CAPE Economics Unit 2 · 2015 · 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)(i)2 marksDefine the term 'gross domestic product (GDP)'.
2. 1(a)(ii)3 marksExplain why certain final goods and services are NOT included in the measurement of GDP.
3. 1(a)(iii)3 marksExplain why economists use 'real GDP' rather than 'nominal GDP' to gauge economic wellbeing.
4. 1(b)(i)4 marksCalculate real GDP in 2013 and 2014, respectively.
5. 1(b)(ii)2 marksCalculate the growth (in percentage terms) of nominal GDP between 2013 and 2014.
6. 1(b)(iii)2 marksCalculate the growth (in percentage terms) of the real GDP between 2013 and 2014.
7. 1(b)(iv)3 marksExplain the difference between 'the growth of nominal GDP' and 'the growth of real GDP'.
8. 1(b)(v)4 marksCalculate the output gap (in percentage terms) in 2013 and in 2014, respectively.
9. 1(b)(vi)2 marksState whether the output gap was recessionary or inflationary in 2013 and 2014, respectively.
10. 2(a)(i)1 markIdentify the most important determinant of consumer spending and personal saving.
11. 2(a)(ii)a)2 marksDefine marginal propensity to consume (MPC).
12. 2(a)(ii)b)2 marksDefine marginal propensity to save (MPS).
13. 2(a)(iii)2 marksDescribe the relationship between MPC and MPS.
14. 2(b)(i)a)2 marksCalculate the average propensity to consume (APC).
15. 2(b)(i)b)3 marksCalculate the average propensity to save (APS).
16. 2(b)(ii)4 marksCalculate the multiplier and interpret its value.
17. 2(c)4 marksDistinguish between the 'investment demand curve' and the 'investment curve'.
18. 2(d)(i)3 marksUsing the accelerator model of investment, calculate the change in investment if firms desire to hold 25% of output as inventory and output falls by $500 million.
19. 2(d)(ii)2 marksCalculate the change in investment if firms' desire to hold inventories rise to 30%, with all else remaining constant.
20. 3(a)(i)a)2 marksDefine national budget deficit.
21. 3(a)(i)b)2 marksDefine national debt.
22. 3(a)(ii)4 marksState FOUR causes of national debt.
23. 3(b)(i)3 marksExplain why the size of national debt is commonly expressed as a ratio to GDP.
24. 3(b)(ii)4 marksEvaluate the statement "public debt is a burden on future generations".
25. 3(c)(i)8 marksCopy Table 2 into your answer booklet and complete it to show the budget balance indicating whether it is a deficit, surplus or neither.
26. 3(c)(ii)2 marksCalculate the public debt in this economy over the four-year period.
27. 4(a)(i)2 marksDefine the term 'fiscal policy'.
28. 4(a)(ii)5 marksExplain, using TWO examples, the term 'automatic stabilizers'.
29. 4(a)(iii)4 marksDistinguish between 'discretionary fiscal policy' and 'non-discretionary fiscal policy'.
30. 4(b)(i)4 marksAnalyse how monetary policy can be used to address the problem of recession or slow growth.
31. 4(b)(ii)4 marksAnalyse how monetary policy can be used to address inflation.
32. 4(c)(i)2 marksDefine the term 'stagflation'.
33. 4(c)(ii)4 marksWith the use of a labelled Phillips curve, explain how the use of fiscal and monetary policies to solve problems of inflation and unemployment can further compound the problems.
34. 5(a)(i)4 marksCopy Table 3 into your answer booklet and complete it by calculating the percentage of World GDP earned by EACH income group. Round your answers to one decimal place.
35. 5(a)(ii)4 marksList FOUR factors which could explain the inequality in income amongst all groups in the table.
36. 5(a)(iii)3 marksIdentify the income group in which the majority of CARICOM countries fall and state TWO structural peculiarities of CARICOM countries which might justify them being in that group.
37. 5(a)(iv)6 marksOutline THREE implications for CARICOM economies that might result from the structural peculiarities identified in (a)(iii) above.
38. 5(b)8 marksDiscuss ONE benefit of economic growth and ONE cost of economic growth.
39. 6(a)(i)3 marksIdentify THREE factors which may affect the levels of imports and exports of a country.
40. 6(a)(ii)a)3 marksExplain the concept of comparative advantage.
41. 6(a)(ii)b)3 marksExplain the effects of foreign exchange earnings on small open economies.
42. 6(b)(i)2 marksDefine the term 'protectionism'.
43. 6(b)(ii)4 marksDiscuss the infant industry's argument for protection.
44. 6(c)(i)2 marksDefine 'trade liberalization'.
45. 6(c)(ii)8 marksDiscuss TWO benefits of trade liberalization.