged, what effect will this have on the money supply?
May/June 2017
In what way do commercial banks generate money?
May/June 2017
Explain the reasons why people demand money under the liquidity preference theory. Consider which reason is the most important.
May/June 2017
Explain why people demand money under liquidity preference theory.
May/June 2017
A party of tourists is left stranded on a desert island. They choose to create their own money system. Which statement about their choice of money is correct?
May/June 2018
Explain the characteristics that money must possess so that it can carry out its functions effectively.
May/June 2018
Consider the extent to which commercial banks are able to influence the money supply.
May/June 2018
Which is likely to be the least effective store of value during a period of rapid inflation?
May/June 2019
What would lead to a rise in the transactions demand for money?
May/June 2019
What might cause bank lending to fall in a country?
May/June 2019
The diagram illustrates a liquidity preference curve (LP), which shows the demand for holding money against the rate of interest and the money supply (MS) in an economy. The market is initially in equilibrium at interest rate r. If the government raises the money supply, what happens to the interest rate?
May/June 2019
The graph indicates a movement in the liquidity preference curves for an economy from LP1 to LP2. What could have led to this movement?
May/June 2019
What factor would lead to a rise in the transactions demand for money?
May/June 2019
What factors might cause bank lending to fall in a country?
May/June 2019
Abdul receives $50 000 a year as a teacher. He owns a house worth $250 000 and holds shares valued at $20 000. His current bank account has a balance of $1500, and he carries $200 in his wallet. In his house, there is a jar containing $100 that he has put aside for spending on his upcoming holiday. Calculate the value of Abdul’s liquid assets.
May/June 2020
A person’s demand curve for an active money balance will shift to the left if there is a rise in the
May/June 2020
A country’s central bank purchases government securities from the private sector. What is the most probable effect on long-term interest rates and the money supply?
May/June 2020
Which set of changes is most likely to cause the demand for money to rise?
May/June 2020
The demand curve of an individual’s active money balance will shift leftwards if there is a rise in the
May/June 2020
Explain the Keynesian theory of the determination of the rate of interest.
May/June 2020
If the inflation rate increases from 2% to 20%, which function of money would be affected the most?
May/June 2021
The British pound serves as the national currency of the UK. In Brixton, in south London, people can obtain a specially designed currency known as the Brixton pound from dedicated cash machines. It may then be used with 150 local shopkeepers. Comparable schemes also exist in towns in the US, Italy and France. Should Brixton pounds be regarded as money?
May/June 2021
Which alteration would permit an increase in an economy’s money supply?
May/June 2021
For a country, the original money supply curve is MS0, the original liquidity preference curve is LP0 and the original rate of interest is R0. If the precautionary motive for holding money rises, which diagram shows the changes that will happen?
May/June 2021
Explain and critically evaluate the quantity theory of money, paying close attention to its assumptions and implications.
May/June 2021
Explain and critically evaluate the quantity theory of money in detail.
May/June 2021