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Economics entrance exam, 2011 E.C. (2019)

Real questions from the Grade 12 university entrance exam in Economics, as students sat it in 2011 E.C. Every question comes with the correct answer and a worked explanation.

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  • Social science stream

    Who sits it

  • 2011 E.C. (2019)

    Exam year

  • 30 questions with answers

    In this set

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Answer each question yourself before opening the answer. The explanations point to the exact textbook section, so you know which page to reread when you miss one.

Question 1

External assistance, which a country can receive from friendly governments is:

  1. A.Multilateral assistance
  2. B.Multilateral loans
  3. C.Bilateral assistance
  4. D.Unilateral assistance
Show the answer and explanation

Answer: C Bilateral assistance

Why

Aid is named after how many parties are on each side. Assistance that passes from one friendly government straight to another government is bilateral assistance, because only two states are involved.

Multilateral assistance is different. It comes from an institution that many countries fund together, such as the World Bank, the IMF or the African Development Bank, so option A fails even though the money may still reach the same treasury.

Textbook: Economics Grade 11, Unit 5 Trade and Finance.

Question 2

Which one of the following statements is true?

  1. A.Real GDP is GDP at market prices at any time of the year
  2. B.Nominal GDP is GDP measured in current market prices
  3. C.Nominal GDP can grow only when there is growth in output
  4. D.Real GDP can grow when prices increase
Show the answer and explanation

Answer: B Nominal GDP is GDP measured in current market prices

Why

Nominal GDP values this year's output at this year's prices, so it is measured in current market prices. Real GDP values the same output at the prices of a fixed base year, which is why it is called GDP at constant prices.

Option D is the common trap. Real GDP cannot rise just because prices rise, since the base year prices are held fixed. Only more physical output can raise real GDP.

Textbook: Economics Grade 10, Unit 7 The Ethiopian Economy, section 7.2 Real GDP versus Nominal GDP.

Question 3

Which one of the following costs increases as output increases in the short run?

  1. A.Overhead cost
  2. B.Rent of land (land cot)
  3. C.Cost on factory building
  4. D.Labor cost
Show the answer and explanation

Answer: D Labor cost

Why

In the short run, costs split into two groups. Fixed costs stay the same whatever the firm produces, and variable costs rise as output rises. Wages paid to workers hired for production are the standard variable cost, so labour cost is the one that grows with output.

Overhead cost is another name for fixed cost, and rent of land and the cost of the factory building are fixed by contract for the short run. The firm pays them even on a day it produces nothing, so none of them can be the answer.

Textbook: Economics Grade 9, Unit 5 Introduction to Production and Cost, section 5.3 Cost of Production.

Question 4

Which one of the following conditions characterizes the capitalist economics system?

  1. A.Private ownership of resources is the dominant ownership type
  2. B.There is no wastage of resources
  3. C.There is a smooth and constant growth of the economy
  4. D.All citizens equally benefit from economic activities
Show the answer and explanation

Answer: A Private ownership of resources is the dominant ownership type

Why

Capitalism is defined by who owns the means of production. Under a capitalist system, land, capital and firms are owned mainly by private individuals, and they decide what to produce by following profit and prices.

The other three options describe outcomes that capitalism does not promise. Competition can waste resources, growth comes in booms and slumps, and income is shared unequally, so B, C and D are not features of the system.

Textbook: Economics Grade 9, Unit 2 The Basic Economic Problems and Economic Systems, section 2.3 Economic Systems.

Question 5

Which of the following statements is true about the historical development of the industrial sector in Ethiopia?

  1. A.The earliest types of industrial activities were largely confined to small-scale establishments
  2. B.The earliest types of industrial activities were largely confined to medium-scale establishments
  3. C.The earliest types of industrial activities were largely confined to large-scale establishments
  4. D.The military government followed export-promotion industrialization strategy
Show the answer and explanation

Answer: A The earliest types of industrial activities were largely confined to small-scale establishments

Why

Modern industry started late in Ethiopia and started small. The first manufacturing units were small scale establishments making simple consumer goods such as flour, edible oil, soap, leather items, wood and furniture, mostly for the local market.

Option D is wrong on a separate point. The Derg period followed an inward looking, import substitution line under state ownership, not export promotion.

Textbook: Economics Grade 10, Unit 7 The Ethiopian Economy, section 7.4 The Industrial Sector in the Ethiopian Economy.

Question 6

Which one of the following is an expansionary monetary Policy Instrument?

  1. A.Increasing cash reserve ratio
  2. B.Increasing bank rate
  3. C.Decreasing money supply
  4. D.Decreasing cash reserve ratio
Show the answer and explanation

Answer: D Decreasing cash reserve ratio

Why

Expansionary monetary policy means the central bank wants more money circulating and cheaper credit. Cutting the cash reserve ratio leaves banks holding less of each deposit in reserve, so they can lend more and the money supply grows.

Raising the reserve ratio, raising the bank rate and cutting the money supply all pull money out of the economy, so A, B and C are contractionary measures.

Textbook: Economics Grade 12, Unit 4 Macroeconomic Policy Instruments, section 4.3 Monetary Policy.

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Economics papers from other years

2017 E.C. (2025)2016 E.C. (2024)2012 E.C. (2020)

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Are these the real 2011 E.C. Economics entrance exam questions?

Yes. They come from the national university entrance exam in Economics that students sat in 2011 E.C. (2019). Our set holds 30 of its questions, each with its answer and an explanation that points back to the textbook.

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