CAPE Economics Unit 2 · 2016 · Paper 2

30 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 'equilibrium level of output'.
2. 1(a)(ii)4 marksOutline TWO factors that could account for the volatility of investment spending.
3. 1(b)4 marksDifferentiate between the 'investment curve' and the 'investment demand curve' for an economy.
4. 1(c)(i)3 marksExplain why the information in Table 1 essentially describes an investment demand curve.
5. 1(c)(ii)4 marksUsing the information in Table 1, graph the investment demand curve.
6. 1(d)8 marksDiscuss TWO ways in which businesses adjust their level of inventory investment if the level of GDP is in disequilibrium.
7. 2(a)2 marksDescribe the relationship between the marginal propensity to consume (MPC) and marginal propensity to save (MPS).
8. 2(b)6 marksCopy and complete Table 2 to show the 'consumption' and the 'average propensity to consume' (APC).
9. 2(c)(i)8 marksFrom your completed Table 2, draw ONE graph to show the consumption schedule and ONE graph to show the saving schedule.
10. 2(c)(ii)1 markDetermine the break-even level of income.
11. 2(d)8 marksDiscuss TWO ways in which the economy adjusts withdrawals if the level of GDP is in disequilibrium.
12. 3(a)(i)3 marksDefine the term 'inflation' and state how it is measured.
13. 3(a)(ii)4 marksState FOUR challenges in measuring inflation accurately.
14. 3(b)4 marksDifferentiate between 'cost-push inflation' and 'demand-pull inflation'.
15. 3(c)6 marksDescribe TWO ways in which inflation impacts a country's balance of payments.
16. 3(d)8 marksDiscuss ONE positive and ONE negative effect of inflation on an economy.
17. 4(a)(i)3 marksState THREE functions of money.
18. 4(a)(ii)4 marksOutline TWO motives for holding money.
19. 4(b)6 marksExplain TWO ways in which the fluctuating value of money affects an economy.
20. 4(c)4 marksOutline TWO ways in which a surplus of money affects the money market.
21. 4(d)8 marksThe widespread use of credit cards has resulted in huge debts as people spend far more than they earn. Discuss TWO potential economic consequences of a large increase in consumer spending.
22. 5(a)3 marksExplain what is meant by a 'current account deficit'.
23. 5(b)6 marksExplain TWO ways in which Caribbean countries could improve performance on their current account.
24. 5(c)(i)4 marksOutline TWO ways in which expenditure-switching policies may be used to correct balance of payments disequilibrium.
25. 5(c)(ii)4 marksOutline TWO ways in which expenditure-reducing policies may be used to correct balance of payments disequilibrium.
26. 5(d)8 marksDiscuss ONE positive and ONE negative effect of a current account deficit on a country.
27. 6(a)(i)3 marksExplain the theory of comparative advantage.
28. 6(a)(ii)2 marksDescribe the trade patterns in the Caribbean.
29. 6(b)12 marksDescribe TWO advantages and TWO disadvantages of regional trading groups, such as North American Free Trade Agreement (NAFTA).
30. 6(c)8 marksDiscuss the effectiveness of devaluation and quota policies in addressing trade deficits.