CAPE Economics Unit 2 · 2013 · Paper 2

37 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 marksExplain the term 'Gross Domestic Product (GDP) deflator'.
2. 1(a)(ii)1 markState the purpose of the GDP deflator.
3. 1(b)(i)2 marksState ONE reason why an individual buying a used textbook will or will NOT be included in the calculation of a country's GDP.
4. 1(b)(ii)2 marksState ONE reason why a dealer selling $400 worth of illegal drugs will or will NOT be included in the calculation of a country's GDP.
5. 1(b)(iii)2 marksState ONE reason why a meat processing plant building a new factory will or will NOT be included in the calculation of a country's GDP.
6. 1(c)(i)a)1 markDetermine the autonomous consumption.
7. 1(c)(i)b)1 markDetermine the marginal propensity to consume.
8. 1(c)(ii)4 marksCalculate the equilibrium level of real GDP.
9. 1(c)(iii)a)2 marksCalculate the multiplier.
10. 1(c)(iii)b)2 marksState whether the multiplier will be smaller or larger than the government spending multiplier. Justify your response.
11. 1(d)(i)3 marksBriefly describe Net National Product (NNP) and state how it is measured.
12. 1(d)(ii)3 marksBriefly describe Personal Disposable Income (PDI) and state how it is measured.
13. 2(a)4 marksIdentify the FOUR major determinants of investment.
14. 2(b)15 marksUsing the Keynesian 45° graph, explain the difference between a 'recessionary gap' and an 'inflationary gap'.
15. 2(c)(i)3 marksExplain how the Classical school will respond to a recessionary gap.
16. 2(c)(ii)3 marksExplain how Keynesian economists will respond to a recessionary gap.
17. 3(a)(i)1 markDefine the term 'money'.
18. 3(a)(ii)2 marksBriefly describe TWO types of money.
19. 3(a)(iii)2 marksDistinguish between M1 and M2.
20. 3(b)12 marksDiscuss THREE tools of monetary policy that any Central Bank in the Caribbean region can use to help control inflation.
21. 3(c)8 marksUse the Keynesian liquidity preference framework to illustrate how the contractionary policies discussed in 3 (b) will impact interest rates and the demand for money.
22. 4(a)(i)1 markDefine the term 'fiscal policy'.
23. 4(a)(ii)12 marksDiscuss THREE ways in which fiscal policy can be used by Caribbean governments to increase the level of employment and output in their economies.
24. 4(b)6 marksOutline THREE reasons why some fiscal measures may NOT work in the small open economies of the Caribbean.
25. 4(c)6 marksExplain the 'crowding out effect' and state how this effect can be avoided.
26. 5(a)(i)3 marksDistinguish between 'economic growth' and 'economic development'.
27. 5(a)(ii)6 marksDescribe THREE determinants of economic growth.
28. 5(b)(i)2 marksExplain the concept of 'human development index'.
29. 5(b)(ii)6 marksOutline THREE main indicators of the human development index.
30. 5(c)8 marksDiscuss TWO impediments to economic growth faced by Caribbean economies.
31. 6(a)(i)1 markDefine 'tariffs'.
32. 6(a)(ii)1 markDefine 'quotas'.
33. 6(a)(iii)1 markDefine 'non-tariff barriers'.
34. 6(b)4 marksIdentify FOUR factors that determine a country's export revenue.
35. 6(c)(i)3 marksDescribe fixed exchange rates and identify ONE Caribbean country which uses them.
36. 6(c)(ii)3 marksDescribe floating exchange rates and identify ONE Caribbean country which uses them.
37. 6(d)12 marksDiscuss TWO advantages and TWO disadvantages of foreign direct investment (FDI) in the Caribbean.