IGCSE ECONOMICS (EDEXCEL) 2.1
EXAM QUESTIONS AND ANSWERS
2025
,define budget deficit - ANSWERSthe amount by which government spending is greater
than government revenue
the macroeconomic objectives are... - ANSWERSreduce unemployment, protect the
environment, balance payments, grow the economy, control inflation, redistribute
income
define economic growth - ANSWERSincrease in the level of output of a nation
define national income - ANSWERSvalue of income, output or expenditure over a
period of time
national income is calculated by... - ANSWERSadding all incomes in the economy
together
national income is equal to... - ANSWERSthe value of all production in the economy;
the value of all spending in the economy
economic growth is desirable because... - ANSWERSif an economy grows, businesses
are more profitable, and therefore have more capital to use; this can make jobs,
increase wages, and these increased wages give consumers more money to spend,
restarting the whole cycle
the most common measure of economic growth is... - ANSWERSGross Domestic
Product (GDP)
GDP is... - ANSWERSthe market value of all final goods and services produced within a
country in a given period of time
use of GDP as an indicator of economic growth is limited by... - ANSWERSinflation,
population changes, statistical errors, the value of home produced goods, the hidden
economy, external costs
inflation limits use of GDP as an indicator of economic growth by... - ANSWERSgiving
misleading figures, having not had inflation taken into account; ie, if inflation is rising by
4%, and GDP rises by 5%, the effects are those of a GDP rise of 1% and no inflation
population changes limit use of GDP as an indicator of economic growth by... -
ANSWERSif a population grows significantly, it increases GDP, even if living standards
do not increase; this is because there are more people involved in economic activity
, statistical errors limit use of GDP as an indicator of economic growth by... - ANSWERSit
is a huge task to gather data about all economic activity in a country, so some of it may
be left out; this means that GDP is not 100% accurate
the value of home produced goods limits use of GDP as an indicator of economic
growth because... - ANSWERSsome goods and services are not traded, such as people
growing their own vegetables, and people doing repairs themselves instead of paying
others to do the repairs for them
the hidden economy limits use of GDP as an indicator of economic growth by... -
ANSWERSnot being visible to governments; for example, if someone pays a friend $25
for a lift somewhere, it is not recorded, and these transactions cannot be shown by GDP
GDP and living standards limit use of GDP as an indicator of economic growth by... -
ANSWERSnot taking into account data concerning leisure time, income distribution,
whether growth has resulted in pollution and the quality of goods and services
external costs limits use of GDP as an indicator of economic growth by... -
ANSWERSnot being taken into account when GDP grows; eg, if an economy grows, but
there is lots of pollution with that growth, this is not taken into account by GDP
an economic cycle consists of... - ANSWERSa boom, a downturn, a recession or
depression and a recovery
a boom consists of... - ANSWERSfast-growing GDP with many businesses doing very
well, and lots of new businesses entering the market; demand, wages, and profits all
rise and new jobs are created, however, prices may also be rising
a downturn consists of... - ANSWERSthe economy growing, but at a slow rate; demand
begins to fall and unemployment starts to rise; prices rise more slowly than in a boom
a recession or depression consists of... - ANSWERSthe lowest point in an economic
cycle; this period is often associated with widespread poverty, as demand falls for a
large number of goods and services, particularly non-essentials; unemployment rises
sharply, business confidence is very low, and there are many bankruptcies; prices may
even fall
the difference between a recession and a depression is... - ANSWERSa recession is
less severe than a depression; a recession is two quarters of negative economic
growth, whereas a depression is three or more years in which GDP decreases by 10%
or more
recovery from an economic cycle consists of... - ANSWERSGDP starting to rise,
increased business confidence, more economic activity, more demand, less
unemployment and prices rising again
EXAM QUESTIONS AND ANSWERS
2025
,define budget deficit - ANSWERSthe amount by which government spending is greater
than government revenue
the macroeconomic objectives are... - ANSWERSreduce unemployment, protect the
environment, balance payments, grow the economy, control inflation, redistribute
income
define economic growth - ANSWERSincrease in the level of output of a nation
define national income - ANSWERSvalue of income, output or expenditure over a
period of time
national income is calculated by... - ANSWERSadding all incomes in the economy
together
national income is equal to... - ANSWERSthe value of all production in the economy;
the value of all spending in the economy
economic growth is desirable because... - ANSWERSif an economy grows, businesses
are more profitable, and therefore have more capital to use; this can make jobs,
increase wages, and these increased wages give consumers more money to spend,
restarting the whole cycle
the most common measure of economic growth is... - ANSWERSGross Domestic
Product (GDP)
GDP is... - ANSWERSthe market value of all final goods and services produced within a
country in a given period of time
use of GDP as an indicator of economic growth is limited by... - ANSWERSinflation,
population changes, statistical errors, the value of home produced goods, the hidden
economy, external costs
inflation limits use of GDP as an indicator of economic growth by... - ANSWERSgiving
misleading figures, having not had inflation taken into account; ie, if inflation is rising by
4%, and GDP rises by 5%, the effects are those of a GDP rise of 1% and no inflation
population changes limit use of GDP as an indicator of economic growth by... -
ANSWERSif a population grows significantly, it increases GDP, even if living standards
do not increase; this is because there are more people involved in economic activity
, statistical errors limit use of GDP as an indicator of economic growth by... - ANSWERSit
is a huge task to gather data about all economic activity in a country, so some of it may
be left out; this means that GDP is not 100% accurate
the value of home produced goods limits use of GDP as an indicator of economic
growth because... - ANSWERSsome goods and services are not traded, such as people
growing their own vegetables, and people doing repairs themselves instead of paying
others to do the repairs for them
the hidden economy limits use of GDP as an indicator of economic growth by... -
ANSWERSnot being visible to governments; for example, if someone pays a friend $25
for a lift somewhere, it is not recorded, and these transactions cannot be shown by GDP
GDP and living standards limit use of GDP as an indicator of economic growth by... -
ANSWERSnot taking into account data concerning leisure time, income distribution,
whether growth has resulted in pollution and the quality of goods and services
external costs limits use of GDP as an indicator of economic growth by... -
ANSWERSnot being taken into account when GDP grows; eg, if an economy grows, but
there is lots of pollution with that growth, this is not taken into account by GDP
an economic cycle consists of... - ANSWERSa boom, a downturn, a recession or
depression and a recovery
a boom consists of... - ANSWERSfast-growing GDP with many businesses doing very
well, and lots of new businesses entering the market; demand, wages, and profits all
rise and new jobs are created, however, prices may also be rising
a downturn consists of... - ANSWERSthe economy growing, but at a slow rate; demand
begins to fall and unemployment starts to rise; prices rise more slowly than in a boom
a recession or depression consists of... - ANSWERSthe lowest point in an economic
cycle; this period is often associated with widespread poverty, as demand falls for a
large number of goods and services, particularly non-essentials; unemployment rises
sharply, business confidence is very low, and there are many bankruptcies; prices may
even fall
the difference between a recession and a depression is... - ANSWERSa recession is
less severe than a depression; a recession is two quarters of negative economic
growth, whereas a depression is three or more years in which GDP decreases by 10%
or more
recovery from an economic cycle consists of... - ANSWERSGDP starting to rise,
increased business confidence, more economic activity, more demand, less
unemployment and prices rising again
