OCR GCSE Economics Paper 2 Questions With 100% Verified Solutions

OCR GCSE Economics Paper 2 Questions With 100% Verified Solutions What is cyclical unemployment? - ANSWER -Unemployment caused by a lack of demand in the economy. Demand for goods and services falls- fewer workers required to produce output- others become unemployed. This causes the unemployed to have lower incomes and spend less so firms have lower profits and employ less Benefits of unemployment - ANSWER -1) Wage rates decrease which mean its cheaper for firms to invest in capital and etc. As unemployed workers are competing for jobs, firms do not have to raise wage rate 2) Firms are more competitive as costs are lower Costs of unemployment - ANSWER --Lower standard of living -Loss of self-esteem and status (could lead to relationship breakdowns within families) -Excluded workers- workers are unemployed for so long they become unemployable -Costs to tax-payers (Government will need to spend more money on benefits) Costs of unemployment to the government - ANSWER --Labour resources wasted -Unemployment leads to more unemployment (i.e. cyclical unemployment) -Budget deficit (government spends more than it receives in tax revenue)- unemployed are not paying income tax or NI contributions Costs of unemployment to regions - ANSWER --Unemployment is often spread unevenly throughout the country- some areas tend to suffer more than others -Could cause social problems like rise in crime rate - Value of property decreases for homeowners What is the distribution of income? - ANSWER -How incomes are shared out between individuals and households What is inequality of income? - ANSWER -Some individuals/ households have low incomes while others have much higher incomes What are the 5 different ways an individual can earn income? - ANSWER -1) Wages- People who work in highly skilled jobs with high demand get higher wages than others 2) Rent- The owners of land and property can gain an income from rent. Rent is the reward for letting others live/ work in the owner's property 3) Interest- The reward for saving/lending. 4) Profit- This can be through enterprise or through being a shareholder in a company 5) State Benefits- For unemployed, disabled or pensioners What are dividends? - ANSWER -Shares of a company's profit How do the factors of production link to the four factor incomes? - ANSWER -Land -> Rent Labour -> Wages Capital -> Interest Enterprise -> Profit What is wealth? - ANSWER -A stock of assets that can be given monetary value and measured at a particular point in time e.g. assets that can earn you income like rent, interest or dividents What is income? - ANSWER -A flow of money going to the factors of production over time e.g. a weekly wage or a monthly salary What is gross income? - ANSWER -Income received before any taxes are taken or benefits given What is net/ disposable income? - ANSWER -Income available after the effect of direct taxes and benefits How is income distributed in the UK? - ANSWER -There is a high level of inequality of income Why is income unevenly distributed in the UK? (5 reasons) - ANSWER -1) Age- Younger and older age groups have lower average incomes than those in the middle 2) Gender- Still illegal gender discrimination and women often take time out of work to have/raise kids 3) Reliance on benefits- These benefits are much lower than the average wage 4) Differences in Wages 5) Income-earning assets are distributed unevenly- Not all households in the UK receive the four factor incomes What is the distribution of wealth? - ANSWER -How wealth is shared out between individuals and households How is wealth distributed in the UK? - ANSWER -It is divided even more unequally than income Why is wealth unevenly distributed in the UK? (4 reasons) - ANSWER -1) Inheritance- The rich pass down their assets through generations and keep on being rich