May/June 2025

Which statement concerning a free vaccination programme is normative?

Economic methodology

The diagram illustrates the demand for and supply of a product. Which area represents producer surplus?

Cross elasticity of demand

What would be an example of wealth?

Taxes and subsidies

Eating too much sugar leads to an increase in a consumer’s weight. A government has introduced a ‘sugar tax’ on drinking soft drinks that contain a high sugar content. How might this policy help to reduce the number of overweight people?

Maximum and minimum prices

A 1 price set below the market equilibrium will lead to a 2 of the product, while a 3 price set above the market equilibrium will lead to a 4 of the product. Which words complete gaps 1, 2, 3 and 4?

Maximum and minimum prices

The diagram illustrates demand for and supply of eye tests offered by opticians. Which policy would allow the government to raise the number of eye tests from OQ1 to OQ2?

Maximum and minimum prices

State one example of a transfer payment.

Short-run costs

Which statement gives the correct description of an increase in real GDP?

National income statistics

In an open economy that includes a government sector, the economy is at equilibrium. Households in this economy save $100 million, and firms devote $150 million to investment. Which combination of the budget balance and the current account balance would produce an equilibrium position in the circular flow of income?

Aggregate demand and aggregate supply

The manufacturing share of an economy’s real GDP declined from 30% in 1990 to 12% in 2023. What type of unemployment would this have caused?

Price stability and inflation

Which statement is incorrect?

Economic methodology

The diagram illustrates the production possibility curves for two countries, X and Y. What conclusion can be drawn from the diagram?

Production possibility curves

Over one year, the price of a pack of six eggs increases from $1.00 to $1.32. During that same period, consumer prices, as measured by the consumer price index, increase by 10%. What is the real price of a pack of six eggs at the end of the year?

Balance of payments

Which of the following is not an example of monetary policy?

Monetary policy

A government chooses to obtain most of its tax revenue from indirect taxes. What would make this policy more effective?

Fiscal policy

A government applies expansionary monetary policy during a three-year period. Which combination best identifies the likely effect of this policy?

Monetary policy

Which of the following is not an example of an expansionary supply-side policy?

Supply-side policy

The table gives the tax paid at three different income levels. Which combination indicates a proportional income tax system?

Short-run costs

Why are there no monetary units attached to the value of a country’s terms of trade?

6.3

Which statement gives the correct description of a tariff?

Protectionism

A country is running a persistent deficit on the current account of its balance of payments. What is most likely to improve this situation over the long term?

6.5

Primary income and secondary income form parts of the current account in the balance of payments. Which option correctly names an example of primary income and an example of secondary income?

6.3

Which goods are least likely to be distributed by market forces in a mixed economy?

1.6

The table illustrates how the value of UK sterling changed during a three-month period. What is the most likely short-term effect of this change in the value of UK sterling on the UK economy?

6.4

In 2020, a global pandemic occurred. High-income countries rapidly created a vaccine. Low-income countries constructed high-tech factories to manufacture large quantities of the vaccine for export. What accounts for this international division of labour?

International trade and free trade

In what way can a public good turn into a private good?

1.6

Which of the following is not a function of the price mechanism?

Resource allocation in different economic systems

Cars and petrol (gasoline) are jointly demanded. What happens to the demand for petrol if the price of cars rises?

Demand and supply curves

Which explanation best accounts for the fact that the price elasticity of supply (PES) is likely to be lower for fresh vegetables produced inside a country than for goods manufactured in that same country?

Price elasticity of supply

The diagram illustrates the demand for and supply of a product. What could cause supply to move from S1 to S2?

Demand and supply curves

Which definition most accurately describes a positive economic statement?

Economic methodology

Farmers aim to harvest wild honey from beehives. They locate the beehives by tracking birds called honeyguide birds, which are attracted by the beeswax that is also present in the beehives. What does this suggest?

Scarcity, choice and opportunity cost

An indirect tax is levied on good X. Which situation is most likely to lead to producers bearing a larger share of the tax burden?

Price elasticity of demand

What would be excluded from the calculation of a person’s wealth?

Short-run costs

For what reasons might governments offer free education to children aged 4 to 16 years old?

Government intervention in markets

The rice market starts out in equilibrium at a price of P1. The government then sets a maximum price of Pmax. At the same time, the supply of rice rises. What effect do these changes have on the rice market?

Maximum and minimum prices

In the diagram, D shows the demand curve for an agricultural commodity, while S represents the original supply curve. The government undertakes to keep farmers’ incomes at least at this starting level. The harvests in the four following years are illustrated by supply curves S1–S4. What total amount will the government have to pay to support farmers during those four later years?

Maximum and minimum prices

Price stability may be said to exist when the measured value of the consumer prices index (CPI) remains unchanged throughout the year. Which statement is correct?

Balance of payments

According to the circular flow of income, what condition must exist for an open economy to be in equilibrium?

Perfect competition

The aggregate demand curve usually slopes downward. What is one reason that could account for this?

Economic growth

Which factor is most likely to lead an unemployed worker to be classed as frictionally unemployed?

Price stability and inflation

The diagram comes from a chapter on 'The Fundamental Economic Problem'. It ought to include the terms opportunity cost, scarcity and choice in the sequence that shows the fundamental economic problem. In what order should the terms be placed in the diagram?

Scarcity, choice and opportunity cost

The table presents estimates made when a train drivers’ strike ended. (Items: train companies’ lost ticket revenue $600,000; strikers’ extra leisure time valued at $20,000; government tax revenue lost $40,000; police overtime payments $30,000.) By how much did the strike lower the measured level of national income?

National income statistics

What would be an example of an expansionary monetary policy?

Monetary policy

In order to reduce its budget deficit, a government raises direct taxation. What is the most likely effect on the government’s capacity to meet its macroeconomic objectives? (The options show the likelihood of low unemployment, low inflation, economic growth.)

Fiscal policy

An income tax offers a tax-free allowance of $10 000 and applies a single rate of 25%. Which type of tax is this?

Maximum and minimum prices

Which supply-side policy would promote the entry of new entrepreneurs?

Supply-side policy

The diagram illustrates aggregate demand (AD) and aggregate supply (AS) curves, with the starting equilibrium located at X. The government chooses to spend more on infrastructure. What will be the short-term impact of this policy on the equilibrium?

Economic growth

Which statement is not a legitimate reason for a country to introduce protectionist measures?

Protectionism

Which factor is most likely to cause a persistent surplus in a country’s current account of its balance of payments?

6.3

Which formula is used to determine the terms of trade?

6.3

A country is running a deficit on the current account of its balance of payments. Which policy decision could lower the deficit?

6.5

What does the non-rivalrous nature of public goods mean?

1.6

The diagram illustrates the exchange rate for the Euro against the US dollar. What is the most likely reason for this change in the value of the Euro?

6.4

A country raises its expenditure on education and training. It finances this by cutting unemployment benefit payments and by increasing taxes on machinery imports. What is the most likely impact of these changes? (Effects on physical capital and human capital shown in options.)

Supply-side policy

The diagram illustrates an outward movement of the production possibility curve from PPC1 to PPC2. What might have brought about this change?

Production possibility curves

D1 and S1 are the starting demand and supply curves in the market for new cars, with equilibrium at X. Which change would make the demand curve move to D2 and the supply curve move to S2?

Income elasticity of demand

Under what circumstances can a product be described as having a negative income elasticity of demand?

Price elasticity of demand

The diagram illustrates the short-run supply curve (SSR) and long-run supply curve (SLR) for a bakery. The price of a loaf of bread rises from $2.00 to $2.20. What is the bakery’s price elasticity of supply (PES) in the short run and in the long run when the price of a loaf of bread rises?

Price elasticity of supply

A rise in which variable will always cause consumer surplus to rise?

Cross elasticity of demand

A tourist goes to a tropical beach owned by the government. She pays $10 to gain entry, but discovers that it is very crowded. What type of good is the beach?

1.6

The table gives the supply and demand for avocados in kilograms (kg). Because transport costs fall, supply increases by 60kg at every price. What is the new equilibrium price?

Income elasticity of demand

A construction firm estimates that the price elasticity of supply for building a nuclear power plant is +0.1. What could account for this?

Price elasticity of supply

Which statement concerning maximum and minimum prices is correct?

Maximum and minimum prices

A flood-control dam is an example of a good supplied directly by a government. Which statement about the direct provision of a flood-control dam is not correct?

Maximum and minimum prices

A country is highly reliant on producing an agricultural commodity, good X. It chooses to set up a buffer stock scheme for good X. The government sets aside a fixed sum of money to establish and operate the scheme. In which case is the scheme least likely to exhaust its funds?

Maximum and minimum prices

The graph illustrates a person’s income before and after income tax has been deducted. Which alteration to this income tax system is the most progressive?

Taxes and subsidies

Which source of income is excluded when real GDP is measured?

National income statistics

The table presents several labour market statistics: number of people of working age: 45 million; number of people unemployed: 2 million; number of people in the labour force: 40 million; number of people in the population: 80 million. What is the unemployment rate?

Price stability and inflation

The diagram illustrates aggregate demand (AD) and aggregate supply (AS), with the starting equilibrium located at point X. The central bank predicts an increase in raw material costs. The government intends to raise spending on health. What will the new short-run equilibrium be if the forecasts turn out to be correct and the government’s plans are carried out?

Economic growth

An economy is going through a phase of deflation. What has to be occurring?

Balance of payments

The diagram illustrates a country’s production possibilities. Points K, L, M, N, R and S show different mixes of capital goods and consumer goods. Point K is unattainable unless economic growth occurs. Point M is located on the country’s production possibility curve. Which two points have to lie on opposite sides of the country’s production possibility curve?

Production possibility curves

What is the most probable consequence of economic growth?

Unemployment

A government wishes to implement a tighter monetary policy. What would it raise?

Monetary policy

Which action would be regarded as a fiscal policy measure?

Fiscal policy

The table presents government spending and revenue across a three-year period. What conclusion can be drawn from the data?

Fiscal policy

Which of the following is a correct statement about supply-side policies?

Supply-side policy

A government has set a target of lowering the inflation rate. Why may it be unwilling to increase interest rates in order to meet this target?

Monetary policy

Which argument supporting protectionism is not usually considered to be economically valid?

Protectionism

A country is running a deficit on the current account of the balance of payments. Which change would be expected to increase the size of the deficit?

6.3

A government raises the import quota for cars. What is the most likely result of this?

Protectionism

The table lists the terms of trade index for a country across three years: year1 100, year2 105, year3 112. What is the most probable effect of this change?

6.3

Using a fixed quantity of resources, a business produces 100 units of good Y and 200 units of good X. It then plans to raise output of good Y to 120 units, and because of this it can produce only 170 units of good X. What is the opportunity cost of making the additional 20 units of good Y?

Scarcity, choice and opportunity cost

Country X and country Y each employ the same quantity of resources to make mobile phones and televisions. The table indicates the output of each item if every resource is devoted to producing that single item. What can be inferred about absolute advantage and comparative advantage? (Country X: televisions 400, mobile phones 200; Country Y: televisions 500, mobile phones 100)

International trade and free trade

What is the most likely advantage of specialisation for a firm?

7.7

Which row gives the goods that you would expect to be produced in a mixed economy?

1.6

A theatre has a set quantity of tickets available for each performance. What is meant by the price elasticity of supply?

Price elasticity of supply

The diagram illustrates the market for computers in a country. Which region shows consumer surplus?

Cross elasticity of demand

The diagram illustrates the market demand for and supply of foodstuffs. In this economy, the supply of foodstuffs has fallen while, at the same time, consumer demand for foodstuffs has risen. Which point indicates the market equilibrium after these changes?

Income elasticity of demand

What is correct about income elasticity of demand, but not about price elasticity of demand?

Price elasticity of demand

Using the data in Table 1.1, compare changes in the inflation rate and changes in the interest rate in the US.

Monetary policy

Using a diagram, explain the reasons for a movement within a production possibility curve (PPC) and a shift of a PPC, and assess how far opportunity cost determines the shape of a PPC.

Production possibility curves

Using a diagram, explain how changes in a subsidy can affect the price and quantity sold of a product in a market and consider how expenditure on a subsidy is influenced by the price elasticity of demand for the product.

Maximum and minimum prices

Explain how the circular flow of income in an economy alters when it changes from a closed to an open economy and judge what affects the size of the change.

Aggregate demand and aggregate supply

Explain the difference between a budget surplus and a budget deficit and assess how far a budget surplus is better than a budget deficit.

Fiscal policy

Identify one possible effect on firms in South Africa and one possible effect on the government in South Africa of such a high unemployment rate.

Price stability and inflation

With examples, Explain the difference between public goods and free goods and consider whether a market economy can ever produce public goods.

Behavioural economics

Explain three reasons, linked to costs of production, why the supply curve in a particular market may move to the right and consider how far government microeconomic policy may also move the supply curve in a particular market to the right.

Price elasticity of supply

With the aid of AD/AS diagram(s), Explain one demand-side cause and one supply-side cause of deflation, and judge which is likely to be more harmful to an economy.

Economic growth

Using a diagram, explain two ways in which a fall in the balance of trade in goods may influence the value of a floating exchange rate and consider whether a change in the relative rate of interest between two countries may have the larger impact on the exchange rate.

6.4

Use a demand and supply diagram to show how ‘a sequence of typhoons’ affected the market price of food crops in Southeast Asia in January 2023.

Demand and supply curves

Explain what these estimates imply for producers of smartphones that use semi-conductors, and take into account the significance of the long-run estimate.

Price elasticity of supply

Explain what a merit good means and why governments make merit goods such as healthcare available free of charge, and consider why this policy may not always work successfully.

Government intervention in markets

Explain two causes of economic growth and judge how far their effects can be measured.

Unemployment

In one year, the terms of trade index for an economy rose from 105 to 110. Explain two likely reasons for this change and consider the extent to which the change is likely to benefit the current account of the balance of payments of this economy.

6.3

Using the data in Fig. 1.1, describe the pattern shown in the annual rate of economic growth in Malaysia over the period January 2019 to January 2022.

Unemployment

Using a formula, explain what price elasticity of demand means and assess how important it is for a firm to have price elastic or price inelastic demand for its product.

Price elasticity of demand

With the help of a diagram, explain the impact of introducing an effective minimum price for a product and consider how consumer surplus for that product is affected.

Maximum and minimum prices

Explain why spending on education and training is a supply-side policy, and consider why its effect on the general price level may vary in the short run and the long run.

Supply-side policy

With the help of a formula, explain the causes of an improvement in the terms of trade in an economy and assess whether such an improvement can ever be harmful to an economy.

6.3

What does the equi-marginal principle mean?

Utility and rational consumer behaviour

In an effort to cut traffic congestion, a government constructed a new highway. Most citizens were against this. In response, some citizens changed from using public transport to travelling by private cars. As a result, car journeys became even slower. What can be concluded about government failure in this case?

Maximum and minimum prices

What might lead an individual to be caught in the poverty trap when their income goes up?

Short-run costs

The diagram illustrates the effect on the labour market when a national minimum wage (MW) is introduced. What do the distances XY and YZ show?

Long-run costs and economies of scale

Give one example of how ‘nudge’ theory may be used to reduce tax evasion.

Maximum and minimum prices

The diagrams illustrate labour demand and labour supply. Which two areas indicate economic rent?

Long-run costs and economies of scale

In an economy without a government sector or foreign trade, the marginal propensity to consume is 0.6. If equilibrium national income is $10000 million and the full employment level of national income is $15000 million, by how much would investment need to rise in order to reach full employment?

Economic growth

How would you define hysteresis unemployment?

Price stability and inflation

An economy is experiencing a positive output gap. What is occurring to economic growth and the general price level?

Economic growth

What is one factor that influences the occupational mobility of labour?

Long-run costs and economies of scale