The Macroeconomic Objectives (Edexcel IGCSE Economics): Exam Questions

Which one of the following types of unemployment is caused by changes in the business cycle?

State one possible impact of a current account deficit.

The US has a progressive taxation system for income tax rates. In 2023, the income tax rates ranged from 10% for individuals on low incomes, up to 37% for those on the highest incomes.

Explain one way progressive taxation can help to reduce poverty for a country such as the US.

Using the diagram below, label the remaining three stages of the economic cycle in the boxes on the diagram.

Germany’s economy shrank more than expected in the fourth quarter of 2022. This raised doubts over the ability of Europe’s biggest economy to avoid a recession and recover quickly from its energy crisis due to high gas and oil prices.

Record inflation rates of 10.4% caused reductions in German consumer spending and business investment in buildings and machinery. This led to a 0.4% decrease in gross domestic product (GDP) from the previous quarter.

The effects will be felt by consumers, workers, firms and the German Government.

With reference to the data above and your knowledge of economics, assess how a recession may affect inflation in a country such as Germany.

Which one of the following describes voluntary unemployment?

Which one of the following is the calculation for the rate of unemployment in a country?

State one possible reason for a current account surplus.

What is meant by the term relative poverty?

The Chinese economy only grew by 3% in 2022. However, in 2023 exports increased by 14.8% compared to the previous year, suggesting that China would achieve its growth target of 5%.

By March 2023, China was experiencing an economic recovery with the services and construction sectors reaching a 12‐year high.

However, China’s export recovery is expected to be temporary. This is because of possible weaker global demand due to interest rate rises in many economies.

With reference to the data above and your knowledge of economics, assess how a recovery may affect unemployment for a country such as China.

Which one of the following is an example of a menu cost for Nike in its online shop during times of inflation?

Using the diagram below label the remaining three stages of the economic cycle in the boxes on the diagram.

Costa Rica has 5% of the world’s wildlife species but occupies only 0.03% of the earth’s surface. Costa Rica takes pride in having 30 national parks, with more than 25% of the territory marked for conservation.

National parks have economic value to both national and local economies. Costa Rica takes advantage of the growing demand by tourists visiting these national parks by charging an entry fee. National parks contribute almost $2 billion to the Costa Rican economy. 122,465 tourists visited national parks in Costa Rica in the last two weeks of 2021.

Local economies near the national parks benefit from the creation of jobs and the increased expenditure by tourists on hotels, local shops, guides, restaurants, and tours.

With reference to the data above and your knowledge of economics, evaluate the possible advantages of the government providing national parks to protect the environment in a country such as Costa Rica.

Which one of the following is a reason why a government wants to reduce poverty and inequality?

Which one of the following is a benefit of using gross domestic product (GDP) as a measure of growth?

What is meant by the term deflation?

Figure 1 shows imports and exports for a country in $bn.

Calculate the invisible trade balance in $bn for the country. You are advised to show your working.

Annual inflation in Türkiye was 73.5% in May 2023, the highest rate since 1998.This was mainly caused by an annual increase of 152.7% in energy prices.

With reference to the data above and your knowledge of economics, analyse how high levels of cost‐push inflation affect business confidence in a country such as Türkiye.

In China there are restrictions on coal consumption and emissions from factories. These restrictions have led to job losses in some industries.

Explain one reason why there might be a trade‐off between economic growth and environmental protection for an economy such as China.

ChatGPT is the latest example of artificial intelligence (AI)* technology. There are increased concerns that AI will cause the loss of jobs for millions of workers. This includes Wall Street traders, salespeople, writers of basic computer code and journalists.

IBM has stopped recruiting for 7,800 jobs that could be eventually replaced by AI. British Telecom (BT) predicted that AI would replace 10,000 jobs by 2030.

*The use of computer systems to perform tasks normally undertaken by humans.

With reference to the data above and your knowledge of economics, assess the possible impact of the introduction of AI on the levels of structural unemployment.

The price of a basket of goods and services was £1200. The consumer price index (CPI) increased from 120 to 130.

Calculate the new price of the basket of goods and services.

The Clean Air Act (CAA) is an important regulation that sets standards for air quality in the US. The CAA regulates emissions from cars, trucks and buses.

With reference to the data above and your knowledge of economics, analyse how regulations can help to protect the environment in a country such as the US.

Figure 5 shows the gross domestic product (GDP) for India in 2021 and 2022.

Calculate, to two decimal places, the percentage change in GDP for India between 2021 and 2022. You are advised to show your working.

The Indian Government offers many different benefit payments and other provisions to very low‐income individuals and families to help to reduce poverty. These include cash transfers, food rations and training courses for unemployed workers.

With reference to the data above and your knowledge of economics, analyse how benefits offered by the government can help to reduce poverty for a country such as India.

Tourism is a major sector in the French economy. It employs around 2 million people, both directly and indirectly.

Explain one reason why some people in the tourism sector might suffer from seasonal unemployment in a country such as France.

In December 2020, Australia had a current account surplus of $18.1bn, a rise of $4.4bn on the previous quarter.

Analyse the benefits of a current account surplus for a country such as Australia.

Money earned from foreign tourists visiting Canada is shown in Canada’s current account on the balance of payments as:

Which one of the following is likely to help protect the environment?

State one possible disadvantage of economic growth.

In March 2021, the Scottish Government announced a package of measures worth £37.2m. This money is to be given to low income households to tackle poverty and inequality in Scotland.

Explain one possible reason why the Scottish Government wants to reduce poverty and inequality.

Using the diagram below, label the remaining three stages of the economic cycle in the boxes on the diagram.

What was the rate of inflation if the consumer price index (CPI) of a country rose from 120 to 150?

In December 2020, the UK unemployment rate was 5.1%. This was an increase of 1.3% from September 2020.

Explain one likely impact on UK tax revenue from rising unemployment rates.

Lithium is used in batteries to power various electrical and electronic goods including mobile phones and electric cars. Lithium has to be mined from the ground and large deposits are found in countries such as Chile. Lithium mining uses a lot of water – approximately 2 million litres per tonne of lithium.

Analyse how business activity can damage the environment in a country such as Chile.

Figure 4 shows labour force information for Mexico in the third quarter of 2020.

Figure 4
(Source adapted from: https://tradingeconomics.com/mexico/unemployed-persons (opens in a new tab))

Calculate, to two decimal places, the rate of unemployment for Mexico in the third quarter of 2020. You are advised to show your working.

In Mexico the minimum wage was increased by 15% to 141.7 pesos (US $7.15) in 2021. Nearly 11 million workers in Mexico are paid the minimum wage.

Analyse the impact of increasing wages on inflation in Mexico.

What does the International Labour Organisation (ILO) measure?

Which one of the following is considered to be a progressive tax in the UK?

Describe one negative impact of economic growth.

Mexico's annual inflation rate was 3.4% in 2020. The minimum wage was increased by 20% from 2019.

Explain the impact of wages rising faster than inflation on a country such as Mexico.

Which type of unemployment would result from the permanent closure of a coal mine?

An airport is a key part of most large urban areas. They are usually found on the edge of cities and are often surrounded by houses.

Explain one way an airport can cause damage to the environment.

In November 2020, Pakistan recorded a current account surplus of $1.64bn. This was its fifth consecutive current account surplus.

Explain one reason why an improvement in the quality of domestic goods may have resulted in a positive impact on Pakistan’s current account.

China has been investing in healthcare as the main way to reduce poverty. Over 90% of the medical bills of patients are now paid by the government.

Analyse the benefits of investing in healthcare for a country such as China.

Figure 3 shows the gross domestic product (GDP) per capita for Egypt in 2019 and 2020.

Figure 3

(Source adapted from: a gdp-per-capita-in-egypt/)

Calculate, to two decimal places, the percentage change in GDP per capita in Egypt between 2019 and 2020. You are advised to show your working.

Figure 4 shows the quarterly current account deficit (US$m) for Egypt from January 2018 until October 2020.

Analyse the possible impact on Egypt of having a continuous current account deficit.

Which one of the following is a possible cause of positive economic growth?

A trade union is an organisation that aims to improve

What is meant by the term economies of scale?

Define the term excess supply.

The Brazilian Government announced plans to privatise one of its state-owned food companies.

Explain one possible advantage of privatisation for consumers in Brazil.

What is meant by the term opportunity cost?

Figure 3 shows some of the production costs in March for a firm manufacturing clothing in Bangladesh.

Calculate the total fixed costs for the firm in March. You are advised to show your working.

Describe one reason why an entrepreneur is a factor of production.

The introduction of a minimum wage above the equilibrium wage in a labour market is most likely to

On the diagram below, draw and label economies of scale, diseconomies of scale and the point at which the firm is most efficient.

Simona owns a hairdressing business in Romania. She charges low prices and makes no charge when customers arrive late for appointments or make very late cancellations. She thinks customer care is more important than making a profit.

However, some customers have complained at having to wait weeks before an appointment is available. As a result, Simona has lost customers. This has caused financial problems in repaying a loan to the bank.

In response, Simona is considering increasing her prices and charging a fee to those who arrive late or cancel without suitable notice.

With reference to the data above and your knowledge of economics, assess the benefits to Simona of making these changes.

Figure 5 shows profit for a firm between 2020 and 2022.

Figure 5

Calculate, to two decimal places, the percentage change in profit for the firm between 2020 and 2022. You are advised to show your working.

What is meant by the term imports?

Describe one reason why governments make benefit payments.

Figure 1 shows the UK’s imports and exports for the year ending July 2019.

Figure 1

(Source: Department for International Trade: UK Trade in Numbers September 2019)

Using the data in Figure 1, calculate in £bn, the current account for the UK year ending July 2019. You are advised to show your working.

Norway had a current account surplus of 19.07bn Norwegian Krone (NOK) in the fourth quarter of 2019.

Explain one possible reason why a country such as Norway had a current account surplus.

Which one of the following is a possible impact of economic growth?

State one type of unemployment.

What is meant by the term recovery?

Nigeria’s rate of inflation increased to 12.2% in February 2020. A rise in the price of food products, such as bread and meat, was the main reason for the increase.

Explain one impact of rising inflation on shoe leather costs in Nigeria.

Which one of the following is likely to cause cost-push inflation?

The UK Government gives subsidies to firms in the renewable energy market that provide wind and solar energy.

Explain one reason why the UK Government gives subsidies to firms in the renewable energy market.

Figure 5 shows the average unemployment rate (%) in India between 2016 and April 2020.

With reference to the data above and your knowledge of economics, analyse the impact of rising unemployment rates on business confidence for a country such as India.

Which one of the following is an example of cyclical unemployment?

Describe one impact that education may have on inequality and poverty.

The consumer price index (CPI) was 110.2 in 2019 and the base year was 100 in 2015.

Calculate how much inflation there has been between 2015 and 2019. You are advised to show your working.

State one type of inflation.

Indonesia is one of the largest exporters of coal in the world. In 2020, the Indonesian Government started to deregulate the mining industry by removing some environmental controls.

Explain one disadvantage of deregulation for a country such as Indonesia.

Using the diagram below label the remaining three stages of the economic cycle in the boxes on the diagram.

Which one of the following describes shoe leather costs?

Which one of the following may cause a current account surplus?

In February 2020, Singapore experienced deflation for the first time since January 2010. This was mainly caused by a decline in the price of airfares and holidays due to the government lockdown.

With reference to the data above and your knowledge of economics, analyse the impact of deflation on consumer confidence in a country such as Singapore.

The UK has a benefits payment called Universal Credit. It is a payment to help with living costs if a person is on low income or out of work.

Figure 3

(Source adapted from: https://www.gov.uk/universal-credit/what-youll-get (opens in a new tab))

With reference to the data above and your knowledge of economics, assess the advantages of using benefit payments to redistribute income in a country such as the UK.

Figure 4 shows the change in gross domestic product (GDP) per capita for Vietnam.

Figure 4

(Source adapted from: https://www.ceicdata.com/en/indicator/vietnam/gdp-per-capita (opens in a new tab))

Calculate, to two decimal places, the percentage increase in GDP per capita between 2018 and 2019. You are advised to show your working.

Vietnam is struggling with high levels of air pollution. Its two biggest cities, Hanoi and Ho Chi Minh City, are now among the 15 most polluted cities in Southeast Asia. Air pollution is particularly harmful to human health causing diseases including strokes, heart disease and respiratory infections. Up to 60,000 deaths in Vietnam in 2018 were related to air pollution. On average, poor air quality reduces life expectancy by one year and costs the country about 5% of GDP per year.

Among the main causes of this pollution is transportation. Vietnam now has 3.6 million automobiles and 58 million motorbikes, mostly found in big cities. Many of these vehicles are old, with limited emission control technology. They cause daily traffic jams and are responsible for a large amount of air pollution.

The Vietnamese Government is considering whether to increase the environmental tax on petrol and diesel by 33%. The proposed tax will generate $2.4bn each year, an annual increase of $650.2m from current tax revenues on fuels.

(Source adapted from: https://thediplomat.com/2020/03/vietnams-big-air-pollution- (opens in a new tab)challenge/)

With reference to the data above and your knowledge of economics, evaluate the effectiveness of increasing taxation on petrol and diesel to protect the environment in a country such as Vietnam.

Public universities in Norway do not charge students any tuition fees. Education is funded by the government. In recent years Norway has spent more on education than any other country as a percentage of GDP. Norway also has one of the lowest rates of unemployment in the world.

With reference to the data above and your knowledge of economics, assess the benefits to Norway of the government funding all education.

Which type of unemployment occurs when the demand for a product is only at certain times of the year?

What is meant by the term recession?

The UK has 13 national parks with the Lake District National Park being the largest and most popular. It had over 19.17 million visitors in 2018. Woodland covers over 12% of the national park.

Explain one benefit to the UK Government of providing parks.

Which one of the following is likely to result in poverty?

State one effect on the balance of payments of improved quality of foreign goods.

In the first quarter of 2019 the unemployment rate in Argentina increased by 1% to 10.1%. This was the highest level in 13 years.

Explain one impact of rising unemployment on consumer confidence for a country such as Argentina.

In 2019, Germany was considering increasing the tax on meat to protect the environment and improve animal welfare. Currently meat in Germany has a reduced tax rate of 7%. Some political groups are arguing that this should increase to the standard 19%. According to United Nations research, methane from animals accounts for 14.5% of greenhouse gas emissions – more than the direct emissions from transport.

(Source adapted from: https://www.independent.co.uk/environment/ (opens in a new tab) german-meat-tax-environment-animal-welfare-a9045271.html)

With reference to the data above and your knowledge of economics, assess the use of taxation to protect the environment in a country such as Germany.

The Slovenian Government spent €3.05bn on healthcare in 2019. This included additional funding for reducing the time people were waiting for treatment and an extra €104m to cover the recent increase in wage rates for healthcare staff.

With reference to the data above and your knowledge of economics, analyse why the Slovenian Government might want to increase investment in healthcare.

In recent years Turkmenistan has been one of the fastest growing economies. The most important sector of the economy is oil and natural gas extraction, which accounts for more than 60% of GDP. Although agriculture accounts for only 10% of GDP, it employs 50% of the labour force. Turkmenistan has seen annual GDP growth rates of 6.2%.

With reference to the data above and your knowledge of economics, assess the likely benefits of economic growth for a country such as Turkmenistan.

In July 2019, China’s annual inflation rate increased to 2.8%. This was the highest rate since February 2018.

With reference to the data above and your knowledge of economics, analyse the impact of inflation on individuals in a country such as China.

What is meant by the term downturn?

Economic growth in Malaysia increased to 4.9% between April and June 2019.

Explain one disadvantage of economic growth for a country such as Malaysia.

Which one of the following terms may refer to someone having a lower standard of living in comparison to the average person in society?

State one effect on the balance of payments of improved quality of domestic goods.

In December 2019 the unemployment rate in Venezuela was approximately 44%. This was much higher than the previous December’s figure of 35%.

Explain one impact of increasing unemployment rates on business confidence in a country such as Venezuela.

Total healthcare spending in England was £129bn in 2018–2019 and was expected to rise to nearly £134bn by 2019–2020. Access to healthcare is free in England.

With reference to the data above and your knowledge of economics, assess the use of investment in healthcare to reduce the level of inequality and poverty in a country such as England.

A UK environmental group has called for tough action to tackle air pollution, particularly from road transport. It wants the UK Government to impose higher taxation on petrol and diesel fuel for cars and trucks.

With reference to the data above and your knowledge of economics, analyse the advantages of using taxation to help protect the environment in a country such as the UK.

Just 30 years ago, Ghana was in crisis with high levels of poverty and on the edge of economic collapse. The West African nation has made a significant recovery and was predicted to be the world’s fastest growing economy in 2019.

The International Monetary Fund (IMF) estimates Ghana’s Gross Domestic Product (GDP) growth rate of 8.8% will be double that of emerging economies, and well ahead of world growth rates. Ghana is one of the world’s largest cocoa producers. Its growth is now being maintained by a different commodity, the extraction of crude oil.

(Source adapted from: https://www.imf.org/external/datamapper/ (opens in a new tab)
NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD/GHA)

With reference to the data above and your knowledge of economics, assess the use of GDP as a measure of growth for a country such as Ghana.

What is the name given to a country’s exports and imports of services?

What is meant by the term unemployment?

Calculate, to two decimal places, the rate of unemployment for a country which has a labour force of 72 million of which 8 million are unemployed. You are advised to show your working.

In November 2018, Mexico’s current account deficit increased to $5.082bn.

Explain one reason why the quality of domestic goods might have resulted in this increase in the current account deficit for Mexico.

Figure 2 shows the rates of taxation in the UK in 2018.

Figure 2

This is an example of what type of taxation system?

State one method of government intervention that should lead to the protection of the environment.

What is meant by the term relative poverty?

A recent report estimates 23% of gross domestic product (GDP) in Greece is from revenue that goes unrecorded by the government.

Explain one possible reason why a large percentage of Greece’s GDP might be unrecorded.

The rate of inflation in Cyprus decreased from 3.1% in September to 3% in October.

Explain one reason why low and stable inflation is a macroeconomic objective for a country such as Cyprus.

What is calculated by using the consumer price index (CPI)?

What is meant by the term boom?

What is meant by the term shoe leather costs?

State one macroeconomic objective.

In 2018, the annual rate of inflation in Egypt was 16% in September and 17.7% in October.

Explain one likely impact of this change in inflation on the current account of the balance of payments for a country such as Egypt.

Figure 2 shows the UK’s unemployment rates for 16–64 year olds in different regional areas in December 2018.

Figure 2

(Source: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/ (opens in a new tab) employmentandemployeetypes/bulletins/regionallabourmarket/latest)

Calculate, to two decimal places, the average rate of unemployment in the UK in December 2018. You are advised to show your working.

With reference to the data in Figure 2 and your knowledge of economics, analyse one possible reason why rates of unemployment vary in the different regional areas of the UK.

State one possible cause of positive economic growth.

The International Labour Organisation (ILO) measures

What is meant by the term gross domestic product (GDP)?

Describe one positive impact of economic growth.

Consumer Price Index (CPI) was 120.4 in 2017 and it increased to 130.3 in 2018.

Calculate, to two decimal places, the rate of inflation in 2018. You are advised to show your working.

Using the diagram below draw and label the three stages of the economic cycle in the boxes on the diagram.

According to the US Labour Department, employees working in the public education sector are leaving their jobs at faster rates than ever recorded before.

Explain one reason why some people in the education sector might choose to become voluntarily unemployed?

Canada Child Benefit (CCB) payments get a boost

In 2018, the monthly tax-free welfare benefit for children was increased to match the cost of living in Canada.

The amount a family receives is calculated based on income. As a family’s income rises the amount of benefits decrease. Some higher income households do not receive the benefit at all. The CCB has distributed more than CAD$23.3bn to around 3.7 million Canadian families, and has helped to remove more than 300,000 children out of poverty.

With reference to the data above and your knowledge of economics, assess the advantages of using benefit payments to redistribute income in a country such as Canada.

Which type of taxation has a higher proportion of income paid as income rises?

In 2018, Italy entered a recession after the country’s manufacturing sector decreased for the third month in a row. Gross domestic product (GDP) fell by 0.1% from July to September.

Analyse the impact on unemployment of a recession in a country such as Italy.

What type of unemployment is likely to be caused by generous welfare benefits?

What name is given to the phase in the economic cycle when consumers start to regain confidence and economic activity is on the increase?

Mexico plans to increase the country’s minimum wage by 16% to $5.10 a day. Mexico’s President promised further rises to keep up with the high rates of inflation.

Explain the impact of high rates of inflation on wages in a country such as Mexico.

Which of the following is used as a measure of economic growth?

State one reason why a government wants to reduce poverty and inequality.

Cost‐push inflation is most likely to result from an increase in

Indonesia’s Economic Minister Darmin Nasution said that the current account deficit would reach 3% of gross domestic product (GDP) by the end of 2018.

“Yes, it is a bit high, but nothing to worry about. The deficit in 2014 was even higher,” said Darmin Nasution.

Meanwhile, senior economist Faisal Basri called on the government to take the growing current account deficit as a serious matter because it could have negative effects on the economy.

With reference to the data above and your knowledge of economics, assess the impact of a current account deficit for a country such as Indonesia.

In 2018, the USA increased its emissions of carbon dioxide. This increase happened even though large numbers of coal‐fired power stations were closed and American consumers purchased nearly double the number of electric cars. The main reason, often stated as a benefit to an economy, was high economic growth.

A booming US economy has meant increased industrial production, more truck and air travel and more offices and other workplaces to heat. The result is that the USA will have to do even more in the coming years to meet international commitments for greenhouse gas reductions by increasing its protection of the environment.

(Source adapted from: https://www.nbcnews.com/news/us‐news/ (opens in a new tab) economic‐boom‐spikes‐carbon‐emissions‐despite‐green‐tech‐gains‐n956336)

With reference to the data above and your knowledge of economics, evaluate whether there is a trade‐off between economic growth and environmental protection for a country such as the USA.

Which one of the following may result in economic growth?

What is the main cause of frictional unemployment?

The price of a basket of goods and services used to calculate the Consumer Price Index (CPI) in an economy, rose from €1 250 to €1 300 in one year.

What is the rate of inflation?

What is the name of the term used to describe tax on income, wealth and profit?

State one way businesses can damage the environment.

What is the name given to a country’s exports and imports of physical goods?

Explain one method of government intervention that could be used to protect the environment.

Analyse the possible impact of unemployment on an economy.

Inflation remains a major problem for Turkey’s economy. Annual inflation in Turkey increased to 11.9% in October 2017. The highest price rises were for transportation, which rose by 16.79% and food, which increased by 12.74%.

With reference to the data above and your knowledge of economics, assess the impact of inflation on a country such as Turkey.

GDP per capita is a measure of a country’s economic output that accounts for population. Figure 4 shows the population and gross domestic product (GDP) for Vietnam in 2016.

Figure 4

(Source: © 2018 The World Bank Group)

Calculate, to two decimal places, the GDP per capita for Vietnam in 2016. You are advised to show your working.

The unemployment rate fell in Vietnam between 2015 and 2016 but in the same period the inflation rate increased.

Analyse how a fall in unemployment may have caused an increase in Vietnam’s inflation rate.

A report by the charity Oxfam, stated that Vietnam has 210 super-rich people. Their combined earnings for one year are enough to take 3.2 million people out of poverty and end absolute poverty in Vietnam. To reduce inequality and poverty, Oxfam is calling on international leaders to increase taxes to fund healthcare, education and job creation. Oxfam also asked business leaders to pay employees a living wage and pay their fair share of tax.

With reference to the data above and your knowledge of economics, evaluate whether an increase in progressive taxes is the most effective way to reduce inequality and poverty for a country such as Vietnam.

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

Describe one impact of economic growth on the productive potential of a country.

Figure 1 shows the main components of Germany’s current account in 2016.

Figure 1

(Source: Bundesbank)

Using the data in Figure 1, calculate in € bn the current account balance for Germany in 2016.

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.

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

State one impact of a current account deficit.

What is meant by the term absolute poverty?

President Xi Jinping of China has made environmental protection a priority. This is due to rising public concern over widespread environmental damage caused by years of uncontrolled economic growth.

Explain one possible negative effect on the environment caused by the economic growth of a country such as China.