IGCSE Economics Paper-1: Specimen Questions with Answers 33 - 34 of 64

Question number: 33

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Question

After Hurricane Andrew devastated part of South Florida in August 1992, we can be reasonably sure that the production possibility frontier for that area temporarily will

Choices

Choice (4)

a.

Shift out away from the origin.

b.

Shift towards the origin.

c.

Be Steeper.

d.

Be flatter.

Answer

b.

Explanation

  • All points on PPC is drawn by the given resources used in the production of two commodities at given technology level. Outward or inward shift in PPC is caused by the change in technology and resources.

  • If the factor of production increases, it will cause an outward shift in the curve away from the origin.

  • Conversely, if there is a war that destroys capital and labor, natural disasters like, hurricane, earthquake, etc. , disrupted supply of inputs (steel, iron, copper, etc. ), unemployment etc. will cause an inward shift of the curve.

Question number: 34

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Question

A company owner decides to install new computers due to which some employees got fired from the job because of lack of computer knowledge. What kind of unemployment it is?

Choices

Choice (4)

a.

Structural unemployment

b.

Disguised Unemployment

c.

Hidden unemployment

d.

Frictional unemployment

Answer

a.

Explanation

There are four kinds of Unemployment in economy:

  • Frictional Unemployment: It is a type of unemployment where workers are looking for a new job and are in a transition phase from one job to another.

  • Structural Unemployment: Structural unemployment is due to the mismatch of skills between the unemployed and available jobs.

  • Disguised Unemployment: Also known as, hidden unemployment is a type of unemployment where people seem to be employed but are not actually working. Example: Electricians, plumbers who do not find work on daily basis.

  • Cyclical Unemployment: It is due to the cyclical trends in the business cycle. Where people are unemployed during the off-season. Example- worker working in Umbrella manufacturing company.

In Structural unemployment, people can work again by learning computer skills but they will learn they will be called unemployed.

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