PAST PAPER SOLUTIONS

2018Q4
1.
a. Define the term fiscal policy

Fiscal policy is a tool used by the government to achieve its goals for the
economy. These tools are the increasing or decreasing of taxes and government
spending.

b. List THREE types of unemployment

Cyclical
Seasonal
Frictional
Search
Structural

c. Explain TWO types of inflation

Demand pull inflation occurs when there is 'too much money chasing too few goods'. It occurs
when aggregate demand exceed supply putting upward pressure on prices. Governments
decision to reduce taxes could leading to increasing spending across the economy and higher
prices..

Cost push inflation occurs when there is a rise in the cost of one of the factors of production
which drives up the prices of goods and services. For example a rise in the cost of labour
results in higher cost of production across the economy and higher prices.

d. Determine the component of gross domestic product (GDP) that is affected by

EACH of the following activities.
i. Your aunt buys a house
Investment
ii. A family buys a new car
Consumption
iii. Farmer Joe grows tomatoes for his family
Not in GDP
iv. Domestically made sugar is sold to a bakery in a foreign country
Exports

CSEC ECONOMICS ECONLABTT - K GONZALES 2022

PAST PAPER SOLUTIONS

2014Q4

1.
a. Define the term ‘economic goals’ (2 marks)
Economic goals are the aims or objectives that an organization or the
government wishes to achieve during the course of its activities.

b. List THREE economic goals of a government (3 marks)

Any 3 of the following
Minimize Unemployment or achieve a high level of employment
Minimize Inflation
Economic growth
Achieve Equilibrium trade

c. Explain TWO disadvantages of using Gross Domestic Product (GDP as a

measure of standard of living (6 marks)
The GDP measures all the finished goods and services within a country for a
specific period of time. However it does not produced those good and services
that make up part of the informal sector. For example, non money transactions
that contribute to the quality of life such as neighbor exchanging services.
Another example would be the income earned by an unregistered private car for
hire.

It does not account for the distribution of income. An economy may be

experiencing high levels of GDP growth, however, this may be a result of
increased incomes of a few high incomes and not the majority of the population.

It does not account for the sustainability of growth or for what incomes are spent
on.Some countries may may have experience a one off growth spurt due to
resource discovery but this not not necessarily translate into higher quality of life
as incomes may not necessarily have been spent on goods to increase
sustainable growth or improve quality of life

d. Table 3 shows the economic statistics for country Y. Calculate the gross
domestic product (GDP) using the information provided in table 3 . Hint use
the expenditure approach (4 marks)

GDP = C + I + G + (X - M)
GDP = 900+ 500+300+(300-400)
GDP = 1600

CSEC ECONOMICS ECONLABTT - K GONZALES 2022