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Edexcel IGCSE Economics 2.1 government and the economy

Build Paper 2 confidence with macroeconomic objectives, national data, fiscal policy, monetary policy, supply-side policy and trade-offs.

Syllabus
First assessment 2019
Course
Economics 4EC1

Covered syllabus points

2.1.1 Macroeconomic objectives2.1.2 Government policies2.1.3 Relationships between objectives and policies

2.1 Government and the economy question 1

[Maximum number: 14]

Question (a)

(a)

What is likely to happen if a government successfully reduces unemployment?

A

Inflation might rise as more people have money to spend

B

More people working leads to lower overall economic growth

C

Inflation decreases because people have less money to spend

D

Government spending on benefits would increase

[ 1 ]

Question (b)

(b)

Describe one impact on consumers of an increase in interest rates.

[ 2 ]

Question (c)

(c)

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

Figure 1

Figure 1

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

[ 2 ]

Question (d)

(d)

In December 2023, Portugal reported a fiscal surplus of €6.2bn, which was €3.4bn higher than 12 months before.

Explain one possible benefit of a fiscal surplus for a country such as Portugal.

[ 3 ]

Question (e)

(e)

In February 2024, the Greek Prime Minister Kyriakos Mitsotakis said that the Greek economy was entering the recovery phase of the economic cycle.

With reference to the data above and your knowledge of economics, analyse the impact of a recovery on unemployment for a country such as Greece.

[ 6 ]

2.1 Government and the economy question 2

[Maximum number: 18]

Question (a)

(a)

Explain one possible disadvantage of having a fiscal deficit for a country such as the US.

Consumers in the UK are very unhappy with another rise in inflation. The consumer price index (CPI) was 3.9\% in November and increased to 4\% in December 2023.

[ 3 ]

Question (b)

(b)

With reference to the data above and your knowledge of economics, analyse the possible impact of rising inflation on shoe leather costs for consumers in the UK.

Gross domestic product (GDP) growth in France is forecast to remain low over the next two years. Consumer spending is expected to improve as inflation reduces. However, a weak outlook for the German economy, France's main trade partner, and low growth in China are expected to limit any increases in growth.

As a result, unemployment levels are expected to remain high. The interest rate in France (as set by the European Central Bank) was 4.5% in December 2023, but may change in the future.

Figure 4

Figure 4

[ 6 ]

Question (c)

(c)

With reference to the data above and your knowledge of economics, assess how effective monetary policy might be in decreasing unemployment for a country such as France.

[ 9 ]
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