9708A. 27 March

1. Which combination of changes over time in an economy would definitely represent increased
economic growth per capita?

Average Price LevelTotal OutputTotal PopulationGini Coefficient
BFallsRisesNo changeFalls

2. Under which circumstances will the future burden of the national debt on a country increase the

Increase in the budget deficitChange in GDPPrice of government bonds
A+ 2% of GDP+4%Decreasing
B+ 2% of GDP+4%Increasing
C+ 4% of GDP+2%Decreasing
D+ 4% of GDP+2%Increasing

3. Country X has a low rate of inflation and a stable currency and unemployed resources. It attracts
$25 billion of direct foreign investment.
What is most likely to be a positive benefit of the inflow of this foreign direct investment for
country X?
A Aggregate demand will be boosted through the investment multiplier.
B Country X will have to use its foreign reserves to eliminate any trade deficit.
C The balance of payments will be affected with the outflow of profits to foreigners.
D The rate of inflation will increase if country X tries to increase capacity.

4. A country with an income tax rate X decides to increase its tax rate.
The diagram shows tax revenue will fall.

Why would this happen?
A Fewer goods will be produced.
B People will work fewer hours to maintain incomes.
C Prices will rise.
D There will be an increase in tax avoidance.

5. What are the labels on the axes of a Phillips curve diagram?

Vertical AxisHorizontal Axis
AInflation rateUnemployment level
BInflation rateUnemployment rate
CPrice levelUnemployment level
DPrice levelUnemployment rate


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