CAPE Economics Unit 2 · 2007 · Paper 2

35 questions and parts from this paper. Open one to see it in full, then practise it on Quelpr and get it marked against the mark scheme.

1. 1(a)6 marksExplain the difference between Gross Domestic Product (GDP) and Gross National Product (GNP).
2. 1(b)(i)2 marksExplain why purely financial transactions are not counted in GDP calculations.
3. 1(b)(ii)2 marksExplain why second-hand sales are not counted in GDP calculations.
4. 1(c)12 marksOutline the main difference between the expenditure approach and the income approach to the determination of GDP.
5. 1(d)(i)2 marksBriefly describe how Net Domestic Product is calculated.
6. 1(d)(ii)2 marksBriefly describe how National Income is calculated.
7. 1(d)(iii)2 marksBriefly describe how Personal Income is calculated.
8. 1(d)(iv)2 marksBriefly describe how Disposable Income is calculated.
9. 1(e)3 marksDefine the term 'Consumer Price Index'.
10. 1(f)3 marksExplain what is meant by the GDP deflator.
11. 1(g)14 marksDiscuss four reasons why GDP is not always a true measure of the well-being of an economy.
12. 2(a)8 marksState four major determinants of aggregate demand.
13. 2(b)8 marksState four major determinants of aggregate supply.
14. 2(c)9 marksDiscuss three factors that account for the volatility of investment.
15. 2(d)5 marksExplain the relationship between 'saving' and 'investment'.
16. 2(e)20 marksUsing the standard Keynesian 45° diagram, explain the difference between inflationary and recessionary gaps.
17. 3(a)10 marksExplain how commercial banks 'create' money.
18. 3(b)5 marksState what the money multiplier is and how it is calculated.
19. 3(c)(i)2 marksWhat is 'fiat money'?
20. 3(c)(ii)3 marksList the three main functions of money.
21. 3(c)(iii)2 marksList three desirable characteristics of money.
22. 3(c)(iv)3 marksState three reasons why people hold money.
23. 3(d)15 marksIdentify four main instruments of monetary control used by Central Banks and explain why each of these may not always be effective in the context of the Caribbean.
24. 3(e)10 marksDiscuss why residents in many Caribbean countries choose to save in US currency rather than that of their own country.
25. 4(a)25 marksUsing a graph showing the theory of liquidity preference, explain how monetary policy can be used to increase the level of output and employment in an economy.
26. 4(b)25 marksDiscuss the fiscal policy tools available to Caribbean countries that can be used to increase and decrease output and employment.
27. 5(a)5 marksExplain what is meant by economic integration.
28. 5(b)15 marksDiscuss three benefits and two costs of economic integration.
29. 5(c)15 marksDescribe the various stages of economic integration of Caribbean countries up to the level of the Caribbean Single Market and Economy (CSME).
30. 5(d)15 marksDiscuss the forces driving the worldwide trend towards greater economic integration known as 'globalisation'.
31. 6(a)25 marksDiscuss five arguments that may be used by Caribbean countries in order to keep out imports from foreign countries.
32. 6(b)(i)7 marksExplain how the exchange rate is determined in a fixed exchange rate system.
33. 6(b)(ii)6 marksState three advantages and three disadvantages of a fixed exchange rate system.
34. 6(b)(iii)6 marksExplain how the exchange rate is determined in a free-floating exchange rate system.
35. 6(b)(iv)6 marksState three advantages and three disadvantages of a free-floating exchange rate system.