Oct/Nov 2025

Consumers and producers both have the same difficulty of meeting wants. What is the most likely reason that wants cannot be fully met?

The nature of the economic problem

What role does money play when it is used to measure the worth of goods and to keep a record of transactions?

Money and banking

The table illustrates how household expenditure varies as income rises. At which first income level shown do savings become positive?

Households

Pay for school teachers is going up. Which is least likely to be responsible for this?

Workers

What is one characteristic of every trade union?

Trade unions

What has to happen when a firm experiences economies of scale?

Firms and production

The diagram illustrates a firm's costs. At an output level of 100 units, what is the firm's total variable cost?

Firms’ costs, revenue and objectives

If a firm's average revenue rises from $4$ to $5$ while quantity demanded falls from $20$ units to $10$ units, what effect will this have on the firm's total revenue?

Firms’ costs, revenue and objectives

Which two macroeconomic aims does the government have?

The macroeconomic aims of government

At present, government spending is equal to government revenue. If the government chooses to reduce its spending, what is the most likely effect in the short run?

Fiscal policy

Which of the following is not a monetary policy measure?

Monetary policy

A worker chooses to leave a job as a bus driver and accept work as a lorry driver. What would rise the opportunity cost of this decision?

Opportunity cost

Which government measure would not be classified as part of a supply-side policy?

Supply-side policy

An economy that is operating on its production possibility curve (PPC) goes into a recession, creating unemployment. As the recession becomes more severe, some unemployed workers emigrate to seek jobs overseas. On a diagram of the economy's PPC, how are these recession effects represented in the short-term and the long-term?

Employment and unemployment

Chile focuses on producing copper for export. Explain how a substantial increase in the supply of copper from other countries is likely to affect the Chilean economy.

International specialisation

The table illustrates employment trends in selected industries in two years. How did the employment patterns alter between year 1 and year 2?

Employment and unemployment

What does deflation mean?

Inflation and deflation

Which factor is most likely to result in increased poverty within a country?

Poverty

The charts depict the population structure of a country in year X and year X + 50. Across this period, what changes took place in the birth and death rates?

Population

What benefit do consumers gain from international specialisation?

International specialisation

Which government policy would be likely to promote greater international trade?

Globalisation, free trade and protection

At present, the US trades oil with the UK. If new oil and gas deposits are found in the US, its oil imports would fall and its oil exports would rise. Starting from the initial equilibrium point X, which letter shows the new equilibrium point for the US exchange rate?

Foreign exchange rates

The diagram depicts a country's production possibility curve (PPC). What would result in a move from point X to point Y?

Production possibility curve (PPC) diagrams

What is the most likely direct consequence of a country having a persistent and substantial surplus on its current account in the balance of payments?

Current account of balance of payments

Petrol prices rise in a country with a market economic system. What consequence does this lead to?

Price changes

Which factors influence a consumer’s demand for a product?

Demand

The diagram represents the market for a product. Which distance indicates a market disequilibrium resulting from excess supply?

Price determination

The price elasticity of demand (PED) for a good is $-1$. What happens to both demand and total revenue when price rises?

Price elasticity of demand (PED)

In a market economy, which two economic institutions are present?

Market economic system

The table presents the weekly demand for, and supply of, good X at three prices. What effect will result if the government sets a minimum price of $40$ per tonne?

Price determination

A government plans to construct a new hospital. What is most likely to stop the government from carrying out this plan?

Opportunity cost

Which of the following is not a function of the central bank?

Money and banking

The table gives the share of disposable income that four different households spend on three different goods. Which household is most likely to have the lowest income?

Households

In which types of jobs are wages usually the lowest?

Workers

In what ways could a trade union strengthen its bargaining power?

Trade unions

Rubber is needed in order to make a car tyre. If a car tyre manufacturer joins with a supplier of rubber, what type of merger is this?

Firms

If a firm makes 100 units, its total variable cost is $300$ and its total fixed cost is $2700$. What is the average total cost?

Firms’ costs, revenue and objectives

What is likely to exist when an industry contains many small firms?

Market structure

A government places tariffs on imported goods. Which of the following is not a likely reason for doing this?

Globalisation, free trade and protection

In one year, a government receives the following revenue: taxes on goods = $30\text{m}$, taxes on income = $500\text{m}$, taxes on services = $20\text{m}$, customs and excise duties = $50\text{m}$. What is the total amount of indirect tax revenue?

Fiscal policy

Which policy measures would be regarded as fiscal policy?

Fiscal policy

Which term refers to the potential benefit a consumer gives up when selecting one option instead of another?

Opportunity cost

What is the most probable effect of a decrease in interest rates?

Monetary policy

What is increased in an economy by a successful supply-side policy?

Supply-side policy

During one specific year, South Sudan’s population growth rate was $1.3\%$ and its GDP growth rate was $2\%$. What is the most probable consequence of this?

Economic growth

What are the correct meanings of unemployment and employment in relation to the number of people of working age?

Employment and unemployment

The graph illustrates changes in the average price level. During which period did the country experience deflation?

Inflation and deflation

In a number of high-income economies, rising income inequality has resulted in higher poverty levels. Which combination of policies would be intended to cut income inequality?

Poverty

In a country where the birth rate is decreasing and the death rate is increasing, and where more of its adults of working age (16-60 years) are looking for jobs overseas, what effect is this likely to have on the size of the different age groups in that country?

Population

What is one benefit of international specialisation?

International specialisation

An economy increases the tariffs applied to imported goods. What outcome is most likely?

Globalisation, free trade and protection

Which pairing of changes in export revenue and import expenditure would be most likely to lead to a depreciation in a country’s exchange rate?

Foreign exchange rates

A country is operating at point X on its production possibility curve (PPC), showing how output can be divided between capital goods and consumer goods. A recession later leads to the closure of some factories. Which point might show the country’s new position?

Production possibility curve (PPC) diagrams

A government wants to cut the deficit on the current account of its balance of payments. Which policy should it choose?

Current account of balance of payments

Which pairing gives the correct examples of macroeconomics and microeconomics?

Microeconomics and macroeconomics

The diagram illustrates the supply and demand curves for a product. The original market equilibrium is at point $E_1$. A market change results in a new equilibrium at $E_2$. What caused the shift in market equilibrium?

Price determination

The diagram illustrates the demand curve for a good. What can be concluded from one demand curve that slopes downward?

Demand

If the price of butter rose by 10%, and the quantity supplied of butter rose by 20%, what is the price elasticity of supply (PES) for butter?

Price elasticity of supply (PES)

How are economic decisions made in a market economic system?

Market economic system

A bridge is constructed across a river, and this shortens journey times. The table sets out the costs and benefits of constructing the bridge. private benefit = $12000$, private cost = $10000$, external benefit = $8000$, external cost = $5000$. Which calculation shows social benefit?

Market failure

Which factor is least likely to raise the geographical mobility of labour?

Workers

Why are banknotes used as money?

Money and banking

Worker X is paid less than worker Y. Which statement is most likely to be true about worker X?

Workers

What would make a trade union stronger?

Trade unions

The large scale of Japan’s domestic car industry has allowed Japanese car producers to offer lower prices than competing car producers. What explains this?

Firms

The table presents the number of cakes produced by four bakeries, A, B, C and D. Which bakery has the greatest labour productivity?

Firms and production

The table presents a firm’s average revenue and average cost at various output levels. If every unit produced is sold, at which output level is profit highest?

Firms’ costs, revenue and objectives

What factors would make the presence of a monopoly market more likely?

Market structure

Which function is not carried out by a government?

The role of government

A government has announced that, over the next year, it has four main aims. Which two of these are macroeconomic aims for the government?

The macroeconomic aims of government

What would not usually be included in a government budget?

Fiscal policy

What does opportunity cost measure?

Opportunity cost

Which mix of policy measures is most likely to raise total demand in an economy?

Fiscal policy

Which supply-side policy measure would be most likely to lead to the largest rise in labour productivity in a country?

Supply-side policy

By what method is a country’s economic growth measured?

Economic growth

A country sees unemployment drop substantially. What is one possible benefit and one possible drawback of this decrease?

Employment and unemployment

A country’s Consumer Prices Index (CPI) decreases from 120 to 110 over one year. What is a likely effect of this decrease?

Inflation and deflation

The population sizes of four countries, A, B, C and D, are each the same. From the changes shown in the table, which country is most likely to experience the greatest population growth?

Population

Which combination of features would be present in a less developed economy?

Differences in economic development between countries

What is one probable advantage of greater national specialisation?

International specialisation

Which of the following is not likely to be a benefit of free trade?

Globalisation, free trade and protection

Which combination of changes would certainly increase the value of the Pakistani rupee in the foreign exchange market?

Foreign exchange rates

The diagram illustrates a production possibility curve (PPC). Which point is most likely to cause the PPC to shift outward the most?

Production possibility curve (PPC) diagrams

What government policy might be used to cut a deficit on the current account of the balance of payments?

Current account of balance of payments

Which is not a role of prices in a market economy?

The role of markets in allocating resources

The diagram illustrates the Caribbean market for fresh fish with equilibrium at point X. A new kind of fishing boat raises output, lowering costs. Which point shows the new equilibrium?

Price determination

The table sets out the market schedule for good X. The prices and quantities are as follows: price 10, quantity supplied 400, quantity demanded 100; price 9, quantity supplied 300, quantity demanded 200; price 8, quantity supplied 200, quantity demanded 300; price 7, quantity supplied 100, quantity demanded 400. If the quantity supplied increases by 50% at each price, what will the equilibrium price and quantity become?

Price determination

The price of fish has risen from $3.00 to $4.80. The quantity supplied of fish has risen from 100 units to 130 units. What is the price elasticity of supply (PES) of fish?

Price elasticity of supply (PES)

Which combination shows the characteristics of the mixed economic system?

Mixed economic system

The diagram illustrates the equilibrium price of bread. What would be the short-term impact if the government imposed a maximum price below $5?

Price determination

Source material: The Swiss economy In 2022, inflation in Switzerland was above the 2% target, but it remained lower than the inflation rates seen in other high-income economies, including the US (9.1%), the UK (11.1%) and Germany (7.9%). Prices are more steady because a mix of microeconomic and macroeconomic policy tools is used. These tools include maximum prices, subsidies and contractionary monetary policy. To boost the output of solar energy, the Swiss Government has given producers more than $500 million in subsidies. This forms part of the government’s strategy to reduce dependence on non-renewable energy sources, most of which are imported. Relying too heavily on foreign markets could make the economy more vulnerable to external shocks. From 2015 to 2022, Switzerland’s current account in the balance of payments has been in surplus. Low inflation, together with the production of very high-quality products, may have helped create this surplus. A strong currency has also helped keep the price of imported raw materials low in Switzerland. The Swiss franc is among the world’s most stable currencies. In periods of economic uncertainty, the Swiss franc normally appreciates. Fig. 1.1 presents the global growth rate (% change in GDP) and the percentage change in the value of the Swiss franc against the USD($), from 2018-2022. Even though inflation was not especially high when compared with other countries, the Swiss central bank raised interest rates in 2022. This was intended to cut inflationary pressures. However, there was a danger that higher interest rates could push unemployment up. The increase in interest rates had a negative effect on some firms. The Swiss Government had to arrange a merger between the two largest banks in Switzerland. This was done to prevent one of them from failing, which would have weakened confidence in the whole banking system. A merger might also have allowed the combined bank to benefit from larger economies of scale. On the other hand, the merger caused some workers to lose their jobs and gave the merged bank greater monopoly power.

Inflation and deflation

During the first half of 2022, Guyana's GDP increased by 36.4%. Much of this expansion came from stronger output in the primary sector. The government used some of the tax revenue created by this growth to finance long-term development projects such as infrastructure and education. However, in the short run, house prices rose.

Economic growth

Japan has experienced extended periods of deflation in recent decades. Even though fiscal policy and monetary policy have been used to boost the economy, economic growth is still weak. Some economists also argue that the central bank’s monetary policy is one cause of Japan’s low productivity.

Inflation and deflation

Lanzarote, an island in Spain, once had very high poverty levels. Yet the growth of tourism has cut unemployment by a large amount. The government is trying to attract more workers to the island by relying on non-wage factors. Low taxes in Lanzarote also make the island attractive to workers. Labour mobility in the island’s economy has increased as well.

Workers

Street vendors usually work outside the formal economy in order to avoid government regulation. Yet many are now moving into the formal economy. As a result, government revenue has risen, productivity has increased and economic growth has become higher. Some governments intend to introduce measures to raise the number of firms in the economy.

Economic growth

Source material: Japan’s labour shortages

Employment and unemployment

In Belgium, some markets are in equilibrium. The nation makes a broad range of goods and services that have different levels of price elasticity of demand. The Belgian Government wants the economy to shift to a production possibility point beyond its present production possibility curve (PPC). One sector of Belgium’s economy that is performing well is the scientific industry. Workers in this industry have a high degree of specialisation.

Production possibility curve (PPC) diagrams

In April 2023, a cosmetics company from France merged with a cosmetics company from Australia. The merger is predicted to cut average total costs because the enlarged business is likely to gain more internal economies of scale. A manager said that one major objective is to make production more sustainable by using raw materials sourced from renewable resources. In most countries, the firm’s products, including perfume, are taxed more heavily than food.

Firms’ costs, revenue and objectives

A central bank or a government has several policy options that can be used to cut unemployment. One measure a government could choose is to raise spending on house construction. The Federal Reserve, the central bank of the US, has two main aims: keeping prices stable and achieving full employment. Some central banks also set economic growth as an objective, but no central bank uses HDI value as a target.

The macroeconomic aims of government

Some countries practise dumping by exporting their products to Cambodia at below cost price. The Cambodian Government is aiming for the country to reach high-income economy status by 2050. It applies fiscal, monetary and supply-side policies to raise its economic growth rate. Cambodia provides subsidies for some infant industries. The country has one of the world’s largest deficits on the current account of its balance of payments, measured as a percentage of GDP. Some economists suggest that tax cuts would reduce this deficit.

Globalisation, free trade and protection

Background text: Economic change in Malawi Malawi is a low-income country in East Africa. It is frequently hit by natural disasters such as droughts, floods and storms. In January 2022, Malawi was affected by Storm Ana. This caused damage to agricultural crops, factories, forests and power stations. More than three-quarters of Malawi’s labour force work in agriculture. Tea and sugar are two of the country’s major crops. The amount of tea supplied for sale is influenced by weather conditions, government subsidies and fertiliser prices. The world sugar market has also been affected by health reports that identified the possible harmful effects of eating too much sugar. Three of the Malawian Government’s priorities are to develop new industries, improve education standards and expand more sustainable sources of energy. The share of Malawian children who complete their primary education (5-11 years of age) is relatively low. Table 1.1 gives GDP per head and the percentage of children who finish primary education in selected countries in 2022. Only a small share of Malawi’s population has access to electricity. Most households depend on wood and charcoal for cooking and heating. Using wood as fuel contributes to forest loss and worsens air quality. However, the country receives 3000 hours of sunshine each year. This suggests that solar energy could be developed. There would be an initial expense to install solar panels and to lower the risk of storm damage. Solar energy plants (also called solar farms) can occupy a large area and create visual pollution. Even so, a successful solar energy industry could cut Malawi’s fuel imports and might influence its exchange rate. Malawi’s foreign exchange rate fell in 2022. The country’s currency, the kwacha, bought fewer US dollars. This depreciation affected Malawi’s current account of the balance of payment, its inflation rate and its economic growth rate. Some economists argued that the Malawian Government should prevent the kwacha from falling further in value.

Differences in economic development between countries

A Swiss multinational food producer raised the prices of its products by an average of 8% in 2022. In the USA, its prices went up by 11.6%. This multinational company (MNC) is among the world’s oldest MNCs. It began as a small business and has expanded over the past 160 years. Throughout this time, opportunity cost has always shaped its decisions.

Opportunity cost

Central banks affect the money supply in their countries. They also oversee commercial banks. Households gain several advantages from these commercial banks. In recent years, commercial banks have adopted new technology. Global online banking rose by 14% between 2019 and 2022. These technology improvements were accompanied by a higher use of division of labour.

Money and banking

Chad, the Central African country, has a population pyramid with a triangular shape and widespread poverty. It normally records an overall deficit on the current account of its balance of payments. Chad typically shows a surplus on secondary income, but trade in goods, trade in services and primary income are each usually in deficit. Some economists argue that the Chadian Government ought to introduce import quotas to cut the trade in goods deficit.

Current account of balance of payments

In 2023, the Canadian Prime Minister stated that his country's goal was to lift immigration to 500,000 annually. This was because the country was facing labour shortages and a longer life expectancy. Having more workers in Canada would raise the tax revenue available for pensions, and it would also boost consumer spending. Higher immigration of both skilled and unskilled workers might influence the country's car industry.

Economic growth