Essay Questions by Topic

a) Explain how capital goods contribute to production in a modern economy and how capital is rewarded. [8]

(b) Entrepreneurs are vital in an economy to achieve long run economic growth. Assess whether encouraging entrepreneurship or increasing another of the factors of production will be a more effective way to achieve long-run economic growth. [12]

In 2015, it was reported that the global demand for chocolate was projected to increase but it was unlikely that the global supply of cocoa beans, required to produce chocolate, would increase. a) State and explain two factors of production needed for the manufacture of chocolate. Explain the benefits of specialisation in the manufacture of chocolate. [8]

(b) Assess the extent to which a government can ensure that both merit and demerit goods are produced in desirable quantities. [12]

(b) Assess whether a market economy is always the best economic system to effectively answer the three basic questions of resource allocation. [12]

(b) Assess whether consumers always benefit when the government of a mixed economy reduces the role of the market mechanism in allocating resources. [12]

b) The provision of merit and demerit goods differs from the provision of other private goods. Assess the view that the consequences of imperfect information are more serious in a market economy than in a mixed economy. [12]

(b) Assess whether all market economies should become mixed economies. [12]

(b) Discuss the disadvantages of a planned economy and consider whether the transition to an economy in which many resources are allocated by market forces is likely to be of overall benefit. [12]

When a planned economy introduces the price mechanism to allocate some resources, a mixed economy arises. (b) Discuss the advantages of a mixed economy and whether it is always preferable to a planned economy. [12]

(b) Discuss whether the transition from a planned economy to a market economy will always benefit consumers. [12]

(a) Explain how the fundamental economic problem is addressed in a planned economy and in a market economy. [8]

(b) Discuss whether the advantages of a transition from a planned economy to a market economy always outweigh the disadvantages. [12]

(b) Discuss why in most mixed economies, resources are mainly allocated using market forces and the price mechanism. [12]

(b) Discuss whether the transition of an economy from one that is centrally planned to one in which resources are allocated through the free market is likely to be of overall benefit to the citizens of that economy. [12]

(a) Explain the different ways in which resources are allocated in a market economy and in a mixed economy. [8]

(b) Discuss two methods of increasing the provision of merit goods in a mixed economy. Consider which is more likely to be effective. [12]

b) Discuss the way in which resources are allocated in planned economies and free market economies. Consider which type of economic system is likely to have the more beneficial outcome. [12]

(b) Assess whether a shift to the right of a PPC is only caused by an increase in the quantity of resources. [12]

(a) With the help of a production possibility curve (PPC) diagram, explain the term scarcity and choice and consider the extent to which every choice has an equal opportunity costs. [8]

(a) With the help of a production possibility curve (PPC) diagram(s), explain the difference between constant and increasing opportunity costs and consider how choices in deciding which type of goods to produce in the short run may influence future economic growth. [8]

(a) With the help of a diagram, explain the significance of a position within a market economy’s production possibility curve (PPC) and consider whether such a position is likely to be permanent. [8]

(a) Use a production possibility curve (PPC) diagram to explain how a government in a mixed economy might allocate more resources to consumption and fewer resources to investment and consider a limitation of this approach to resource allocation. [8]

(a) Explain how a production possibility curve can be used to demonstrate scarcity, choice and opportunity cost. [8]

(a) With the help of a diagram, explain the difference between the causes of a movement along, and a shift of, a production possibility curve (PPC) and consider which is likely to have the most immediate impact on an economy. [8]

(a) Explain, with the use of a diagram(s), how the production possibility curve of an economy could be affected by a decrease in the quantity of labour available, but an increase in its quality. [8]

(a) Explain with the help of a production possibility curve diagram(s) how a decision to re-allocate resources in an economy to produce more capital goods and fewer consumer goods would affect consumers in both the short run and the long run. [8]

(a) Use a diagram(s) to explain how a production possibility curve can be used to show opportunity cost and why such a curve is usually drawn with increasing opportunity costs. [8]

(a) With the aid of a diagram, compare what happens to an economy’s resources to cause a movement along its production possibility curve with what happens to an economy’s resources to cause a shift of its production possibility curve. [8]

a) Use a production possibility curve diagram(s) to distinguish between the growth of an economy and a reduction in the number of unused resources in an economy and explain one reason that might cause each to occur. [8]

(a) Explain, with the aid of a production possibility curve (PPC) diagram, why scarcity makes choice inevitable for firms and how each choice has an opportunity cost. [8]

(a) Explain, with the help of diagrams, how (i) constant and (ii) increasing opportunity costs determine the shape of an economy’s production possibility curve. [8]

(a) Show how a production possibility curve can be used to explain scarcity, choice and opportunity cost. [8]

(b) Discuss whether enterprise is crucial to the outward shift of the production possibility curve in a mixed economy. [12]

(a) Explain what is meant by a merit good and why governments provide merit goods such as healthcare free of charge and consider why such provision may not always be successful. [8]

a) With the aid of examples, explain the characteristics of public goods and free goods **and** consider whether free-of-charge vaccinations offered by a government should be classified as a free good. [8]

a) With the use of examples, explain the difference between public goods and merit goods and consider whether markets will always provide enough of both goods. [8]

a) Explain why the provision of bus and local rail (mass transit) services in cities is classified as a private good not a public good and consider why such services might only be provided by the private sector. [8]

(b) Assess whether education should be classified as a public good rather than classified as a merit good. [12]

a) Explain why demerit goods are over-consumed and merit goods are under-consumed. [8]

b) Discuss why merit goods are provided by both the private sector and the public sector. [12]

a) With the help of a production possibility curve diagram(s) compare growth in the productive capacity of an economy and growth that results from a reduction in the quantity of unused resources in an economy. Explain one reason that might cause each to occur. [8]

When a planned economy introduces the price mechanism to allocate some resources, a mixed economy arises. a) Explain, using examples, why merit goods are classified as private goods rather than public goods. [8]

When a planned economy introduces the price mechanism to allocate some resources, a mixed economy arises. b) Discuss the view that in a mixed economy the only role of government should be to provide public goods and the supply of merit goods should be left to the private sector. [12]

In 2018 the UK government, concerned about the rise in obesity, particularly amongst young people, imposed a tax on producers of sugar-sweetened drinks. a) State what is meant by a demerit good, and with the help of a diagram(s) explain how a tax on producers can improve the allocation of resources in the market for sugar-sweetened drinks. [8]

In 2018 the UK government, concerned about the rise in obesity, particularly amongst young people, imposed a tax on producers of sugar-sweetened drinks. a) Explain whether private goods, free goods and public goods will all be sold in a free market economy. [8]

a) Explain, with the help of examples, how imperfect information among consumers affects their consumption of merit goods and demerit goods. [8]

b) Discuss the view that the only goods a government should produce are public goods. [12]

a) The government raises taxes to provide a toll road bridge and streetlights in a country. Explain how an economist would classify each of these provisions. [8]

b) ‘Since the demand for a demerit good such as cigarettes is price inelastic, a tax on the product is a waste of time. What is needed is better awareness amongst consumers of the negative effects of smoking cigarettes.’ Discuss this view. [12]

b) Discuss, with the use of examples, whether a government should directly provide certain goods and services in an economy. [12]

b) Discuss whether merit goods should always be subsidised and demerit goods always taxed. [12]

a) Using sin examples, explain why some goods cannot be provided as private goods. [8]

a) Explain the features of a public good. Consider whether a motorway (highway) provides an example of a public good. [8]

b) Discuss whether merit goods and demerit goods are best provided by a market economy. [12]

Semi-conductors are widely used in the production of many types of electronic goods such as smartphones. It has been estimated that the price elasticity of supply for semi-conductors is 0.2 in the short run and 0.8 in the long run. (b) Assess the likely effects on resource allocation of a continuing increase in demand for semi-conductors. [12]

(a) With the help of a diagram(s), briefly explain how the cause of a movement along the demand curve differs from the cause of a shift in the demand curve and consider the impact on the demand for one good of price changes in other goods. [8]

(a) Explain the determinants of supply for an agricultural product, such as rice, and consider which of these determinants is likely to be of the greatest significance at the present time. [8]

With the help of a formula, explain the meaning of price elasticity of demand and consider the significance to a firm of having price elastic or price inelastic demand for its product. [8]

(b) Assess whether knowledge of income elasticity of demand or price elasticity of demand for its product is more useful to a business aiming to increase the total expenditure on its product during a period of economic growth. [12]

(b) Assess whether cross elasticity of demand is likely to be more important in determining the demand for electric cars than income elasticity of demand. [12]

(b) Assess the extent to which price elasticity of supply or cross elasticity of demand is most useful to businesses. [12]

(b) Assess whether an estimate of the price elasticity of demand for a product is likely to be more useful to a firm than an estimate of its price elasticity of supply. [12]

(b) Assess whether knowledge and understanding of price elasticity of demand (PED) or cross elasticity of demand (XED) is likely to be more useful to a producer of smartphones. [12]

(b) Assess whether price elasticity of demand (PED) or income elasticity of demand (YED) is likely to be of greater importance to a firm producing cars. [12]

(a) With the help of a formula, explain the meaning of cross elasticity of demand and consider which determinants are most important in establishing the size and sign of its coefficient [8]

(a) With the help of a formula, explain what is meant by the term price elasticity of demand for a product and consider the extent to which it allows an entrepreneur to determine the effect of price changes on the total expenditure on their product. [8]

(b) When the price of a product changes, it usually changes the consumer surplus in the market. Assess how variations in price elasticity of demand for a product determine the extent of changes in consumer surplus in a market. [12]

(b) Discuss whether knowledge of price elasticity of demand or income elasticity of demand would be of greater use to a business that produces cars. [12]

(a) Explain, with the help of examples, the significance of the size and sign of the coefficient of income elasticity of demand for the classification of a good and consider how confident you are of this classification. [8]

(b) Discuss the difficulties that businesses might have when they try to control the factors that determine the price elasticity of demand for a product and consider whether attempts to control these factors are likely to be successful. [12]

(b) Discuss whether cross elasticity of demand or income elasticity of demand is likely to be more useful in assisting a firm in its pricing decisions. [12]

Market research has estimated that the cross-elasticity of demand for hotels in Barbados with respect to the price of flights to Barbados is –2.5, and that the cross-elasticity of demand for flights to Antigua with respect to the price of flights to Barbados is +0.5. (a) Explain what is meant by cross-elasticity of demand and what these values mean in terms of the effect of changes in the price of flights to Barbados on (i) the demand for hotels in Barbados, and (ii) the demand for flights to Antigua. [8]

An economy is experiencing a fall in average incomes during a severe recession. (b) Discuss the extent to which the concepts of income elasticity of demand and price elasticity of demand might be useful to an entrepreneur in this economy and consider which would be more useful. [12]

(b) Discuss the extent to which knowledge of the income elasticity of demand for its product is likely to be more useful to a business than knowledge of the cross elasticity of demand for its product. [12]

(a) Explain what is meant by income elasticity of demand and, with the help of examples, show how it can be used to determine whether a good is normal or inferior. [8]

(b) Explain the implications of price elasticity of demand and income elasticity of demand for business decisions. Discuss which measure is likely to be more useful to a business. [12]

(b) Discuss whether, for a manufacturer of smartphones, knowledge of their product’s price elasticity of demand or its cross elasticity of demand with respect to other products is more useful. [12]

Semi-conductors are widely used in the production of many types of electronic goods such as smartphones. It has been estimated that the price elasticity of supply for semi-conductors is 0.2 in the short run and 0.8 in the long run. (a) Explain what these estimates mean for producers of smartphones that use semi-conductors and consider the significance of the long-run estimate. [8]

(b) Assess the extent to which knowledge of a product’s price elasticity of supply is the most useful measure of elasticity to a firm needing to react quickly to changes in its market. [12]

(b) Assess whether the supply of agricultural products is likely to be more price elastic or less price elastic than the supply of manufactured products. [12]

(a) With the help of a formula, explain what is meant by the income elasticity of demand for a product and consider the extent to which demand for the product will always rise at the same rate as the income of its consumers. [8]

a) The price elasticity of supply (PES) for a new smartphone is estimated to be 0.8 in the short run and 1.8 in the long run. Explain what these estimates mean for producers and consumers of smartphones and consider why the estimates differ. [8]

b) Assess whether the concept of price elasticity of supply or cross elasticity of demand will be more useful to a business wanting to increase its total sales in a growing economy. [12]

a) Explain two factors that determine the price elasticity of supply of a manufactured product. [8]

a) Use examples to explain why the supply of some products is price elastic and the supply of other products is price inelastic. [8]

b) Discuss whether decisions made by a business are more likely to be influenced by knowledge of the price elasticity of demand for its product or by knowledge of the price elasticity of supply of its product. [12]

b) Discuss whether knowledge of price elasticity of demand or price elasticity of supply is more useful for a car manufacturer. [12]

The price elasticity of supply for a new smartphone is estimated at 0.8 in the short run and 1.5 in the long run. a) Explain price elasticity of supply and suggest why the above estimates differ. [8]

In summer 2018, many countries suffered a water shortage because of a long spell of very dry weather. a) Explain whether you would expect the price elasticity of supply of water to be relatively elastic or relatively inelastic. [8]

(a) Explain three reasons, associated with costs of production, why the supply curve for a particular market may shift to the right and consider the extent to which government microeconomic policy may also shift the supply curve for a particular market to the right. [8]

With the help of diagrams(s), explain the difference between a cause of movement along the demand curve and a shift in the demand curve. Consider the impact of a change in demand of one good due to the change in price of another good. [8]

Explain the determinants of supply for an agricultural product, such as rice, and consider which of these determinants is likely to be of the greatest significance at the present time. [8]

From 2030, most new car production in the United Kingdom (UK) will be of electric cars. a) Excluding the price of electric cars, explain the determinants of demand for electric cars and consider which of these determinants is likely to be of greatest significance at the present time. [8]

(a) With the help of a diagram(s), explain what is meant by equilibrium in a market and consider the extent to which the equilibrium price and equilibrium quantity are likely to change for a product following an increase in the wages for labour across the whole economy. [8]

(a) With the help of a diagram, explain what could cause an increase in demand for a product and consider whether the impact of an increase in demand on the price of the product will be the same in the short run and the long run. [8]

a) Explain the functions of price in resource allocation and consider the importance of these functions in relation to the potential effectiveness of a market economy. [8]

a) Using diagrams, explain what might cause a market to be in disequilibrium, and how market forces would lead to equilibrium being restored. [8]

There is increasing concern about the impact of foreign holidays on the environment of the host country. a) Explain, with the aid of a demand and supply diagram, two factors that might cause an increase in the demand for foreign holidays. [8]

a) Explain what determines the change in equilibrium price and equilibrium quantity of a good when there is a rise in incomes in an economy. [8]

(a) With the help of a diagram(s), explain what is meant by consumer surplus and producer surplus and consider whether a rise in the price of a product because of higher costs of production is likely to always reduce the consumer surplus. [8]

a) With the aid of diagrams, explain how consumer surplus is affected by a decrease in the price of a luxury product with many substitutes, and of an essential product with few substitutes.[8]

(b) Assess whether a minimum wage policy is the best way to redistribute income in an economy. [12]

(b) Assess whether governments should always support the provision of merit goods in markets such as those for education or health care. [12]

(b) Assess whether a charge made for healthcare at the point of use is likely to be more beneficial to consumers and providers than if healthcare is available to all free of charge. [12]

(b) Assess whether an increase in the tax on a demerit good is always the best way to reduce the consumption of such a product. [12]

**(b)**Assess the extent to which a subsidy is likely to be the best method to increase the consumption of a merit good. [12]

**(b)**Assess whether the expected benefits of providing healthcare services free of charge at the point of use exceed the likely costs. [12]

(b) Assess whether fixing a minimum price is likely to be the best policy to reduce the consumption of a demerit good. [12]

(a) With the help of examples, explain the difference between the marginal rate of taxation and the average rate of taxation and consider whether a government should decide to increase the rate of indirect tax to raise additional revenue. [8]

(b) Assess the effectiveness of government intervention through buffer stock schemes in agricultural markets. [12]

(a) With the help of a demand and supply diagram, explain how the introduction of an indirect tax affects equilibrium in a market and consider the extent to which the incidence of the tax will fall on the consumer. [8]

(b) Assess whether bus and local rail systems in cities should receive substantial subsidies from governments. [12]

(b) Governments sometimes fix maximum prices on goods for different reasons. Assess whether the use of a maximum price is always advantageous. [12]

(a) A government wishes to keep the price of an essential food, such as rice, affordable to help low income households. Assess whether a policy of fixing the maximum price for an essential food is likely to be more effective than a policy of making transfer payments to low-income households. [12]

(b) With the help of a diagram, assess whether the introduction of a minimum price in a market can be justified. [12]

(b) Assess how governments use macroeconomic intervention to achieve their macroeconomic objectives. [12]

(b) Discuss the extent to which the introduction of a maximum price in a market will benefit consumers. [12]

(a) Explain why government intervention may be required to provide merit goods and consider why such intervention may not always be successful. [8]

(b) With the help of a diagram, assess whether the benefits of a buffer stock scheme for an agricultural product always outweigh its disadvantages. [12]

(b) Assess which policies are likely to be most effective in redistributing income. [12]

(b) Assess the extent to which government policies to redistribute income and wealth are likely to be successful. [12]

(a) Explain the possible economic reasons for inequality of income and consider whether inequality of income can benefit an economy. [8]

(a) Explain how the circular flow of income in an economy changes when that economy moves from a closed to an open economy and consider what determines the extent of the change. [8]

(a) With the help of a diagram, explain what is meant by the circular flow of income in an open economy and consider the extent to which it can explain economic growth in such an economy. [8]

(a) Explain the circular flow of income in a closed economy and consider the extent to which the circular flow of income changes as an economy becomes an open economy. [8]

(a) With the help of a circular flow of income diagram, explain how equilibrium is determined in an open economy and consider whether a budget deficit or a trade deficit is more likely to cause lasting disequilibrium. [8]

(b) Assess whether an increase in investment in new infrastructure projects will always have a positive impact on the circular flow of income in an economy. [12]

a) With the help of a diagram, explain how increases in aggregate demand affect the level of real output and the price level in an economy and consider when such increases may become a problem. [8]

a) Explain what is meant by aggregate supply and explain one reason why the aggregate supply curve of an economy would shift outwards in (i) the short run, and (ii) the long run. [8]

(a) With the help of an AD/AS diagram(s), explain cost-push inflation and demand-pull inflation in an economy and consider in what circumstances one may be more damaging than the other. [8]

a) Explain how the factor of production enterprise contributes to aggregate supply in a modern economy and how it differs from the other factors of production in terms of the reward for its services. [8]

(b) Assess the extent to which economic growth is always beneficial for the people and government in an economy. [12]

(a) Explain two possible causes of economic growth and consider whether the consequences of economic growth for an economy will always be positive. [8]

a) With the help of an aggregate demand and aggregate supply diagram, explain how a decrease in interest rates could cause economic growth and consider whether economic growth will always result in inflation. [8]

b) Assess whether the consequences of economic growth for an economy are always positive. [12]

(a) Explain two methods of measuring unemployment and consider the extent of the possible difficulties in obtaining an accurate measurement of unemployment. [8]

(b) Assess whether increases in aggregate demand are the best way of reducing unemployment in a high-income country. [12]

(a) Explain three causes of unemployment and consider which cause is likely to be most damaging to a high-income economy. [8]

(a) With reference to a country that is known to you, explain the main causes of unemployment and consider which of these causes is most significant.[8]

(b) Assess whether the consequences of inflation in an economy are always negative. [12]

(a) With the help of an AD/AS diagram(s), explain one demand-side and one supply-side cause of deflation and consider which is likely to be more damaging to an economy. [8]

a) In 2021, year-on-year inflation in many economies increased to a level not experienced for fifty years. With the help of a diagram, explain what is meant by cost-push inflation **and** consider whether this type of inflation has affected your own economy since 2021. [8]

b) Assess whether the internal effects of inflation are more serious than the external effects of inflation for an economy. [12]

(a) Explain the difference between cost-push and demand-pull inflation and consider which is more likely to occur if there is a depreciation in the exchange rate of a country with few natural resources. [8]

(b) Assess whether monetary policy or supply-side policy is likely to be more successful in reducing the rate of inflation in an economy. [12]

a) Explain the difference between cost-push inflation and demand-pull inflation. [8]

(b) Assess whether monetary policy is the only way to control a high rate of inflation. [12]

a) Explain how inflation is measured and why a rising rate of inflation may be of concern to consumers and producers. [8]

b) Discuss whether the domestic effects of inflation are more serious than the external effects for an economy. [12]

Explain what is meant by deflation and use aggregate demand and aggregate supply diagrams to explain how it might arise in an economy. [8]

b) Explain how aggregate demand is likely to be affected by an increase in the money supply and consider whether the impact of such an increase will be on employment or on the general price level. [12]

The annual rate of inflation in an economy increased sharply and unexpectedly. a) Explain the likely consequences of such an increase for consumers and firms. [8]

(b) Assess the extent to which using fiscal policy would be the best way to reduce a high rate of inflation. [12]

(b) Assess whether expansionary fiscal policy always benefits an economy. [12]

(a) With the help of a AD/AS diagram, explain what is meant by an expansionary fiscal policy and consider the extent to which an expansionary fiscal policy will always increase the level of aggregate demand. [8]

(b) Assess whether a government should always aim for an expansionary fiscal policy rather than a contractionary fiscal policy. [12]

The Chinese government has re-emphasised its commitment to rebalancing the economy from one focused mainly on investment and exports to one aiming to increase the proportion spent on domestic consumption. b) Assess the extent to which it would be possible to achieve this by fiscal policy alone. [12]

b) Assess whether a government should always aim to balance its budget rather than have a budget surplus or a budget deficit. [12]

(b) Assess whether the achievement of a balanced budget should always be a main government macroeconomic objective. [12]

b) Discuss whether an increase in direct taxes or an increase in interest rates is the more effective way of reducing inflation. [12]

b) Discuss the ways in which fiscal policy can be used to increase the aggregate supply of products in an economy and consider whether this approach is likely to be effective. [12]

b) Discuss the view that direct taxes are the fairest and the most effective way for governments to raise revenue. [12]

b) Assess which expansionary macroeconomic policy would be most likely to enable a government to meet its economic objective of a low rate of unemployment. [12]

In many economies, the use of cash is declining as people use contactless payments that transfer funds directly between bank deposits. a) Discuss whether an expansionary monetary policy will be successful in correcting deflation. [12]

(a) Explain how monetary policy may be able to reduce the rate of inflation in an economy and consider the likely success of this policy. [8]

b) Discuss whether a contractionary monetary policy is the best way to reduce the rate of inflation. [12]

b) Discuss whether a policy of increasing interest rates is the best way of controlling a rising rate of inflation in an economy. [12]

b) Discuss whether a government should use monetary policy or fiscal policy to solve the problem of deflation in an economy. [12]

The annual rate of inflation in an economy increased sharply and unexpectedly. b) Discuss whether a government should Discuss whether a substantial rise in interest rates is the best way of correcting this increased rate of inflation. [12]

b) Discuss whether monetary policy measures are always effective in correcting a high rate of inflation. [12]

(a) Explain why expenditure on education and training is a supply-side policy and consider why its impact on the general price level may differ between the short run and the long run. [8]

(b) Assess the extent to which supply-side policy is the best method to reduce the rate of inflation. [12]

(b) Assess whether supply-side policy is likely to be equally successful in reducing both structural and cyclical unemployment. [12]

(b) Assess whether supply-side policy is the most effective way to achieve long-run economic growth. [12]

(b) Assess whether supply-side policy is the only way of reducing long-term unemployment in an economy. [12]

(b) Assess whether supply-side policies are the most effective way to correct a deficit on the current account of the balance of payments of an economy. [12]

(b) Discuss the difficulties that might be encountered when adopting supply side policies to expand the productive capacity of an economy and consider whether these difficulties can be overcome. [12]

(b) Discuss whether supply side policies will be successful in increasing the quantity and quality of the factor enterprise in a modern economy. [12]

(b) Discuss the extent to which a supply-side policy involving new road schemes and new training schemes will increase the rate of inflation in the economy. [12]

In summer 2018, many countries suffered a water shortage because of a long spell of very dry weather. (b) Consider the short-term and long-term policies that could be adopted to deal with a water shortage in an economy and discuss whether these are likely to be successful. [12]

(a) With the help of a formula, explain the causes of an improvement in the terms of trade in an economy and consider whether such an improvement can ever be harmful to an economy. [8]

(b) Assess whether government policy can influence an economy’s comparative advantage in a good or service. [12]

(b) Assess the extent to which the consequences of free trade are always positive for an economy. [12]

(a) Explain the potential advantages of free trade and consider whether such advantages are always greater than the potential disadvantages of free trade. [8]

a) Explain two possible causes of a change in the terms of trade in an economy and consider which of these causes is likely to be more important for low-income countries. [8]

b) Assess whether a rise or a fall in the terms of trade will benefit the macroeconomic performance of an open economy that is heavily dependent on international trade. [12]

a) Explain how a higher rate of inflation in an economy compared to its trading partners and a decline in the exchange rate will each affect the terms of trade in an economy. [8]

(a) Two countries each produce two products and wish to trade with each other. Explain the difference between the principles of absolute advantage and comparative advantage and consider whether the principle of comparative advantage is always the more important influence when each country is deciding whether to trade with each other. [8]

(b) Assess whether the theories of absolute and comparative advantage are substantially undermined by their various limitations. [12]

An economy adopts a freely floating exchange rate. b) Discuss the advantages and disadvantages that result from a rise in an economy’s terms of trade and consider whether a rise is likely to be of overall benefit to an economy. [12]

b) Discuss whether the principle of comparative advantage concludes that a movement to free trade will always result in an overall benefit for an economy. [12]

b) Discuss the view that the gains from tariff-free trade are greater for countries who are net importers than for countries who are net exporters. [12]

b) Discuss whether a rise in the terms of trade or a fall in the terms of trade is more likely to be of benefit for an economy. [12]

a) Explain why the theory of comparative advantage may not give a true account of the benefits of free trade. [8]

(b) Assess whether the potential benefits of free trade always outweigh the arguments for protectionism. [12]

(b) Assess whether protectionism is always the best way of reducing a deficit on the current account of the balance of payments. [12]

(b) Assess whether free trade is always better than a policy of protectionism for a developing economy that wishes to trade internationally. [12]

(a) Explain the difference between an import tariff and an import quota and consider why a government would choose an import tariff rather than an import quota as a tool of protection in international trade. [8]

Since 2018, China and the United States (US) have been imposing tariffs on trade with each other. (b) Discuss the view that some will benefit and some will lose but the overall impact of these tariffs will be negative. [12]

(b) Assess whether the arguments for protectionism in the context of international trade are always stronger than the arguments against. [12]

(b) Assess whether protectionism is the best way to correct a deficit in the current account of the balance of payments. [12]

Protectionism can take different forms in different countries. (b) Discuss whether export subsidies are always a better method of protectionism than tariffs. [12]

(b) Discuss the advantages and disadvantages of protecting an industry such as steel and consider whether the protection will be of overall benefit to this economy. [12]

In April 2018, the United States (US) government threatened to impose tariffs of 25% on a wide range of imports from China including steel, technological products, medicines and household goods such as washing machines. In turn, China threatened to retaliate with the same proposed tariff on imports from the US of soya beans, cars and chemicals. (b) Discuss whether the US and China could both benefit from the imposition of tariffs on goods such as those identified. [12]

(b) Assess whether an improvement in the terms of trade or a surplus on the current account of the balance of payments is of more benefit to an economy. [12]

(b) Assess whether an economy will always benefit from having a surplus on the current account of its balance of payments. [12]

b) Assess whether contractionary fiscal policy is likely to be the best way to reduce a current account deficit on the balance of payments. [12]

b) A country has a persistent deficit on the current account of its balance of payments. Assess the likely consequences for the domestic and external economy of this country. [12]

b) Discuss whether protectionist policies would be the most effective way to correct a current account deficit on the balance of payments in an economy. [12]

a) Explain why some countries consistently have a deficit on the current account of the balance of payments. [8]

An economy moves from a deficit to a surplus on the current account of the balance of payments. a) Explain what is meant by a surplus on the current account of the balance of payments and consider the possible impact on the level of employment and prices when there is a change from a deficit to a surplus current account balance in an economy. [8]

(b) Assess whether the depreciation of an exchange rate is always beneficial to an economy. [12]

(a) With the help of a diagram, explain two ways in which a fall in the balance of trade in goods may affect the value of a floating exchange rate and consider the extent to which a change in the relative rate of interest between two countries may have a greater impact on the exchange rate. [8]

(a) Explain what is meant by a depreciation of the exchange rate and consider whether a depreciation is likely to increase domestic real output. [8]

(a) With the help of a diagram, explain what is meant by an appreciation of a floating exchange rate and consider whether a country can only benefit from the appreciation of its currency. [8]

An economy adopts a freely floating exchange rate. (a) Explain how this economy’s exchange rate is likely to be affected when its inflation rate is much higher than inflation rates in its trading partners. [8]

(a) With the help of a diagram(s), explain the likely causes of a depreciation of a floating exchange rate and consider whether such a depreciation is always beneficial to an economy. [8]

(a) Explain, with the use of a diagram(s), two factors that could bring about a depreciation in the value of a country’s exchange rate in a freely floating exchange rate system. [8]

(a) Explain why a fixed exchange rate could cause difficulties for a country that has one. [8]

(b) Discuss whether expenditure-reducing policies are likely to reduce the current account deficit on the balance of payments for an economy with a floating exchange rate. [12]

(b) Discuss how likely it is that monetary policy would be successful in reducing inflation in an economy with a floating exchange rate. [12]

(b) Discuss whether an appreciation of a country’s foreign exchange rate is likely to cause both a rise in inflation and a decrease in employment in its economy. [12]

Some countries consistently have a deficit on the current account of the balance of payments. b) Discuss the extent to which expenditure-switching policies and expenditure-reducing policies might be able to reduce such a deficit. [12]

Some countries consistently have a deficit on the current account of the balance of payments. b) Discuss whether expenditure-reducing or expenditure-switching policies are more likely to be of greater overall benefit if adopted to remove a persistent deficit on the current account of the balance of payments. [12]

b) Discuss whether supply-side policies are an effective way of correcting a deficit on an economy’s current account of the balance of payments. [12]

Evaluate whether marginal utility theory can fully explain the link between the changing price of a
good and quantity demanded of that good. [20]

With the help of a diagram, evaluate the use of indifference curve analysis to explain the relationship
between a change in the price of a product and the change in an individual consumer's demand
for this product. [20]

Evaluate the use of indifference curve analysis to derive the demand curve for a normal good and
the demand curve for an inferior good. [20]

A rational consumer will always purchase less of an item as the price increases.

Discuss, with the use of indifference curve analysis, whether this statement is correct. [25]

A city bus company proposes to reduce passenger fares.

Explain whether consumers always buy more of a good at a lower price than a higher price.
Consider what might be the effect on demand for bus journeys and the revenue of the bus
company of the lower fares. [25]

The UK Government has established a behavioural insight team known as the 'nudge unit,' which
attempts to change consumer behaviour by persuasion.

Explain how indifference curve theory predicts a consumer will react to changes in income and
changes in the price of a product in order to maximise satisfaction. Consider whether the use of
'nudge' theory (persuasion) conflicts with this theory of maximising satisfaction. [25]

Use indifference curves to distinguish between the income and substitution effects of a price
change. Discuss whether the distinction might be important for a manufacturer. [25]

Choice is an essential part of economics. Sometimes consumers change their choices either
when shops have special offers on previously very expensive luxury products, or when advertising
persuades them to change their preferences.

Analyse how the economic theory of indifference curves can be used to construct a consumer's
demand curve. Discuss whether this theory can explain the above changes in choice. [25]

The use of indifference curves to establish a consumer's equilibrium is purely a theoretical tool.
They show the relation between two goods; they do not show prices or income and, therefore,
cannot be used to determine a demand curve.

How far do you agree with this statement? [25]

With the help of a diagram, consider whether economic efficiency can be achieved without
government intervention in a market economy. [20]

The provision of health care by the public sector is inefficient and therefore all health care should
be provided by firms operating in the private sector.

Evaluate this comment. [20]

To improve allocative efficiency economists frequently advise governments to remove existing
subsidies to the private sector providers of education.

With the help of a diagram, evaluate this advice. [20]

Explain what is meant by cost benefit analysis and consider how it might be used by a government
to decide whether a new hospital should be built. [25]

'The cause and extent of market failure depends entirely upon the type of market structure under
consideration.'

Discuss this statement. [25]

Assess the suggestion that a free market economy is neither possible nor desirable. [25]

Assess the suggestion that a free market economy is neither possible nor desirable. [25]

Discuss whether competitive markets in the private sector are the best way to achieve an efficient
allocation of resources. [25]

'Free markets make the most efficient use of resources and are the foundation of a successful
economy.' To what extent do you agree with this? [25]

Explain what is meant by 'market failure' and consider how far government intervention can reduce
market failure. [25]

Discuss whether economic efficiency is always achievable in a market economy. [25]

'A society that cares about efficiency needs to provide government funds for social sciences that
work on the assumption that efficiency matters'. (Royal Society of Arts Journal, Issue 4, 2013)

Explain what is meant by economic efficiency. Consider whether you agree that the only way to
achieve economic efficiency is through public sector intervention in the economy. [25]

A free market economy operates to the benefit of both consumer and producer to achieve the

most efficient outcome, and therefore there is no role for a government to play in controlling the
market.

Consider the extent to which this statement is correct. [25]

In recent years, many countries have faced economic difficulties. At such a time, discovering the
best means of allocating scarce resources becomes much more pressing.

Consider whether the study of economics has anything to offer to achieve an efficient allocation of
resources in a country. [25]

Discuss whether privatisation and an increase in competition would hinder or help the achievement
of economic efficiency. [25]

Firms should be allowed to produce in the manner they wish and consumers allowed to buy what
they believe they want.

Discuss whether this is the best means of ensuring an efficient use of an economy's resources.
[25]

'Lack of efficiency in the use of resources is not due to the market's inability to function. It is due to
government intervention in a system that is best left to its own workings.' (Source: RSA Journal, Issue 4,
2013)

Consider this opinion. [25]

A society that says it cares about efficiency needs to abandon the notion of a market system to
allocate resources. Markets only serve self-interest, they are never efficient.

Discuss whether this opinion is supported by economic analysis. [25]

'The price mechanism is the most effective and certain method for ensuring an efficient allocation
of resources to achieve maximum welfare.

Comment on this opinion. [25]

It has been said that the aim in the allocation of resources should be to achieve the greatest
happiness for the greatest number of people.

Discuss whether economics has anything to say about the best way to maximise welfare from the
use of resources. [25]

Adam Smith's eighteenth century idea of an 'invisible hand' where the free market allocates

resources effectively and efficiently is false because the 'invisible hand' cannot work in a complex
modern economy.

Do you agree with this argument? [25]

Private sector developers have discovered potentially profitable supplies of gas and proposed a
new method of extracting it that involves drilling in some areas of natural beauty. They say it is
important that a country's resources are used efficiently.

Consider whether they might mean the same as economists when they talk about the efficient
use of resources and whether it is possible in practice for private organisations to achieve such
economic efficiency. [25]

'Government economic policy is based on the idea that people cannot be trusted to choose what is
good for them but instead sometimes choose things that are harmful to themselves or detrimental
to the environment (or both). Therefore a free market cannot allocate resources efficiently.

Do you support this argument? [25]

'The best way to increase economic welfare is to encourage competition in a market system,

Consider whether you agree with this view. [25]

Negative externalities of production cause market failure.

With the help of a diagram, assess the extent to which the introduction of indirect taxation is likely
to address this cause of market failure. [20]

Governments in many countries are promoting policies that reduce the impact of the negative
externalities.

Evaluate, using appropriate diagram(s), the extent to which two policies used to reduce negative
externalities can also improve allocative efficiency. [20]

With the help of a diagram, assess the effectiveness of a government's intervention in the price
mechanism to address the causes of climate change. [20]

Pollution is caused when consumers or producers make decisions based on self-interest. This is
a sign of market failure.

With the help of a diagram, evaluate the extent to which government policies should rely upon
market forces to address this market failure. [20]

The increased use of electric vehicles (EVs) is encouraged as part of governments' climate change
policies because they create fewer negative externalities than diesel and petrol (gas) vehicles.

Evaluate, with the help of a diagram(s), two policies that a government may use to encourage the
use of EVs. [20]

The use of air travel leads to market failure caused by negative externalities.

With the help of a diagram, assess the extent to which a government can intervene to correct this
market failure. [20]

'Smoking cigarettes causes negative externalities and negative externalities cause market failure,
which can only be solved by government intervention.'

To what extent do you agree with this statement? [25]

Monopolies restrict output to raise prices to exploit consumers.

With the help of a diagram, assess the extent to which a government should intervene in monopoly
markets. [20]

Oligopolies are able to avoid price competition while maintaining supernormal profits in the long
run.

Evaluate this statement. [20]

Evaluate the view that monopolistically competitive firms will always charge lower prices and
operate more efficiently than a monopoly firm. [20]

The model of perfect competition is the ideal form of market structure because it is the most
efficient.

With the help of diagrams, evaluate this statement. [20]

Evaluate, with the help of a diagram(s) how total market demand and minimum efficient scale may
determine the form of market structure in an industry. [20]

Some firms in oligopoly markets choose to collude rather than engage in price competition. This
will lead to higher prices and a less efficient allocation of resources.

Evaluate this statement. [20]

'A firm is fully aware of market conditions and its best rational interest would be achieved by
pursuing the clearly defined objective of maximising profits.'

Consider whether this statement has any merit in different market structures. [25]

'Competition is an essential element of an efficient market economy. If there is a monopoly then
there is no competition. Monopolies exist in all economies and, therefore, all economies must be
inefficient.'

Discuss this opinion. [25]

'Governments should use whatever methods they can to regulate monopolies because they are
inefficient.'

Consider whether monopolies are always inefficient and what methods might be used by
governments to regulate them. [25]

A businessman claimed it was difficult to make decisions as his business was subject to uncertainty
and interdependence.

Discuss the methods used by oligopoly firms to reduce uncertainty and interdependence and the
extent to which these methods exploit the consumer. [25]

Explain what is meant by the 'equilibrium of a perfectly competitive firm' and consider the view that
equilibrium is always achieved in perfect competition but never in a monopoly market. [25]

'Inacomplex modern economy there is no possibility of a perfect market system. A concentration
of market power always results and does not serve the public interest'

Do you agree with this opinion? [25]

The growth of a firm using a takeover is desirable because it enables consumers to benefit from
lower prices and the firm to gain additional profits.

Evaluate this statement. [20]

Evaluate the consequences for the price and output of a firm if it changes its objective from profit
maximisation to sales maximisation as a response to the principal-agent problem. [20]

A government allows the merger of two large firms in the same industry.

With the help of a diagram, evaluate the view that this merger should not have been allowed. [20]

In recent years the prices of many electronic products have fallen as sales have increased.
Research to improve the products is expensive but there are large economies of scale in production.

Discuss what is likely to happen to the costs, prices of products and market structure in industries
where there are large economies of scale. [25]

Some firms frequently use price discrimination.

Assess the view that when this occurs, price discrimination will always benefit the producer at the
expense of the consumer and society. [20]

Analyse the reasons why it might be thought necessary for a government to control dominant firms in an industry and consider the methods it might use to achieve such control. [25]

Discuss whether market failure can be successfully eliminated by governments. [25]

Evaluate whether the marginal revenue product theory (MRP) always explains the differences in
wages. [20]

With the help of a diagram, assess whether the impact of an increase in labour productivity on the
wages and employment of a firm is likely to be greater in a perfectly competitive labour market
than in an imperfectly competitive labour market. [20]

With the help of a diagram, evaluate the consequences of imposing an effective minimum wage
on the employment level and the wage level in a monopsony labour market. [20]

Wages in a perfectly competitive labour market will always be higher than wages in a monopsony
labour market.

With the help of a diagram, evaluate this statement. [20]

The introduction of a trade union into a perfectly competitive labour market will always lead to
higher wage levels and a higher level of unemployment.

With the help of a diagram, evaluate this statement. [20]

Discuss the extent to which the marginal revenue product theory can be used to explain the
determination of wages. [25]

The best outcome for labour markets is that the forces of supply and demand are left to determine
wages without government interference.

Discuss with the use of diagrams, whether this statement is always true. [25]

Evaluate whether the theory of wage determination can account for wage differentials (i) between
a director and a general worker in the same company and (ii) between two workers doing the
same job in different companies. [25]

'Wage differentials can be explained by economic theory. They are a sign of the power of a firm to
exploit its workforce and are unjust.'

Do you agree with this view? [25]

'Wage differentials can be explained by economic theory. They are a sign of the power of a firm to
exploit its workforce and are unjust.'

Do you agree with this view? [25]

Marginal revenue productivity theory analyses why wage rates differ in imperfect markets.

Explain this analysis using a diagram and consider if a trade union negotiated a higher wage than
determined by the market, whether the outcome would necessarily be the same as that in perfect
competition. [25]

The wages of the Chief Executive Officers (CEO) of the six largest banks in the United States

(US) were reported to be between 250 and 360 times the average wage of the workers in those
banks. The six CEOs were all male.

Discuss the extent to which economic theory can account for these variations in wages. [25]

After negotiation, the workers in an industry obtained from employers higher wage rates. The
employers' spokesperson said 'the cost of the deal would have to be met through improved
productivity or by reductions in other costs'.

Analyse whether this deal can be incorporated into the economic theory of wages and consider
the possible outcome for employment of such a deal. [25]

Analyse and discuss whether the economic theory of wages can explain why there are inequalities
in wage rates in a country. [25]

'A rise in wages and salaries will increase the costs of production, decrease profits, cause inflation
and is detrimental.'

Discuss whether the economic theory of wage determination supports the view that an increase in
the level of wage rates is detrimental for the firm and for the worker. [25]

Discuss how economic theory analyses wage rate determination. Consider if the theory can be
used to explain the fact that the highest pay is often given for the work that is most agreeable
while those occupations that are most unpleasant, such as rubbish collection, receive low pay.

[25]

Consider whether wages are only determined by the market forces of supply and demand. [25]

Trade unions, minimum wage legislation and large powerful businesses invalidate the conclusions
of the traditional economic theory of wage determination. The theory needs to be replaced.

How far do you agree with this assertion? [25]

The French film industry is subsidised by the government. Some actors receive very high fees.
In 2015 it was proposed that, as part of the fee is public money, some of the subsidy should be
withdrawn.

Discuss what might happen to employment and wages if a subsidy for production were reduced.
Use the economic theory of wage determination in perfect and imperfect labour markets to support
your answer. [25]

The merit of the economic theory of wage determination is that it clearly shows what the best level

of wage rates should be and thus is evidence that there is no need for either the government or
trades unions to fix wages.

Discuss this assertion. [25]

Analyse the difference shown by marginal revenue productivity theory between wage determination
in perfect and imperfect labour markets. Discuss the proposition that, in imperfect markets, a trade
union can only increase the wage rate by allowing a reduction in employment. [25]

Economic theory produces a precise equilibrium outcome, often in an idealised market situation,
but in reality things are much less certain.

Discuss whether this opinion can be applied to the determination of wage rates. [25]

A politician remarked that the absence of trades unions would necessarily lead to an improvement
in all labour markets.

To what extent does economic analysis support this remark? [25]

In 2014, the average monthly salary in South Africa for an executive business manager in the
private sector was 60000 rand; for a public sector nurse, 13700 rand; for a cleaner, 3600 rand.
These differences in wage rates can be entirely explained by the economic theory of the labour
market.

Discuss whether you agree with this conclusion. [25]

'Wage rate inequalities are inevitable and can be justified'

Discuss whether this statement can be supported by economic theory. [25]

Evaluate how a country might increase its potential economic growth. [20]

The table below contains some key economic data for Mexico in 2020.

Gross National Income (GNI)	18.5 billion pesos
nominal wages	+2.8%
disposable income	+1.2%
unemployment rate	4.2%
population growth rate	1.1%
inflation rate	3.4%

Source: knoema.com

Evaluate the use of these statistics in assessing the standard of living in Mexico in 2020. [20]

Cyclical and structural unemployment are the most common types of unemployment.

Explain the causes of these types of unemployment and assess the effectiveness of government
policies to reduce them. [25]

Central banks can control the money supply. An increase in the money supply will cause inflation,
therefore central banks can control inflation.

Evaluate this statement. [20]

With the help of an injections and withdrawals graph, assess the impact of a decrease in interest
rates on the level of employment in an economy. [20]

A country is experiencing stagflation, when there is a high rate of inflation at the same time as a negative output gap.

With the help of a diagram, evaluate the effectiveness of using fiscal policy to solve this problem. [20]

With the help of a diagram, assess the effectiveness of government policies that might be used to
reduce demand-pull inflation. [20]

In periods of rising and persistent inflation, consumers and workers change their expectations of
the future rate of inflation.

Evaluate, with the help of a diagram(s), the consequences of these changes of expectations for
fiscal policy. [20]

With the help of a diagram, assess the effectiveness of government policies which might be used
to reduce cost-push inflation. [20]

With the help of a diagram, assess the effectiveness of using fiscal policy to close a negative
output gap in an economy [20]

Assess the extent to which monetary policy can be used effectively to solve the problem of
unemployment. [20]

Evaluate the effectiveness of using monetary policy to reduce the rate of inflation and how this
policy may affect a government's ability to achieve its other macroeconomic aims. [20]

An increase in a government's budget surplus will increase unemployment in the short run but it
will make it easier to control a balance of payments deficit on the current account in the long run.

Evaluate this statement. [20]

A government's decision to increase its budget deficit as a proportion of the economy's GDP will
depend significantly upon whether the economy's output gap is positive or negative.

With the help of a diagram explain and evaluate this statement. [25]

Government policies which rely on increasing budget deficits to solve the problem of unemployment
will not be successful because they do not affect the natural rate of unemployment.

Discuss the extent to which you agree with this statement. [25]

Explain why an economy might be in equilibrium at less than a full employment level of output and
critically evaluate alternative policy measures which might be used to move the economy to a full
employment level of output. [25]

'The rate of interest is one of the most important macroeconomic variables because changes in
the rate of interest have a significant impact on each of the key macroeconomic aims.'

To what extent do you agree with this statement? [25]

Evaluate how the relative size of injections into and leakages from the circular flow of income can
affect the ability of a government to achieve its macroeconomic aims. [25]

'The failure of the policy of quantitative easing (QE) to solve problems associated with an
economic recession illustrates the weakness of monetary transmissions mechanisms in particular

and monetary policy in general.'

Critically evaluate this statement. [25]

'Keynesian policies to solve the problem of unemployment will not work because they will conflict
with the attainment of other key macroeconomic aims.'

Assess the accuracy of this statement. [25]

Recession in some economies has caused high unemployment. At the same time high levels of
national debt and substantial budget deficits have been experienced.

This means that governments can no longer use Keynesian demand management policies to
solve the problem of unemployment.

To what extent do you agree with this conclusion? [25]

Economic models have little practical relevance.

Discuss whether this is true of the analysis of how a fall in interest rates might affect an economy's
GDP. [25]

Equilibrium is a key concept in the study of economics. Explain what an equilibrium level of national
income means and discuss the relative merits of policies a government might use to cause the
equilibrium level to change in an open economy. [25]

A ccountry with an open economy has falling demand for exports.

Consider the view that monetary policy alone will solve this problem. [20]

With the help of a diagram, evaluate the effectiveness of the use of expenditure-switching policies
to reduce a current account deficit on the balance of payments. [20]

Consider the extent to which the depreciation of its foreign exchange rate contributes to the
economic growth of a low-income country. [20]

&Expenditure-reducing policies will reduce a balance of payments deficit but will also cause
significant unemployment.

Evaluate this statement. [20]

Consider the relative merits of gross national income (GNI) and the multidimensional poverty
index (MPI) as measures of the standard of living. [20]

'To what extent do you agree that an increase in productivity will lead to a higher standard of living
in low-income countries? [20]

Developing economies have a high proportion of economically inactive people relative to the size
of the labour force (a high dependency ratio). This is the main reason why the standard of living is
low in developing economies.

Evaluate this statement. [25]

Explain what economists mean by an increase in real GDP per capita and discuss the extent to
which an increase in real GDP per capita will have a positive impact on economic development.
[25]

With the help of a circular flow diagram discuss how a policy of export-led growth might affect the
standard of living in a developing economy. [25]

Many developing countries rely heavily on the production and export of primary products. This is
the main cause of low levels of economic growth in developing countries and therefore the main

explanation for the low standard of living in these countries.

Discuss the extent to which you agree with this statement. [25]

Discuss the extent to which gross domestic product (GDP) is a useful measure of living standards
and economic development. [25]

Discuss the extent to which the Human Development Index (HDI) and the Measure of Economic
Welfare (MEW) provide better measures of living standards than Gross National Income (GNI).
[25]

'There have been many attempts to measure changes in living standards both within and between
countries. Although some have been more useful than others, none of these alternative measures
has produced a sufficiently accurate, reliable indicator of changes in living standards.'

How far would you agree with this statement? [25]

Discuss whether countries at different stages of development should use different methods of
measuring living standards. [25]

'The Human Development Index (HDI) is a more useful indicator of changes in living standards
than changes in Gross Domestic Product (GDP) but it still does not provide an entirely accurate
assessment of whether living standards have improved over a given time period.'

Critically evaluate this statement. [25]

Economic development can only be achieved by economic growth and this depends solely on
higher levels of government investment.

To what extent would you agree with this statement? [25]

'Both developed and developing economies can experience high levels of unemployment, high
rates of inflation and large current account deficits. Therefore there is now no real difference
between these two types of economy'.

How far would you agree with the view that this statement is misleading? [25]

Some developing countries pursue export-led growth and argue that the overall growth of the
economy can be generated not only by increasing the amounts of labour and capital but also by
expanding exports.

Other developing countries prefer to promote growth by encouraging investment by foreign
multinational corporations.

Compare these approaches and assess which is likely to be the more effective. [25]

Whether a country can be classified as developed depends on the value of its GDP and the higher
the GDP the better it is for the country.

Consider this opinion. [25]

'The measurement of living standards is problematic. It is never certain that people in one country are better off than those in another. The classification of countries into developing and developed is, therefore, never clear.'

Do you agree with this argument? [25]

Imagine you have been asked to produce a report about the quality of life in your country. Discuss
what would be important to include in your report and what economic indicators you would use in
order to reach a conclusion. [25]

Discuss which issues are at the heart of the debate about the quality of life in a country and what
indicators might be used to assess them. [25]

Governments want to increase the standard of living in their country.

Discuss whether the indicators used to measure the standard of living are reliable and consider
what policies a government might use to try to increase the standard of living in its country. [25]

Privatisation is often required by the International Monetary Fund (IMF) and the World Bank
before they are prepared to offer support to countries requiring loans, grants, debt relief and debt
cancellation programs.

Evaluate the view that privatisation will always improve the allocation of resources in a country.
[20]

Between 2010 and 2020, very low interest rates encouraged low-income countries to borrow
money from foreign investors and governments to finance long-term economic growth.

Evaluate this approach to promoting long-term economic growth. [20]

Assess the impact of international aid on the standard of living in low-income countries. [20]

The presence of multinational corporations (MNCs) in a low-income country always promotes
economic growth in that country.

Evaluate this statement. [20]

Discuss the ability of multinational corporations to increase living standards in their home country
and the other countries in which they operate. [25]

The International Monetary Fund (IMF) lends money to developing countries but requires that
these countries reduce existing restrictions on imports, focus on the export of primary goods and
accept a devaluation of their currencies.

Based upon the above, assess whether developing countries should continue to borrow money
from the IMF. [25]

'In developing economies an increase in GDP determines an increase in the standard of living.
Foreign direct investment (FDI) will produce an increase in GDP therefore governments in
developing economies should encourage FDI.'

How far do you agree with this statement? [25]

“Investment by multinational corporations (MNCs) in a developing country always promotes
sustainable economic growth in that country.”

Discuss. [25]

Globalisation will have an equally beneficial effect on the standard of living in both high-income
and low-income countries.

Evaluate this statement. [20]

A free trade area gains all the benefits associated with being a member of a customs union while
avoiding all the costs associated with being a member of a customs union.

Evaluate this statement. [20]

Some high-income countries have introduced a policy of high tariffs on some imports to reduce
the negative effects of globalisation on their economies.

With the help of a diagram, evaluate this policy. [20]

In recent years many countries have joined or established a free trade area (FTA).

Evaluate, with the help of a diagram(s), whether membership of an FTA is always beneficial to a
country. [20]

Globalisation will help to achieve economic growth in high-income economies and this will
automatically improve living standards.

Evaluate this statement. [20]

To what extent do you agree with the view that globalisation benefits high-income countries at the
expense of low-income countries? [20]

Assess the impact of globalisation on the standard of living in low-income countries. [20]