OCR GCSE Economics Paper 2 2025”2026 REAL EXAM REVIEW 150
QUESTIONS AND CORRECT ANSWERS WITH RATIONALES COVERING
THE RECENT TESTED QUESTIONS PERFECT FOR A+ GRADE
1. (6 marks)
The table below shows GDP per capita for three countries:
Country GDP per capita ($)
A 2,500
B 15,000
C 40,000
a) Identify which country is most likely a low-income country. (1 mark)
b) Explain two reasons why GDP per capita might not fully reflect the standard of living. (5
marks)
Answer:
a) Country A ☑
b)
1. GDP per capita does not account for income inequality; average income could be
skewed.
2. It ignores non-monetary factors like health, education, or environmental quality.
Rationale: GDP per capita measures average income but cannot capture wealth distribution or
quality of life.
2. (8 marks)
A country has high unemployment and low economic growth. The government is considering
two policies: cutting interest rates or increasing government spending.
Explain which policy is likely to be more effective in stimulating growth.
Answer:
Increasing government spending is likely more effective. It directly raises aggregate demand,
,creating jobs and stimulating investment. Cutting interest rates encourages borrowing and
spending but may be less effective if consumer confidence is low.
Rationale: Fiscal policy (government spending) has an immediate impact on demand, whereas
monetary policy depends on the willingness of firms and consumers to borrow.
3. (6 marks)
Define structural unemployment and give one example.
Answer:
Structural unemployment occurs when workers’ skills do not match the jobs available.
Example: Coal miners losing jobs due to the closure of coal mines.
Rationale: Structural unemployment arises from long-term changes in the economy, not short-
term cycles.
4. (10 marks)
The government is considering subsidising electric cars to reduce carbon emissions.
a) Explain one likely effect on the supply of electric cars. (3 marks)
b) Explain one likely effect on the demand for petrol cars. (3 marks)
c) Evaluate one possible limitation of using subsidies to reduce emissions. (4 marks)
Answer:
a) Supply of electric cars will increase because subsidies reduce production costs, allowing firms
to produce more.
b) Demand for petrol cars may decrease as consumers switch to electric alternatives.
c) Limitation: Subsidies can be expensive for the government and may not reduce emissions if
consumers still buy petrol cars or if electricity comes from fossil fuels.
Rationale: Subsidies incentivise production and consumption of greener alternatives but may
have unintended costs or limited environmental impact.
5. (12 marks)
The table shows unemployment rates in two countries over five years:
Year Country X Country Y
2019 5% 10%
,Year Country X Country Y
2020 6% 12%
2021 7% 9%
2022 6% 8%
2023 5% 7%
a) Describe the trend in unemployment in Country Y. (3 marks)
b) Suggest one possible reason for the fall in unemployment between 2021 and 2023. (3 marks)
c) Evaluate which country has a healthier labour market. (6 marks)
Answer:
a) Unemployment in Country Y initially rises from 10% to 12%, then falls steadily to 7%.
b) Economic recovery and job creation policies could explain the fall.
c) Country X has a lower and more stable unemployment rate overall, suggesting a healthier
labour market, though Country Y shows improvement.
Rationale: Trend analysis shows stability versus recovery; evaluation requires considering both
levels and changes.
6. (8 marks)
Explain how a weak exchange rate can affect a country’s exports and inflation.
Answer:
A weak currency makes exports cheaper for foreign buyers, increasing demand. However,
imports become more expensive, which can increase inflation.
Rationale: Exchange rates affect the competitiveness of goods abroad and domestic prices of
imported goods.
7. (10 marks)
A developing country receives foreign aid to improve healthcare and education.
a) Explain two possible benefits of foreign aid. (6 marks)
b) Suggest one limitation of relying on foreign aid. (4 marks)
Answer:
a) Benefits:
, 1. Improves health outcomes, reducing disease and increasing productivity.
2. Supports education, raising human capital and future economic growth.
b) Limitation: Aid can create dependency or may be misused due to corruption.
Rationale: Aid can accelerate development but is not a sustainable long-term solution without
domestic growth.
8. (8 marks)
A country is experiencing inflation at 6%, above its target of 2%. The central bank considers
raising interest rates.
a) Explain how raising interest rates might reduce inflation. (4 marks)
b) Suggest one possible disadvantage of raising interest rates. (4 marks)
Answer:
a) Higher interest rates increase borrowing costs, reducing consumer spending and business
investment, which lowers aggregate demand and helps reduce inflation.
b) Disadvantage: Higher rates can slow economic growth and increase unemployment.
Rationale: Monetary policy can control inflation but may have trade-offs with growth.
9. (10 marks)
The table shows a country’s exports and imports over three years:
Year Exports (£bn) Imports (£bn)
2020 150 180
2021 160 190
2022 170 200
a) Define balance of payments. (2 marks)
b) Identify whether this country has a trade deficit or surplus. (2 marks)
c) Explain one possible effect of a trade deficit on the economy. (6 marks)
Answer:
a) Balance of payments records all transactions between a country and the rest of the world.
b) Trade deficit ☑ (Imports > Exports)
c) Effect: A trade deficit may weaken the currency, increase foreign debt, or reduce domestic
employment in import-competing industries.
QUESTIONS AND CORRECT ANSWERS WITH RATIONALES COVERING
THE RECENT TESTED QUESTIONS PERFECT FOR A+ GRADE
1. (6 marks)
The table below shows GDP per capita for three countries:
Country GDP per capita ($)
A 2,500
B 15,000
C 40,000
a) Identify which country is most likely a low-income country. (1 mark)
b) Explain two reasons why GDP per capita might not fully reflect the standard of living. (5
marks)
Answer:
a) Country A ☑
b)
1. GDP per capita does not account for income inequality; average income could be
skewed.
2. It ignores non-monetary factors like health, education, or environmental quality.
Rationale: GDP per capita measures average income but cannot capture wealth distribution or
quality of life.
2. (8 marks)
A country has high unemployment and low economic growth. The government is considering
two policies: cutting interest rates or increasing government spending.
Explain which policy is likely to be more effective in stimulating growth.
Answer:
Increasing government spending is likely more effective. It directly raises aggregate demand,
,creating jobs and stimulating investment. Cutting interest rates encourages borrowing and
spending but may be less effective if consumer confidence is low.
Rationale: Fiscal policy (government spending) has an immediate impact on demand, whereas
monetary policy depends on the willingness of firms and consumers to borrow.
3. (6 marks)
Define structural unemployment and give one example.
Answer:
Structural unemployment occurs when workers’ skills do not match the jobs available.
Example: Coal miners losing jobs due to the closure of coal mines.
Rationale: Structural unemployment arises from long-term changes in the economy, not short-
term cycles.
4. (10 marks)
The government is considering subsidising electric cars to reduce carbon emissions.
a) Explain one likely effect on the supply of electric cars. (3 marks)
b) Explain one likely effect on the demand for petrol cars. (3 marks)
c) Evaluate one possible limitation of using subsidies to reduce emissions. (4 marks)
Answer:
a) Supply of electric cars will increase because subsidies reduce production costs, allowing firms
to produce more.
b) Demand for petrol cars may decrease as consumers switch to electric alternatives.
c) Limitation: Subsidies can be expensive for the government and may not reduce emissions if
consumers still buy petrol cars or if electricity comes from fossil fuels.
Rationale: Subsidies incentivise production and consumption of greener alternatives but may
have unintended costs or limited environmental impact.
5. (12 marks)
The table shows unemployment rates in two countries over five years:
Year Country X Country Y
2019 5% 10%
,Year Country X Country Y
2020 6% 12%
2021 7% 9%
2022 6% 8%
2023 5% 7%
a) Describe the trend in unemployment in Country Y. (3 marks)
b) Suggest one possible reason for the fall in unemployment between 2021 and 2023. (3 marks)
c) Evaluate which country has a healthier labour market. (6 marks)
Answer:
a) Unemployment in Country Y initially rises from 10% to 12%, then falls steadily to 7%.
b) Economic recovery and job creation policies could explain the fall.
c) Country X has a lower and more stable unemployment rate overall, suggesting a healthier
labour market, though Country Y shows improvement.
Rationale: Trend analysis shows stability versus recovery; evaluation requires considering both
levels and changes.
6. (8 marks)
Explain how a weak exchange rate can affect a country’s exports and inflation.
Answer:
A weak currency makes exports cheaper for foreign buyers, increasing demand. However,
imports become more expensive, which can increase inflation.
Rationale: Exchange rates affect the competitiveness of goods abroad and domestic prices of
imported goods.
7. (10 marks)
A developing country receives foreign aid to improve healthcare and education.
a) Explain two possible benefits of foreign aid. (6 marks)
b) Suggest one limitation of relying on foreign aid. (4 marks)
Answer:
a) Benefits:
, 1. Improves health outcomes, reducing disease and increasing productivity.
2. Supports education, raising human capital and future economic growth.
b) Limitation: Aid can create dependency or may be misused due to corruption.
Rationale: Aid can accelerate development but is not a sustainable long-term solution without
domestic growth.
8. (8 marks)
A country is experiencing inflation at 6%, above its target of 2%. The central bank considers
raising interest rates.
a) Explain how raising interest rates might reduce inflation. (4 marks)
b) Suggest one possible disadvantage of raising interest rates. (4 marks)
Answer:
a) Higher interest rates increase borrowing costs, reducing consumer spending and business
investment, which lowers aggregate demand and helps reduce inflation.
b) Disadvantage: Higher rates can slow economic growth and increase unemployment.
Rationale: Monetary policy can control inflation but may have trade-offs with growth.
9. (10 marks)
The table shows a country’s exports and imports over three years:
Year Exports (£bn) Imports (£bn)
2020 150 180
2021 160 190
2022 170 200
a) Define balance of payments. (2 marks)
b) Identify whether this country has a trade deficit or surplus. (2 marks)
c) Explain one possible effect of a trade deficit on the economy. (6 marks)
Answer:
a) Balance of payments records all transactions between a country and the rest of the world.
b) Trade deficit ☑ (Imports > Exports)
c) Effect: A trade deficit may weaken the currency, increase foreign debt, or reduce domestic
employment in import-competing industries.
