CAPE Economics Unit 2 · 2010 · Paper 2

31 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)(i)4 marksExplain the difference between 'Real GDP' and 'Nominal GDP'.
2. 1(a)(ii)6 marksDiscuss TWO reasons why GDP alone is not a complete measure of net economic welfare.
3. 1(b)(i)1 markDetermine the value of autonomous consumption.
4. 1(b)(ii)1 markDetermine the value of the marginal propensity to consume.
5. 1(b)(iii)4 marksDetermine the equilibrium level of real GDP.
6. 1(b)(iv)3 marksDetermine the value of the multiplier.
7. 1(c)(i)3 marksBriefly describe Net National Product (NNP) and state how it is measured.
8. 1(c)(ii)3 marksBriefly describe Personal Disposable Income (PDI) and state how it is measured.
9. 2(a)(i)10 marksUsing the Keynesian 45° graphs, explain the difference between the 'recessionary gap' and the 'inflationary gap'.
10. 2(a)(ii)5 marksUsing the Classical Model, explain why disequilibrium employment exists.
11. 2(b)(i)2 marksDefine the term 'investment'.
12. 2(b)(ii)8 marksDescribe FOUR factors that influence investment.
13. 3(a)(i)1 markDefine 'money'.
14. 3(a)(ii)6 marksOutline THREE functions of money.
15. 3(b)(i)3 marksExplain what is meant by a 'fractional reserve banking system'.
16. 3(b)(ii)6 marksStarting with an initial deposit of $100 and given a required reserve ratio of 10 per cent, explain how commercial banks use this system to create money.
17. 3(c)(i)3 marksExplain how a shortening of the pay period for workers affects the transactions demand for money and the equilibrium interest rate.
18. 3(c)(ii)3 marksExplain how an increase in the nominal gross domestic product affects the transactions demand for money and the equilibrium interest rate.
19. 3(c)(iii)3 marksExplain how an increase in the number of automated teller machines throughout the country affects the transactions demand for money and the equilibrium interest rate.
20. 4(a)5 marksExplain what is meant by 'automatic stabilizers', giving TWO examples of automatic stabilizers.
21. 4(b)(i)3 marksExplain what is meant by the term 'fiscal policy'.
22. 4(b)(ii)9 marksOutline THREE ways by which fiscal policy can be used by Caribbean governments to increase the level of employment and output in their economies.
23. 4(c)8 marksDiscuss TWO reasons why fiscal policy may not work in practice in the small open economies of the Caribbean.
24. 5(a)3 marksIdentify the THREE main stages of economic integration that CARICOM countries have attempted to achieve over the past 30 years.
25. 5(b)12 marksState THREE benefits and THREE costs associated with economic integration.
26. 5(c)(i)5 marksaccess to technology.
27. 5(c)(ii)5 marksjob creation.
28. 6(a)4 marksDistinguish between 'absolute advantage' and 'comparative advantage'.
29. 6(b)9 marksOutline THREE arguments in favour of protection that these economists could have used to support their position.
30. 6(c)6 marksThose countries in favour of the agreement with the European Union argued that the region could receive benefits from free trade with Europe. Outline TWO of these potential benefits.
31. 6(d)6 marksDiscuss TWO policy options that a country can use in order to correct a trade deficit.