Economics Past paper

pattern
And practice
Mini Book By Sir Fahad

It will help the Students to compare the Grade A and C papers

along with p1 and p2 detailed practice , both for o levels and
igcse

Mfahadkhan57@gmail.com
Economics
M. Fahad khan
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"In the name of Allah, the Most

Gracious, the Most Merciful. O Allah,
open for us the doors of your mercy,
and unfold for us the treasure of your
knowledge. Grant us success in this
endeavor, and make it a means of
benefit for ourselves and others. Verily,
you are the Bestowed of blessings and
the Most Merciful."
Economics
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Unlocking the World of Economic Principles

Sections:A and B

Syllabus Overview:

 Comprehensive coverage of microeconomics and macroeconomics.

 In-depth exploration of market structures, economic systems, and global economic
trends.

 Detailed analysis of supply and demand dynamics.

 Insights into economic policies and their real-world implications.

 Question-Solving Strategies:

 Practical tips and strategies for effective problem-solving.

 Step-by-step guidance on approaching different types of economic questions.

 Examples and practice exercises to reinforce understanding.

 Comparison between A and C Grades:

 Clear distinctions between A and C grade answers.

 Common pitfalls to avoid and key elements that differentiate top-tier responses.

 Practical advice on how to elevate your answers for maximum marks.

 MCQs Practice with 150 Questions:

 Extensive set of 150 multiple-choice questions covering diverse economic concepts.

 Detailed explanations for each question to enhance understanding.

 Practice quizzes to assess and reinforce your knowledge.

Solving an Economics O Levels paper requires a combination of knowledge, understanding, and

effective exam strategies. Here are some tips to help you tackle your Economics O Levels paper
Economics
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Understand the Exam Format:

 Familiarize yourself with the structure of the paper, including the number and types of questions in each
section.
 Pay attention to the allocation of marks for each question.
 Master the Basics:

 Ensure a strong understanding of fundamental economic concepts. These form the basis for more complex
topics.
 Practice Past Papers:

 Practice with past papers to get a sense of the question style and time management.
 Analyze the marking schemes to understand how answers are evaluated.
 Time Management:

 Allocate your time wisely across all sections of the paper.

 Don't spend too much time on one question. Move on if you get stuck and come back to it later.
 Answer Structure:

 Organize your answers with a clear structure: introduction, main points, and conclusion.
 Use headings and subheadings where appropriate to enhance clarity.
 Include Relevant Diagrams:

 For questions that allow it, include relevant diagrams to support your explanations.
 Ensure that diagrams are correctly labeled and explained.
 Use Key Terms:

 Incorporate key economic terms in your responses to demonstrate a strong command of the subject.
 Define terms when necessary.
 Comparisons and Evaluations:

 In essays and extended responses, compare different theories, policies, or economic situations.
 Include critical evaluations to demonstrate a nuanced understanding.
 Be Concise and Clear:

 Write concise and clear answers. Avoid unnecessary information that doesn't contribute to your point.
 Stay Updated:

 Keep yourself informed about current economic events and developments.

 Relate real-world examples to theoretical concepts where applicable.
 Revision:

 Regularly revise your notes and key concepts to reinforce your understanding.
 Focus on weak areas and seek help if needed.
 Practice Numerical Questions:

If your paper includes numerical questions, practice solving them to build

confidence in your quantitative skills. Remember, success in an Economics
O Levels paper comes not just from memorization but from a deep
understanding of economic principles and the ability to apply them in
various scenarios. Regular practice, effective time management, and a
strategic approach to answering questions will contribute to your overall
success
Economics
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We have in this Mini past paper books

 Syllabus over view

 Section A question solved with A and c
Grade marking scheme
 Mcqs from all topics
 Section A case studies
 Section b Structrure questions

1 Syllabus overview

Aims
The aims describe the purposes of a course based on this syllabus.

The aims are to enable students to:

 know and understand economic terminology, concepts and theories
 use basic economic numeracy and interpret economic data
 use the tools of economic analysis
 express economic ideas logically and clearly in a written form
 apply economic understanding to current economic issues.
Economics
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bridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Syllabus over

Assessment overview

All candidates take two components. Candidates will be eligible for grades A* to E.

All candidates take: and:

Paper 1 45 minutes Paper 2 2 hours 15 minutes

Multiple Choice 30% Structured Questions 70%
30 marks 90 marks
Candidates answer all 30 questionsExternally Candidates answer one compulsory question
assessed andthree questions from a choice of four.
Externally assessed

Information on availability is in the Before you start section.

Assessment objectives
The assessment objectives (AOs) are:

AO1 Knowledge and understanding

Candidates should be able to:
 show knowledge and understanding of economic definitions, formulas, concepts and theories
 use economic terminology.

AO2 Analysis
Candidates should be able to:
 select, organise and interpret data
 use economic information and data to recognise patterns and to deduce relationships
 apply economic analysis to written, numerical, diagrammatic and graphical data
 analyse economic issues and situations, identifying and developing links.

AO3 Evaluation
Candidates should be able to:
 evaluate economic information and data
 distinguish between economic analysis and unreasoned statements
 recognise the uncertainties of the outcomes of economic decisions and events
 communicate economic thinking in a logical manner.
Economics
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3 Subject content

This syllabus gives you the flexibility to design a course that will interest, challenge and engage your learners.
Where appropriate you are responsible for selecting topics, subject contexts, resources and examples to support
your learners‟ study. These should be appropriate for the learners‟ age, cultural background and learning context as
well as complying with your school policies and local legal requirements.

Teachers and students are encouraged to focus learning of the following subject content around real, relevant and
up-to-date economic events that affect the whole world and students‟ own countries. Such events might include but
are certainly not limited to:
(a) how large immigration movements may impact on economic growth/living standards in countries affected
(b) the impact that changes in oil prices and the effect that drilling/fracking may have on world trade
(c) the impact that a significant recession in one country may have on its trading partners
(d) how changes in corporation tax between countries may impact on where multinational companies (MNCs)
locate their head office.

1 The basic economic problem

1.1 The nature of the economic problem
Topic Guidance
1.1.1 finite resources and unlimited wants Definition and examples of the economic problem in
the contexts of: consumers; workers; producers; and
governments.
1.1.2 economic and free goods The difference between economic goods and free
goods.

1.2 The factors of production

Topic Guidance
1.2.1 definitions of the factors of production and Definitions and examples of land, labour, capital and
their rewards enterprise. Examples of the nature of each factor of
production.
1.2.2 mobility of the factors of production The influences on the mobility of the various factors.
1.2.3 quantity and quality of the factors of The causes of changes in the quantity and quality of
production the various factors.

1.3 Opportunity cost

Topic Guidance
1.3.1 definition of opportunity cost Definition and examples of opportunity cost in
different contexts.
1.3.2 the influence of opportunity cost on decision Decisions made by consumers, workers, producers
making and governments when allocating their resources.
Economics
M. Fahad khan
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

1.4 Production possibility curve (PPC) diagrams

Topic Guidance
1.4.1 definition of PPC Definition, drawing and interpretation of
appropriatediagrams.
1.4.2 points under, on and beyond a PPC The significance of the location of
1.4.3 movements along a PPC production points.Movements along a
1.4.4 shifts in a PPC PPC and opportunity cost.
The causes and consequences of shifts in a
PPC interms of an economy‟ s growth.

2 The allocation of resources

2.1 Microeconomics and macroeconomics
Topic
2.1.1 microeconomics
2.1.2 macroeconomics

2.2 The role of markets in allocating resources

Topic Guidance
2.2.1 the market system How a market system works; including
buyers, sellers,allocation of scarce
resources, market equilibrium, and
2.2.2 key resources allocation decisions market disequilibrium.
Establishing that the economic problem
creates threekey questions about
determining resource allocation
2.2.3 introduction to the price mechanism
– what to produce, how, and for whom.
How the price mechanism provides
answers to thesekey allocation questions.

2.3 Demand
Topic
2.3.1 definition of demand

2.3.2 price, demand and quantity

2.3.3 individual and market demand

2.3.4 conditions of demand

Economics
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

2.4 Supply
Topic
2.4.1 definition of supply

2.4.2 price, supply and quantity

2.4.3 individual and market supply

2.4.4 conditions of supply

2.5 Price determination

Topic
2.5.1 market equilibrium

2.5.2 market disequilibrium

2.6 Price changes

Topic
2.6.1 causes of price changes

2.6.2 consequences of price changes

Economics
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

2.7 Price elasticity of demand (PED)

Topic
2.7.1 definition of PED
2.7.2 calculation of PED

2.7.3 determinants of PED

2.7.4 PED and total spending on a product/revenue

2.7.5 significance of PED

2.8 Price elasticity of supply (PES)

Topic
2.8.1 definition of PES
2.8.2 calculation of PES

2.8.3 determinants of PES

2.8.4 significance of PES

2.9 Market economic system

Topic
2.9.1 definition of market economic system

2.9.2 advantages and disadvantages of the marketeconomic system

Economics
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

2.10 Market failure

Topic
2.10.1 definition of market failure

2.10.2 causes of market failure

2.10.3 consequences of market failure

2.11 Mixed economic system

Topic
2.11.1 definition of the mixed economic system
2.11.2 government intervention to address marketfailure
Economics
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

3 Microeconomic decision makers

3.1 Money and banking

3.1.1 money
3.1.2 banking

3.2 Households
Topic
3.2.1 the influences on spending, saving andborrowing

3.3 Workers
Topic
3.3.1 factors affecting an individual‟ s choice ofoccupation
3.3.2 wage determination

3.3.3 reasons for differences in earnings

3.3.4 division of labour/specialisation

3.4 Trade unions

Topic
3.4.1 definition of a trade union
3.4.2 the role of trade unions in the economy

3.4.3 the advantages and disadvantages of tradeunion activity

Economics
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

3.5 Firms
Topic
3.5.1 classification of firms

3.5.2 small firms

3.5.3 causes and forms of the growth of firms

3.5.4 mergers

3.5.5 economies and diseconomies of scale

3.6 Firms and production

Topic
3.6.1 demand for factors of production

3.6.2 labour-intensive and capital-intensiveproduction

3.6.3 production and productivity

3.7 Firms’ costs, revenue and objectives

Topic
3.7.1 definition of costs of production

3.7.2 calculation of costs of production

3.7.3 definition of revenue

3.7.4 calculation of revenue

3.7.5 objectives of firms

Economics
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

3.8 Market structure

Topic
3.8.1 competitive markets

3.8.2 monopoly markets

4 Government and the macroeconomy

4.1 The role of government
Topic
4.1.1 the role of government

4.2 The macroeconomic aims of government

Topic
4.2.1 the macroeconomic aims of government

4.2.2 possible conflicts between macroeconomicaims

4.3 Fiscal policy

Topic
4.3.1 definition of the government budget
4.3.2 reasons for government spending

4.3.3 reasons for taxation

4.3.4 classification of taxes

4.3.5 principles of taxation

4.3.6 impact of taxation

Continued
Economics
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

4.3 Fiscal policy continued

Topic
4.3.7 definition of fiscal policy
4.3.8 fiscal policy measures

4.3.9 effects of fiscal policy on governmentmacroeconomic aims

4.4 Monetary policy

Topic
4.4.1 definition of money supply and monetarypolicy
4.4.2 monetary policy measures

4.4.3 effects of monetary policy on governmentmacroeconomic aims

4.5 Supply-side policy

Topic
4.5.1 definition of supply-side policy
4.5.2 supply-side policy measures

4.5.3 effects of supply-side policy measures ongovernment macroeconomic aims

Economics
M. Fahad khan
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

4.6 Economic growth

Topic
4.6.1 definition of economic growth
4.6.2 measurement of economic growth

4.6.3 causes and consequences of recession

4.6.4 causes of economic growth

4.6.5 consequences of economic growth

4.6.6 policies to promote economic growth

4.7 Employment and unemployment

Topic
4.7.1 definition of employment, unemployment andfull employment
4.7.2 changing patterns and level of employment

4.7.3 measurement of unemployment

4.7.4 causes/types of unemployment

4.7.5 consequences of unemployment

4.7.6 policies to reduce unemployment

Economics
M. Fahad khan
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

4.8 Inflation and deflation

Topic
4.8.1 definition of inflation and deflation
4.8.2 measurement of inflation and deflation

4.8.3 causes of inflation and deflation

4.8.4 consequences of inflation and deflation

4.8.5 policies to control inflation and deflation

5 Economic development
5.1 Living standards
Topic
5.1.1 indicators of living standards

5.1.2 comparing living standards and incomedistribution

5.2 Poverty
Topic
5.2.1 definition of absolute and relative poverty
5.2.2 the causes of poverty

5.2.3 policies to alleviate poverty and redistributeincome

Economics
M. Fahad khan
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

5.3 Population
Topic
5.3.1 the factors that affect population growth

5.3.2 reasons for different rates of populationgrowth in different countries

5.3.3 the effects of changes in the size and structureof population on different countries

5.4 Differences in economic development between countries

Topic
5.4.1 differences in economic developmentbetween countries

6 International trade and globalisation

6.1 International specialisation
Topic
6.1.1 specialisation at a national level

6.1.2 advantages and disadvantages of specialisationat a national level

6.2 Globalisation, free trade and protection

Topic
6.2.1 definition of globalisation
6.2.2 role of multinational companies (MNCs)

6.2.3 the benefits of free trade

6.2.4 methods of protection

6.2.5 reasons for protection

6.2.6 consequences of protection

20
Economics
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025. Subject content

6.3 Foreign exchange rates

Topic
6.3.1 definition of foreign exchange rate
6.3.2 determination of foreign exchange rate inforeign exchange market

6.3.3 causes of foreign exchange rate fluctuations

6.3.4 consequences of foreign exchange ratefluctuations

6.3.5 floating and fixed foreign exchange rates

6.4 Current account of balance of payments

Topic
6.4.1 structure

6.4.2 causes of current account deficit and surplus

6.4.3 consequences of current account deficit andsurplus
6.4.4 policies to achieve balance of paymentsstability
Economics
M. Fahad khan
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Cambridge O Level Economics 2281 syllabus for 2023, 2024 and 2025.

4 Details of the assessment

For information on the assessment objectives (AOs), see section 2.

Paper 1 – Multiple Choice

Multiple-choice paper, 45 minutes, 30 marks

Candidates answer all 30 multiple-choice questions. Candidates indicate their answers on the multiple choice
answer sheet provided. The questions are based on all six sections of the syllabus content. The questions may
include calculations.

Calculators may be used in the examination.

The paper assesses the following assessment objectives:

AO1: Knowledge and understanding
AO2: Analysis

Paper 2 – Structured Questions

Written paper, 2 hours 15 minutes, 90 marks

Candidates answer one compulsory question in Section A and three questions from a choice of four in Section B.
Candidates write their answers in the answer booklet provided.

Candidates should be aware of the marks for each part question. These are printed on the question paper.
Candidates should use them as a guide to the amount of detail and length of response expected and to help them
manage their time effectively.

Calculators may be used in both sections of the examination.

Section A
Candidates answer one compulsory question (30 marks), which requires them to interpret and analyse previously
unseen source material relevant to a real economic situation. The question has part questions. Each part question
is based on one or more topics drawn from the syllabus content. The part questions require short and extended
responses, based on the source information provided and may include calculations and diagrams. The source
material contains written text and may contain diagrammatic or tabular information. Candidates must refer to this
source material.

Section B
Candidates answer three questions from a choice of four. Each question is worth 20 marks and has four part
questions. Each part question is based on one or more topics drawn from the syllabus content. The questions
require short and extended responses, and may include calculations and diagrams. Each question is introduced by
stimulus material. The stimulus gives the question context. Candidates may refer to this material and/or to other
examples that they have studied.

The paper assesses the following assessment objectives:

AO1: Knowledge and understanding
AO2: Analysis
AO3: Evaluation
Economics
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Command words
Command words and their meanings help candidates know what is expected from them in the exams. The table
below includes command words used in the assessment for this syllabus. The use of the command word will relate
to the subject context.

Analyse examine in detail to show meaning, identify elements and the relationship between them
Calculate work out from given facts, figures or information
Define give precise meaning
Describe state the points of a topic / give characteristics and main features
Discuss write about issue(s) or topic(s) in depth in a structured way
Explain set out purposes or reasons / make the relationships between things evident / provide
why and/or how and support with relevant evidence
Give produce an answer from a given source or recall/memory
Identify name/select/recognise
State express in clear terms

23
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Paper 2 – Structured questions

Question 1
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Example candidate response – grade

A
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 Economics Paper 2 – Structured questions
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Examiner comment – grade A

(a) The answer might have provided more evidence but it does note that most of Angola’s output is oil. (1/2)

(b) A brief but pertinent answer which recognises the significance of there being only one taxi firm in
Luanda. (2/2)

(c) An accurate and well-labelled diagram is produced here. As the question asks candidates to ‘draw a demand
and supply diagram to show what is likely to have happened to the price of diamonds in 2012’ it was not
necessary to provide written comments. (4/4)

(d) A perceptive answer which recognises how average income is calculated and explains the impact that a high
population growth rate may have on the dependency ratio. (3/3)

(e) There is a good approach here to the question. The candidate’s answer provides an accurate interpretation
of the table to draw the conclusion that most of the evidence does support the view. It backs this up with
relevant data and mentions an exception. (4/4)

(f) This is again a strong answer. There are clear analytical links established between higher GDP, total
demand, unemployment, tax revenue and poverty. The discussion then goes on to consider why an increase
in GDP may not reduce poverty. This recognises that not everyone may benefit and that the poor may not
be able to gain employment. (5/5)

(g) Two relevant reasons are identified. The explanation is stronger on the lack of education but is just
sufficient on health care. (4/4)
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Example candidate response – grade

C
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
 Economics Paper 2 – Structured questions
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

Examiner comment – grade C

(a) The answer appears to be uncertain
of the meaning and significance of
specialisation. There is a confusing
statement at the end that ‘only
because of specialisation output can
be increased’. This apparent lack of
understanding of the term resulted
in the candidate not being able to
address the question directly. (0/2)

(b) The answer does not pick up on the

reference to a specific year and so does
not concentrate on the particular
reason why taxi fares were high in that
year. Closer attention to the wording of
the question was required. (0/2)

(c) The diagram shows the demand curve

shifting to the right. The axes and the
demand and supply curves are accurately
labelled. By shifting the supply curve to
the left it does, however, not get the new
equilibrium correct. (3/4)

(d) There is some awareness here of the

nature of average income. Points, such
as the level of education people will
have, are asserted rather than
explained. (1/3)
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0321-4018844
Paper 2 – Structured questions

Question 2
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Example candidate response –

grade C
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 Economics
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Question 3
(
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examining the effect on government
revenue. (4/6)

Total mark awarded = 18 out of 20

Examiner
comment – grade
A
(a) A succinct and clear definition bringing out
both the willingness and ability to purchase
a product. (2/2)

(b) The answer starts by explaining

how a reduction in income tax can
increase the ability of consumers to
buy bicycles. The effect of the
relative price of different forms of
transport is well explained. A
relevant reason is given for a
change in tastes and preferences
and it is explored. (6/6)

(c) The answer starts with an

accurate definition of price
elasticity of demand and then goes
on to analyse three relevant
reasons for differences in
elasticity in different countries. In
each case, the candidate correctly
analyses how the influencing
factors affect the degree of price
elasticity of demand. (6/6)

(d) The effect of the impact of

imposing taxes is explained in
terms of price and quantity. This
is followed by a confused
discussion in relation to demerit
goods and firms’ revenues and
profits. At the end the answer
becomes relevant again by
Economics
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Paper 2 – Structured questions

Example candidate response – grade C

 Economics
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knowledge about price elasticity of
demand. (1/6)

Examiner
comment – grade
C
(a) An accurate definition is provided.
(2/2)

(b) The answer starts well by

explaining how an increase in
income may increase demand
for bicycles. It then,
unfortunately, mentions a
price reduction. This would
cause an extension in
demand rather than an
increase in demand. The last
reason given is essentially a
repetition of an increase in
purchasing power. (2/6)

(c) This answer writes around

the question. There is
uncertainty shown about
what is required and, as a
result, some vague
statements are made.
There is a hint of awareness
that cars may be regarded
as more essential in some
countries. Towards the end,
the candidate is seeking to
answer a different question
i.e. how should a business use
Economics
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MCQS
Practice

Choice Questions and Answers

( O level )

Q 1The table shows the percentage change in employment over a period for a
country with threeeconomic sectors.

economic change in

sector employment

(%)

agriculture –6
manufacturing +2
services +4
Economics
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What could be concluded from this information?
A Agricultural output fell.

B The country became more developed.

C The working population stayed constant.

D Total employment remained the same.

Question 2

Developing countries often wish to prevent the population in rural areas moving to the towns.Investment
grants are given to companies if they set up their businesses in rural areas.

A What is this policy intended to

achieve?

B decreased government

expenditure

C increased economies of scale

D increased use of labour

March 2017 Answer D

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Question 3

Which combination of changes in national output and population would cause an increase inGDP per head?

national output population

A decrease by 4% unchanged
B decrease by 5% decrease by 6%

C increase by 3% increase by 5%

D unchanged increase by 2%

March 2017 Answer B

Question 4

The population structure of many developed countries is changing. Birth rates are low, those over 65 are
living longer and the working population (16-65 years) is a smaller proportion of the total population.

What is the most likely consequence of this changing structure?

A Economic migrants make up shortages in the working population.

B Overall the standard of living is gradually falling.

C The population is healthier and needs less medical care.

D The ratio of those under 16 dependent on the working population is rising.

March 2017 Answer A

Economics
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Differences in economic development between countries
Question 1

A country has the highest GDP per head in the world.

What is this information most likely to suggest about the

country?

A It has the world‟ s biggest economy.

B It has the world‟ s fastest economic growth rate.

C It has the world‟ s greatest size of population.

D It has the world‟ s highest standard of living

February 2019 Answer D

Question 2

All countries need to produce food.

Which type of agriculture would make the best use of the resources of developing anddeveloped
economies?

developing developed

A capital- capital-
intensive intensive
B capital- labour-intensive
intensive
C labour-intensive capital-
intensive
D labour-intensive labour-intensive

February 2019 AnswerC

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Question 3

What is a common feature of developed

countries?

A a high fertility rate

B a low population

C high net emigration

D low birth rates

February 2018 Answer D

Question 4
The table shows data for four countries in 2006.

percentage
life computers per oflabour birt

expectanc 100 force h

y(years) population employed in rate

agriculture

Bangladesh 64.1 1.2 66 24.8

Egypt 71.3 3.7 27 24.2

India 64.8 1.5 60 23.0

Pakistan 65.6 1.6 42 27.2

On the basis of the information given, what is the likely ranking order of the four countriesin terms
of development, starting from the most developed to the least developed?

A Bangladesh → India → Pakistan → Egypt B

Egypt → Pakistan → India → Bangladesh C India

→ Egypt → Bangladesh → Pakistan

D Pakistan → Bangladesh → Egypt → India

March 2017 Answer B

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Question 5

The table shows the percentage of the working population in different sectors in threecountries.

country agriculture (%) manufacturing (%) services (%)

Iran 38 33 29
Nepal 93 2 5
UK 2 42 56

What can be concluded from the table?

What can be concluded from the table?

A Iran has fewer people working in the secondary sector than the UK.

B Nepal is a developed economy.

C The tertiary sector is more developed in Iran than in

Nepal.D The UK is dependent on the primary sector.

February 2018 Answer C

Question 6

What is included in the Human Development Index (HDI) of acountry?

A level of net immigration

B life expectancy at birth

C population size

D rate of population growth

February 2019 Answer B

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Question 7

A developing country starts to show increases in economicgrowth.

What is most likely to occur?

A a reduction in imports

B a reduction in the number of doctors per capita

C an increase in absolute poverty

D an increase in incomes

Answer D February 2019

Question 8

A country‟ s minister for agriculture said

“the biggest challenge the country faces is to develop irrigation so that we are not atthe
mercy of the weather for crucial export earnings”.

Which type of country is this most likely to be?

a) developed, exporting manufactured goods

b) developed, exporting services

c) developing, exporting primary commodities

d) developing, exporting services

February 2019 Answer C

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Government and the macroeconomy

The role of government

19 Which type of business is always in the public sector?

A monopoly

B multinational corporation
C public corporation

D public limited company

February/March 2019AnswerC

What is not a public sector expenditure?

A claims paid on travel insurance for cancelled flights

B collections of rubbish by a local council to meet regulations on recycling waste

C grants from central funds to compensate people whose property has been damaged by storms

D the establishment of a national database to assist the police in finding criminals

17 Which combination of changes in a government‟ s budget will lead to greater income inequality?

health and
direct indirect
taxes taxes education spending

A decrease decrease increase

B decrease increase decrease

C increase decrease decrease

D increase increase increase

February/March 2018AnswerB

March 2017 Answer A

The macroeconomic aims of government#

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Fiscal policy

20 Which pair of government actions combines a fiscal policy with a supply-side policy? A

changing government spending with changing interest rates

B cutting tax rates with providing information on job vacancies C

limiting bank lending with the privatisation of industry

D restricting credit with less control over labour markets

February/March 2018AnswerB

16 What is an example of an expansionary

fiscalpolicy? A decreased budget deficit

B higher interest rates

C increased money supply

D reduced tax rates

February/March 2019AnswerD

Taxes

17 Which statement describes a progressive tax?

A a tax that has a higher percentage rate as income rises B

atax that increases government income over time

C a tax that places an increasing burden on the poor D

atax that rises in line with the rate of inflation

February/March 2018AnswerA
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18 The Indian government uses direct and indirect taxation.

Which is a direct tax?

A corporate (profits) tax

B customs duty
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C goods and services tax

D petrol tax

March 2017 Answer

March 2017 Answer

19 A worker earns $60 000 a year and pays 25% income tax. He spent $2000 on furniture and
$5000 on a computer and paid 20% sales tax on each.

How much indirect tax did he pay?

A $1000 B $1400 C $15 000 D $16 400

March 2017 Answer

Subsidy

15 A government believes that consumption of a certain good will be of benefit to

society.Which policy is most likely to encourage producers to increase their output

of that good? A an increase in the period required for training the industry‟ s workers

B an increase in the regulations affecting businesses

C an increase in the subsidies for that good

D an increase in the taxation of that good

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AnswerC
February/March 2018

19 The Indian government gives farmers a subsidy of $5 per kilo to supply food in a market where
Xis the equilibrium position.

The effect is illustrated in the diagram below.

S3 S1

20

price

($ per kilo) 15

10

What will be the new equilibrium price and quantity supplied as a result of the subsidy?

equilibrium price quantity

($ per kilo) supplied(‟ 000

kilos)

A 10 20

B 13 25

C 15 20

D 20 10
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March 2017 Answer

B

Monetary policy

Supply-side policy

Economic growth#

17 A government lowers interest rates to encourage more borrowing and spending by households to
increase economic growth.

Why could this lead to a conflict with other government aims? A

It could cause uncertainty and lead to lower demand.

B It could encourage more savings and lead to higher unemployment. C

Itcould lead to lower prices of consumer goods and result in deflation. D

It could stimulate consumer demand and lead to inflation.

February/March 2019AnswerD

21 What is a recession?

A a period when incomes rise by less than inflation

B a period when prices are falling continuously for twelve months C

aperiod when real GDP is declining for two consecutive quarters D a

period when unemployment is rising

February/March 2018AnswerC

16 Official statistics in 2010 showed South Africa had a very high unemployment rate at
around25%, although wages were double those in Brazil.

What might be a reason for South Africa‟ s high wages in a time of high unemployment
comparedwith Brazil?

A a skilled workforce in Brazil

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B high levels of savings in South Africa

C more labour-intensive production in Brazil

D strong trade unions in South Africa

February/March 2018AnswerD

Employment and unemployment

18 Which policy would be most likely to reduce unemployment in the short

run? A a programme of privatisation

B a reduction in the standard rate of income tax

C grants to firms to research new technology

D removal of all restrictions on imports into the country

February/March 2019AnswerB

18 The table shows the weekly values of certain items for the average person in each

group. In which group does the average person save the most?

income ($) spending ($) borrowing

($)

A employed workers 500 400 50

B retired people 150 140 0

C school students 25 30 5

D unemployed 200 300 100

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February/March 2019

AnswerA

8 What could discourage women from seeking employment?

A More education and training are provided.

B More flexible and part-time jobs are available.

C There are fewer promotion opportunities for

women.

D There is a shift in employment to the

servicessector.

February/March 2019AnswerC

19 Which combination of government policies is most likely to reduce unemployment?

income government rate of

tax spending interest

rate

A decrease decrease increase

B decrease increase decrease

C increase decrease decrease

D increase increase increase

February/March 2018AnswerB
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20 What may cause an immediate decrease in the

workingpopulation?

A a falling death rate

B a falling infant
mortalityrate C a rising
birth rate

D a rising rate of net emigration

March 2017 Answer

Inflation and deflation

22 An economy is suffering from a period of

deflation. What does this mean for the

economy?

A Consumers may delay purchase of some products.

B Purchasing power of consumers falls.

C Tax revenues for the government will rise.

D The real value of personal savings falls.

February/March 2018AnswerA
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17 An economy experienced deflation.

Which combination shows the likely outcome of this?

consumer pric investor

confidence e confidence

level

A decrease decrease decrease

B decrease increase decrease

C increase decrease increase

D increase increase increase

AnswerA February/March 2019A

22 The table shows the Consumer Price Index (CPI) of an economy over five years.

year CPI

1 100
2 103

3 105

4 107

5 110

Between which years was the rate of inflation the greatest?

A from year 1 to year 2

B from year 2 to year 3

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C from year 3 to year 4

D from year 4 to year 5

March 2017 Answer

A

23 In a year the rate of inflation in a country was 3%. During that year company
managers‟ salaries rose by 6% and office workers‟ wages rose by 2%.

What happened to real income (purchasing power)?

company office

managers workers

A fell fell

B fell rose

C rose fell

D rose rose

March 2017 Answer

C
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International trade and globalisation
Multiple Choice Questions and Answers ( O level)

Which method of trade protection has the most predictable effect in controlling the levelof
imports?

A quotas on imports

B safety and quality regulations for

imports

C subsidies to domestic producers

D tariffs on imports

February 2018 Answer A

Globalisation, free trade and protection

A country imposes tariffs and quotas on imported goods.

What will citizens of that country experience?

A higher prices

B higher unemployment

C higher welfare

D wider consumer choice

February 2019 AnswerA

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Which policy is a form of protectionism?

A a tax on emissions

B a tax on imports C

a tax on income D a

tax on property

March 2017 Answer B

28 When does free trade occur?

A when goods are exported with government

subsidies

B when goods are given as part of an aid

programme

C when goods are traded using barter

D when goods face no import barriers

March 2017 Answer D

Foreign exchange rates

What usually decreases when there is a depreciation of a country‟ s foreign exchange rate?

A the level of national debt

B the level of trade protection

C the price of exports

D the price of imports

February 2019 Answer C

Economics
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The diagram shows the market for the Indian rupee priced in US dollars. The equilibriumpoint is at X.

If more Americans take holidays in India and fewer Indians buy American exports, in which
sector of the diagram will the new equilibrium point for price and quantity of theIndian rupee
be?

March 2017 Answer A

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In October 2015, one UK pound could be exchanged for 100 Indian rupees. By October2016, one UK
pound could be exchanged for 80 Indian rupees.

What would be a short-term consequence of this

change?

A Economic growth in India would increase.

B Indian manufacturers would earn higher profits from exports to theUK.

C Inflationary pressure in the UK would reduce.

D UK manufacturers would find it easier to export to India.

February 2018Answer

Current account of balance of payments

30 Skin creams preventing sunburn made in the European Union (EU) are more effective than those made
in the United States (US). US tourists stock up on the creams when visiting Europe. Such creams are
banned from production in the US because of the chemicals in them. In 2013, negotiations began to
remove this ban in order to allow production in the US.

How is this freer trade likely to affect manufacturers of skin creams in the US and theEU?

manufacturers manufacturers

in the US in the EU

A gain gain
B gain lose

C lose gain

D lose lose

February/March 2019AnswerB
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The table shows a country‟ s balance of payments that has no secondary income (currenttransfers).

item $ million

exports of goods 280

imports of goods 350
exports of services 110
imports of services 60
net primary income – 40

What is the country‟ s current account balance?

A a deficit of $60 million

B a deficit of $160 million

C a surplus of $20 million

D a surplus of $760 million

February/March 2019AnswerA
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The table shows details of India‟ s current account of the balance of payments in the 1stquarter of 2014.

$ billion

trade in goods (visible) balance –34

trade in services (invisible) balance ?
primary income (income) balance –7
secondary income (current transfers) balance 16
current account balance –8

What is the trade in services (invisible) balance?

A surplus of $9bn B
surplus of $17bnC
surplus of $27bnD

surplus of $33bn

March 2017 Answer B

A country imports oil which is used in the production and distribution of goods. The country has also
experienced a rise in incomes which has resulted in a large increase in the demand for goods, some of
which it imports.

What is likely to happen to the country‟ s balance of trade in goods (visible) and to theprice of oil?

balance of

price of
oil
trade in goods

A improves falls
B improves rises

C worsens falls

D worsens rises

February/March 2018AnswerD
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Which measure would a government take to reduce a current account

deficit?

A increase tariffsB

increase value

added tax

C reduce income tax

D reduce domestic
subsidies

February/March 2019 AnswerA

Economics
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Microeconomic decision makers

O level multiple choice and answers
Money and banking

What would be least likely to act as a store of value during a period of rapid

inflation?

A cash

B gold
C property

D shares

February/March 2019AnswerA

Which statement about financial matters is correct?

A Commercial banks‟ main activity is the finance of international trade. B Paper

banknotes possess all the desirable properties needed to act asmoney.

C Stock exchanges trade mainly in second-hand stocks and shares.

D The central bank acts as the lender of last resort to companies facing bankruptcy.

May/June 2017AnswerC

What is a function of a stock exchange?

A It allows company shares to be traded.

B It enables tourists to purchase foreign currency.

C It provides a market for firms to sell their products.

D It sets the rate of interest in an economy.

February/March 2018AnswerA
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Households

The table shows how three people (X, Y and Z) spend their income.

person X person Y person Z

food, clothing and housing 30% 25% 50%

entertainment and leisure 35% 35% 25%

luxury goods 35% 40% 25%

For these three people, what is the most likely order of income, from lowest income tohighest
income?

A. Y→X→Z

B. Y→Z→X

C. Z→X→Y

D. Z→Y→X

February/March 2019AnswerC

This table shows how three people spend their income.

person X person Y person Z

food and housing 60% 20% 30%

travel and 20% 40% 30%
leisure
luxury goods 20% 40% 40%

Put the three people in the most likely order of income from the lowest to the highestincome.

A X,Y,Z B X,Z,Y C Y,Z,X D Z,Y,X

March 2017 Answer B

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Workers

In South Africa, the number of skilled workers is relatively low. However, average wages in South Africa
are double the average wage in Brazil and Turkey and they are 1.6 times higher than in Malaysia.

What may be concluded from this information?

A Malaysian workers are more skilled than South African

workers.

B Prices in South Africa are double those in Brazil.

C South Africa‟ s labour productivity is low.

D South African trade union bargaining power is strong.

May/June 2017AnswerD

What is most likely to be used to support a claim for wage increases in anindustry?

A a decrease in the industry‟ s sales

B a decrease in the need for specialist training

C an increase in cheap imports of a rival product

D an increase in wages in a similar industry

May/June 2017AnswerC

What is a direct benefit to a worker of specialisation?A the

higher output that may lead to higher earningsB the higher

output that may lead to higher profits

C the higher output that may lead to lower costs per unit produced

D the longer training period that is required before starting work

February/March 2018AnswerA
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Why are some assembly workers poorly paid?

A because their work is exhausting

B because their work is repetitive C

because their work is unskilled D

because they work long hours

March 2017 Answer C

When is a firm most likely to reduce its demand for labour?

A when the demand for the final good

increases

B when the firm‟ s profitability increases

C when the price of labour decreases

D when the productivity of labour decreases

March 2017 Answer D

Trade unions

A trade union succeeds in raising the wages in an industry above the equilibrium wage.How would

the demand and supply of labour change?

change in quantity change in

of labour quantityof labour

demanded supplied

A fall fall
B fall rise

C rise fall

D rise rise
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February/March 2018 AnswerB
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Firms and production

To achieve horizontal integration, a firm producing tyres could merge with another firmproducing

A motor cars.

B rubber.
C tyre-producing machinery.

D tyres.

May/June 2017AnswerD

When will a firm maximise its profits?

A when it excludes a rival supplier from the market

B when it produces where average cost and average revenue

areequal

C when it sells as many products in as many different markets as it can

D when the difference between total cost and total revenue is greatest

February/March 2019AnswerD
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The high volume of goods sold by large supermarkets enables them to reduce prices, but the most
important advantage that these businesses have is that they can sell non-food items as well as food.

Which economic results does the statement suggest are available to largesupermarkets?

A economies of scale and diversification

B external benefits and specialisation

C horizontal integration and optimum

output

D increased sales and diminishing returns

March 2017 Answer A

Firms’ costs, revenue and objectives

Which costs will necessarily fall continuously as output

increases?

A average fixed costs

B average variable costs

C opportunity costs

D repayment costs of borrowing

May/June 2017AnswerA
Economics
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The table shows the costs of a firm.

units variable costs total

of ($) costs
output ($)

10 20 80
20 50 110
30 80 140

40 110 170

What is the value of the firm‟ s fixed costs?

A $20 B $30 C $60 D $80

February/March 2019AnswerC

A firm‟ s average revenue is $10. It sells 2000 units.

What is the firm‟ s total revenue and the price of the product?

total pric

revenu e

e($) ($)

A 10 10
B 2 000 200

C 20 000 10

D 20 000 200

AnswerC
February/March 2019
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The table shows some of the costs of running a retail shop in one week.

rent of shop 200

insurance premium 40

purchase of stock 700

delivery of goods 50

What are the total fixed costs during this week?

A $200 B $240 C $700 D $750

February/March 2018 AnswerB

A company‟ s annual report suggested that it had benefited from some changes.

Which change is an internal economy of scale for this company?

A an improvement in road and rail facilities that has reduced its distributioncosts

B an increase in the number of local specialist workers that it could recruit

C the introduction of new training at a local college for which staff have enrolled

D the reduction in the company‟ s costs by the purchase of a factory

supplyingcomponents

February/March 2018AnswerD
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Market structure

A monopoly takes over an industry from competitive firms.

What is not likely to be true about a monopoly compared with a

competitive firm?

A A monopoly will earn a higher rate of profit.

B A monopoly will gain a greater share of the market.

C A monopoly will offer a wider choice to the consumer.

D A monopoly will operate on a larger scale of production.

May/June 2017AnswerC

12 A firm‟ s aim is to become a monopoly supplier.

Which policy is it most likely to use to eliminate

competition?

A adopt price reductions and advertising

B avoid diseconomies of
scale

C maximise output and profit

D reduce financial barriers to entry

March 2017 Answer A

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The allocation of resources

Multiple Choice Questions and Answers ( O level )

In 2015 there was a significant fall in the world price of petrol

(gasoline). What would not have been a cause of the price fall?

A the continuing global recovery from the world economic

recession

B the increasing exploitation of US oil reserves

C the re-entry of Iranian producers to the world oil

market

D the shorter journeys from using the new Suez Canal

May/June 2017 AnswerA

The diagram shows the demand for chocolate.

What could cause the movement from point X to point Y?

A a change in tastes

B a fall in the price of chocolate

C an increase in income

D a successful advertising campaign for chocolate

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May/June 2017 AnswerB
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What is meant by the equilibrium price in the market for agood?

A the average price paid by consumers

B the price at which maximum profit is made

C the price at which the producer breaks even

D the price at which the supply and demand curves intersect

February/March 2019AnswerD

The diagram shows the market for oil. The initial equilibrium is X.

If the quantity of oil sold increased by two million barrels a day, which point represents thenew
equilibrium?

February/March 2018 AnswerB

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Price elasticity of demand (PED)

A product has a price elasticity of demand that is greater than one.

What will happen to total revenue if the price of the product is reduced by 3%?

A It will fall by more than 3%.

B It will fall to zero.

C It will be unchanged

D It will rise.

March 2017 Answer D

The table shows the demand for chocolates at two different prices.

price quantity
$ demanded

0.50 400
0.45 480

What is the price elasticity of demand when the price falls from $0.50 to $0.45?

E less than 0.5

F between 0.5 and 1

G between 1 and 1.5

H greater than 1.5

February/March 2018 AnswerD

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Price elasticity of supply (PES)

In response to an increase in price from $5 per kilo to $6 per kilo a chicken farmer increasedsupply from
400 kilos to 500 kilos per week.

What is the price elasticity of

supply?

A 0.8 B 0.9 C 1.2 D 1.25

May/June 2017AnswerD

The table shows the effect of a change in the market price from $5 to $6 on the supply ofmobile (cell)
phones.

Which statement about the price elasticity of supply of mobile phones is correct?

A Price elasticity of supply is 0.4. B

Price elasticity of supply is 2.5. C

Supply is perfectly elastic.

D There is unit elasticity.

AnswerB
February/March 2019
Economics
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Market economic system

In a market system who has the most important role in influencing the allocation of

resources?

A consumers

B entrepreneurs

C government officials

D producers

February/March 2018 AnswerA

Market failure

A bee-keeper maintains hives of bees to produce honey. The bees can pollinate neighbours‟ fruit trees but
also give a painful sting to gardeners.

If both of these events occur, how will costs and benefits beaffected?

A External benefits will fall and social costs will fall.

B External costs will rise and social benefits will fall.

C Social costs and social benefits will fall.

D Social costs and social benefits will rise.

May/June 2017AnswerD
What can be found in a market economy?

A externalities and monopolies

B interest rates and public goods

C public corporations and market prices

D tax rates and commercial banks

February/March 2019 Answer A

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The basic economic

problem
Multiple Choice Questions and Answers ( O level )

The factors of production

A person bought a shop and stocked it with fresh fruit. He employed one member ofhis family
to help in the shop.

Which factors of production have

been used?

A labour and capital only

B labour, capital and
enterprise only
C land and labour only
D land, labour, capital and enterprise

March 2017 Answer D

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What is an example of the purchase of a capitalgood?

A a farm owner purchasing additional land

B a farm owner purchasing a

television

C a farm owner purchasing a

tractor

D a farm worker purchasing some seeds

February 2018 AnswerC

The nature of the economic problem

What best describes the problem of

scarcity?

A All consumer wants must be

satisfied.

B All resources are free at the point of use.

C There are limited resources and

unlimitedwants.

D There are unlimited resources and

limitedwants.

February 2018 Answer C

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Opportunity cost

Heavy rain caused floods in an area of a country.

What may be an opportunity cost of repairing the damage caused?A the

allocation of government funds to the area instead of on a new airport

B the cost of providing shelter for those made homeless

C the decline in the tourist industry in the area

D the loss of profits from businesses affected by the flood

May 2017AnswerA

A student decides to buy a ticket for a concert instead of buying anew

shirt. What is the opportunity cost of buying the ticket?

A the concert

B the price of the ticket to the

concert

C the shirt

D the time spent purchasing the ticket

February/March 2018 AnswerC

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A farmer reduces the land used to grow wheat from 80 hectares to 60 hectares andincreases
the use of the land for growing potatoes from 80 to 100 hectares.

What is the opportunity cost of this change?

A The output from 20 hectares used for growing

potatoes.

B The output from 20 hectares used for growing

wheat.

C The output from 60 hectares used for growing

wheat.

D The output from 80 hectares used for growing

potatoes.

February/March 2019 AnswerB

Production possibility curve diagrams (PPC)

The diagram shows a production possibility curve for a country. As a result of anincrease
in demand for manufactured goods it moves from a situation of unemployment to full
employment.
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How would this be represented on this diagram?

A by a movement from E to G B by

a movement from F to E C by a

movement from F to G D by a

movement from G to H

March 2017 Answer C

The diagram shows the choices for an individual between leisure and earnings. Hecurrently earns
$25 a day.

24
hours of

leisure 18

per day
12

What is the opportunity cost for the person if he accepts more work and earns
$75 a day?

A $25

B $50

C 6 hours of leisure a day

D 12 hours of leisure a day

March 2017 Answer D

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The macroeconomy and government
intervention
Multiple Choice Questions and Answers ( O level )

The role of government

Which type of business is always in the public

sector?

A monopoly

B
multinational

corporation

C public corporation

D public limited company

February 2019 AnswerC

Fiscal policy
Which pair of government actions combines a fiscal policy with a

supply-side policy?

A changing government spending with changing interest

ratesB cutting tax rates with providing information on job

vacancies

C limiting bank lending with the privatisation of industry

D restricting credit with less control over labour markets

February AnswerB
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Taxes
Which statement describes a progressive tax?

A a tax that has a higher percentage rate as

incomerises

B a tax that increases government income over time

C a tax that places an increasing burden on

thepoor

D a tax that rises in line with the rate of inflation

February 2018 Answer A

The Indian government uses direct and

indirecttaxation. Which is a direct tax?

A corporate (profits) tax

B customs duty

C goods and services

tax

D petrol tax

March 2017 Answer A

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M. Fahad khan
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A worker earns $60 000 a year and pays 25% income tax. He spent $2000
on furniture and $5000 on a computer and paid 20% sales tax on each.

How much indirect tax did he pay?

A $1000 B $1400 C $15 000 D $16 400

March 2017 Answer B

Subsidy

A government believes that consumption of a certain good will be of

benefit to society. Which policy is most likely to encourage producers

toincrease their output of that good?

A an increase in the period required for training the industry‟ s workers

B an increase in the regulations

affectingbusinesses

C an increase in the subsidies for that good

D an increase in the taxation of that good

Answer C February 2018

Economics
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The Indian government gives farmers a subsidy of $5 per kilo to supply food
ina market where X is the equilibrium position.

The effect is illustrated in the diagram below.

S3 S1

20 2

price
X
($ per
kilo) 15
10

What will be the new equilibrium price and quantity supplied as a result
ofthe subsidy?

equilibrium quantity
price supplie
d
($ per
kilo) (‟ 000 kilos)

A 10 20
B 13 25
C 15 20
D 20 10

March 2017 Answer B

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Economic growth
A government lowers interest rates to encourage more borrowing and
spendingby households to increase economic growth.

Why could this lead to a conflict with

othergovernment aims?

A It could cause uncertainty and lead to

lowerdemand.

B It could encourage more savings and lead to

higherunemployment.

C It could lead to lower prices of consumer goods and result

in deflation.

D It could stimulate consumer demand and lead to inflation.

February 2019 AnswerD

What is a recession?

A a period when incomes rise by less than inflation

B a period when prices are falling continuously for

twelvemonths

C a period when real GDP is declining for two

consecutivequarters

D a period when unemployment is rising

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February 2018 Answer C
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Official statistics in 2010 showed South Africa had a very high
unemployment rate at around 25%, although wages were double those
inBrazil.

What might be a reason for South Africa‟ s high wages in a time of high
unemployment compared with Brazil?

A a skilled workforce in Brazil

B high levels of savings in South Africa

C more labour-intensive

productionin Brazil D strong trade

unions in South Africa

February 2018 Answer D

Employment and unemployment

Which policy would be most likely to reduce unemployment

inthe short run?

A a programme of privatisation

B a reduction in the standard rate

ofincome tax

C grants to firms to research

newtechnology

D removal of all restrictions on imports into the country

February 2019 Answer B

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The table shows the weekly values of certain items for the average

person in each group. In which group does the average person save

the most?

spending borrowing
income ($) ($) ($)

employed
A workers 500 400 50
B retired people 150 140 0
C school students 25 30 5
D unemployed 200 300 100

February march 2019 Answer A

Economics
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What could discourage women from seeking employment?

A More education and training are provided.

B More flexible and part-time jobs are available.

C There are fewer

promotionopportunities for

women.

D There is a shift in employment to

theservices sector.

February 2019 Answer C

Which combination of government policies is most likely to

reduceunemployment?

income government rate of

tax spending interest
rate

A decrease decrease increase

B decrease increase decrease
C increase decrease decrease
D increase increase increase

February 2018 Answer B

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What may cause an immediate decrease in

theworking population?

A a falling death rate

B a falling

infantmortality
rate

C a rising birth rate

D a rising rate of net emigration

March 2017 Answer D

Inflation and deflation

An economy is suffering from a period

ofdeflation. What does this mean for

the economy?

A Consumers may delay purchase of some

products.

B Purchasing power of consumers falls.

C Tax revenues for the government

willrise.

D The real value of personal savings

falls.
Economics
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February Marh 2018 Answer A
Economics
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An economy experienced deflation.

Which combination shows the likely outcome of this?

consumer pric investor

confidence e confidence
level

A decrease decrease decrease

B decrease increase decrease
C increase decrease increase
D increase increase increase

Answer A February 2019

Economics
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The table shows the Consumer Price Index (CPI) of an economy over
five years.

year CPI

1 100
2 103
3 105
4 107
5 110

Between which years was the rate of inflation the greatest?

A from year 1 to year 2

B from year 2 to year 3

C from year 3 to year

D from year 4 to year 5

March 2017 Answer A

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In a year the rate of inflation in a country was 3%. During that year company
managers‟ salaries rose by 6% and office workers‟ wages roseby 2%.

What happened to real income (purchasing power)?

company office
managers workers

A fell fell
B fell rose
C rose fell
D rose rose

March 2017 Answer

Economics
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Practice questions for P1 and P2

Read the source material carefully before answering Question 1.
Source material: Changes in US macroeconomic performance and policies
US fact file 2020
Current account of the balance of –$470bn
payments
Imports of goods and services $2800bn
Imports from China as % of total 20%
imports
Economic growth rate –2.8%
Inflation rate 1.4%
Between 2009 and 2019, US real GDP increased every year. This was the result
of, among other causes, low interest rates, land reclamation and an increase in
the labour force. The higher US output brought a number of benefits but some
workers lost their jobs. This was because while some industries expanded,
others closed down. Income also became more unevenly distributed and
pollution increased. US exports and imports rose over this period. The growth of
trade with China, a major trading partner of the US, was affected later in the
period by increases in US tariffs on some Chinese imports. These increases were
expected to change the US current account balance, output and tax revenue.
The US exports a range of products to China, including ice cream. China is the
world‟ s largest consumer of ice cream, buying a third of all ice cream
consumed. Chinese consumers sometimes buy chocolate to eat with ice cream.
In 2019, the price of chocolate increased. In 2020, US macroeconomic
performance changed. The country‟ s price level rose more slowly, largely due
to a decrease in consumer expenditure and a reduction in workers‟ bargaining
power. The country‟ s real GDP fell and unemployment rose. These changes
influenced US macroeconomic policy. US government spending rose significantly
as shown in Table 1.1.
Table 1.1 US Government spending and unemployment rate 2015–2020
Year Government spending ($ Unemployment
billion) (%)
2015 3 700 5.3
2016 3 900 4.9
2017 4 000 4.4
2018 4 100 3.9
2019 4 400 3.7
2020 6 600 6.7
The US central bank, the Federal Reserve, announced in September 2010
that it would allow the inflation rate to rise and would not increase the
Economics
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interest rate. In the past, central banks have aimed to keep the inflation
rate low because of the effects that inflation can have on, for example,
investment, exports, the distribution of income and tax revenue. The
Federal Reserve stated that it wanted to raiseeconomic growth which can
increase income per head, employment and tax revenue

Answer all parts of Question 1. Refer to the source material in your

answers.

(a) Calculate the value of US imports from China in 2020. [1]

(b) Identify two causes of the increase in the quantity of US factors of

production. [2]

(c) Explain one way that import tariffs could improve the US economy. [2]

(d) Explain two reasons why the US inflation rate fell in 2020. [4]

(e) Draw a demand and supply diagram to show the effect of an

increase in the price of acomplement on the market for ice cream. [4]

(f) Analyse the relationship between government spending and

unemployment. [5]

(g) Discuss whether or not a central bank should aim for a low inflation rate.
[6]

(h) Discuss whether or not economic growth benefits everyone in the US.
[6]
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Question2:
Source material: How will oil change Guyana?

Guyana fact file 2020

Population 790 000
Estimated optimum population 1100 000
Proportion of population living in poverty 35%

Economic growth rate 26%

Unemployment rate 11%
Current account of the balance of -$237m
payments
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Guyana was the fastest growing economy in the world in 2020. Sugar,
gold and timber have accounted for a relatively high proportion of the
country‟ s output and exports for some time. In 2020, the sugar industry
was hit by bad weather and falling global demand. In contrast, the
output of gold and timber increased. The main reason why Guyana‟ s real
GDP increased so rapidly was the increase in oil production. Oil was
discovered offshore by a foreign multinational company (MNC) in 2015
and the MNC started production in 2019. It is predicted that Guyana will
become the world‟ s largest oil producer per head by 2025. The Guyanese
government is planning to use some of the tax revenue it will raise from
oil to spend on education and improvements to the country‟ s
infrastructure. Planned projects include new railway lines and stations. A
more extensive and cheaper rail service may enable more people to work
further from home and may influence the market for substitutes, such as
car transport. The Guyanese government is also planning to spend some
of the tax revenue on improving the country‟ s access to the internet.
Table 1.1 shows GDP per head and internet access in seven countries in
2020.
Table 1.1 GDP per head and internet access in selected countries in 2020

Population with
Country GDP per head ($)
internet access (%)
Brazil 8717 72
Eritrea 643 2
France 40 494 83
Guyana 6160 39
Iceland 66 945 99
Morocco 3204 64
Zambia 1305 29

Guyana has experienced a slow growth in its population size in recent years. In
2020, its birth rate was 16.5, its death rate was 6.8 and its net migration rate
was –7.7. With increases in oil production, emigration may decline and the
country may start to experience net immigration. A higher population may
affect Guyana in a number of ways including changing the size of its labour
force and affecting the environment.

Answer all parts of Question . Refer to the source material in your answers.

(a) Calculate the number of people who were living in poverty in Guyana in
2020. [1]
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(b) Identify two causes of the decrease in the output of sugar in 2020. [2]

(c) Explain how economic growth is measured. [2]

(d) Explain two reasons why labour mobility may increase in Guyana in the
future. [4]

(e) Draw a demand and supply diagram to show the effect of a decrease in the
price of rail transport on the market for car transport. [4]

(f) Analyse the relationship between GDP per head and internet access. [5]

(g) Discuss whether or not the discovery of oil is likely to increase living
standards in Guyana. [6]

(h) Discuss whether or not Guyana would benefit from an increase in the size of
its population. [6]
Economics
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Question3:
Read the source material carefully before answering Question.
Source material: Happiness

Bhutan fact file 2018

Population 0.8 m
GDP per head $3250
Government spending $450 m
Government tax revenue $380 m
World Happiness Index ranking 95th
Human Development Index ranking 134th

The United Nations has published a World Happiness Index every year since
2012. This index ranks countries according to life expectancy, freedom, social
support, trust, generosity and GDP per head. New Zealand was ranked 8th in
the World Happiness Index in 2019. The governments of both Bhutan and New
Zealand now consider a number of influences on the happiness of their
populations.
While more than half of Bhutan‟s labour force is employed in agriculture, most people
in New Zealand are employed in the tertiary sector. Working conditions, working
hours, the type of work and pay vary between the primary and tertiary
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sectors. Productivity is higher in all sectors in New Zealand than in Bhutan. This
is partly the result of higher investment in capital goods and education in New
Zealand. New Zealand also has a higher GDP per head. GDP per head ($) can
influence net migration (number of people) as shown for selected countries in
2017 in Fig. 1.1.

Bhutan
Cyprus
Kenya
Mozambique
New Zealand
Slovenia
–55 000 –35 000 –15 000 5000 25 000 45 000 65 000

Net migration (number of GDP per head ($)

Fig. 1.1 GDP per head ($) and net migration (number of people) of selected
countries 2017
In its 2019 budget, the New Zealand government said it would measure its
progress not by increases in GDP but by increases in the quality of people‟ s
lives. To achieve this, it announced increased spending on some areas including
mental health, child poverty and pollution. Some economists criticised this
approach. They argued that the best way the government could improve living
standards is to reduce income tax rates. This reduction could change
government spending and the quantity of products that people buy, including
cars.
Tax revenue had increased in New Zealand in 2019, partly because of a rise in
revenue from corporation tax. It was, however, difficult to predict firms‟ future
profits. This was because of uncertainty about what would happen to its GDP
and its corporation tax rates.
Answer all parts to Question . Refer to the source material in your answers.
(a) Calculate Bhutan‟ s GDP in 2018. [1]

(b) Identify two indicators that are in both the World Happiness Index and
the Human Development Index. [2]

(c) State why Bhutan‟ s 2018 government budget is likely to have increased
total demand in Bhutan. [2]

(d) Explain two reasons why someone may prefer to work in the tertiary
sector rather than in the primary sector.[4]
Economics
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(e) Analyse how investment in capital goods and education can increase New
Zealand‟ s productivity. [4]

(f) Analyse the relationship between GDP per head and net migration. [5]

(g) Discuss whether or not enterprise is likely to have increased in New

Zealand after 2019. [6]

(h) Discuss whether or not a cut in income tax rates will increase living
standards. [6]
Economics
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Question4:
Read the source material carefully before answering Question.

Source material: Will Germany continue to be a strong economy?

Population fact file 2017 Germany world

population 81 million 7.5 billion
percentage of population aged 22.0% 8.5%
over 65
average age 47.4 years 30.6 years

Germany is a country with a trade surplus and a high GDP per head. It also has a
budget surplus (government tax revenue greater than expenditure), a high HDI
and a low inflation rate.

In recent years, German firms have exported a higher value of goods and
services. This has contributed to the growth of world trade, caused partly by a
fall in transport costs. A relatively large number of German firms produce both
in Germany and in other countries, helped by better communications.

Germany is a major producer and exporter of luxury cars. Demand for luxury
cars was influenced in 2018 by increases in incomes in Germany and abroad, a
rise in the price of US luxury cars and, in some countries, a fall in the price of
petrol.
Improvements in the quality of education and information on job vacancies have
made it easier for workers to change jobs in Germany. This greater ability to change
jobs has helped to reduce unemployment and to increase the country‟s output.
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Fewer workers in the German car industry are now members of a trade union.
As shown in Table 1.1, trade union membership in Germany has declined in
recent years.

Table 1.1 selected data on the German labour market 2013–2016

Trade Size of labour Unemploymen Average

Year union t rate annual wage
force
members (%) ($)
(millions)
hip
(millions)
2013 18.0 42.2 5.4 40 567
2014 17.7 42.5 5.1 41 188
2015 17.6 42.8 4.8 42 084
2016 17.0 43.3 4.3 42 708

A challenge facing Germany is its ageing population. The effect of an older

labour force is uncertain. It may mean firms become reluctant to invest in new
technology, but a shortage of young workers may encourage firms to buy more
capital goods.

Germany‟ s population may fall and there will soon be fewer Germans aged
under 30 than over 60 unless immigration continues at a relatively high rate.
Immigration might increase both the country‟ s labour force and its government‟ s
spending on education.

Answer all parts of Question4. Refer to the source material in your answers.

(a) Calculate the number of Germans aged over 65 in 2017. [1]

(b) Identify two measures of living standards. [2]

(c) Explain one cause of globalisation. [2]

(d) Explain two advantages of an increase in the occupational mobility of

labour. [4]
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(e) Analyse why the price of German luxury cars may have increased in 2018.
[4]

(f) Analyse whether the strength of German trade unions increased from
2013–2016. [5

(g) Discuss whether or not an ageing labour force will reduce productivity.
[6]

(h) Discuss whether or not immigration will increase a country‟ s budget

surplus. [6]

Question5:
Read the source material carefully before answering Question 1.

Source material: India’s airline industry

Air India fact file
total revenue 2018 $2.2
bn
total cost 2018 $2.9
bn
number of passengers carried in 2018 16.4 m
number of passengers carried in 2017 14.8 m
share of India‟ s international and national air travel 13%
market in 2018
share of India‟ s international and national air travel 100%
market in 1994

Air India is owned by the Indian government. The entry of new firms into India‟ s
air travel market has reduced Air India‟ s ability to set price. The state- owned
firm faces competition not only from other airlines but also from other forms of
transport including trains and ships.

In 2017 the Indian government tried, unsuccessfully, to sell Air India to the
private sector. A successful sale would have raised money for the Indian
government and might have increased the airline‟ s efficiency.
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It is predicted that India will have the third largest airline industry by 2025. The
growth in the industry may affect the current account position of India‟ s
balance of payments. Table 1.1 shows the current account position in India and
four other countries
Table 1.1 The current account position of the balance of payments of
selected countries in 2017

Country Current Current

account account
($ bn) % of GDP
Brazil –9.8 –0.5
China 164.9 1.4
India –48.7 –1.9
Kenya –5.4 –6.8
Russia 35.4 2.2
A rise in both the number of routes flown and the quality of the passenger
experience may increase the number of tourists visiting India. A larger Indian
airline industry is likely to increase the ease of movement of people and goods
into and out of India. This might attract more multinational companies (MNCs)
and reduce firms‟ costs of production.

India‟ s air travel market faces a number of challenges. India has Asia‟ s highest
airline fuel tax. Some economists suggest that this should be increased further
to increase tax revenue and to reduce market failure. The airlines‟ other costs
are rising but it is difficult for them to raise prices. This is because India‟ s air
passengers are among the most price-sensitive in the world. Some airlines stop
their costs rising any further by improving their staff training, introducing new
technology and improving their pilots‟ working conditions. The airlines‟ ability to
hire pilots is influenced by, among other factors, the quality of education and
other job opportunities.

Answer all parts of Question5. Refer to the source material in your answers.

(a) Calculate, in $, Air India‟ s loss in 2018. [1]

(b) Identify two substitutes for air travel. [2]

(c) Explain one characteristic that suggests that Air India was a
monopoly in 1994. [2]
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(d) Explain two reasons why a government may privatise an industry. [4]

(e) Analyse how India‟ s position on the current account of its

balance of payments in 2017 compares with the other four
countries. [4]

(f) Analyse how a successful airline industry can promote economic

growth. [5]

(g) Discuss whether the Indian government should increase the tax on
airline fuel. [6]

(h) Discuss whether more people will apply to be pilots for Indian
airlines in the future. [6]
Question6:

Read the source material carefully before answering Questions.

Source material: the challenges facing Pakistan

Pakistan fact file 2016 2017

$ $
billion billion
Exports of goods 20.5 25.2
Imports of goods 47.0 61.7
Government 40.5 43.2
spending
Consumer 259.3 294.8
spending
Pakistan faces a number of economic challenges. These include responding to a
rising population, improving its trade in goods balance, controlling the country‟ s
inflation rate and increasing the country‟ s economic growth rate. To overcome
these challenges, the Pakistani government is trying to increase investment.
Currently, a high proportion of the country‟ s resources are used to produce
consumer goods.

The government is subsidising entrepreneurs and charities to open low-cost

schools. It wants to reduce the dropout rate from schools and to raise
educational standards. Some parents do not recognise the advantages that a
merit good such as education can give their children, for example better health
and better job opportunities. Some of the poor need their children to
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work from a young age to support the family. Government reforms have not yet
led to a significant rise in teachers‟ wages but have improved school buildings
and the number of children attending. The qualifications required to teach may
be increased in the future.

Improved education may affect the number of skilled workers who emigrate and
may raise the quantity and quality of goods and services produced. Any resulting
higher income may influence the value of imports purchased, as shown in Table
1.
Table 1 GDP per head and imports per head in selected
countries in 2017.

Country GDP per Imports per

head head($)
($)
Norway 70 600 14 472
UK 43 600 10 419
South Korea 39 400 11 602
Russia 27 900 4 002
Mexico 19 500 7 343
Pakistan 5 400 1 143
Haiti 1 800 853

Pakistan has relatively high import tariffs. Revenue from import tariffs is 45% of
total tax revenue. The tariffs on vehicles, some of which have inelastic demand,
are particularly high. Future Pakistani tariffs may be influenced by changes in
other countries‟ trade policies, as well as other factors.

Answer all parts to Question6. Refer to the source material in your answers.
(a) Calculate Pakistan‟ s trade in goods balance in 2017. [1]
(b) Identify two possible causes of demand-pull inflation in Pakistan in 2017.
[2]
(c) Explain the opportunity cost to Pakistan of producing consumer goods. [2]
(d) Explain two reasons why education is a merit good. [4]
(e) Analyse why the children of poor families tend to receive less education
than the children of rich families. [4]
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(f) Analyse the relationship between GDP per head and imports per head. [5]
(g) Discuss whether or not the supply of teachers in Pakistan is likely to
increase in the future. [6]
(h) Discuss whether or not an increase in its import tariffs would be likely to
benefit the Pakistani economy. [6]

Question7

Crisis in the ice cream market

Vanilla is used in the production of soft drinks, cakes and perfumes. Its main
use, however, is in the production of ice cream. Fig. 1 shows the different costs
of making ice cream for one firm.

Fig. 1 The costs of producing ice cream for one firm

Madagascar is the world‟ s largest supplier of vanilla followed by Mexico and

Tahiti. At the start of 2016, economists expected the price of ice cream to
increase as the price of vanilla had risen by 130% in 2015. This was largely
because of the poor harvests in Madagascar which reduced the output of vanilla
in 2015.

Ice cream is seen as a luxury product in most countries. It has a range of

substitutes and this is one reason why producers do not always pass on higher
costs to consumers. In 2015, there were a number of other changes in the
production of ice cream including a rise in the productivity of the workers.

As well as vanilla, Madagascar produces a number of other primary products

including coffee andsugar. Nearly 80% of the country‟ s labour force is employed
in the primary sector. The country has a relatively low Gross Domestic Product
(GDP) per head and a relatively low Human Development Index (HDI) value as
shown in Table 1. This limits the amount that people in Madagascar save.
Table 1 GDP per head and HDI in selected countries in
2015
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Country GDP per head (US$) HD
I
Argentina 22 400 0.836
Bangladesh 3 600 0.570
Cuba 10 200 0.769
Egypt 11 500 0.690
Ghana 4 300 0.579
Madagascar 1 500 0.510

Half of Madagascar‟ s population live in poverty. The government is

trying to reduce poverty by introducing a programme of cash benefits.
It is hoped that one effect of this will be to increase school enrolment
and attendance of the children of poor families. To increase economic
growth, the government has sold off a number of state-owned
enterprises and is moving the economy towards a market system.

(a) Identify two fixed costs of production in Fig. 1. [2]

(b) Explain, using information from the extract, two reasons why a
rise in the price of vanilla might not cause an increase in the price
of ice cream. [4]

(c) Analyse, using a demand and supply diagram, the effect of an

increase in income on the market for ice cream. [5]

(d) Analyse the extent to which the relationship shown in Table 1

between countries‟ GDP per head and their HDI value is the
expected one. [4]

(e) Discuss whether or not a government should encourage people to

save more. [5]

(f) Explain, using information from the extract, how cash benefits
given to the poor can reduce poverty.[4]

(g) Discuss whether or not a market system benefits consumers. [6]

Question8:

From inflation to deflation

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For some time, many central banks have tried to achieve a target inflation rate
of about 2%. A small and steady rise in the price level can bring a number of
benefits to an economy. For central banks and governments, the problem used
to be stopping the inflation rate from going above the target rate while keeping
the unemployment rate low. Now the problem has changed, and the risk is that
inflation will fall below this target rate. At the end of 2014 the consumer prices
index in China stood at 100.5. The inflation rate in the country in 2015 was 2%.
Meanwhile, a number of countries in Europe experienced deflation. This had
several consequences, including increasing the gap between the wages of
skilled and unskilled workers.
One major reason for the downward pressure on inflation was a fall in the
global price of oil from US$120 to US$66 a barrel in 2015. This reduced the price
of energy and transport. Lower transport costs had a noticeable impact on the
price of food. Fig. 1 shows how the market for food was affected in 2015

Fig. 1 The market for food in 2015

At the same time as falling inflation, some countries experienced falling
unemployment. Other countries, however, experienced both falling inflation and
rising unemployment. For example, France saw unemployment rising between
2014 and 2015. This put upward pressure on French Government spending.
(a) Identify, from the extract, two aims of government policies. [2]

(b) Explain two problems caused by inflation. [4]

(c) Calculate, using information from the extract:

(i) the percentage fall in the global price of a barrel of oil in 2015 [2]
(ii) the consumer prices index in China at the end of 2015. [2]
(d) Analyse why an increase in unemployment might cause an increase
in government spending. [5]

(e) Discuss whether the supply of workers for unskilled jobs will be high
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incountry. [5]

(f) Explain, using information from the extract and Fig. 1, what happened to
the market for food in 2015. [4]

(g) Discuss whether a decrease in income tax would reduce deflation. [6]

Section B
Each question is introduced by stimulus material. In your answer you may
refer to this material and/orto other examples that you have studied.

Question1:
Vietnam has a high number of female entrepreneurs. Some of their firms have
grown and now compete with foreign multinational companies (MNCs) and public
sector firms. The Vietnamese government encourages MNCs to locate in Vietnam
as a host country. It also intervenes in the economy to encourage the
consumption of merit goods.

(a) Identify two reasons why people become entrepreneurs. [2]

(b) Explain two benefits that an MNC can bring to its host country. [4]

(c) Analyse how a government could encourage the consumption of

merit goods. [6]

(d) Discuss whether or not private sector firms are likely to charge
lower prices than public sector firms. [8]
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Question2:
In 2019, India became the world‟ s largest producer of sugar. Sugar cane is grown
in the country by a large number of mainly low‑income farmers. They sell sugar
cane to mills which process the sugar cane into sugar. Processing the sugar cane
is more capital‑intensive than growing it. The Indian government sets a minimum
price for sugar cane and subsidises the export of sugar.

(a) Define a minimum price. [2]

(b) Explain two advantages of capital‑intensive production. [4]

(c) Analyse why low‑income farmers are likely to have low living
standards. [6]

(d)Discuss whether or not a government subsidy on the export of

sugar will help it achieve its macroeconomic aims. [8)
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Question3:
Safiye Ali became the first female doctor in Turkey in 1923. By 2020, 40% of
Turkish doctors were women. Over this period, labour productivity increased.
Turkey also experienced advances in technology, a change in the current account
balance on its balance of payments and a significant increase in the size of its
population.

(a) Identify two causes of an increase in labour productivity. [2]

(b) Explain two reasons why someone may choose to become a doctor. [4]

(c) Analyse how advances in technology may improve the current

account balance on a country‟ s balance of payments. [6]

(d) Discuss whether or not a country with a high population growth

rate is likely to experience a high economic growth rate. [8]

Question4:
Serbia is the world‟ s second largest producer of raspberries, a product with
elastic demand. Consumers experience the economic problem when buying
raspberries. Few raspberry farm workers are members of trade unions.
Membership of trade unions in Serbia had fallen to 20% of all workers by 2020. In
that year, Serbia had more state pensioners than workers.

(a) Identify two determinants of price elasticity of demand. [2]

(b) Explain how the economic problem results in consumers having to

make choices. [4]

(c) Analyse why some workers decide not to join a trade union. [6]

(d) Discuss whether or not a government should reduce the amount of

money it gives to each state pensioner
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M. Fahad khan
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Question5:

In 2020, the largest Thai commercial bank merged with a smaller commercial
Thai bank. It was expected that the merger would affect the price charged for
bank services and the amount that would be lent. Thai commercial banks operate
in the private sector. A growing private sector can move an economy towards a
market economic system.

(a) Identify two influences, other than price, on a customer‟ s choice of

bank. [2]

(b) Explain two reasons why a merger may result in higher prices for
consumers. [4]

(c) Analyse how an increase in bank lending can benefit an economy. [6]

(d) Discuss whether or not a market economy allocates resources in the best
possible way. [8]

Question6
Canada‟ s private sector firms have a number of different objectives. The
quantity and quality of land used by these firms, including farms, has increased.
There has also been increased investment with the firms buying more capital
goods. In 2021, the Canadian government encouraged higher investment and
aimed to prevent a rise in unemployment.

(a) Identify two objectives of private sector firms. [2]

(b) Explain one reason why the quantity of land may increase and one reason
why the quality ofland may increase. [4]

(c) Analyse how an increase in investment may affect unemployment. [6]

(d) Discuss whether or not a government should try to prevent a rise in

unemployment. [8]

Question7:
In 2020, Australia had a high national minimum wage (NMW). The NMW is
received by some people who work on Australian dairy farms. Australia produces
milk and soft drinks. Milk is purchased by some people as an alternative to soft
drinks. Some dairy farms and some small firms went out of business in 2020. The
year saw an increase in the value of the country‟ s floating foreign exchange rate.
Economics
M. Fahad khan
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(a) Identify two reasons why a government may set an NMW. [2]

(b) Explain two causes of an increase in the value of a country‟ s floating

foreign exchange rate.[4]

(c) Analyse how an increase in the price of milk may affect the revenue earned
by milk producers and soft drinks producers. [6]

(d) Discuss whether or not small firms are more likely to go out of business than
large firms. [8]

Question8:
2019, China‟ s economic growth rate was 6.1% and Chinese households increased
their spending. More Chinese people attended sports events and the earnings of
top sportspeople increased. China exported more despite a rise in tariffs on some
of its products. For example, the US imposed higher tariffs on the imports of
Chinese tea and coffee.

(a) Identify the opportunity cost of households spending their income

and the opportunity cost of Chinese firms exporting goods and
services. [2]

(b) Explain two reasons why some top sportspeople have high earnings. [4]

(c) Analyse the reasons for imposing tariffs on imports. [6]

(d) Discuss whether or not a country with a high economic growth rate
will have a deficit on thecurrent account of its balance of
payments. [8]

Question9:

There was a significant increase in the money supply in Angola in 2019. The
National Bank of Angola was concerned that this would keep inflation above 17%
and harm Angola‟ s producers. The Angolan government had concentrated on
reducing unemployment, which had fallen from 10% in 2010 to 7% in 2019.

(a) Identify two forms of money. [2]

(b) Explain two functions a central bank performs for its government. [4]

(c) Analyse why a government may have lower unemployment as its main aim.
[6]
Economics
M. Fahad khan
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(d) Discuss whether or not inflation will harm producers. [8]

Question10:
In 2019, France produced inside its production possibility curve (PPC). France
exports a wide range of its products. It is the world‟ s top exporter of luxury
perfume and the 7th largest exporter of soap. Changes in technology affect the
products people produce and buy. The French government plans to upgrade its
infrastructure for all households to have internet access.

(a) Define a production possibility curve. [2]

(b) Explain why demand for soap is more price-inelastic than

demand for a luxury brand ofperfume. [4]

(c) Analyse, using a demand and supply diagram, how

an increase in income will affect the market for a
luxury brand of perfume. [6]

(d) Discuss whether or not the public sector should be responsible for
the supply of all internet services. [8]

Question11:
The South Korean government thinks that Japan is dumping steel. South Korean
firms trade with, and produce in, other countries. Some South Korean
multinational companies (MNCs) claim to reduce poverty in their host countries.
In 2019, South Korean firms were affected by a depreciation in South Korea‟ s
foreign exchange rate. Some firms also experienced a shortage of workers, which
was influenced by the country‟ s very low birth rate.

(a) Define dumping. [2]

(b) Explain two reasons why a country‟ s foreign exchange rate may depreciate.
[4]

(c) Analyse how a MNC could reduce poverty in a host country. [6]

(d) Discuss whether or not a very low birth rate would be a cause for concern
for a government.[8]

Question12:
Nicaragua experienced a 4% decrease in GDP in 2019, although household
spending rose. One Nicaraguan product that increased in supply was bananas,
Economics
M. Fahad khan
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which are a merit good. The Nicaraguan government encouraged its banana
farmers and its other producers to increase their output. Increases in output can
affect a firm‟ s average costs of production.

(a) Define supply. [2]

(b) Explain two ways a government could increase the consumption of merit
goods.[4]

(c) Analyse how the level and pattern of household spending may change when
GDP decreases.[6]

(d) Discuss whether or not a firm will benefit from an increase in its output.
[8]

Question13:
India has experienced a relatively high economic growth rate in recent years.
This growth has been driven by increases in government spending and exports,
including exports of textiles. India‟ s unemployment rate has, however,
increased. The government is concerned that trying to reduce unemployment
may increase India‟ s inflation rate.

(a) Define economic growth. [2]

(b) Explain the possible opportunity cost to India of exporting more textiles.
[4]

(c) Analyse how higher government spending could increase economic growth.
[6]

(d) Discuss whether or not a government can reduce unemployment without

increasing inflation.
[8]
Question14:

In the Netherlands in 2018, there were 1.3 bicycles per person and the world‟ s
largest underground bicycle parking area was built in the capital city. Land is
scarce in city centres, where most cycling takes place. Demand for bikes in the
Netherlands is price-inelastic. Only a few people in the Netherlands borrow
money to buy bikes. The government encourages cycling by spending on both
bike parking areas and leisure cycle parks.

(a) Identify one difference between land and labour. [2]

Economics
M. Fahad khan
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(b) Explain two reasons why demand for a product may be price-inelastic. [4]

(c) Analyse why households in one country may borrow more than
households in another country.[6]

(d) Discuss whether or not a government should encourage more people to

cycle. [8]

Question15:
It is estimated that half of Egyptian men smoke. This is one of the highest rates
in the world. In recent years the Egyptian government has increased the tax on
cigarettes. The government and central bank have also tried to reduce inflation
and improve Egypt‟ s international trade performance. The Egyptian government
could use subsidies to reduce its deficit on the current account of its balance of
payments.

(a) Identify two qualities of a good tax. [2]

(b) Explain two reasons why governments tax cigarettes. [4]

(c) Analyse how a central bank could reduce inflation. [6]

(d) Discuss whether or not an increase in government subsidies will

reduce a deficit on the current account of the balance of payments.
[8]

Question16:
Sweden has a mixed economic system. In 2018, it was operating at a point
inside its production possibility curve (PPC). In 2018, the country‟ s schools
employed nearly 2500 extra teachers. A few of these had previously been
actors. A higher number had previously been government officials involved
with regulation of Swedish monopolies.

(a) Define a mixed economic system. [2]

(b) Explain the difference between a point inside a PPC and a point outside
a PPC. [4]

(c) Analyse why an actor may decide to become a teacher. [6]

(d) Discuss whether all monopolies have low costs of production. [8]

Question17:
Economics
M. Fahad khan
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A number of countries, including Morocco, capture water from fog. Water is used
in the primary, secondary and tertiary sectors. In recent years, Morocco has
increased the quantity and quality of its resources and has moved more of them
into the tertiary sector. The quantity, quality and composition of a country‟ s
resources are influenced by a number of factors, including its birth rate.
Morocco‟ s birth rate fell from 19.9 in 2016 to 18.7 in 2018.

Define a free good

(a) (2)
Explain, with examples, the difference between the secondary
(b)
sector and the tertiary sector.[4]
(c) Analyse, using a production possibility curve (PPC), the effect of an
increase in the quality ofits resources on an economy. [6]
(d) Discuss whether or not a fall in a country‟ s birth rate will benefit an
economy. [8]
Question18:
Two of Uzbekistan‟ s main industries are cotton and gas. Uzbekistan is the
world‟ s seventh largest producer, and fifth largest exporter, of cotton. The
Uzbek government has tried to influence the cotton industry‟ s price elasticity of
supply. It has also nearly ended the use of child labour in cotton production. The
country‟ s output of gas increased by 7% in 2018 and its average cost of gas
production fell.

(a) Identify two determinants of price elasticity of supply. [2]

(b) Explain two advantages to an economy of ending child labour. [4]

(c) Analyse how average cost can change as output increases. [6]

(d) Discuss whether or not an economy would benefit from allocating more of
its resources to agriculture. [8]
Quetion19:
In Tunisia, resource allocation decisions are made by both the public sector and
private sector. Tunisia‟ s GDP increased from 2014 to 2018 but its households
saved less. Income levels can be affected by changes in trade union activity and
the foreign exchange rate. From 2014 to 2018, Tunisia experienced a number of
strikes organised by its largest trade union, the Tunisian General Labour Union.
There was also a significant fall in its foreign exchange rate.

a) Identify two of the three resource allocation decisions. [2]

b) Explain two reasons why households may save less even though their
income has increased. (4)
c) Analyse how a trade union may benefit its members.[6]
d) Discuss whether or not a fall in its foreign exchange rate will improve a
Economics
M. Fahad khan
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country‟ s macroeconomic performance.(8)
Question20:
The US operates a mainly market economic system. Life expectancy in the US
fell in 2017, for thethird year in a row. Although the US has a high GDP per
head, it also has a high level of income inequality. The poor benefited from
the US‟ s low and stable inflation rate. The government‟ s supply-side policy
measures were partly responsible for reducing inflationary pressure.

(a) Identify two ways a government could reduce income inequality. [2]

(b) Explain two advantages of a market economic system. [4]

(c) Analyse why life expectancy may decrease. [6]

(d) Discuss whether or not supply-side policy measures can reduce

inflation. [8]

Question21:
The Indian government has declared that the country, now a major car producer,
will sell only electric cars by 2030. The government wants to reduce external
costs, some of which are caused by petrol and diesel cars. Demand for electric
cars is currently relatively low and price-elastic. The government, however,
thinks that it will not need to subsidise the production of electric cars to achieve
its target.

(a) Define external costs. [2]

(b) Explain two influences on whether demand for a product is price-

elastic or price-inelastic. [4]

(c) Analyse, using a demand and supply diagram, how a subsidy given
to producers could affectthe market for electric cars. [6]

(d) Discuss whether cars should be produced by the private sector or the
public sector. [8]

Question22:
A number of countries are withdrawing high value banknotes. For instance,
Singapore plans to stop issuing its $10 000 note. High value notes were originally
intended to act as a convenient store of value. Central banks are concerned some
notes are now being used illegally. The Singapore Police Force and the Monetary
Authority of Singapore (its central bank) were trying to recruit more workers in
2017. It was expected that the central bank would raise the rate of
Economics
M. Fahad khan
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interest in 2018.

(a) State two functions of money, other than a store of value. [2]

(b) Explain two advantages banknotes have as a form of money. [4]

(c) Analyse the influences on the mobility of workers. [6]

(d) Discuss whether or not a central bank should raise the rate of
interest. [8]

Question23:
In 2017, the Japanese government announced improvements to its tax
system. The amount of tax raised is influenced by the size and age distribution
of a country‟ s population. Japan‟ s birth and death rates are falling, its
population is ageing, and it has low immigration. Overall, Japan‟ s population is
decreasing.

(a) State two qualities of a good tax. [2]

(b) Explain two causes of a decrease in the death rate. [4]

(c) Analyse, using a production possibility curve (PPC) diagram, the

effect of a decrease in population size on an economy. [6]

(d) Discuss whether or not an ageing population is a benefit to an

economy. [8]
Economics
M. Fahad khan
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Question25:
Mali is a low income and low productivity country in Africa. Its government is
using fiscal policy to reduce poverty. The country‟ s main industries are agriculture
and gold mining. In recent years, however, there have been some changes in its
resource allocation. The country is developing its iron ore industry. Globally, the
iron ore industry is one which has experienced a significant number of mergers in
recent years.

(a) State two key questions about how resources are allocated. [2]

(b) Explain two fiscal policy measures that can be used to reduce poverty.
[4]

(c) Analyse why a country may have low productivity. [6]

(d) Discuss whether or not mergers benefit an economy. [8]

Question26:

Swaziland is a small African country where six in ten people live in poverty and most
firms are small and use little capital equipment. In October 2015 it opened a new
airport. Some economists suggest that the building of the airport involved a high
opportunity cost and caused a range of external costs. The building of the airport is
part of the government‟ s plan to turn the country from a developing into a developed
country.

(a) What may be the opportunity cost of building an airport? [2]

(b) Explain two reasons why a government would want to turn its country
from a developing intoa developed country.
[4]

(c) Analyse the external costs that can be caused by the building and
expansion of an airport.[6]

(d) Discuss whether people would prefer to buy a product from a small firm or a
large firm. [8]

Question27:
Farms in the USA are getting larger. One dairy farm in the state of Indiana has over
38 000 cows. Farms in the USA compete with farms in both developed and developing
countries. The value of the farms‟ exports of milk appears in the trade in goods
section of the current account of the USA‟ s balance of payments.
Economics
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(a) Identify two examples of capital goods that may be used by a farm. [2]
(b) Explain how a country could have a trade in goods surplus, but a deficit on the
current account on the balance of payments. [4]
(c) Analyse the economies of scale from which a farm may benefit. [6]
(d) Discuss whether or not developing countries benefit from producing mainly
primary products.[8]

Question28:
In the UK, bus journeys outside London have fallen by nearly 40% since 1980. This
fall in demand has been largely due to a rise in bus fares, a rise in income and
changes in the price and quality of substitutes. On some routes there are monopolies
operating and this lack of competition can pushup the price.

(a) Define a substitute and give an example. [2]

(b) Explain two advantages a firm may gain from being a monopoly. [4]
(c) Analyse how price elasticity of demand for a product influences the revenue a
firm receives.[6]
(d) Discuss whether or not a government should subsidise bus transport. [8]

Question29:
In October 2015, the Chinese government switched from its one child policy to a two
child policy partly because of the challenges caused by an ageing population. The
birth rate was falling anyway due to rising female participation in the labour force,
improvements in education, later marriages and the rapidly rising price of housing.

(a) Identify two causes of an ageing population. [2]

(b) Explain why the price of housing may increase. [4]

(c) Analyse why more women may enter the labour force. [6]

(d) Discuss whether or not a rise in the birth rate will benefit an economy.[8]

Question30:
In February 2016, share prices on stock exchanges fell throughout the world. There
were a number of reasons for this; including concerns about the slowdown in world
growth, the possibility of deflation and unemployment, and fears that some
commercial banks could go out of business.

(a) Define commercial bank. [2]

(b) Explain how a stock exchange could encourage economic growth. [4]
Economics
M. Fahad khan
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(c) Analyse what can cause deflation. [6]
(d) Discuss whether or not government policy measures to reduce
unemployment will causeinflation. [8]

Question31:
World output has grown in recent years, but a number of countries have experienced
a recession. The removal of trade restrictions such as import tariffs has slowed
down, reducing the growth of world trade.

(a) Define import tariff. [2]

(b) Explain two benefits of an increase in world output. [4]

(c) Analyse how a recession may reduce a country‟ s imports. [6]

(d) Discuss whether or not a developing country will benefit from the removal of
trade restrictions.[8]

Question32:

Singapore is usually ranked as one of the best countries in which to do business. It

is an open economy engaging in free trade. It has a history of strong
entrepreneurship, low unemployment, low average costs and relatively low tax
rates. Its example may encourage other countries to remove trade restrictions.

(a) Define „average costs‟ . [2]

(b) Explain two factors that would increase the supply of entrepreneurs in
an economy. [4]

(c) Analyse how the market for a product would be affected by a

reduction of the tax on the product combined with a fall in the price
of a complement.
[6]

(d) Discuss whether low unemployment in a country will encourage

multinational companies(MNCs) to set up there.
[8]

Question33:
Rich people in some countries are now working for more hours on average than
Economics
M. Fahad khan
0321-4018844
poor people. One reason for this is thought to be that well-paid jobs provide more
job satisfaction. Gaining enjoyment from work can lead to high labour productivity.

(a) What is a possible opportunity cost of working? [2]

(b) Explain two reasons why older workers tend to earn more than younger
workers. [4]

(c) Analyse, using a production possibility curve diagram, how an increase in

labour productivitywill affect an economy.[6]

(d) Discuss whether the rich in one country will save more than the rich in
another country. [8]

Question34:
In Pakistan there is a limited choice of cars to buy. The country has a population of
approximately 190 million but only about 120 000 cars a year are produced there.
The firms producing cars in Pakistan are protected from foreign competition by a
range of methods of trade protection.

(a) Name two factors of production used in making cars. [2]

(b) Explain how two methods of trade protection may reduce imports. [4]

(c) Analyse the social costs created by car production and car use. [6]

(d) Discuss whether demand for cars is likely to increase in the future. [8]

Question35:
Nauru is one of the smallest countries in the world with a population of only10 000.
Fifty years ago the population was one of the richest per head in the world, largely
the result of exporting the phosphate created over many centuries by sea-bird
droppings. This labour-intensive industry has declined significantly. Now incomes are
much lower and one third of workers are jobless.

(a) What is meant by a „labour-intensive industry‟ ? [2]

(b) Explain two reasons why a country may stop exporting a product. [4]

(c) Analyse the effects of an increase in unemployment on inflation. [6]

Economics
M. Fahad khan
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(d) Discuss whether having a relatively small population is an advantage
or a disadvantage for an economy.
[8]

Question36:
Moldova has a population of 3.5 million. It is one of the poorest countries in Europe,
with relatively low living standards. In 2015, the country experienced a recession
and a doubling of its inflation rate. Moldova‟ s central bank increased its interest
rate from 8.5% to 15.5%.

(a) Identify two influences on the size of a country‟ s population. [2]

(b) Explain two causes of an increase in living standards. [4]

(c) Analyse how an increase in the rate of interest could increase unemployment.
[6]

(d) Discuss whether a government should increase tax rates during a recession. [8]

Question37:
The Gulf countries, some of which are quite specialised, import a high proportion
of the food their inhabitants eat. For example, the United Arab Emirates imports
83% of all the food that it consumes. The Gulf countries are trying to reduce their
reliance on imports of food.
(a) Define „specialisation‟ . [2]

(b) Explain two disadvantages that workers may experience from specialising.
[4]

(c) Analyse how a country could reduce its reliance on imports. [6]

(d) Discuss whether producing more food will increase living standards. [8)

Thank you so much

Alhumdulellah