Oct/Nov 2024

Which economic question is the least likely to emerge due to scarcity?

The nature of the economic problem

What is one significant function of a central bank?

Money and banking

In what way would a shift in demand for labour influence the labour market for an occupation?

Workers

A multinational fast-food company purchased a food-ordering website so that the multinational’s customers could download menus and pay in advance. Which term most accurately describes this merger?

Market structure

The diagram illustrates a firm’s long-run average total cost (ATC). What could bring about the movement from ATC$_1$ to ATC$_2$?

Firms' costs, revenue and objectives

Which factor is most likely to promote capital-intensive production methods in a low-income economy?

The factors of production

A company’s average revenue equals $20. It sells 1000 units. What are the company’s total revenue and the product price?

Firms' costs, revenue and objectives

A competitive market turns into a monopoly. What is the most likely benefit for consumers?

Market structure

Which factor will lead to an increase in real GDP in a country?

Economic growth

What does the term money supply mean?

Money and banking

Which macroeconomic policy is most likely to deliver economic growth and price stability simultaneously?

Supply-side policy

What does opportunity cost mean?

Opportunity cost

How is economic growth defined?

Economic growth

What leads to cyclical unemployment during a recession?

Employment and unemployment

The table presents government spending and income in chosen years. What could account for the changes in the government’s budget across the period?

Fiscal policy

The table presents shifts in economic policies for four countries, A, B, C and D. Which country is most likely to be adopting a policy aimed at avoiding deflation?

Inflation and deflation

On average, employees in Switzerland receive higher pay than employees in Mexico. What is a likely reason for this?

Differences in economic development between countries

The table gives information about birth rate, death rate and net migration for a number of countries in one year. What conclusion can be drawn from the table?

Population

Which combination most accurately describes the features of a high-income economy?

Differences in economic development between countries

What factors might promote international specialisation among countries?

International specialisation

A government wants to prevent the dumping of a particular imported good at a very low price. Which protection method would be the most effective?

Globalisation, free trade and protection

The value of the US dollar against other currencies is determined by demand and supply forces. What does this statement refer to?

Foreign exchange rates

The diagram illustrates a production possibility curve (PPC) for an economy producing two goods, X and Y. Which point indicates the highest opportunity cost of making one additional unit of good X?

Opportunity cost

The diagram illustrates a country’s export and import values for goods across five years. During which two years did the country experience a rise in import value and an improvement in its balance of trade in goods?

Current account of balance of payments

A spell of poor weather causes the rice crop to fail. What happens to the market for rice?

Supply

The diagram illustrates a shift in demand for coffee. What factor would make demand for coffee move from D₁ to D₂?

Demand

The table displays the supply of a product at different prices. If the price rises from 12 to 14, what change will occur in supply?

Supply

Which changes would cause the equilibrium shown in the diagram to shift from point X to point Z?

Price determination

As the price of shirts increases from 8 to 10, demand for shirts decreases from 1000 to 500. What is the value of the price elasticity of demand for shirts?

Price elasticity of demand (PED)

A government plans to construct a new international airport in an area of exceptional natural beauty. What external cost could result from this decision?

Market failure

What is the reason for the economic problem affecting the worldwide market for gold?

The nature of the economic problem

What does a commercial bank do?

Money and banking

In what circumstances are households more likely to save?

Households

A country wants to raise the number of nurses available. Which method would be the most effective for doing this?

Workers

Employers located in major cities often give staff extra allowances on top of normal wage rates. What is the most likely explanation for this?

Workers

Employees in a country have been worried that their wages are not rising as fast as inflation. How can trade unions help workers obtain a pay increase?

Trade unions

What method is used to calculate total revenue?

Firms' costs, revenue and objectives

A city centre has a number of cafés that sell snacks and drinks. A few of these cafés shut down because their owners retire. What is the most likely impact on the prices and profits of the cafés that remain?

Price determination

What is one macroeconomic objective of a government?

The macroeconomic aims of government

The table presents earnings and the total income tax paid each year. Which kind of tax system is shown by this?

Fiscal policy

Can you give one example of monetary policy?

Monetary policy

The management of an airline chose to replace its aeroplanes with aircraft that were more technologically advanced. At the same time, the company retrained its pilots. Which factors of production have been improved by the airline?

The factors of production

By what is Gross Domestic Product (GDP) divided to work out GDP per head?

Living standards

What are the effects of economic growth on individuals and on the economy?

Economic growth

What is measured by the labour force survey (LFS)?

Employment and unemployment

The table gives the weights assigned to the three items in a Consumer Prices Index (CPI) for two years. What conclusion can be drawn from this data?

Inflation and deflation

A government raises the rate of progressive income tax and also increases its expenditure on hospitals. What is likely to occur to the distribution of income and to living standards?

Living standards

The population pyramids for country 1 and country 2 in a specific year are shown. From these population pyramids, what can be deduced?

Population

According to the table, which country would be regarded as the most developed?

Differences in economic development between countries

What factors promote international specialisation?

International specialisation

A country aims to cap the number of imported cars at a maximum of $100\,000$ per year. Which measure is most likely to meet this objective?

Globalisation, free trade and protection

The diagram illustrates a shift in the exchange rate of the Indian rupee in relation to the US$. What might lead to this change in the exchange rate?

Foreign exchange rates

The diagram illustrates the options available to an individual between leisure and earnings. What is the opportunity cost to the individual of the additional earnings when moving from position X to position Y?

Opportunity cost

Country X shows the following selected items in its balance of payments current account. • Country X sells $200\,$m worth of goods to other countries. • Country X buys $50\,$m worth of services from overseas. • Citizens of country Y who are employed in country X remit $25\,$m back to relatives. • Country X gives country Y $75\,$m in aid. By what amount did country X’s current account balance rise?

Current account of balance of payments

The world price of cocoa has been decreasing, whereas the prices of goods produced from cocoa have been increasing. Which combination could account for this?

Price changes

The table gives the quantities of tomatoes demanded and supplied at various prices. The starting equilibrium occurs at a price of $40. In the next year, improved harvesting technology causes supply to rise by 50% at each price. What will happen to the suppliers’ total revenue?

Firms' costs, revenue and objectives

A reduction in which variable would help to eliminate a market shortage?

Price determination

As the price of meat rose from $5 to $6 per kg, Joe cut the amount of meat he bought from 40 kg to 20 kg each month. What was Joe’s price elasticity of demand for meat?

Price elasticity of demand (PED)

In the diagram, which line is used to represent perfectly inelastic supply?

Price elasticity of supply (PES)

What does external benefit mean?

Market failure

In 2020, Jordan recorded a deficit on the current account of its balance of payments. That deficit helped to reduce Jordan’s total demand in that year. The lower total demand was the chief reason that the number of workers was higher than the number of jobs available. Employment decreased in most of Jordan’s industries. A key industry in Jordan is tourism. In recent years, some Jordanian tourism firms have merged. These mergers lowered the prices of some holidays and improved their quality. Jordan’s population is still rising. This is mainly because net immigration is positive, although the birth rate is also above the death rate. Table 1.1 shows the birth rate and average age in six countries in 2020. Changes in the size of a country’s population affect the market for many products, including clothing. A larger population also increases pressure on the country’s energy supplies. The Jordanian government has several major renewable energy projects and intends to spend even more on such projects. Greater use of renewable energy, including wind and solar power, can cut environmental harm and may be relatively inexpensive in the long term. However, most renewable energy generators, including hydroelectric power stations, are expensive to construct. In addition, wind turbines and solar panels depend on favourable weather conditions. Some government spending in Jordan is paid for by borrowing. At the beginning of 2021, the Jordanian central bank was expected to increase the interest rate. This was because total demand was forecast to rise and positive economic growth was expected to return. A higher interest rate could affect Jordan’s foreign exchange rate and investment.

Current account of balance of payments

During 2021, the UK’s production point on its production possibility curve (PPC) shifted. Mean wages rose. A waiter had an average annual wage of $23,580, whereas a chief executive of a large commercial bank earned $1,617,000. Higher wages allow people to dine in restaurants more frequently. Some food sold in UK restaurants is brought in from abroad. In 2021, the UK government entered into free trade agreements with a number of countries, which removed import restrictions.

Production possibility curve (PPC) diagrams

The central bank of Madagascar steps in within the country’s foreign exchange market. Even so, Madagascar mainly operates a market economic system. Almost $70\%$ of Madagascar’s population live in poverty. A large share of the nation’s industries are labour-intensive. In 2020, Madagascar recorded an economic growth rate of $6\%$ and a current account deficit on its balance of payments of $0.6bn.

Foreign exchange rates

During 2021, demand for several South African products showed both extensions and contractions. In that same year, a South African court prevented a multinational company (MNC) from carrying out oil exploration along South Africa’s coastline. South Africa’s output rose, mainly because the tertiary sector expanded. Even so, its unemployment rate was $35\%$, which was still far from full employment.

Living standards

The Peruvian government is facing pressure from its industries to upgrade the nation’s transport network. Tourism is Peru’s third-largest industry. The Peruvian tourism industry contains many firms. Fruit farming is another important industry in Peru. In recent years, trade union membership in Peru’s fruit-farming industry has risen.

Trade unions

Read the source material carefully before you answer Question 1. Background material: The Belarus economy Belarus, which has a mixed economy, was among the poorest countries in Europe during the 1990s. Since that time, GDP per head has risen and poverty has fallen. The country has also seen an increase in life expectancy. Table 1.1 presents life expectancy and Human Development Index (HDI) value for six chosen countries in 2019. From 2011 to 2021, the price level in Belarus rose. Higher energy prices increased firms’ production costs in both the public sector and the private sector. Over the same period, investment in Belarus increased, the size of the country’s labour force decreased, and fewer students went on to university. Belarus makes a variety of products. Milk is one agricultural product produced there. The country is the fifth largest producer of milk in the world. The Belarus government is unwilling to subsidise milk production, although it has given large loans to mechanise the dairy industry. The Belarus government wants to promote the production and purchase of electric vehicles. It intends to construct 1300 electric vehicle charging stations by 2030. Using electric vehicles can bring environmental benefits. However, some other types of transport may offer greater benefits, and some people and firms may be unwilling to change to electric vehicles. A less popular government policy introduced in 2015 was a law that fined anyone who had been unemployed for six months or more. Anyone who failed to pay the amount owed to the government for breaking the law was jailed. If suitable jobs were available, this may have lowered frictional unemployment. However, some unemployment may have been structural or cyclical. The law was abolished in 2018.

Economic growth

Luxembourg is a nation with a very high level of economic development. Its government steps in to try to reduce some of the drawbacks that may arise in a market economic system. Some firms in the country operate in competitive markets, whereas others are monopolies. Households in the country save a large share of their income. Immigration is the chief reason for the country's population growth.

Mixed economic system

In Indonesia, some people play tennis. Yet badminton is the nation’s favourite sport. The equipment required to play it, including badminton racquets, is comparatively inexpensive. Players from the country win a large share of international tournaments. Leading Indonesian players earn ten times the average wage and over thirty times the wage of a cleaner.

Demand

Davos is a ski resort in Switzerland that is well known for hosting a world economic conference for leaders from both private and public sectors. The subjects covered normally concern global economic development. Hospitality firms in Davos rely on seasonal migrant labour, especially when they need to raise the supply of goods and services quickly.

Differences in economic development between countries

In 2021, Turkey’s central bank reduced the interest rate on four separate occasions. This happened even though the country’s inflation rate climbed from 15% at the start of the year to 36% by the end of the year. Turkish commercial banks drew in more customers, which caused bank deposits to rise by 10%. Later that year, the Turkish lira dropped to a record low against the US dollar.

Monetary policy