ECONOMICS PAPER 2 ACTUAL TEST
PAPER 2026 QUESTIONS AND SOLUTIONS
GRADED A+
●● balance of payments.
Answer: a record of all transactions between the residents of a country
and the residents of all other countries, showing payments received and
payments made
●● bilateral trade agreement.
Answer: trade agreement involving two trading partners, usually two
countries
●● budget deficit.
Answer: government tax revenues are less than government
expenditures (usually a year)
●● comparative advantage.
Answer: a country has a lower opportunity cost in the production of a
good than another country
●● current account.
, Answer: the balance of trade between countries (exports - imports) (X -
M)
current account deficit = (X > M)
current account surplus = (X > M)
●● customs union.
Answer: a type of trading bloc where the countries eliminate trade
barriers (free trade area) and adopt a common policy towards all non-
member countries
●● depreciation.
Answer: a decrease in the value of a currency
●● devaluation.
Answer: a decrease in the value of a currency in the context of a fixed
exchange rate
●● development aid.
Answer: foreign aid intended to help less economically developed
countries (LEDCs); for example, project aid, programme aid, debt relief
or technical assistance
●● economic development.
PAPER 2026 QUESTIONS AND SOLUTIONS
GRADED A+
●● balance of payments.
Answer: a record of all transactions between the residents of a country
and the residents of all other countries, showing payments received and
payments made
●● bilateral trade agreement.
Answer: trade agreement involving two trading partners, usually two
countries
●● budget deficit.
Answer: government tax revenues are less than government
expenditures (usually a year)
●● comparative advantage.
Answer: a country has a lower opportunity cost in the production of a
good than another country
●● current account.
, Answer: the balance of trade between countries (exports - imports) (X -
M)
current account deficit = (X > M)
current account surplus = (X > M)
●● customs union.
Answer: a type of trading bloc where the countries eliminate trade
barriers (free trade area) and adopt a common policy towards all non-
member countries
●● depreciation.
Answer: a decrease in the value of a currency
●● devaluation.
Answer: a decrease in the value of a currency in the context of a fixed
exchange rate
●● development aid.
Answer: foreign aid intended to help less economically developed
countries (LEDCs); for example, project aid, programme aid, debt relief
or technical assistance
●● economic development.
