OCR GCSE Economics Paper 2 Questions With
100% Verified Solutions
What is cyclical unemployment? - ANSWER -Unemployment caused
by a lack of demand in the economy. Demand for goods and services
falls- fewer workers required to produce output- others become
unemployed. This causes the unemployed to have lower incomes and
spend less so firms have lower profits and employ less
Benefits of unemployment - ANSWER -1) Wage rates decrease which
mean its cheaper for firms to invest in capital and etc. As unemployed
workers are competing for jobs, firms do not have to raise wage rate
2) Firms are more competitive as costs are lower
Costs of unemployment - ANSWER --Lower standard of living
-Loss of self-esteem and status (could lead to relationship
breakdowns within families)
-Excluded workers- workers are unemployed for so long they become
unemployable
-Costs to tax-payers (Government will need to spend more money on
benefits)
Costs of unemployment to the government - ANSWER --Labour
resources wasted
-Unemployment leads to more unemployment (i.e. cyclical
unemployment)
-Budget deficit (government spends more than it receives in tax
revenue)- unemployed are not paying income tax or NI contributions
Costs of unemployment to regions - ANSWER --Unemployment is
often spread unevenly throughout the country- some areas tend to
suffer more than others
-Could cause social problems like rise in crime rate
,- Value of property decreases for homeowners
What is the distribution of income? - ANSWER -How incomes are
shared out between individuals and households
What is inequality of income? - ANSWER -Some individuals/
households have low incomes while others have much higher
incomes
What are the 5 different ways an individual can earn income? -
ANSWER -1) Wages- People who work in highly skilled jobs with high
demand get higher wages than others
2) Rent- The owners of land and property can gain an income from
rent. Rent is the reward for letting others live/ work in the owner's
property
3) Interest- The reward for saving/lending.
4) Profit- This can be through enterprise or through being a
shareholder in a company
5) State Benefits- For unemployed, disabled or pensioners
What are dividends? - ANSWER -Shares of a company's profit
How do the factors of production link to the four factor incomes? -
ANSWER -Land -> Rent
Labour -> Wages
Capital -> Interest
Enterprise -> Profit
What is wealth? - ANSWER -A stock of assets that can be given
monetary value and measured at a particular point in time
e.g. assets that can earn you income like rent, interest or dividents
, What is income? - ANSWER -A flow of money going to the factors of
production over time
e.g. a weekly wage or a monthly salary
What is gross income? - ANSWER -Income received before any taxes
are taken or benefits given
What is net/ disposable income? - ANSWER -Income available after
the effect of direct taxes and benefits
How is income distributed in the UK? - ANSWER -There is a high level
of inequality of income
Why is income unevenly distributed in the UK? (5 reasons) - ANSWER
-1) Age- Younger and older age groups have lower average incomes
than those in the middle
2) Gender- Still illegal gender discrimination and women often take
time out of work to have/raise kids
3) Reliance on benefits- These benefits are much lower than the
average wage
4) Differences in Wages
5) Income-earning assets are distributed unevenly- Not all households
in the UK receive the four factor incomes
What is the distribution of wealth? - ANSWER -How wealth is shared
out between individuals and households
How is wealth distributed in the UK? - ANSWER -It is divided even
more unequally than income
Why is wealth unevenly distributed in the UK? (4 reasons) - ANSWER
-1) Inheritance- The rich pass down their assets through generations
and keep on being rich
100% Verified Solutions
What is cyclical unemployment? - ANSWER -Unemployment caused
by a lack of demand in the economy. Demand for goods and services
falls- fewer workers required to produce output- others become
unemployed. This causes the unemployed to have lower incomes and
spend less so firms have lower profits and employ less
Benefits of unemployment - ANSWER -1) Wage rates decrease which
mean its cheaper for firms to invest in capital and etc. As unemployed
workers are competing for jobs, firms do not have to raise wage rate
2) Firms are more competitive as costs are lower
Costs of unemployment - ANSWER --Lower standard of living
-Loss of self-esteem and status (could lead to relationship
breakdowns within families)
-Excluded workers- workers are unemployed for so long they become
unemployable
-Costs to tax-payers (Government will need to spend more money on
benefits)
Costs of unemployment to the government - ANSWER --Labour
resources wasted
-Unemployment leads to more unemployment (i.e. cyclical
unemployment)
-Budget deficit (government spends more than it receives in tax
revenue)- unemployed are not paying income tax or NI contributions
Costs of unemployment to regions - ANSWER --Unemployment is
often spread unevenly throughout the country- some areas tend to
suffer more than others
-Could cause social problems like rise in crime rate
,- Value of property decreases for homeowners
What is the distribution of income? - ANSWER -How incomes are
shared out between individuals and households
What is inequality of income? - ANSWER -Some individuals/
households have low incomes while others have much higher
incomes
What are the 5 different ways an individual can earn income? -
ANSWER -1) Wages- People who work in highly skilled jobs with high
demand get higher wages than others
2) Rent- The owners of land and property can gain an income from
rent. Rent is the reward for letting others live/ work in the owner's
property
3) Interest- The reward for saving/lending.
4) Profit- This can be through enterprise or through being a
shareholder in a company
5) State Benefits- For unemployed, disabled or pensioners
What are dividends? - ANSWER -Shares of a company's profit
How do the factors of production link to the four factor incomes? -
ANSWER -Land -> Rent
Labour -> Wages
Capital -> Interest
Enterprise -> Profit
What is wealth? - ANSWER -A stock of assets that can be given
monetary value and measured at a particular point in time
e.g. assets that can earn you income like rent, interest or dividents
, What is income? - ANSWER -A flow of money going to the factors of
production over time
e.g. a weekly wage or a monthly salary
What is gross income? - ANSWER -Income received before any taxes
are taken or benefits given
What is net/ disposable income? - ANSWER -Income available after
the effect of direct taxes and benefits
How is income distributed in the UK? - ANSWER -There is a high level
of inequality of income
Why is income unevenly distributed in the UK? (5 reasons) - ANSWER
-1) Age- Younger and older age groups have lower average incomes
than those in the middle
2) Gender- Still illegal gender discrimination and women often take
time out of work to have/raise kids
3) Reliance on benefits- These benefits are much lower than the
average wage
4) Differences in Wages
5) Income-earning assets are distributed unevenly- Not all households
in the UK receive the four factor incomes
What is the distribution of wealth? - ANSWER -How wealth is shared
out between individuals and households
How is wealth distributed in the UK? - ANSWER -It is divided even
more unequally than income
Why is wealth unevenly distributed in the UK? (4 reasons) - ANSWER
-1) Inheritance- The rich pass down their assets through generations
and keep on being rich
