Answer ALL questions.

Some questions must be answered with a cross in a box . If you change your mind about an
answer, put a line through the box and then mark your new answer with a cross .

1 Figure 3a shows the rate of inflation in Vietnam from 2007 to 2009.

Rate of Inflation
25

20

15
%
10

0
2007 2008 2009
Figure 3a

(a) (i) Define rate of inflation.

(2)
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(ii) Regarding the data in Figure 3a, describe what happened to prices in Vietnam between
2008 and 2009.
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 (b) The balance of payments on a country’s current account shows the trade in
visible and invisible imports and exports.

(i) Give an example of a visible import.

(1)
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(ii) Give an example of an invisible import.

(1)
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(iii) Define balance of payments. (1)

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(iv)Inflation always worsens the balance of payments on current account. Do you

agree with this statement? Explain your answer.
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(c) (i)In 2008 the government of Vietnam increased the rate of interest from 6.5%
to 10.25%. An increase in interest rates is an instrument of
(1)
A Fiscal policy

B Monetary policy

C Supply side policy

D Regional policy

(ii) Explain two reasons why an increase in the rate of interest might lead to an
increase in the level of unemployment.
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(Question No 1= 20 Marks)
2 (a) Fiscal policy would involve a change in which of the following?
(1)
A Income tax

B Interest rates

C Exchange rates

D Minimum wage

(b) Which of the following groups would benefit from an increase in

interest rates?
(1)
A Manufacturers

B Retailers

C Savers

D Borrowers

(c) Which of the following refers to people out of work when moving between jobs?
(1)
A They are complements

B They are substitutes

C They are unrelated

D They must be grown together

(d) What is progressive taxation? (1)

A Everyone pays the same proportion of their income in tax

B Richer people pay a higher proportion of their income in tax

C Poorer people pay a higher proportion of their income in tax

D Pensioners pay a higher proportion of their income in tax

 (e) What is meant by the term economic growth?
(2)

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(f) In 2018, Kepler had $4 500 in his savings account. The annual interest rate for this savings
account was 6.5%. Calculate how much interest Kepler received in one year. You are advised to
show your working. (2)

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(g) In May 2017, gross domestic product (GDP) in Bangladesh increased by 7.24%. This was
higher than predicted by the government and higher than many countries nearby. Explain one
possible limitation of GDP as a measure of economic growth in Bangladesh. (3)
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(h) What is meant by the term absolute poverty? (3)

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(i) Explain three different types of unemployment. (6)

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(Question No 2= 20 Marks)

3 (a) In a recovery, a country’s Gross Domestic Product (GDP)

(1)
A rises

B falls

C stays the same

D fluctuates

(b) GDP per capita is a measure of a country’s economic output that accounts for
population. If Sweden has a population of 10 million and a GDP of $511
bn

(1bn = 1 000 000 000), then its GDP per capita is

(1)
A $511

B $5 110

C $51 100

D $511 000

(c) What is the name of the policy that focuses on interest rate changes?
(1)
A Deregulation

B Exchange rate

C Monetary

D Fiscal

(d) State one impact of a current account deficit. (1)

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(e) Kenyans who holiday in South Africa would be shown on the Kenyan current
account as
(1)
A an invisible import

B a visible export

C a visible import

D an invisible export

(f) Which one of the following is an example of an indirect tax?

(1)
A Inheritance tax

B Income tax

C Business tax

D Value added tax

(g) Explain one way a government could reduce inequality and poverty. (3)

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(h) The UK exports goods to eurozone countries. Using the diagram below, draw

the effects of an increase in exports from the UK to the eurozone on the exchange
rate of the £. Label the new curve, the new equilibrium exchange rate and the new

equilibrium quantity. (3)

Price of
£s in € S
D

ER1

S D

Q1
Quantity of £s

(i) In September 2017, the growth rate of the gross domestic product (GDP) in
the UK was 0.4%, a slight increase of 0.1% on the previous quarter. Explain
one reason why economic growth is a key macroeconomic objective for a
country such as the UK.

(2)
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(j) In December 2017, Argentina’s Consumer Price Index (CPI) increased from 20.9% to 25%.
Analyse the possible impact of high inflation on consumers in a country such as Argentina. (6)
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(Question No 3= 20 Marks)