PODAR INTERNATIONAL SCHOOL
PODAR INTERNATIONAL SCHOOLIGCSE EXAM- 2015 ECONOMICS
0455/02Paper 2 Structured Questions Time : 2.15 hoursDate: July
2015 Marks: 90 NameClassCandidate No Additional Materials: Answer
Booklet/Paper INSTRUCTIONS TO CANDIDATESWrite your name, Centre
number and candidate number in the spaces provided on the answer
booklet / answer paper.Answer Question 1 (Section A) and any three
questions from Section B.Write your answers on the separate answer
paper provided.If you use more than one sheet of paper, fasten the
sheets together.
INFORMATION FOR CANDIDATESThe number of marks is given in
brackets [ ] at the end of each question or part question.
Section-A
1 Fiscal policy and an ageing population in Japan
A sales tax was introduced in Japan in 1989, initially at a rate
of 3%, and this was later increased to 5% in 1997. The intention is
to increase the rate to 8% in 2014 and to 10% in 2015. This will
still leave the tax rate below other countries. The tax increase in
1997 was not opposed by many of the Japanese people, but since then
Japans Gross Domestic Product (GDP) has fallen by 10%. It was
US$5069 billion in 2011. There has been deflation and this has
badly affected tax revenue, which has fallen 22% since 1997,
leading to a doubling of the Japanese Governments debt. The
Japanese Government was required to spend a great deal of money in
March 2011 when a devastating earthquake and tsunami (coastal
flooding) struck the countrys north-eastern coast, leaving 20 000
people dead or missing; it has been estimated that the rebuilding
work will cost US$260 billion. The Japanese Governments debt is now
at a very high level, as can be seen in Table 1.
The Japanese Government has decided to increase sales tax to
help pay for the pensions and health care of the ageing population.
The problem is that the higher tax rate might lead to a fall in
consumption, leading to an increase in unemployment. It may not
help the country to get out of recession. The average annual growth
in Gross Domestic Product over the last five years has been
0.3%.Many Japanese people are anxious and worried about the future,
especially fearing that the government might try to reduce its
public sector debt, leading to further increases in unemployment.
The rate of unemployment in Japan is currently above its average
rate over the last ten years. Economists in Japan are thinking of
ways to promote economic growth to get the country out of
recession, such as through encouraging increased productivity and
greater entrepreneurship.It is certainly the case that there is a
high savings ratio in Japan. This is despite the fact that interest
rates are at their lowest ever level. There is a strong tradition
of saving in Japanese culture and the level of interest rates is
clearly only one influence on the decision of how much people
save.The ageing population is a particular problem in Japan. The
percentage of the Japanese population that is over the age of 60 is
30.5%. The life expectancy of Japanese men is now 80.1 years and
Japanese women 87.2 years, giving an average of 83.7 years. Table 2
shows how this compares with a number of other countries.
(a) Explain what is meant by deflation. [2] (b) Using
information from the extract, calculate the level of government
debt in US$ in Japan in 2011. [1](c) Using information from the
extract, explain two reasons why Japans government debt, as a
percentage of Gross Domestic Product, is so high. [4](d) Discuss
whether an increase in the rate of a sales tax will cause
unemployment. [6] (e) Analyse how increased productivity and
greater entrepreneurship could help an economy to get out of
recession. [6] (f) Using information from the extract, explain two
influences, other than interest rates, on how much people save. [4]
(g) Using Table 2, calculate the difference between average life
expectancy in Japan and Kenya. [1] (h) Discuss whether an ageing
population is always a problem for an economy. [6]
Section-B (Answer any THREE Questions)
2 All countries face the economic problem and so choices have to
be made.(a) Explain what is meant by the economic problem. [2](b)
Describe the two main features of the factor of production,
enterprise. [4](c) Using a production possibility curve diagram,
explain how the curve can be used to show the consequences of a
change in the allocation of resources between the production of two
goods. [6](d) Discuss whether a decision by a government, with
limited financial resources, to increase expenditure on education
by 25% over a three year period, is likely to be an appropriate
decision. [8]
3 A government decides to encourage the use of public transport
by the provision of a subsidy.(a) Using a demand and supply
diagram, analyse the effect of a subsidy on the equilibrium price
and the equilibrium quantity in such a market. [6](b) Explain what
factors influence the price elasticity of demand for public
transport. [6](c) Discuss whether transport in a country should be
provided by the public sector or by the private sector. [8]
4 The types of business organisation in India vary a great
deal.(a) Describe two features of a partnership. [4](b) Explain why
a partnership might become a private limited company. [5](c)
Distinguish between internal and external economies of scale.
[4](d) Discuss whether all small firms will eventually become large
firms. [7]
5. Many people like to save some of their income and commercial
banks usually have various ways of encouraging people to save. (a)
Analyse two motives that people may have for saving money. [4] (b)
Describe why different groups of people are likely to save
different proportions of their income. [4](c) Explain the different
ways that commercial banks can encourage people to save. [5](d)
Discuss whether a government should be worried if more people in a
country decide to save a large proportion of their income. [7]
6 Inflation and unemployment are two economic problems that
governments usually have to deal with. (a) Distinguish between
demand-pull and cost-push inflation. [4] (b) Explain three reasons
why inflation is regarded as a serious economic problem. [6] (c)
Distinguish between frictional and cyclical unemployment. [4](d)
Discuss whether there is likely to be a conflict between the
government aims of low inflation and low unemployment. [6]
7 Whilst in recent years more countries have adopted freely
floating exchange rates, a number of countries have been increasing
the protection they are giving to their domestic industries. (a)
Define the term exchange rate. [2] (b) Explain what determines the
value of a freely floating exchange rate. [6] (c) Describe two
methods of trade protection. [4] (d) Discuss whether a country
should impose more trade restrictions. [8]
PODAR INTERNATIONAL SCHOOLIGCSE ExaminationsECONOMICS 0455/ 1
PAPER-1 Multiple Choice 45 minutes DATE: July 2014 30
Marks-------------------------------------------------------------------------------------------------------------------------------Additional
Materials: Multiple Choice Answer SheetSoft clean eraserSoft pencil
(type B or HB is recommended)Name Candidate No. Class.
-------------------------------------------------------------------------------------------------------------------------------
READ THESE INSTRUCTIONS FIRST Write in soft pencil. Do not use
staples, paper clips, highlighters, glue or correction fluid. Write
your name, Centre number and candidate number on the Answer Sheet
in the spaces provided unless this has been done for you. There are
thirty questions on this paper. Answer all questions. For each
question there are four possible answers A, B, C and D. Choose the
one you consider correct and record your choice in soft pencil on
the separate Answer Sheet. Read the instructions on the Answer
Sheet very carefully. Each correct answer will score one mark. A
mark will not be deducted for a wrong answer.
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1 A power station was built to provide electricity to rural
villages in Namibia. What was its opportunity cost? A the cost of
producing the electricity B the school which could have been built
instead C the time given up by the architect to design the power
station D the wages of the workers who built the power station
2 Using all available resources, an economy produces different
combinations of two types of goods, clothes and food, shown by the
production possibility curve (PPC) below. What does the PPC
indicate? A It is more efficient to produce more of clothes than
food. B It is only possible to increase the output of clothes by
reducing the output of food. C The best situation is to produce
equal units of clothes and food. D The cost of producing a unit of
clothes is always higher than that of food. 3 What is most likely
to reduce the supply of factors of production in an economy? A
increasing the age of retirement B introducing new methods of
irrigation C lowering the cost of borrowing from banks D raising
the rate of tax on profits 4 The government of a developed country
subsidises local private businesses, and encourages large foreign
companies to locate in the country. Which type of economic system
is this? A free marketB mixedC plannedD subsistence
5 What would cause a movement down the demand curve for cars? A
a fall in the price of cars B a fall in the price of petrol C a
rise in the price of car insurance D a rise in the price of public
transport 6 An area attracts tourists to see rare animals but the
tourists have few hotels in which to stay. The local government has
given permission for a developer to build a hotel. Conservationists
say that the area will be ruined as the animals will move away and
the nature of the area will be changed. What is likely to happen as
a result of this decision to the private benefit of the tourists
and the external cost?
7 Russia is the worlds third largest exporter of grain but much
of the countrys farmland was damaged by fire in 2010.How would this
be represented on demand and supply diagrams for the Russian grain
market and for a country importing Russian grain? 8 What may cause
an individual to save a higher proportion of their income? A a
belief that the price of goods will rise in the future B a fall in
the rate of interest paid by the countrys banks C a fear that
income will fall in the future D a rise in the individuals wish to
enjoy higher consumption immediately 9 Why are unskilled workers
paid less than skilled workers? A There is a higher demand for
unskilled labour than skilled labour. B There is a larger supply of
unskilled labour than skilled labour. C Unskilled labour belong to
trade unions. D Unskilled labour is more productive than skilled
labour. 10 Between 2009 and 2010 the number of potential jobs for
qualified law students fell by 16%. During the same period the
total number of applicants for places on law courses increased.
What is the most likely explanation for this? A an economic
recession and an increase in general unemployment B an increase in
crime rates and the possibility of high salaries in the legal
profession C an increase in the retirement age for existing lawyers
and an increase in law course fees D the merger of law firms and
the closure of law courses 11 A trade union is negotiating a wage
rise for its members. What will increase the chance of the wage
rise being granted? A The companys product has many substitutes. B
The economy is entering a period of recession. C The government has
made strike action illegal. D Wages are a small part of the
companys costs. 12 Which type of economy of scale results from a
firm producing a diverse range of products? A buying B financial C
risk bearing D technical 13 A market changes from perfect
competition to monopoly.What is likely to happen in this market? 14
The diagram shows the fixed costs, variable costs and total costs
of a firm. Which distance represents the firms fixed costs?A PS B
QR C QS D RS 15 When it produces 100 units, a firms total variable
cost is $300 and its total fixed cost is $2700. What is the average
cost? A $3 B $24 C $27 D $30 16 Which are two aims that a
Government normally pursues when managing the performance of the
whole economy? A to encourage an increase in production and to
prevent high inflation B to ensure no one is unemployed and to
reduce exports C to give everyone equal incomes and to increase
government revenues D to protect the environment and to reduce
interest rates 17 The Mexican government has passed a law which
prevents any monopoly charging a price significantly above its
production costs. Any monopoly that breaks the law is fined. Which
type of policy measure is this? A minimum price B regulation C
subsidy D tax 18 Governments aim to encourage stable prices because
inflation can result in a current account deficit on the balance of
payments. How does high inflation contribute to a current account
deficit? A Countries have to barter manufactured goods for raw
materials. B Goods manufactured for export lose their
competitiveness. C Numbers of foreign visitors increase. D Spending
on imported goods is reduced. 19 A government collects the
following revenue in a year. What is the amount of indirect tax
revenue?A $30m B $70m C $100m D $500m20 What is the definition of
inflation? A an increase in demand B an increase in output C an
increase in the general price level D an increase in wages 21 It
was reported in 2011 that an economy had negative economic growth
for six months in a row. What would be evidence for such a
situation? A an increase in GDP B an increase in profit levels C an
increase in the level of unemployment D an increase in the standard
of living 22 The diagram shows the rate of unemployment and the
periods of recession in Britain between 1978 and 2012. What can be
concluded from the diagram? A Each recession lasted for more than
two years. B Recessions occurred at regular intervals. C The
unemployment rate peaked in a recession period. D The unemployment
rate rose during recession periods.23 In which case is success for
the government in achieving the first aim likely to cause problems
in achieving the second? 24 Which statement about poverty is
correct? A Absolute poverty occurs when income falls below what is
needed for survival. B An advanced economy is likely to have a
higher level of absolute poverty than relative poverty. C It is
impossible for relative poverty to rise as absolute poverty falls.
D Relative poverty measures the same goods and services in all
countries. 25 Developing countries often wish to prevent the
population in rural areas moving to the towns. Investment grants
are given to companies if they set up their businesses in rural
areas. What is this policy intended to achieve? A decreased
transport costs B decreased external cost C increased economies of
scale D increased use of labour 26 The table shows data collected
in 2010 for the average number of children a woman gave birth to
and the education she received during her lifetime. What can be
concluded from this information? A Average fertility was 2.8 in
2010. B Most girls do not go to school. C Providing more education
for girls would reduce fertility rates. D There is no relationship
between education and fertility rates. 27 The table gives
information about four countries. Which country has the lowest
standard of living? 28 The Sri Lankan government decides to offer
financial support to local firms. Of what is this an example? A a
quota B a subsidy C a tariff D exchange control 29 In 2012 the UK
held the Olympic Games which attracted a large number of visitors
from foreign countries. Which item of the UKs current account
balance will have benefitted directly from this event? A export
trade in goods B export trade in services C import trade in goods D
import trade in services 30 Countries in Europe were in a recession
in 2012. Usually a recession would mean oil prices fall. In fact in
2012, oil prices rose. Which international events might have
explained these changes?
