May/June 2025

What is likely to make the occupational mobility of labour greater?

Workers

Which of the following is not a type of money?

Money and banking

If interest rates decrease, what is the most likely impact on saving and borrowing?

Money and banking

When the wage rate rises, a bus driver at first chooses to work longer hours. Once his income grows, a point is reached where he values additional leisure more than taking on extra work. Which supply curve, $S$, illustrates this situation?

Workers

What is one role of a trade union?

Trade unions

Transport infrastructure in India has improved, which lowers the costs of farming. What does this show an example of?

Supply-side policy

A firm decides to become more capital-intensive. Which of the following is least likely to have risen?

The factors of production

The diagram illustrates a firm’s average total costs (ATC) and average fixed costs (AFC). Which statement is correct?

Firms' costs, revenue and objectives

What does the term macroeconomic aim of a government mean?

The macroeconomic aims of government

What does the term principle of taxation mean?

Fiscal policy

Monetary policy often involves changes in which variables?

Monetary policy

Sonia runs a takeaway food delivery service. She chooses to grow the business by purchasing more vans and employing extra drivers. Which factors of production were altered?

The factors of production

Which supply-side policy measure is most likely to help a government achieve its objective of full employment?

Supply-side policy

Which policy decision is most likely to lead to economic growth?

Economic growth

A government calculates unemployment using the labour force survey method. What condition must a person meet to be counted as unemployed under this method?

Employment and unemployment

What is most likely to increase when the level of employment decreases in a high-income economy?

Employment and unemployment

A Consumer Prices Index (CPI) is made up of four items. The table gives the percentage change in price for each item over a one-year period and the weighting of each item. Which price change will have the greatest effect on the level of the CPI?

Inflation and deflation

The table gives the Human Development Index (HDI) value for a country in two years: year 1 = $0.467$, year 2 = $0.609$. Which of the following would not account for the change in the HDI value?

Living standards

Which pair of statistics is used to calculate a country’s natural population growth?

Population

What factor will raise the degree of specialisation in an economy?

International specialisation

What meaning might an economist attach to the term dumping?

Globalisation, free trade and protection

From the diagram, D represents the demand curve for the Chinese yuan, while S represents the supply curve of the Chinese yuan. The Chinese central bank wants to fix the yuan’s price at $P_1$. Which action would it need to carry out?

Foreign exchange rates

The diagram illustrates a production possibility curve (PPC). The economy is making full use of all the resources it has available. A government chooses to promote the production of manufactured goods rather than agricultural goods. Which movement indicates this policy change?

Production possibility curve (PPC) diagrams

The table presents the amounts for a country’s current account in two years. By how much did net secondary income change from year 1 to year 2?

Current account of balance of payments

During 2020, in order to slow the spread of a pandemic, numerous governments shut restaurants and cafés for a limited period. What would be a macroeconomic effect of this policy?

Employment and unemployment

Favourable weather leads to a rise in both the demand for and the supply of peaches. What effect will this have on the market price of peaches and the quantity traded?

Price determination

The diagram illustrates the demand and supply curves for a product at its equilibrium price $P$. How would the introduction of a subsidy be represented?

Supply

The table indicates the quantity demanded at a range of prices. For which reduction in price is demand price-inelastic?

Price elasticity of demand (PED)

The price elasticity of supply (PES) of coffee is $+0.2$ in the current year and $+2.0$ over the long run. Why does the PES of coffee become higher in the long run?

Price elasticity of supply (PES)

What might a person think who wanted to promote the use of the market system?

Market economic system

A university turns away 2000 applicants who are qualified and want to study there. Which factor of production might have led the university to make this decision?

The factors of production

The table gives the mean wage in four countries, A, B, C and D. In which country is relative wage discrimination against female employees the highest?

Workers

The diagram illustrates the average total cost curve (ATC) for a firm following a merger. Why is the shift from X to Y likely to be caused by this merger?

Firms' costs, revenue and objectives

A restaurant has two chefs who prepare every meal that is served to customers. Which action is most likely to raise the chefs’ productivity?

Firms and production

What do fixed costs mean?

Firms' costs, revenue and objectives

The table sets out the daily output and costs for four firms that produce chairs. Which firm has the greatest average cost of production?

Firms' costs, revenue and objectives

Only the price charged for a firm’s product and the amount sold are known. What additional conclusion can be drawn from this?

Firms' costs, revenue and objectives

If a market with very strong competition turns into a monopoly, what is likely to rise and what is likely to fall?

Market structure

During a recession triggered by a pandemic, many central banks across the world cut interest rates. What macroeconomic objective was this policy most likely intended to achieve?

Monetary policy

The diagram illustrates the percentage of income collected by a tax at different income levels. Which term is used to describe this tax?

Fiscal policy

Which of the following is not a likely result of an increase in the budget deficit in a year?

Fiscal policy

Sanjay, who worked as a coal miner, lost his job when the only mine in the area shut down. He lives in a village close to his family and friends, and he wants to remain in that same village. What is the reason for Sanjay’s occupational immobility?

Workers

When a government seeks to promote economic growth, it may use supply-side policies. Which policy counts as a supply-side policy?

Supply-side policy

An economy operating at full employment is predicted to experience a rise in total demand. What is the most likely outcome to increase?

Inflation and deflation

A government carried out a labour force survey. Only people of working age were included in the survey. The results are displayed in the table. What percentage of working-age people are in the labour force?

Employment and unemployment

A school leaver is not able to secure a job straight after finishing education. Which type of unemployment is this?

Employment and unemployment

Which changes are most likely to cause the largest increase in inflation in country X?

Inflation and deflation

In rural parts of developing countries, farmers produce food mainly for their own consumption. Why could this make GDP a weak measure of the standard of living in those countries?

Living standards

Japan’s population is becoming made up of a larger share of elderly people. What effect is this likely to have on the Japanese economy?

Population

A product from Argentina is first sold in the US at $50 when the exchange rate between the two countries stands at 5 pesos for 1 dollar ($). The exchange rate then shifts to 10 pesos for 1 dollar, while the product’s price in Argentina stays the same. What is the product’s new US price?

Foreign exchange rates

Mining undertaken by multinational companies (MNCs) creates both costs and gains for the host nation. Which activity is least likely to bring an advantage to the host nation?

Globalisation, free trade and protection

The table gives the retail price at which one book can be purchased in four countries. What extra information is needed to compare the book’s price meaningfully across the countries?

Foreign exchange rates

The diagram illustrates the production possibility curve (PPC) for an economy that is currently at point X. Which change in the economy’s labour market would enable it to move to point Y?

Production possibility curve (PPC) diagrams

What result can a surplus on the current account of the balance of payments lead to?

Current account of balance of payments

What are the two macroeconomic decisions?

Microeconomics and macroeconomics

The table gives the number of units of coffee demanded each day and the number supplied each day. At the equilibrium price, what is the total amount spent on coffee?

Price determination

The diagrams illustrate the demand curves for the market’s only two buyers. What shape will the market demand curve for the good have?

Demand

The diagram illustrates the market for ice cream and the impact of very hot weather. If prices had stayed at $P_1$ even in the hot weather, what was likely to happen in the market for ice cream?

Price determination

Which good is likely to have the greatest price elasticity of supply?

Price elasticity of supply (PES)

Which characteristic applies to a demerit good?

Market failure

Background information: Gabon’s industries and labour force Gabon fact file Gabon is a small West African nation. Its rainforests cut air pollution, supply wood for timber production, shield against floods and limit soil erosion. The Gabonese Government aims to protect the country’s rainforests. It has set up some national parks, and this has boosted tourism, which affects the current account of the balance of payments. The Gabonese Government also wants to lessen the country’s dependence on timber production, oil production and agriculture. The country is Africa’s fifth-largest oil producer, but its oil resources are being depleted. The oil industry leads to water pollution. The country has other natural resources, including gold. In 2022, new gold deposits were discovered in Gabon. Gabon’s agricultural industry accounts for a high share of the country’s labour force. Fig. 1.1 shows the literacy rate and the percentage of the labour force employed in agriculture in six selected countries in 2022. In recent years, Gabon has had a high unemployment rate among 15-24 year olds. High youth unemployment can mean that young people do not acquire the skills and experience required to reach high productivity. It can also damage their confidence. Some governments pay private sector firms to offer work experience to unemployed young people. The quality of this experience can differ.

Differences in economic development between countries

Colombia’s population pyramid is taking on a new shape. Even so, the pattern of income distribution in this South American nation is not shifting very much. It has one of the world’s most unequal income distributions. Some Colombians are employed in the footwear industry, which makes shoes, sandals and boots. Footwear is produced in the private sector, yet Colombia has a mixed economic system.

Poverty

During recent years, the quantity of Latvia’s factors of production has altered. Since 2008, its capital has risen and its land has not altered much, but its labour force and its enterprise have fallen. Enterprise and conditions of supply may influence firms’ prices. In 2022, the Latvian Government raised the country’s national minimum wage (NMW). Even so, its NMW remained one of the lowest in the European Union.

The factors of production

During 2023, India became the most populous country. This could influence the government’s macroeconomic aims. In 2018, the Indian Government reduced the nation’s corporation (corporate income) tax rate from 35% to 25%. From 2019 to 2022, India’s inflation rate averaged 6%. Some economists argued that, in order to meet its central inflation rate target, the government should reduce its spending.

Fiscal policy

Australia contains several firms that carry on business in other countries. These multinational companies (MNCs) bring a range of advantages to their home country, Australia. The Australian Government sets relatively low import tariffs, and the country uses a floating exchange rate. Over recent years, Australia has seen more investment and a higher Human Development Index (HDI) figure.

Globalisation, free trade and protection

Read the source material carefully before answering Question 1. Source material: The future of the economy of St. Kitts and Nevis St. Kitts and Nevis is a small Caribbean nation made up of two islands. Its three main industries are tourism, financial services and agriculture. Visitors are drawn to the country’s beaches, coral reefs, forts, rainforests and shipwrecks. However, if rainforests continue to be cleared and soil erosion keeps contaminating the coral reefs, killing off marine life, tourism may be discouraged. The Government of St. Kitts and Nevis is also worried that the social costs of tourism are greater than the private costs. St. Kitts and Nevis’s financial services include an expanding banking sector. A few foreign multinational companies (MNCs) are among the country’s commercial banks. These MNCs are attracted by the country’s relatively high incomes, the absence of personal income tax and a relatively high literacy rate. Some of the country’s chief agricultural products are carrots, onions, peanuts and sweet potatoes. In 2017, the Government of St. Kitts and Nevis launched a training scheme aimed at increasing the productivity of onion farmers. Other important industries in St. Kitts and Nevis include healthcare and fishing. Table 1.1 shows healthcare spending as a percentage of GDP and life expectancy in six selected countries in 2022. Because St. Kitts and Nevis has a very small fishing industry, it imports large amounts of fish. Its fishing boats are small and some do not have up-to-date equipment. A larger fishing industry, with bigger boats, could provide several benefits to the country. Changes in the structure and performance of industries in St. Kitts and Nevis may alter the country’s price level. From 2018 to 2020, the country had deflation. This influenced people’s purchasing power, saving and debts. It also affected the country’s exports and firms’ investment decisions.

Market failure

At the beginning of 2023, the world’s four biggest accountancy firms saw demand for their services fall. One reason for this weaker demand was a fall in mergers in other industries, including the chocolate industry. Three of the accountancy firms cut back on the number of new workers they hired, and the remaining accountancy firm announced job losses. How easily workers can move into new jobs is affected by their mobility.

Workers

In 2022, Paraguay’s production possibility curve (PPC) moved rightward. Paraguay has a mixed economic system. Its government supplies merit goods and public goods. The country’s private sector is a major shampoo producer. Firms in the shampoo industry use division of labour. There are several firms in the industry, but the number is declining. It is possible that soon there may be only one firm in the industry.

Production possibility curve (PPC) diagrams

In 2022, over a quarter of a million workers, doctors included, left Sri Lanka to find jobs in other countries. Economic difficulties were a major cause, including an inflation rate of $50\%$ and fears that unemployment might increase. The Sri Lankan Government raised direct taxation. It also encouraged some public sector workers to go abroad temporarily. People employed overseas often send money back to relatives.

Employment and unemployment

In 2023, the Chinese Government stated that it would target an economic growth rate of $5\%$ and a gradual rise in both exports and imports. It was anticipated that the main source of higher output would be an increase in household spending, although this could also bring about inflation. Another objective of the Chinese Government was to keep unemployment at about $5.5\%$. China has an ageing population and an ageing labour force.

The macroeconomic aims of government