Question 17

If an economy is experiencing high inflation and a positive output gap, which of the following is most likely to reduce inflationary pressure?

[1 ]

A

A fall in the exchange rate.

B

A decrease in the budget deficit.

C

A cut in income tax.

D

A cut in the interest rates.

18

Which of the following would be classified as a factor of production by an economist?

[1 ]

A

A delivery van

B

A bank loan

C

Money held in bank accounts

D

Profits made by firms

20 The existence of scarcity in an economy means that

[1 ]

A

economic activity must be geared towards firms making profits.

B

there are no social costs involved in the production and consumption of goods and services.

C

there is always rivalry in consumption.

D

economic agents must make choices.

Question 21

Surging food prices push UK inflation to 30-year high

Prices have gone up at their fastest rate in nearly 30 years - but there is worse to come, experts have warned. Soaring food costs and the energy bill crisis drove inflation to 5.4% in the 12 months to December, up from 5.1% the month before, in another blow to struggling families.

Fuel bills for households and businesses could also increase by another 50% in the next few months, the energy industry has said.

Paul Johnson, director at the Institute for Fiscal Studies think tank, said people on low incomes would be particularly hard hit by the rising cost of living

"Everyone, particularly those on modest incomes, has had a long period of wages not really growing any faster than prices over the last decade, so another increase at this point is going to be particularly painful/' he told the BBC.

As a result, he said, the Bank of England's rate-setting Monetary Policy Committee was likely to raise interest rates faster than most people expected, with the next increase to 0.5% expected in February.

Source: BBC News - 19 January 2022 (adapted extract)

a)

Explain the term 'inflation'.

[2]

b)

Explain with the aid of a diagram why rising fuel bills for businesses might lead to inflationary pressure in the future.

[6]

C)

Analyse how an increase in interest rates might be expected to reduce inflation.

[6]

d)

Using the case study above and your own knowledge of economics, evaluate the impact that rising inflation might have on living standards in the UK.

[6]

Question 22

Funding secured to enhance safety at Greenhead Park

In the North of England, Greenhead Park in Huddersfield and Crow Nest Park in Dewsbury will benefit from a £46,000 investment from the government's Safer Streets Fund to make them safer.

The council will work with partners and local groups to draw up plans aimed at stopping offences from happening in the first place and reducing safety fears - particularly for women and girls. It's hoped work would also encourage more women's groups to use the spaces and widen private and social benefits across the community.

Plans could include improving the look and feel of the parks, cutting back of vegetation to increase visibility, improved lighting, better signage or training and mentoring for crime prevention activities.

The funding comes after a successful partnership bid secured £46,000 to help pay for the development of the park.

Source: www.huddersfieldtimes.co. uk (adapted extract)

a)

Explain the term 'private benefit'.

[2 ]

b)

Explain with the aid of a diagram how public parks might illustrate market failure.

[6]

C)

Analyse the characteristics of public goods and quasi-public goods

[6 ]

d)

Evaluate how cost-benefit analysis might be a useful tool to local government when considering whether to invest in improving local facilities such as public parks.

[6]

Question 23

Analyse and explain the price and output decisions of a perfectly competitive firm in the long run AND evaluate the view that the advantages of perfect competition always outweigh the disadvantages.

[20]

Question 24

Explain the relationship between total, average and marginal product in the short run and how this is linked to the law of diminishing returns AND analyse and evaluate the extent to which you agree that profit maximisation will always be a firm's primary business objective

[20]

Question 25

Explain how and analyse why governments try to promote economic growth in a country AND evaluate the case for and against economic growth in a country.

[20]

Question 26

Explain the primary determinants of consumption and investment in an economy AND analyse and evaluate with the use of relevant diagrams, the effectiveness of fiscal policy in improving the macroeconomic performance of a country.

[20]