Read the source material carefully before answering Question 1. Source material: changes in the Nigerian economy Nigeria fact file 2017 Government spending $19.5bn Tax revenue $12.9bn Balance of trade in goods $10.4bn Imports of goods $32.7bn Nigeria produces a range of products including delivery vehicles, footwear, machines, maize and office equipment. It does, however, depend heavily on oil for its exports. The government tries to encourage an increase in the output and export of other products. To achieve this, it uses a range of policy measures including changes in taxation and government spending e.g. subsidising the training of construction workers. Successful training can increase job opportunities and wages. The government’s aims are to improve Nigeria’s macroeconomic performance and to raise living standards. Table 1.1 shows data on living standards in Nigeria and Ethiopia in 2017. Table 1.1 Selected data on living standards in Nigeria and Ethiopia in 2017 Country GDP per head ($) Life expectancy at birth (years) Average years spent at school % of children aged under 5 who are underweight Nigeria 5,900 59 9 31.5 Ethiopia 2,200 63 8 23.6 Investment in Nigeria has been growing slowly. Some firms are discouraged from spending on capital goods by the relatively high interest rate, high corporation tax rate and economic uncertainty. Nigeria’s population is increasing rapidly. The birth rate is high and the death rate is falling but it has net emigration. Nigeria’s population was 191 million in 2017 and is forecast to grow to 402 million by 2050. An increase in its population size will create both challenges and opportunities. It will affect the level of demand in the economy, may harm the environment and more food will be needed. The Nigerian government increased the tariff on imported rice in 2016, to encourage an increase in its own rice production. Nigeria is Africa’s largest producer of rice but also its largest importer. In 2018, Nigeria imported almost 50% of the rice it consumed. Nigerian farmers produce less rice for every unit of land used than Asian farmers and Nigerian farmers have high costs of production. Answer all parts to Question 1. Refer to the source material in your answers. 1 (a) Calculate the value of Nigeria’s exports of goods in 2017. [1] (b) Identify two examples of capital goods. [2] (c) Explain whether Nigeria had a budget deficit or a budget surplus in 2017. [2] (d) Explain how government spending on training may increase tax revenue in the long run. [4] (e) Analyse how living standards in Nigeria compare with living standards in Ethiopia in 2017. [4] (f) Analyse how a government could encourage firms to increase their investment. [5] (g) Discuss whether or not an increase in Nigeria’s population will benefit its economy. [6] (h) Discuss whether or not an increase in Nigeria’s import tariff on rice would increase the output of Nigerian rice. [6]

1(a) Calculate the value of Nigeria’s exports of goods in 2017. $43.1bn 1 $ is not essential. 1(b) Identify two examples of capital goods. Two from: • [delivery] vehicles • machines • [office] equipment 2 1(c) Explain whether Nigeria had a budget deficit or a budget surplus in 2017. • budget deficit (1) • government spending exceeded tax revenue (1) • government spending was $19.5bn and tax revenue was $12.9bn (1) 2 1(d) Explain how government spending on training may increase tax revenue in the long run. Logical explanation which might include: • Training may increase skills of workers (1) raise productivity (1) raise wages / incomes (1) increase job opportunities / employment / reduce unemployment (1) increase income tax revenue (1). • Higher wages may increase spending / demand (1) increase indirect tax revenue (1). • A more productive labour force may reduce costs of production (1) raise profits (1) increase corporation tax revenue (1). 4 1(e) Analyse how living standards in Nigeria compare with the living standards in Ethiopia in 2017. Coherent analysis which might include: • Nigeria’s higher GDP per head (income) (1) suggests Nigerians may have been able to enjoy more goods and services (1). • Nigeria has a lower life expectancy (1) suggesting poorer healthcare (1). • Nigeria has a higher average number of years spent at school (1) suggesting the labour force may be more educated (1). • Nigeria has a higher percentage of underweight five-year olds (1) suggesting poor nutrition / income inequality (1). • Overall comment: Nigeria’s income per head and average years spent at school suggests a higher living standard but life expectancy and percentage of five years underweight suggests a lower living standard (1). 4 1(f) Analyse how a government could encourage firms to increase their investment. Coherent analysis which might include: • Reduce the rate of interest (1) making it cheaper to borrow (1) encouraging borrowing as consumer spending is likely to rise (1). • Lower corporation tax (1) increasing the funds available to invest (1) increasing the incentive to invest as return from investment would rise (1). • Create greater economic certainty / confidence (1) by e.g. keeping inflation low and stable / not changing government spending and taxation frequently (1) making it easier for firms to plan / it can take time to get a return from investment (1). • Provide subsidies/grants/loans (1) decreasing cost of investments (1) encouraging MNCs (1). • Raise tariffs (1) increasing demand for home produced goods (1). • Less government regulation/policies (1) reduces costs for firms (1) more willing to invest (1). 5 1(g) Discuss whether or not an increase in Nigeria’s population will benefit its economy. Award up to 4 marks for why it might: • Fall in death rate (1) may indicate improved healthcare (1). • Total (aggregate) demand will increase (1) may enable existing firms to expand / increase output (1) new firms to set up (1) attract MNCs (1). • Labour force may increase (1) causing total (aggregate) supply to increase / raise productive capacity (1) increase output / GDP (1). • May move country towards optimum population (1) if there are unused resources (1). • Net immigration will increase labour force (1) and reduce dependency ratio (1) • More tax revenue (1) can be spent on improving e.g., public services (1). Award up to 4 marks for why it might not: • Birth rate is rising (1) will increase dependency (1) resources which may have increased economic growth may have to be devoted to rearing the children (1). • Labour force may fall in the short run (1) to look after the children (1). • Pressure will be put on the environment (1) there may be more pollution (1) causing overcrowding / poor health (1). • If food output cannot be increased (1) may be more malnourishment/famine / poverty (1) more food is required / food may have to be imported (1) food prices may increase (1). 6 Apply this example to all questions with the command word DISCUSS (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example Tax revenue may decrease… 1 ...because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 1(g) • Population is rising but age structure may be changing (1) as there is net emigration of young people (1) may result in reduction in labour force (1). • [Opportunity] cost for government (1) which has to spend on health/education rather than infrastructure (1). • Increase in output to meet demand (1) results in faster usage of resources in country (1) and shortages (1). 1(h) Discuss whether or not an increase in Nigeria’s import tariff on rice would increase the output of Nigerian rice. Award up to 4 marks for why it might: • A higher tariff may raise the price of imported rice (1) may reduce demand for / consumption of imported rice (1) may cause Nigerians to demand more home- produced rice as it is cheaper (1) effect would be greater, the greater the elasticity of demand for the import of rice (1) may enable Nigerian rice farmers to raise their price / make more profit (1). • A tariff may raise government tax revenue (1) some of this could be used to subsidise Nigerian rice farmers / modernise farming methods and so raise productivity (1). Award up to 4 marks for why it might not: • Nigerian farmers are less productive than Asian competitors (1) have high(er) costs of production (1) Nigerian price may still be higher even with the higher import tariff (1). • The supply of Nigerian rice may be price-inelastic (1) so even if Nigerian farmers could sell their rice for more, they may have difficulties adjusting supply (1). • More Nigerian rice will not be sold if quality is poor (1) consumers my prefer the varieties of rice produced in other countries (1) other countries retaliate by imposing higher tariffs (1) current account surplus may be reduced (1). • Increase in import tariffs may be small (1) making little difference to import prices and consumption (1). • Not enough resources/ factors of production e.g., farmers (1) to produce more rice in Nigeria (1). 6

Read the source material carefully before answering Question 1. Source material: Chilean cherries Producing just a few products can be risky for a country. Fig. 1.1 Population pyramids of Chile and Haiti 2018 Content removed due to copyright restrictions. Content removed due to copyright restrictions. There is, however, evidence of market failure and inequality in how resources are allocated. Answer all parts of Question 1. Refer to the source material in your answers. 1 (a) Calculate Chile’s agricultural output in 2017. [1] (b) Identify two disadvantages of a country specialising. [2] (c) Explain one reason why demand for cherries is price-elastic. [2] (d) Explain how Chile’s population structure differs from Haiti’s population structure. [4] (e) Analyse why China buys most of its cherries from Chile. [4] (f) Analyse why Chilean astronomers are paid more than Chilean farm workers. [5] (g) Discuss whether or not Chilean consumers would benefit from more government intervention in the economy. [6] (h) Discuss whether or not the Haitian economy would benefit from fewer of its people working in Chile. [6] Content removed due to copyright restrictions.

1(a) Calculate Chile’s agricultural output in 2017. $11.76bn / $11 760 000 000 / $11 760m (1). 1 Accept $11.8bn and $12bn. $ is not essential. 1(b) Identify two disadvantages of a country specialising. Two from: • demand may fall / new competitors may appear • supply/output may fall / diseases / natural disasters / bad weather may affect agricultural output / costs may rise • non-renewable resources may run out • structural unemployment may occur • reliance on imports no longer produced by home country / overdependency on other countries 2 One mark each for each of two disadvantages. Rely on a small number of industries is not sufficient. 1(c) Explain one reason why demand for cherries is price-elastic. A luxury product (1) they do not have to be purchased / not essential / not a necessity (1). Has close substitutes (1) example / rise in price will cause some people to switch to rival products (1). 2 In terms of close substitutes, also accept: fall in price will cause some people to switch towards this product and away from rival products. One mark for the reason identified and one mark for the explanation. A candidate who writes a luxury product and has close substitutes and no more has identified two reasons, so just one mark. If a candidate identifies one of the two reasons but does not explain it and then identifies the second reason and explains it, the second reason can be taken and with the explanation, 2 marks. 1(d) Explain how Chile’s population structure differs from Haiti’s population structure. Logical explanation which might include: Chile has a higher proportion of its population aged over 65 / Haiti a lower proportion aged over 65 (1). Chile has a lower proportion of the population aged under 15 / Haiti has a higher proportion aged under 15 (1). Chile is likely to have a lower birth rate / Haiti is likely to have a higher birth rate (1). Chile likely to have a lower death rate / Haiti is likely to have a higher death rate (1). Chile’s population pyramid indicates a relatively high level of development/high income country / Haiti’s population pyramid indicates a relatively low level of development/low income country (1). Chile’s population pyramid is less pyramid shaped / more stationary / constrictive / bulges out in the middle / more egg-shaped / Haiti’s is more pyramid shaped / more expansive (1). Lower dependency ratio in Chile / higher dependency ratio in Haiti (1). Higher proportion of population of working age in Chile / lower proportion of population of working age in Haiti (1). Higher population size in Chile / lower population size in Haiti (1). 4 Accept for the first and second points other relevant age ranges e.g. over 60, under 10. Accept longer life expectancy for lower death rate and shorter life expectancy for higher death rate. Note that each country overall has more females than males, so not a difference. 1(d) Chile has a higher average age / older population / Haiti has a lower average age population / younger population (1). 1(e) Analyse why China buys most of its cherries from Chile. Coherent analysis which might include: Chile has high production standards (1) cherries are likely to be of a high quality (1). China does not impose tariffs on Chilean cherries (1) may keep their price low (1). 4 Free trade agreement on its own is not sufficient. 1(f) Analyse why Chilean astronomers are paid more than Chilean farm workers. Coherent analysis which might include: Most astronomers have a university degree (1) high cost of training/ long period of training (1) well qualified / well educated / high level of knowledge (1) highly productive / highly skilled / efficient (1) in short supply (1) high demand (1) more inelastic demand (1) more inelastic supply (1). Most work in the public sector (1) government may be more willing / able to pay higher wages (1) public sector workers are more likely to belong to a trade union (1) have stronger bargaining power (1). 5 Also accept an approach based on an analysis of why Chilean farm workers are paid less than Chilean astronomers. This may include reference to immigrant farm workers who may be prepared to accept relatively low wages and Chilean farm workers being replaced by capital equipment / more replaceable than astronomers. 1(g) Discuss whether or not Chilean consumers would benefit from more government intervention in the economy. Award up to 4 marks for why they might: • evidence of market failure (1) • merit goods may be underproduced (1) as under- consumed (1) • demerit goods may be overproduced (1) as overconsumed (1) • external costs could be reduced (1) external benefits may be increased (1) external costs / external benefits are not taken into account by the private sector (1) • public goods may not be produced (1) no profit incentive to make them (1) as there can be free riders (1) • inequality (1) poor consumers may lose out / there may be poverty (1) resources may not be devoted to producing what the poor need (1) may not be able to afford prices charged (1) • government subsidies (1) can lower prices (1) • government could set maximum prices (1) lower prices of necessities (1) • government could control (private sector) monopoly power (1) prevent abuse of market power (1) • government investment in education (1) could lower prices / raise quality of output (1). Award up to 4 marks for why they might not: • government failure may occur (1) e.g. government may lack information (1). • market forces can provide wide choice of products (1) may be consumer sovereignty (1) 6 Apply this example to all questions with the command word DISCUSS (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) Not taking lower taxes, lower subsidies or reduced immigration controls as a form of government intervention. Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example Tax revenue may decrease … 1 ... because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 1(g) • profit incentive (1) industries may respond to changes in consumer demand (1) • efficient industries (1) prices may be low (1) quality may be high (1) • government intervention in the form of nationalisation (1) may reduce competition (1). • government taxes / tariffs / regulation / minimum wages (1) may increase costs (1) raise prices (1) • maximum prices could reduce availability of products (1) • government limits on immigration (1) may reduce availability of products / raise prices (1) 1(h) Discuss whether or not the Haitian economy would benefit from fewer of its people working in Chile. Award up to 4 marks for why it might: • wages may be low in Chile (1) work involves unskilled labour (1) • employment may be rising in Haiti (1) the country could keep more of its skilled workers (1) • larger labour force / more workers (1) higher total demand (1) increase GDP / increase economic growth / increase productive potential (1) increase living standards (1) increase exports (1) • rise in the numbers employed in Haiti could increase tax revenue (1) may enable more spending on e.g. education (1) • fewer parents may leave behind dependent relatives (1) reduce burden on the government (1) • jobs could be found in other countries (1) Award up to 4 marks for why it might not: • wages may be higher in Chile (1) fewer emigrant workers may send money home (1) living standards may be lower (1) lower spending (1) • less money coming into the country (1) may increase a current account deficit (1) • job opportunities may be higher in Chile (1) unemployment may rise in Haiti (1) • if unemployment rises in Haiti, cost of unemployment benefits may rise (1) opportunity cost / higher taxation (1) • opportunities to gain new skills may be reduced (1) these skills could be brought back into the country (1) 6 For an approach which discusses whether or not the Haitian economy benefits from its people working in Chile, award a maximum of 3 marks. 1(h) • may reduce pressure to invest / spend on capital equipment (1) reduce advances in technology / reduce increases in efficiency / productivity (1) • may increase overcrowding / overpopulation (1) increase external costs / pollution (1) pressure on resources (1).

Section A Read the source material carefully before answering Question 1. Source material: India’s airline industry Air India fact file total revenue 2018 $2.2 bn total cost 2018 $2.9 bn number of passengers carried in 2018 16.4 m number of passengers carried in 2017 14.8 m share of India’s international and national air travel market in 2018 13% share of India’s international and national air travel market in 1994 100% Air India is owned by the Indian government. The entry of new firms into India’s air travel market has reduced Air India’s ability to set price. The state-owned firm faces competition not only from other airlines but also from other forms of transport including trains and ships. In 2017 the Indian government tried, unsuccessfully, to sell Air India to the private sector. A successful sale would have raised money for the Indian government and might have increased the airline’s efficiency. It is predicted that India will have the third largest airline industry by 2025. The growth in the industry may affect the current account position of India’s balance of payments. Table 1.1 shows the current account position in India and four other countries. Table 1.1 The current account position of the balance of payments of selected countries in 2017 Country Current account ($ bn) Current account % of GDP Brazil –9.8 –0.5 China 164.9 1.4 India –48.7 –1.9 Kenya –5.4 –6.8 Russia 35.4 2.2 A rise in both the number of routes flown and the quality of the passenger experience may increase the number of tourists visiting India. A larger Indian airline industry is likely to increase the ease of movement of people and goods into and out of India. This might attract more multinational companies (MNCs) and reduce firms’ costs of production. India’s air travel market faces a number of challenges. India has Asia’s highest airline fuel tax. Some economists suggest that this should be increased further to increase tax revenue and to reduce market failure. The airlines’ other costs are rising but it is difficult for them to raise prices. This is because India’s air passengers are among the most price-sensitive in the world. Some airlines stop their costs rising any further by improving their staff training, introducing new technology and improving their pilots’ working conditions. The airlines’ ability to hire pilots is influenced by, among other factors, the quality of education and other job opportunities. Answer all parts of Question 1. Refer to the source material in your answers. (a) Calculate, in $, Air India’s loss in 2018. [1] (b) Identify two substitutes for air travel. [2] (c) Explain one characteristic that suggests that Air India was a monopoly in 1994. [2] (d) Explain two reasons why a government may privatise an industry. [4] (e) Analyse how India’s position on the current account of its balance of payments in 2017 compares with the other four countries. [4] (f) Analyse how a successful airline industry can promote economic growth. [5] (g) Discuss whether the Indian government should increase the tax on airline fuel. [6] (h) Discuss whether more people will apply to be pilots for Indian airlines in the future. [6]

1(a) Calculate, in $, Air India’s loss in 2018. 0.7bn, 700m, 700 000 000. 1 7 × 10 to the power 8. 7 × 10ˆ8. 1(b) Identify two substitutes for air travel. Trains (1) ships (1). 2 For ‘ships’ accept water travel. 1(c) Explain one characteristic that suggests that Air India was a monopoly in 1994. Share of the market was 100% (1) only firm / share above 25% of the market / share above 40% / a complete/pure monopoly / no competition (1). Able to set price (1) a price-maker (1). 2 1(d) Explain two reasons why a government may privatise an industry. Logical explanation which might include: Raise (tax) revenue (1) which could be spent on e.g. education, healthcare / increase government spending (1). Increase efficiency / may perform better in the private sector / higher productivity (1) introduce a profit motive / increase output/GDP / reduce costs of production (1). Increase competition (1) lower price / increase quality / increase choice (1). Industry may be loss making / costly to run (1) reduce need to use tax revenue to finance industry / tax revenue can be used for other purposes e.g. education / increase government spending / reduce national debt / tax rates might be cut (1). 4 One mark each for each of two reasons identified and one mark each for each of two explanations. 1(e) Analyse how India’s position on the current account of its balance of payments in 2017 compares with the other four countries. Coherent analysis which might include: Brazil, India and Kenya had a current account deficit (1) while China and Russia had a current account surplus (1). India’s current account deficit is the largest in terms of $s (1) but the second largest in % terms (1). China’s current account had a larger impact on its economy in terms of $s (1) and Kenya’s in percentage terms (1). Russia’s current account surplus is larger than China’s in terms of % of GDP (1). China has the largest surplus in $s (1). 4 Up to 2 marks maximum for idea of size of current account balance without reference to deficit or surplus e.g. China has the largest current account balance and India the lowest. So maximum of 2 marks without reference to deficit/s or surplus/es. No marks for writing about a budget balance. 1(f) Analyse how a successful airline industry can promote economic growth. Coherent analysis which might include; May increase number of tourists (1) raise revenue from tourism / increase the size of the tourist industry (1) may increase exports / imports / increase the ease of movement of people and goods into and out of the country (1). May attract more MNCs (1) these will increase the country’s output/GDP (1) introduce new technology / new methods of production (1). May lower costs of production (1) raising firms’ profits (1) providing the incentive/finance to expand (1) increase the country’s output/GDP (1). May increase employment (1) raise incomes (1) increase total demand (1) increase tax revenue (1) more could be spent on e.g. education (1). May increase (geographical) mobility of labour (1) making it easier for expanding firms to recruit workers (1). 5 1(g) Discuss whether the Indian government should increase the tax on airline fuel. Award up to 4 marks for why it should: • Raise revenue (1) can be used to finance e.g. education / training of pilots / increase government spending (1) burden more likely to fall on the rich / may enable tax on basic necessities to be reduced (1). • May reduce market failure (1) air travel causes external costs / social cost exceeds social benefit (1) air/noise pollution (1) a tax may reduce air travel / lower demand for air travel (1) by raising price (1) encourage people to switch to other forms of transport (1). Award up to 4 marks for why it should not: • Will increase airlines’ costs / reduce airlines’ profits / cause a loss (1) airlines’ other costs are rising (1) difficult for them to cover higher costs / raise prices (1) due to elastic demand / price sensitive demand (1) may go out of business (1) may discourage investment (1) causing unemployment (1). • May reduce tourism in the country (1) harming the current account position (1). • Airline fuel is already highly taxed (1) may be difficult to tax further (1). • Ait travel is safer than car travel in many countries (1) so injuries may increase if there is a switch between the two (1). 6 Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example Tax revenue may decrease … 1 ... because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 1(h) Discuss whether more people will apply to be pilots for Indian airlines in the future. Award up to 4 marks for logical reasons why they might: • Introduction of new technology (1) will make the job easier (1) • Improved staff training (1) improve/increase skills (1) improve motivation / satisfaction (1) • improve working conditions (1) airlines want to retain staff (1) • More routes are being flown / size of industry is increasing (1) demand for pilots may increase / more job opportunities (1) may raise wages (1). • More fringe benefits may be provided (1) example (1). • Being a pilot is a highly regarded occupation in many countries (1). Award up to 4 marks for logical reasons why they might not: • There may not be more people qualified to become pilots (1) education standards may fall / qualifications may be high (1). • Period of training may increase / cost of training may increase (1). • Other jobs may offer higher wages / better working conditions / wages of pilots may fall (1) example of other jobs (1). • Advances in technology may reduce the need for pilots (1) may increase skills needed (1). • Increased tax on fuel may reduce the size of the airline industry (1) causing people to expect fewer job opportunities / unemployment of pilots (1). • Price of substitute forms of transport may reduce (1) lowering demand for pilots (1). 6 Note: some points may be given in reverse e.g. education standards may rise. 1(h) • Job may require workers to be away from their families (1) people may want to stay close to home (1). • Working hours may be unsociable (1) people may want to spend more time with their families (1). • May be considered in some cases to be a risky job (1).

2 Nearly one million people in Cairo, the capital city of Egypt, live in crowded, unhealthy housing. One reason why people lack basic necessities, including adequate housing, is unemployment. In 2019, nearly 10% of Cairo’s workers did not have a job. Other citizens of Cairo live in luxury, in houses costing more than $1 million. Many of Cairo’s rich adults grew up in rich families. (a) Identify two basic necessities, other than housing. [2] (b) Explain how frictional unemployment differs from cyclical unemployment. [4] (c) Analyse why the children of the rich tend to become rich adults. [6] (d) Discuss whether a government should provide subsidies to families to spend on housing. [8]

2(a) Identify two basic necessities, other than housing. Two from e.g.: Food, water, clothing, healthcare and education. 2 Accept any relevant basic necessity e.g. heating or electricty. If more than two examples given, only consider the first three. 2(b) Explain how frictional unemployment differs from cyclical unemployment. Logical explanation which might include: Frictional unemployment arises from people being in between jobs (1) may be waiting for a better paid job / may be seasonally unemployed / may have worked on a short-term contract / may lack information about vacancies (1) may exist even when there is full employment / may be self-correcting (1). Cyclical unemployment is caused by a lack of total (aggregate) demand (1) more people unemployed than there are job vacancies (1) may arise from a recession / economic downturn (1) may need government action to reduce it (1). Frictional unemployment would be reduced by a rise in labour mobility (1) cyclical unemployment would not be (1). Frictional unemployment may be short term (1) cyclical unemployment may be long term (1). 4 Up to 2 marks for each type of unemployment. 2(c) Analyse why the children of the rich tend to become rich adults. Coherent analysis which might include: The children of the rich tend to receive a good education (1) may not have to take part-time jobs / not have to help in family business when studying / not have to leave school early (1) become well qualified / well educated / gain high level of knowledge (1) become highly skilled / productive / efficient (1) find it is relatively easy to find employment / get a good job (1) well-paid (1). The children of the rich tend to receive good health care (1) good nutrition (1) have good housing (1) unlikely to miss time at school (1) unlikely to miss time at work (1) income will be high (1). The children of the rich tend to have high expectations (1) apply for better jobs (1). The children of the rich may inherit e.g. property (1) may gain income from e.g. inherited property / business / savings (1). Rich parents may have connections with e.g. bosses of major employers (1) more likely to gain high paid work (1). 6 Note the focus here is on the children of the rich so no marks for e.g. the children of the poor may lack education. Reference to highly skilled / productive or efficient may be linked to education, healthcare or nutrition but can only be credited once. 2(d) Discuss whether a government should provide subsidies to families to spend on housing. In assessing each answer, use the table opposite. Why it might: • will increase the spending power of families who receive it • may increase quantity supplied • may give low-income families access to a basic necessity, reducing poverty • may enable families to spend more on e.g. education • may increase employment / reduce unemployment, creating jobs building housing / increase labour mobility • may increase quality of housing and so improve health Why it might not: • rich can already afford housing • some families may not spend it on housing • may be inflationary, demand increasing for housing and e.g. furniture, carpets • opportunity cost • taxes may be raised to finance subsidy • building more houses may result in environmental damage 8 Level Description 3 A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall both sided of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 2 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 1 There is a simple attempt at u sing economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0

Cambridge O Level Economics · 2281

O-Level Economics (2281) Government and the macroeconomy past paper questions

These questions cover the role of government, its macroeconomic aims, and fiscal, monetary, and supply-side policy — plus growth, employment, and inflation.

294 free questions from 2016–2021, each with its marking scheme. Open the full topical bank to filter by subtopic, paper, and year.

Government and the macroeconomy in O-Level Economics 2281 exams, 2020–2025

Across 2020–2025, Government and the macroeconomy accounted for 283 questions worth 2,200 marks in Cambridge O Level Economics (2281) papers.

By year
Year	Questions	Marks
2020	51	383
2021	45	321
2022	52	415
2023	51	433
2024	41	385
2025	43	263

Most-tested subtopics

4.7 Employment and unemployment1010 marks
4.3 Fiscal policy790 marks
4.8 Inflation and deflation650 marks

Appears in

Paper 1 · 193 qs
Paper 2 · 90 qs

All most-tested Economics topics

2021 May/Jun · Paper 2 · Q1 · 30 marks
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2021 May/Jun · Paper 2 · Q1 · 30 marks
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2021 Oct/Nov · Paper 2 · Q1 · 30 marks
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2021 May/Jun · Paper 2 · Q2 · 20 marks
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2021 Oct/Nov · Paper 1 · Q3 · 1 mark
Marking scheme
Mark scheme — 2021 Paper 1 Q3
Answer: D
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