How the economy works

Which of the following would be included in the tertiary sector of an economy?

Define the term 'social cost'.

Using Item A and Figure 5, calculate the estimated total cost per kilometre of HS2. Give your answer to the nearest £.

Analyse the possible impact(s) upon labour markets of the cancellation of part of Phase 2b of HS2 to Leeds.

Explain two possible external benefits of HS2.

Do you think that the overall benefits of HS2 are likely to be greater than the costs? Use Items A and B and your own economic knowledge to justify your view.

Fiscal policy would involve changes in which of the following?

Which of the following is an indirect tax?

A balance of trade deficit is best described as which of the following?

Which of the following best describes the type of unemployment caused by interest rates and tax rates remaining high for a long period of time?

Table 1 shows economic growth between 2017 and 2021. **Table 1** | Economic growth | % change in GDP | |---|---| | 2017 | 1.3 | | 2018 | 0.4 | | 2019 | -0.6 | | 2020 | 2.1 | | 2021 | 2.7 | Using Table 1, the average annual rate of economic growth for this period to one decimal place is

Which pair of policies is most likely to increase income inequality?

Which of the following correctly indicates the overall effects an increase in interest rates is likely to have on economic growth and inflation? | | Effect on economic growth | Effect on inflation | |---|---|---| | A | Decrease | Decrease | | B | Decrease | Increase | | C | Increase | Decrease | | D | Increase | Increase |

Which of the following is not a role of a high street bank?

Which of the following might increase demand-pull inflation?

Which of the following identifies the most likely effects of a significant fall in economic growth? | | Effect on unemployment | Effect on balance of trade deficit | |---|---|---| | A | Decrease | Decrease | | B | Decrease | Increase | | C | Increase | Decrease | | D | Increase | Increase |

State two ways a government can reduce cyclical unemployment.

Explain one advantage of using supply-side policies.

Explain one economic consequence of the government decreasing its budget deficit.

Table 2 shows data for an economy for the year 2022. **Table 2** | | Value | |---|---| | Value of exports | £74 billion | | Value of imports | £56 billion | | Value of GDP | £990 billion | Calculate the balance of trade expressed as a percentage of GDP for 2022 to one decimal place. Tick (✔) one box to indicate whether it is a surplus or deficit. Show your working.

Explain one reason why the value of a country's exports might be larger than the value of its imports.

State two functions of money.

Explain one ethical issue faced by UK producers when trading with other countries.

Explain one possible effect of increased inflation on UK businesses.

Table 3 shows information relating to the UK economy: **Table 3** | | Value | |---|---| | GDP (in £s) for 2019 | 2215 billion | | Population for 2019 | 66.3 million | Using Table 3, calculate GDP per capita for the UK in 2019 to the nearest £. Show your working.

Explain one possible benefit of economic growth.

The following table contains data from the Consumer Price Index (CPI). **Table 4** | Year | CPI | |---|---| | 2018 | 119.7 | | 2019 | 120.0 | | 2020 | 121.1 | | 2021 | 120.8 | | 2022 | 122.4 | Based on the data shown in Table 4, draw a bar chart for the CPI for the years 2018, 2020 and 2021.

**Figure 2** Aiming for a steady rate of economic growth is an important economic objective of the UK government. The average rate of economic growth has gradually fallen in the UK. In the 1980s, the average economic growth was 2.7% per year. In the 1990s, average economic growth fell to 2.3% per year. Since 2000, UK average economic growth up until the pandemic of 2020-2021 was 1.8%. *The figure shows a bar chart titled 'UK economic growth, 2000-2019'. The y-axis shows '% change in real GDP per year' from -5 to 4. The x-axis shows the years from 2000 to 2019. Most years show positive growth between 1% and 3%. There is a significant dip in 2009, showing negative growth of around -4%.* Governments aim for economic growth because it generates benefits for both the government and the rest of the population. Clearly, economic growth means more is being produced in an economy, which normally means that incomes will be rising - though this may not be shared out evenly. However, there are some problems created by economic growth. If economic growth is too high, then trade-offs with other objectives are more likely to occur. Using Figure 2, assess whether the government is right to always aim for economic growth as an objective for the economy.

**Item A** The UK left the European Union (EU) in 2020. Economists have been worried about how this will affect the UK economy. Within the EU, the UK benefitted from free trade with other EU economies. Foreign trade significantly benefits the UK economy, contributing almost 30% to the UK's Gross Domestic Product (GDP). The ability to sell goods and services outside of the UK allows UK businesses to access wider markets. As shown in Table 5, total UK exports (to EU and non-EU economies) were over £500 billion in 2016 and have risen over the period 2016-2019. However, some groups of people believe that the free trade the UK has participated in while a member of the EU has proven harmful. Foreign trade, whilst generating many benefits, may also generate disadvantages for the UK economy. For example, now the UK is outside the EU it is believed that smaller UK businesses will face less competition from other EU businesses who have lower production costs. There will still be competition from low-cost producers outside the EU, but these businesses may not always be able to compete efficiently with UK producers due to other reasons. Despite no longer being an EU member, the UK has signed a free trade deal with the EU on trade in goods, but not in services. The UK government is also keen to create more free trade deals with other countries. It is believed that the UK government would like to sign a free trade deal with the USA, but there are concerns from many in the UK that this would lead to a rise in cheaper imports of goods that some people think are not desirable, such as chlorinated chicken. **Table 5** | UK trade with EU economies | Exports (£ bn) | Imports (£ bn) | |---|---|---| | 2016 | 245.6 | 318.8 | | 2017 | 278.0 | 347.9 | | 2018 | 298.3 | 366.3 | | 2019 | 294.3 | 373.5 | | UK trade with non-EU economies | Exports (£ bn) | Imports (£ bn) | |---|---|---| | 2016 | 317.6 | 280.5 | | 2017 | 344.9 | 305.7 | | 2018 | 363.3 | 320.8 | | 2019 | 396.5 | 347.8 | **Item B** Globalisation has affected all countries across the world – both developed and less economically developed countries. Developed countries have benefitted from globalisation by businesses from these countries being able to sell goods and services to many more people across the world. People in less economically developed countries have also benefitted from the job creation that has followed the locating of multinational companies (MNCs) within these countries as part of increased globalisation. MNCs are very large when measured in terms of their own sales revenue. Some MNCs generate more income than the GDP of many individual countries. This means governments in less economically developed countries often want to attract MNCs to their countries. However, MNCs and increased globalisation do not always generate the benefits for the less economically developed countries that was hoped for by these governments. For example, a significant proportion of the tax revenue created by the MNCs' activities is often not paid to the government in these countries. This is because the MNCs use tax avoidance schemes that are viewed by some as unethical, but these schemes are usually legal. **Table 6** | Multinational companies | Revenue (in US$ billions) | |---|---| | Walmart | 599 | | Amazon | 386 | | Royal Dutch Shell | 344 | | Apple | 294 | | Volkswagen | 282 | | Country | GDP (in US$ billions) | |---|---| | United Kingdom | 2638 | | Ireland | 399 | | Bangladesh | 318 | | Vietnam | 341 | | Malaysia | 336 | Define the term 'free trade'.

Using Table 5, calculate the size of the UK's total trade balance in 2019 with both EU and non-EU economies in £ billions.

Using Item A, explain two advantages of foreign trade for the UK economy.

Using Item B, analyse the effects of increasing global interdependence on employment in the UK.

Using Items A and B and your own economic knowledge, discuss whether increasing globalisation is beneficial for people in less economically developed countries. Justify your answer.