1. A fashion model is paid $500 000 a year.
If the next best paid job he could get is as a teacher at $100 000 a year, what are his transfer
earnings and his economic rent?

	Transfer earnings $	Economic rent $
A	Zero	400 000
B	100 000	400 000
C	400 000	zero
D	400 000	100 000

2. What would be the most likely effect of the imposition of a national maximum wage below the
market equilibrium on the labour market for famous television celebrities?
A a reduction in the number of jobs for television celebrities
B an increase in other methods of rewarding television celebrities
C greater movement of celebrities between television channels
D increased employment of foreign television celebrities

3. Which government measure is most likely to encourage faster and more sustainable economic
growth in a country?
A subsidies to firms using recycled materials in production
B grants for the exploration and exploitation of new oil deposits
C increased spending on environmental education in schools
D tougher legislative controls on emissions of air and water pollution

4. Which statement about National Income accounting is correct when Gross Domestic Product
(GDP) is converted into Net National Income (NNI)?
A An allowance for depreciation has to be made, because the NNI does not include output that
replaces capital that has been used up.
B Both GDP and NNI have to be calculated by the incomes method, because that is what NNI
is measuring.
C Double counting is not a problem if the conversion uses the output method, but it is when
using the expenditure method.
D The value of exports needs to be added, because exports generate income for citizens.

5. Real GNP per capita is often used when comparisons of living standards are made between a
developed and a developing country.
What is not a good reason to question the accuracy of this comparison of living standards?
A It is not possible to use price indices accurately when computing real figures because
spending patterns are different.
B People in developed countries enjoy very different amounts of leisure time to people in
developing countries.
C The extent of the unrecorded economy is very different in the two countries.
D The purchasing power parity theory has been used to make comparisons.

Answers