Economic growth

What indicates a recession?

Feb/March 2016

Which pair of changes in national output and population would lead to a rise in GDP per head?

Feb/March 2017

What does recession mean?

Feb/March 2018

As a developing country begins to record higher economic growth, what is most likely to happen?

Feb/March 2019

During 2016, India’s economy expanded by 7.5%, making it the fastest-growing large economy in the world. By comparison, China’s economy increased by 6.8%. India also recorded several other macroeconomic achievements. In 2016, the rise in its price level was smaller than in any year since 2004. Oil prices declined in 2016 and India imports a lot of oil. Government use of monetary policy helped to limit increases in the general price level. India’s manufacturing industry expanded quickly in 2016. One sector that did especially well was the vehicle industry. India was the world’s sixth biggest producer of vehicles and it employed 26 million workers. India was also the world’s largest producer of tractors. In 2015, tractor prices were raised. This caused demand to fall in the short run, but revenue increased. Expansion of the vehicle industry has allowed firms in the industry to hire more specialist workers and has made bank borrowing easier for these larger firms. It is expected that the industry will be able to take on additional workers in the future because India’s labour force is increasing. In 2014, India’s labour force was 500m and this rose by 4% between 2014 and 2016. Fig. 1.1 shows the economic growth rate and the population growth rate in recent years. The rate and steadiness of economic growth influence households’ choices about how much they spend and how much they save. Fig. 1.1 India’s economic growth rate and population growth rate 2010-2016. Growing optimism about how India’s economy is performing has raised total demand in the economy. Even so, the Reserve Bank of India, which is the country’s central bank, has been fairly effective at keeping the inflation rate close to the government’s target, which in 2016 was 4%. A factor affecting the country’s future macroeconomic performance will be changes in its population. By 2020, India is expected to have one of the youngest populations in the world, with an average age of just 29.

Feb/March 2019

How is ‘a reduction in gross domestic product (GDP) for more than two successive quarters’ defined?

Feb/March 2020

A country goes through a prolonged strike by railway workers. What macroeconomic effect would such a strike have?

Feb/March 2020

The table provides some information about an economy. What took place in year 1?

Feb/March 2021

India has recorded a fairly rapid rate of economic growth in recent years. That growth has been fuelled by rises in government spending and exports, including textile exports. However, India’s unemployment rate has risen. The government is worried that any attempt to cut unemployment may push up India’s inflation rate.

Feb/March 2021

The table gives data for a country’s real GDP in one specific year. A quarter means a period of three months. By the close of which quarter had the economy gone into recession?

Feb/March 2023

Study the source material carefully before you answer Question 1. Source material: Shifts in US macroeconomic performance and policy From 2009 to 2019, US real GDP rose in every year. This happened because of, among other factors, low interest rates, land reclamation and a larger labour force. The higher level of US output brought several benefits, although some workers became unemployed. This occurred because some industries grew while others shut down. Income also was distributed more unevenly and pollution rose. Over this period, US exports and imports both increased. Later in the period, the expansion of trade with China, a major US trading partner, was influenced by rises in US tariffs on some Chinese imports. These rises were expected to affect the US current account balance, output and tax revenue. The US exports a variety of products to China, including ice cream. China is the world’s largest consumer of ice cream, purchasing a third of all ice cream consumed. Chinese consumers sometimes buy chocolate to eat with ice cream. In 2019, the price of chocolate went up. In 2020, US macroeconomic performance altered. The country’s price level increased more slowly, mainly because consumer expenditure fell and workers’ bargaining power weakened. The country’s real GDP decreased and unemployment increased. These changes affected US macroeconomic policy. US government spending rose sharply as shown in Table 1.1. The US central bank, the Federal Reserve, announced in September 2010 that it would permit the inflation rate to rise and would not raise the interest rate. In the past, central banks have tried to keep the inflation rate low because of the effects inflation can have on, for example, investment, exports, the distribution of income and tax revenue. The Federal Reserve said that it wanted to increase economic growth, which can raise income per head, employment and tax revenue.

Feb/March 2023

What is expected to rise as the economy grows?

Feb/March 2024

Which action taken by employers is most likely to lower long-term economic growth?

Feb/March 2025

Which factor is most likely to lead to economic growth?

May/June 2015

During 2012 to 2013, European economies saw weak economic growth. Using the GDP, industrial production and unemployment data in the table, which economy performed most poorly?

May/June 2015

By what measure is economic growth assessed?

May/June 2015

The following information was released by a central bank in an economy. In which case was real GDP growth the highest?

May/June 2015

Chile accounts for one third of the world’s copper supply. Any shift in demand for, or supply of, copper influences Chile’s Gross Domestic Product (GDP) and its current account position in the balance of payments.

May/June 2015

What has to happen when a country undergoes economic growth?

May/June 2016

Which sign would best show that an economic boom is beginning?

May/June 2016

An ever-growing number of Pakistani firms are hiring managers who studied at the country’s universities. Pakistan’s universities are also raising the number of entrepreneurs in the country. Each entrepreneur and each manager confronts a range of challenges, including obtaining finance, sometimes through borrowing. Some entrepreneurs and managers also bargain with trade unions. These organisations can affect a country’s economic growth rate.

May/June 2016

A newspaper stated that a country’s economy expanded by 3% over the previous year. What must have risen during that year?

May/June 2017

A newspaper stated that a country’s economy expanded by 3% over the previous year. What must have risen during that year?

May/June 2017

What was the change in GDP per head, after allowing for price increases (real change), between 2000 and 2013?

May/June 2017

A newspaper stated that a country’s economy expanded by 3% over the previous year. What must have risen during that year?

May/June 2017

Oil was found in Kenya in 2012, yet in 2014 an American firm abandoned its plans to explore for oil in the Arabuko Sokoke forest in the country. The relative proportions of Kenya’s primary, secondary and tertiary sectors are shifting. The stock of capital goods in the country is also rising.

May/June 2017

Argentina was once among the countries with the world’s highest GDP per head and had one of the fastest rates of economic growth. A large number of multinational companies were manufacturing there. Some people argue that, if Argentina is to return to the top ten richest nations, it must raise education spending and move towards free trade.

May/June 2017

An economy has recorded negative economic growth for two quarters in a row. What is this economy experiencing?

May/June 2018

Business investment spending fell in the third quarter of $2015$. What would be the most likely outcome of this?

May/June 2018

The table shows how Gross Domestic Product (GDP) has changed in four countries. Which country has gone through a recession?

May/June 2018

Business investment spending fell in the third quarter of 2015. What outcome was most likely to follow?

May/June 2018

What is one possible result of economic growth?

May/June 2018

Business investment spending fell in the third quarter of 2015. What would most likely be the consequence of this?

May/June 2018

In March 2017, Peru was struck by floods and the strongest winds in decades. Roads, bridges, houses and capital goods were ruined. It is expected that the resulting damage will affect Peru’s Human Development Index (HDI) and economic growth rate. In 2016, Peru recorded an economic growth rate of 4%, which was higher than the growth rate of the USA.

May/June 2019

Economic growth refers to

May/June 2021

Economic growth is understood as

May/June 2021

Economic growth may be defined as

May/June 2021

What is one possible cause of economic growth?

May/June 2022

What might lead to a recession?

May/June 2022

The table presents real GDP in US$ billion for a country over a three-year period. What do the GDP figures show for the country from year 1 to year 3?

May/June 2023

An economy is seeing rapid growth because consumer spending has risen. What are the most likely effects on inflation and unemployment?

May/June 2023

Study the source carefully before you start Question 1. Source material: How will oil change Guyana? Guyana had the world’s fastest-growing economy in 2020. For a considerable period, sugar, gold and timber have made up a fairly large share of the nation’s output and exports. In 2020, the sugar industry suffered from adverse weather and a drop in worldwide demand. By comparison, the output of gold and timber rose. The chief explanation for the sharp rise in Guyana’s real GDP was the expansion of oil production. Oil was found offshore by a foreign multinational company (MNC) in 2015 and the MNC began producing in 2019. It is forecast that Guyana will be the world’s biggest oil producer per head by 2025. The Guyanese government plans to direct some of the tax income it will gain from oil towards education and upgrades to the country’s infrastructure. Proposed schemes include additional railway lines and stations. A larger and less expensive rail network may allow more people to take jobs farther from home and could affect the market for substitutes, such as car transport. The Guyanese government also intends to use some of the tax income to improve the country’s internet access. Table 1.1 shows GDP per head and internet access in seven countries in 2020. Guyana’s population size has grown only slowly 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. As oil output rises, emigration may fall and the country may begin to record net immigration. A larger population could influence Guyana in several ways, including altering the size of its labour force and having an impact on the environment.

May/June 2023

Subsistence farming refers to producing crops and keeping livestock only to meet one’s own needs, with no excess left to sell or exchange. Why does this make it hard for a government to assess economic growth in an economy that depends on subsistence farming?

May/June 2024

Which change is most likely to result in faster economic growth in the short run?

May/June 2024

The table presents the yearly change in Gross Domestic Product (GDP) before inflation adjustments and the yearly inflation rate in four countries. Which country has the greatest growth rate in real GDP?

May/June 2024

Which policy choice is most likely to bring about economic growth?

May/June 2025

Brazil’s real GDP decreased by $3.8\%$ over one year. What factors could have led to this?

May/June 2025

Section A Before you answer Question 1, read the source material closely. Source material: The Egyptian economy Egypt fact file (2022): GDP $469.1bn; Population 110.0m; Poverty rate 27.9%; Unemployment rate 7.2%. Tourists have long been drawn to Egypt because of the pyramids and other ancient sights. Even so, the tertiary sector is not the only driver of economic growth; the primary and secondary sectors also add to growth. Egypt’s exports include personal travel, oil, citrus fruits, gold and textiles. Recently, Egypt has experienced a construction boom. A new city is under construction and needs finance, raw materials and labour. Businesses are taking a large risk on this scheme because houses are being built before demand has been confirmed. For instance, if incomes fall, the housing market could fail to make a profit. Tourism provides Egypt with a strong source of economic growth. The country offers attractions that date back thousands of years as well as natural attractions such as attractive beaches and a warm climate. It also has good infrastructure and is regarded as a safe and secure country, which further draws tourists. Free market reforms have increased investment in Egypt. Fig. 1.1 presents investment (as a percentage of GDP) and economic growth rates in Egypt, 2015-2021. Fig. 1.1 description: The vertical axis is labelled "Percentage (%)" with markings from 0 to 20. The horizontal axis is labelled "Year" and shows 2015, 2016, 2017, 2018, 2019, 2020 and 2021. The dotted line is labelled "Investment (as a % of GDP)" and the solid line is labelled "Economic growth rates (%)". Deregulation in education has resulted in a higher number of schools and universities in Egypt. Greater access to education and training should lead to future rises in living standards. However, the establishment of more private schools and universities may widen inequality because private education may still be too costly for some income groups. In 2022, the Egyptian currency fell to half its previous value against the US dollar. This decline in the currency’s value affected inflation and Egyptians’ purchasing power. On the other hand, some industries, including tourism, gained from this because holidays in Egypt became more affordable for non-Egyptians.

May/June 2025

As cities develop economically, the buildings within them tend to grow taller. This is caused by consumers becoming more prepared and able to live in high-rise buildings. Changes in supply conditions have also raised the number of tall buildings being built. Even so, there is a ceiling to building height - once a building passes a certain height, its total construction cost will be greater than the total revenue it produces.

May/June 2025

Germany’s GDP growth was predicted to be $1.5\%$ in 2013. What could lead to economic growth?

Oct/Nov 2015

A large economy records a high GDP growth rate. Which outcome is least likely to occur as a consequence of this growth?

Oct/Nov 2015

At present, around 80% of Cambodia’s export earnings are generated from clothing sales. The Cambodian Government wants clothing producers to export more, although its immediate focus is to boost rice exports. In 2012 Cambodia ranked as the world’s seventh-largest rice exporter. The government wants the country to move into the top five. If export earnings rose above the 2012 figure of US$6 billion, the country’s current account deficit in its balance of payments would fall. To meet the government’s target, several changes are needed to raise Cambodia’s Gross Domestic Product (GDP). One is improving infrastructure, including the construction of additional roads and ports. Better transport infrastructure also has to be matched by greater investment in agriculture. In addition, farm workers’ skills need to be improved. Those who are already skilled should be encouraged to remain in the country rather than leave it. The Cambodian Government is also trying to increase investment in the manufacturing and service sectors. A variety of factors affect investment. Among the most significant is the rate of economic growth. Countries with rapid economic growth usually devote a large share of their income to capital goods. Cambodia is drawing investment from other countries, especially China. This investment is influenced by several factors, including a young population and progress in the country’s financial sector. In 2012 the population was 15 million, with the birth rate exceeding the death rate by 13 per thousand of the population. Emigration was greater than immigration, giving a net migration rate of minus 0.3 per thousand of the population. In 2012 Cambodia launched its first stock exchange, the Cambodian Securities Exchange (CSX). The first company listed on the CSX was the Phnom Penh Water Supply Authority. This Cambodian company is known as one of the most efficient water companies in Asia. It is a desirable employer partly because it offers relatively high wages.

Oct/Nov 2015

The table presents the growth rate of output ($\%$) in four sectors of an economy. Construction sector: first quarter of 2014 $0.9$, second quarter of 2014 $0.5$ Energy sector: first quarter of 2014 $0.1$, second quarter of 2014 $1.6$ Manufacturing sector: first quarter of 2014 $-0.7$, second quarter of 2014 $-0.5$ Services sector: first quarter of 2014 $-3.4$, second quarter of 2014 $0.5$ Which two sectors experienced an increase in the growth rate in the first half of 2014?

Oct/Nov 2016

The table presents some economic indicators. Which rise in the first indicator is most likely to cause a rise in the second indicator?

Oct/Nov 2016

In Egypt during both 2011 and 2012, GDP per head and investment both decreased. One cause of the fall in investment was that firms found it hard to get loans from the country’s commercial banks. Another was the ending of some government subsidies, including the subsidy paid to producers of petrol.

Oct/Nov 2016

An economy is expected to expand by $3\%$ over the coming year. What is the most likely reason for this growth?

Oct/Nov 2017

An increase in which economic indicator is commonly used to measure a country’s economic growth?

Oct/Nov 2018

Economic growth is normally measured through the year-on-year change in

Oct/Nov 2018

At what point is a recession said to occur?

Oct/Nov 2018

The chart illustrates Greece’s GDP annual growth rate (percentage), $2012$-$2016$. In which years did Greece have the longest stretch of positive economic growth?

Oct/Nov 2019

Which government policy would be likely to slow economic growth?

Oct/Nov 2019

A government applies a combination of fiscal policy measures and supply-side policy measures to encourage economic growth. Which combination of policy measures would bring about this result?

Oct/Nov 2019

Country X supplies computers to support teachers in the classroom. In what ways could this technology raise the economic potential of Country X?

Oct/Nov 2019

What is the most probable outcome of a prolonged rise in Gross Domestic Product (GDP)?

Oct/Nov 2019

According to the Global Financial Centres Index, New York ranks as the world’s leading city for human capital. Together with economic freedom that makes it easier for new business start-ups, this has helped to produce rapid economic growth. In fact, the city’s growth rate is above the GDP growth rate for the whole of the USA. Overall, New York’s economy expanded by 3.4% in 2015, which was quicker than the 2.4% seen nationally. Even so, land is in short supply, particularly in Manhattan, where most economic activity is located. The financial sector is the city’s key economic sector - New York contains the first and second largest stock exchanges in the world and 3 of the top 10 largest banks in the USA have their headquarters in New York. Better education also supports New York’s strong growth rates, as the city keeps drawing students from many countries and from a wide range of subjects. Unemployment in the city keeps falling. Also, average weekly wages in New York are regularly higher than in the rest of the USA. Table 1.1 gives the average weekly hours worked and average weekly wages in New York from 2011 to 2017. The jobs being created now are mainly middle- and low-paid rather than high-paid. Finance industry workers make up 20% of the workforce in the city, yet they receive more than half of all wages paid in New York. The earnings gap between finance workers and the other 1.6 million workers in the city continues to grow. This is often because lower-paid workers lack skills and because the finance industry is male-dominated. Alongside income inequality, the city’s ongoing economic development has also damaged the environment. The continually growing finance industry is also raising the danger of another 2007-08 Global Recession, including the risk of bank failures. Growing trade protection by the US government may harm American cities such as New York, particularly while Asian cities such as Singapore, Hong Kong, and Shanghai continue to move towards free trade.

Oct/Nov 2019

In 2015, the Malaysian government stated its aims of boosting productivity and savings. Consumer spending has risen, partly because wages have increased, mainly for older workers. Even so, savings remain low, which is still a worry. Savings supply funds for investment (spending on capital goods), helping economic growth and also affecting inflation.

Oct/Nov 2019

In $2016$, Romania experienced a rise of $4.8\%$ in its real gross domestic product. What does this imply about the Romanian economy?

Oct/Nov 2020

Malaysia’s ongoing economic growth is helped by higher consumer spending and by its capacity to adjust to shifts in global demand. For instance, when the price of natural rubber dropped, most rubber plantations switched to palm oil production. The government has aimed to encourage expansion in different sectors, including the primary sector.

Oct/Nov 2020

Source material: Traffic congestion in the Philippines Manila, the Philippines' capital, is very crowded and has almost no unused land left for construction. It is widely known for heavy traffic jams (congestion). Journeys of only a short distance can take people hours. The Philippine government worries that congestion could harm health, put off multinational companies (MNCs) from investing in the country and slow economic growth. It would also prevent the country from reaching full employment and would lower labour productivity. Entrepreneurs and workers regularly reach their firms stressed and exhausted. More Philippine workers are relocating to Manila to work in the growing computer, retail and education industries. One benefit of the Philippine economy is its youthful and well-educated population. Improvements in the skills of Philippine workers are making it simpler for workers to move from declining industries into expanding ones. Growth in the country's population is raising the number of cars on Philippine roads. Low parking charges and the ease of finding parking also encourage driving, as does the poor standard of public transport. Manila has too few trains but too many buses. By 2017, deregulation had pushed the number of bus companies in the city to over 1100. Taxes in the Philippines are relatively high, but disposable income has increased. Consequently, consumer spending, including spending on cars, has grown. Some of the cars bought are imported. Table 1.1 shows consumer expenditure and imports in selected countries in 2017.

Oct/Nov 2020

A recession occurs when there are two successive quarters (six months) of

Oct/Nov 2021

What leads to economic growth?

Oct/Nov 2021

What effect does economic growth have on individuals and on the economy?

Oct/Nov 2021

What economic condition is present when an economy records negative growth for two consecutive quarters (six months)?

Oct/Nov 2021

Which method is the most effective for a government to increase national output?

Oct/Nov 2022

The diagram illustrates a country’s economic growth rate across a 5-year period. What conclusion can be drawn from the diagram?

Oct/Nov 2022

A person chooses to hire a professional decorator instead of purchasing the materials and decorating her house on her own. Why would this choice cause GDP to increase?

Oct/Nov 2022

A country wants to promote economic growth. Which policy measure is most likely to help achieve this objective?

Oct/Nov 2022

In what way is a country's Gross Domestic Product usually measured?

Oct/Nov 2022

Although Bulgaria is a member of the European Union (EU), its corporation tax rates are much lower than those in other EU member states. However, regulation imposed by the Bulgarian government has put off foreign investment in Bulgaria. In addition, Bulgaria’s economic growth rate has fallen in recent years, partly because its quantity of labour has been steadily declining.

Oct/Nov 2022

Which economic indicator is best used to describe economic growth?

Oct/Nov 2023

What is the most probable effect of economic growth?

Oct/Nov 2023

What factors will lead to an increase in real GDP in a country?

Oct/Nov 2024

How is economic growth defined?

Oct/Nov 2024

What effect does economic growth have on individuals and on the economy?

Oct/Nov 2024

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?

Oct/Nov 2025

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

Oct/Nov 2025

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.

Oct/Nov 2025

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.

Oct/Nov 2025

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.

Oct/Nov 2025