Economics paper 2 past papers
1. Which of the following policies is most likely to reduce cyclical unemployment? box
[1 mark]
A Increase in direct taxes
B Increase in interest rates
C Increase in money supply
D Increase in taxes on business profits: C Increase in money supply
2. Which of the following is an example of a supply-side policy?
[1 mark]
A Reduced taxes on company profits
B Increased government spending on unemployment benefits
C Reduced government spending on education
,D Increased taxes on expenditure: A Reduced taxes on company profits
3. Which of the following pairs of policy changes is the most appropriate response to
the box problem of high inflation?
[1 mark]
Interest rates Tax rates
A Increase Increase
B Decrease Decrease
C Increase Decrease
D Decrease Increase: A Increase Increase
4. Which of the following identifies the most likely effects of a significant increase in
economic growth?
[1 mark]
Effect on unemployment Effect on budget deficit
A Decrease Increased deficit
B Increase Reduced deficit
C Increase Increased deficit
D Decrease Reduced deficit: D Decrease Reduced deficit
5. State two causes of inflation.:
• Any factor that would lead to an increase in demand/spending in the economy
• Any factor that would lead to a rise in the cost of production
• Excessive growth in money supply (needs to have notion of excessive or fast increases)
6. Explain one reason why the UK government may want to reduce a budget deficit.
[2 marks]:
• To avoid further borrowing by government as borrowing will mean more
interest has to be paid.
, Economics paper 2 past papers
• To avoid inflationary consequences of deficit as too much
government spending/taxes being too low may result in
inflation.
• To prevent national debt rising as the debt interest will mean
future tax rises or spending cuts in later years.
• To maintain credit rating which means lower interest rates on
national debt.
• To prevent future tax rises which will be needed to pay off the
deficit in future years.
7. Explain why rapid economic growth may be harmful for individuals in an economy.
[2 marks]:
• Increased negative externalities (e.g. pollution or congestion) which
result from higher economic activity as more output leads to more
pollution/more output leads to more cars/vans on road.
• Depletion of natural resources as growth leads to using up of resources which may be
non-renewable leading to higher prices or shortages.
• Higher inflation may result if growth is excessive or prolonged.
• Increased inequality as the growth may come from those earning high
incomes whilst those on lower incomes or benefits see
no/little change in their income levels.
8. Explain one reason why a government may aim for balance on the current account.
[2 marks]:
1. Which of the following policies is most likely to reduce cyclical unemployment? box
[1 mark]
A Increase in direct taxes
B Increase in interest rates
C Increase in money supply
D Increase in taxes on business profits: C Increase in money supply
2. Which of the following is an example of a supply-side policy?
[1 mark]
A Reduced taxes on company profits
B Increased government spending on unemployment benefits
C Reduced government spending on education
,D Increased taxes on expenditure: A Reduced taxes on company profits
3. Which of the following pairs of policy changes is the most appropriate response to
the box problem of high inflation?
[1 mark]
Interest rates Tax rates
A Increase Increase
B Decrease Decrease
C Increase Decrease
D Decrease Increase: A Increase Increase
4. Which of the following identifies the most likely effects of a significant increase in
economic growth?
[1 mark]
Effect on unemployment Effect on budget deficit
A Decrease Increased deficit
B Increase Reduced deficit
C Increase Increased deficit
D Decrease Reduced deficit: D Decrease Reduced deficit
5. State two causes of inflation.:
• Any factor that would lead to an increase in demand/spending in the economy
• Any factor that would lead to a rise in the cost of production
• Excessive growth in money supply (needs to have notion of excessive or fast increases)
6. Explain one reason why the UK government may want to reduce a budget deficit.
[2 marks]:
• To avoid further borrowing by government as borrowing will mean more
interest has to be paid.
, Economics paper 2 past papers
• To avoid inflationary consequences of deficit as too much
government spending/taxes being too low may result in
inflation.
• To prevent national debt rising as the debt interest will mean
future tax rises or spending cuts in later years.
• To maintain credit rating which means lower interest rates on
national debt.
• To prevent future tax rises which will be needed to pay off the
deficit in future years.
7. Explain why rapid economic growth may be harmful for individuals in an economy.
[2 marks]:
• Increased negative externalities (e.g. pollution or congestion) which
result from higher economic activity as more output leads to more
pollution/more output leads to more cars/vans on road.
• Depletion of natural resources as growth leads to using up of resources which may be
non-renewable leading to higher prices or shortages.
• Higher inflation may result if growth is excessive or prolonged.
• Increased inequality as the growth may come from those earning high
incomes whilst those on lower incomes or benefits see
no/little change in their income levels.
8. Explain one reason why a government may aim for balance on the current account.
[2 marks]:
