CAPE Economics Unit 2 · 2008 · Paper 2

45 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 real Gross Domestic Product (GDP) and nominal GDP.
2. 1(b)20 marksDiscuss TWO methods of measuring national product.
3. 1(c)(i)3 marksIdentify the type of approach used in the provided diagram.
4. 1(c)(ii)3 marksWhat type of gap exists in the economy shown in the diagram?
5. 1(c)(iii)2 marksHow wide is the gap?
6. 1(c)(iv)6 marksHow can the gap be closed?
7. 1(d)10 marksCalculate equilibrium aggregate income (Y) given: Consumption = .8Y, Investment = 100, Government spending = 80, Exports = 500, Imports = 180.
8. 2(a)(i)3 marksState the level of unemployment referred to in the statement that some amount of unemployment still exists when the economy is in equilibrium.
9. 2(a)(ii)9 marksDraw a graph showing equilibrium employment.
10. 2(a)(iii)3 marksOn the same graph, show disequilibrium unemployment.
11. 2(b)5 marksExplain why disequilibrium employment exists according to the classical model.
12. 2(c)10 marksExplain how, according to the classical view, the economy goes back to equilibrium employment from a position of disequilibrium.
13. 2(d)20 marksDescribe FOUR types of unemployment.
14. 3(a)(i)2 marksDefine 'money' in economic terms.
15. 3(a)(ii)6 marksState THREE functions of money.
16. 3(b)16 marksDescribe FOUR tools used by the Central Bank to influence the supply of money.
17. 3(c)(i)4 marksExplain what is meant by the 'money multiplier'.
18. 3(c)(ii)12 marksOutline the first FOUR rounds in the process by which banks create money, assuming an initial deposit of $100 and a required reserve ratio of 10%.
19. 3(d)(i)2 marksState the equation for the quantity theory of money.
20. 3(d)(ii)8 marksState what EACH symbol in the quantity theory of money equation represents.
21. 4(a)(i)5 marksExplain how monetary policy can have a positive impact on inflation.
22. 4(a)(ii)5 marksExplain how monetary policy can have a positive impact on aggregate demand.
23. 4(a)(iii)5 marksExplain how monetary policy can have a positive impact on unemployment.
24. 4(b)(i)5 marksExplain how fiscal policy can have a negative impact on budget deficit.
25. 4(b)(ii)5 marksExplain how fiscal policy can have a negative impact on aggregate demand.
26. 4(b)(iii)5 marksExplain how fiscal policy can have a negative impact on employment.
27. 4(b)(iv)5 marksExplain how fiscal policy can have a negative impact on inflation.
28. 4(c)(i)5 marksExplain what is meant by 'automatic stabilizers'.
29. 4(c)(ii)4 marksIdentify TWO examples of automatic stabilizers.
30. 4(d)(i)6 marksExplain what is meant by 'national debt of a country'.
31. 4(d)(ii)6 marksExplain why 'national debt' is a burden for the country.
32. 5(a)(i)6 marksOutline TWO benefits of exporting goods and services.
33. 5(a)(ii)6 marksOutline TWO problems resulting from the importation of goods and services.
34. 5(a)(iii)3 marksExplain what is meant by the 'commodity terms of trade'.
35. 5(a)(iv)4 marksIdentify TWO factors that determine export revenue.
36. 5(b)9 marksOutline THREE factors that influence economic growth.
37. 5(c)10 marksDiscuss, using TWO determinants of economic growth identified in (b), why some Caribbean countries may NOT always have high rates of growth.
38. 5(d)12 marksDescribe FOUR structural characteristics of Caribbean economies.
39. 6(a)6 marksDefine the following terms: Balance of trade, Trade deficit, Trade surplus.
40. 6(b)(i)3 marksExplain what is meant by Absolute advantage.
41. 6(b)(ii)3 marksExplain what is meant by Comparative advantage.
42. 6(b)(iii)3 marksExplain what is meant by The exchange rate.
43. 6(c)10 marksDiscuss TWO types of exchange rates and give examples in EACH case of Caribbean countries that use them.
44. 6(d)10 marksDiscuss TWO policy options that a country can use in order to correct a trade deficit.
45. 6(e)15 marksDiscuss the THREE lower levels of economic integration preceeding the level to be attained by the CARICOM Single Market and Economy.