Macro Past Papers

AD/AS Models

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amples/

10:
- Explain why a reduction in interest rates might lead to an increase in aggregate demand.
- Explain, using a production possibilities curve (PPC) diagram, an increase in the actual
output of an economy
- Explain how aggregate demand in an economy might be affected by a rise in the
exchange rate and a decrease in the income of major trading partners
- Explain the various phases of the business cycle
- Explain how an increase in leakages can affect the size of the circular flow of income.
- With reference to the income, output and expenditure approaches, explain how the real
gross national product (GNP)/gross national income (GNI) per capita of a country can be
measured.
- Explain how aggregate demand might be affected by an increase in interest rates.
- Explain what effect a reduction in interest rates might have on consumption and
investment
- Explain the causes of economic growth in terms of an increase in actual output and an
increase in potential output.
- Explain what effect an increase in interest rates might have on unemployment.
- Using the Keynesian AD/AS diagram, explain why an economy may be in equilibrium at
any level of real output
- Explain how an increase in interest rates might affect the level of aggregate demand in
an economy
- Explain how a rise in consumer confidence and business confidence might affect
economic growth
- Explain the effect of a rise in taxation and a fall in government expenditure on the
circular flow of income of an economy.
- Explain how business spending on research and development and government
expenditure on infrastructure might shift the long-run aggregate supply curve
- Explain the effect of a rise in saving and a fall in investment on the circular flow of
income of an economy.
- Explain how business spending on research and development and government
expenditure on infrastructure might shift the long-run aggregate supply curve
- Explain how an increase in investment might affect aggregate demand and aggregate
supply.
- Explain the income, output and expenditure methods used to measure real gross
domestic product (GDP).
 - Using an appropriate diagram, explain why a country might experience a deflationary
gap.
- Explain three factors that could cause an economy to go into recession.
- Using AD/AS diagrams, explain how inflation may be caused by demand pull and cost
push factors.
- Using appropriate diagrams, explain how a reduction in income tax could affect both
aggregate demand and aggregate supply in an economy.
- Using appropriate diagrams, explain how an increase in government spending could
affect both aggregate demand and aggregate supply in an economy
- Aggregate demand consists of consumption, investment, government spending and net
exports (exports minus imports). Explain two factors that may influence consumption and
two factors that may influence government spending.
- Aggregate demand consists of consumption, investment, government spending and net
exports (exports minus imports). Explain two factors that may influence investment and
two factors that may influence net exports.
- Explain how a deflationary gap might occur.
- Explain how an increase in unemployment might lead to a loss of gross domestic
product (GDP) and a budget deficit.

15:
- Discuss the view that economies will always return to the full employment level of output
in the long run.
- Discuss the view that the consequences of economic growth are always beneficial.
- Evaluate the view that increased investment is the most important factor in achieving a
faster rate of economic growth.
- Discuss the view that an economy will always return to the full employment equilibrium
level of output in the long run.
- “An increase in aggregate demand may not lead to an increase in real national income.”
To what extent is this statement valid?
- Evaluate the possible impact of an increase in consumption expenditure on the
performance of an economy.
- Evaluate the effectiveness of an increase in investment expenditure on the performance
of an economy.
- Using the monetarist/new classical model and the Keynesian model, discuss the view
that increases in aggregate demand will inevitably be inflationary
- Examine why, in contrast to the monetarist/new classical model, the economy will not
automatically return to the full employment level of output in the Keynesian model.

Macroeconomic Objectives
10:
- Explain the role of improved productivity in achieving economic growth.
 - Explain the factors that cause demand-pull and cost-push inflation
- Explain why structural unemployment may occur in an economy.
- Explain, using a diagram, how interest rates are determined in an economy
- Explain the difference between cost-push and demand-pull inflation.
- Distinguish between the causes of cyclical (demand-deficient) unemployment and
structural unemployment.
- Explain how a producer price index could be useful in predicting future inflation
- Explain the difficulties involved in measuring the rate of inflation.
15:
- Discuss the view that economic growth always leads to a rise in living standards.
- Discuss the view that economic growth can only be achieved at the expense of other
macroeconomic objectives such as a low and stable rate of inflation and equity in the
distribution of income
- To what extent is the use of national income statistics an effective way of comparing the
standard of living between countries?
- Discuss the view that a rise in the GNP/GNI per capita will always lead to a rise in living
standards in a country.
- Discuss the view that deflation will always be bad for an economy.
- Discuss the view that the consequences of economic growth are always beneficial.
- Discuss the view that governments should always try to avoid deflation
- Discuss the view that economic growth always raises living standards in a country
- “A rise in the inflation rate will always result in negative consequences for the economy.”
To what extent is this statement true?
- Discuss the usefulness of real GDP per capita as a method of measuring the living
standards of a country’s population.
- Discuss the view that deflation is a more serious problem than inflation for the economy
of a country.
- Evaluate the view that the consequences of deflation are likely to be more harmful to an
economy than the consequences of inflation.

Inequality & Poverty

10:
- Explain how an economic recession can lead to an increase in absolute poverty.
- Explain how income inequality might be measured in a country
- Explain how the Lorenz curve and the Gini coefficient are used to measure income
inequality
- Using a Lorenz curve, explain how the Gini coefficient is derived and interpreted.
- Using an appropriate diagram, explain how a recession might lead to more poverty
-
15:
- Discuss the view that economic growth can only be achieved at the expense of other
macroeconomic objectives such as a low and stable rate of inflation and equity in the
distribution of income
 - Evaluate the view that government policies to promote equity will always have a negative
effect on efficiency
- Evaluate the view that the best way to reduce income inequality in a country is by using
progressive taxation.
- Discuss the view that the best way to achieve greater equity in the distribution of income
in a country is to use a progressive tax system.
- Evaluate the view that attempts to achieve greater equity in the distribution of income will
reduce economic efficiency.
- Evaluate government policies that could be used to promote a more equal distribution of
income.

Policies
10:
- Explain how expansionary fiscal policy could be used to close a deflationary
(recessionary) gap
- Explain how expansionary monetary policy can help to close a deflationary
(recessionary) gap.
- Explain how labour market reforms may be used to promote economic growth
- Using appropriate diagrams, explain the difference between demand-side and
supply-side economic policies.
15:
- Evaluate the view that expansionary monetary policy is the most effective way to achieve
economic growth
- To what extent is expansionary fiscal policy the best policy to achieve a reduction in the
rate of unemployment?
- Evaluate the view that inflationary pressures in an economy are best reduced using
supply-side policies.
- Evaluate the view that fiscal policy is the most effective way of achieving long-term
economic growth.
- Discuss the view that the best way to reduce unemployment is through education and
training.
- Discuss whether the use of fiscal policy is the most effective way to bring an economy
out of a recession.
- Evaluate the effectiveness of using monetary policy to reduce the rate of inflation.
- Evaluate the effectiveness of fiscal policy as a tool to reduce unemployment.
- Evaluate the effectiveness of monetary policy when an economy is in deep recession.
- Discuss the effectiveness of using expansionary monetary policy to reduce
unemployment.
- Evaluate the effectiveness of fiscal policy to reduce the rate of inflation
- Evaluate the effectiveness of interventionist supply-side policies to achieve economic
growth.
- “Fiscal policy is the most effective way of bringing an economy out of recession.” To what
extent is this statement valid?
- Evaluate government policies used to deal with cyclical unemployment.
- To what extent can supply-side policies help in fighting inflation?
- “Market-oriented supply-side policies will always be more effective in promoting
economic growth than demand-side policies.” To what extent do you agree with this
statement?
- Evaluate the effectiveness of governments using demand-side policies to take an
economy out of a recession.
- Evaluate the view that demand-side policies are more effective than supply-side policies
in reducing the level of unemployment