CAPE Economics Unit 2 · 2011 · Paper 2

38 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)2 marksDefine the term 'intermediate good'.
2. 1(a)(ii)1 markExplain why intermediate goods are excluded from the calculation of Gross Domestic Product (GDP).
3. 1(a)(iii)2 marksExplain what is meant by 'value added'.
4. 1(b)(i)2 marksExplain the difference between nominal GDP and real GDP.
5. 1(b)(ii)4 marksCalculate the GDP for the economy for 2008 and 2009.
6. 1(b)(iii)2 marksState, in terms of economic growth, the difference in the economy between 2008 and 2009.
7. 1(b)(iv)2 marksState, in terms of economic growth, the difference in the economy between 2008 and 2010.
8. 1(c)10 marksUsing a standard 45° Keynesian cross diagram, explain how equilibrium is reached between actual expenditure (AE) and income (Y).
9. 2(a)(i)2 marksDefine marginal propensity to consume (MPC).
10. 2(a)(ii)2 marksDefine average propensity to consume (APC).
11. 2(a)(iii)2 marksDefine autonomous consumption.
12. 2(b)6 marksUsing a graph, explain the Keynesian consumption function showing how the MPC and APC are affected by an increase in income.
13. 2(c)(i)3 marksCalculate the equilibrium level of income.
14. 2(c)(ii)2 marksCalculate the multiplier in the economy.
15. 2(d)8 marksIdentify four major determinants of aggregate consumption and explain how each determinant functions.
16. 3(a)6 marksDescribe three types of demand for money.
17. 3(b)(i)2 marksDefine the reserve requirement (RR) as a tool of monetary policy.
18. 3(b)(ii)2 marksDefine open market operations (OMO) as a tool of monetary policy.
19. 3(b)(iii)2 marksDefine moral suasion (MS) as a tool of monetary policy.
20. 3(c)4 marksExplain how the Central Bank can use monetary policy to have a positive impact on aggregate demand.
21. 3(d)(i)3 marksState the 'quantity theory of money'.
22. 3(d)(ii)1 markIdentify the school of economics that advocates the use of the quantity theory.
23. 3(e)5 marksAnalyse how changes in the money supply by the Central Bank can lead to inflation.
24. 4(a)6 marksOutline three methods that a government can use to finance its fiscal deficit.
25. 4(b)(i)2 marksExplain how government borrowing on the domestic market to finance large fiscal deficits can affect domestic interest rates.
26. 4(b)(ii)2 marksExplain how government borrowing on the domestic market to finance large fiscal deficits can affect domestic investment.
27. 4(b)(iii)2 marksExplain how government borrowing on the domestic market to finance large fiscal deficits can affect the country's exchange rate.
28. 4(c)4 marksState two reasons why Caribbean residents often have a very high demand for the United States (US) dollar rather than their own domestic currency.
29. 4(d)9 marksIdentify three fiscal measures available to Caribbean countries to boost output in times of recession and evaluate the effectiveness of each fiscal measure.
30. 5(a)6 marksOutline three major features of globalization.
31. 5(b)12 marksIdentify three major factors that have driven the process of globalization and evaluate the effectiveness of each factor.
32. 5(c)(i)1 markDefine the term 'balance of payments'.
33. 5(c)(ii)6 marksDescribe three ways in which the recent global financial crisis has negatively impacted the balance of payments of Caribbean countries.
34. 6(a)(i)2 marksExplain what is meant by 'exchange rate'.
35. 6(a)(ii)3 marksGive three examples of actual exchange rates that currently exist between Caribbean currencies and the US dollar.
36. 6(a)(iii)4 marksDistinguish between 'fixed exchange rates' and 'floating exchange rates'.
37. 6(a)(iv)4 marksState two advantages of a fixed exchange rate and two advantages of a floating exchange rate.
38. 6(b)12 marksDiscuss two advantages and two disadvantages of Free Trade or Economic Partnership Agreements signed by CARICOM countries with other countries for the region.