AF Mock - O Level P2

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O Level Economics

AF MOCK EXAMINATION, 2024


ECONOMICS 2281/02

PAPER 2 Data Response and Essays 2 hours 15 minutes

READ THESE INSTRUCTIONS FIRST


An answer booklet is provided inside this question paper. You should follow the instructions on
the front cover of the answer booklet. If you need additional answer paper, ask the invigilator
for a continuation booklet.

INSTRUCTIONS

 Answer four questions in total:


Section A: answer Question 1.
Section B: answer three question.
 Follow the instructions on the front cover of the answer booklet. If you need additional
answer paper, ask the invigilator for a continuation booklet.
 You may use a calculator.

INFORMATION

 The total mark for this paper is 90.


 The number of marks for each question or part question is shown in brackets [ ]

Asif Farooq 0321-2915945 1


O Level Economics

SECTION A
Answer all parts of Question 1.

1 Changes in the Danish economy

Denmark is a high-income, North European country. The Danish population have high living
standards and enjoy relatively long hours of leisure time. They spend this time in a variety of
ways including cycling, jogging and playing golf.

Danish workers are employed in a range of industries. Denmark used to be a leading


shipbuilding country but now the industry is in decline. Ships have substitutes in other forms of
transport. Also, it may be possible to postpone the purchase of ships, they take a long time to
produce and they are expensive to store. In contrast to the shipbuilding industry, the Danish toy
industry has grown in recent years.

Denmark’s shipbuilding and toy industries are in the private sector. Denmark’s economic
performance is also influenced by changes in the public sector. Table 1.1 shows Danish
government spending and GDP over the period 2015 to 2021.

Table 1.1 Danish government spending and GDP 2015 – 2021

Asif Farooq 0321-2915945 2


O Level Economics

Denmark is heavily involved in international trade. It usually has a surplus on the current
account of its balance of payments. International trade affects the availability of products in the
country and the country’s foreign exchange rate. It also affects the country’s GDP and level of
employment.

How people work in Denmark, as in most countries, has changed in recent years. More people
now spend at least some of their working hours working from home. This change is expected to
affect productivity and help firms keep their workers. Households may be encouraged to move
out of cities and to buy larger homes. There may also be changes in demand for transport,
demand for food sold in city centres and firms’ need for office space.

(a) Calculate the average wage paid in Denmark in 2020. [1]

(b) Identify two possible opportunity costs of a Danish person using their leisure time to cycle.[2]

(c) Explain one way that living standards are measured in Denmark. [2]

(d) Explain two reasons why the supply of ships is price-inelastic. [4]

(e) Analyse the relationship between government spending and GDP in Denmark. [4]

(f) Analyse, using a demand and supply diagram, how an increase in the birth rate would affect
(f) the market for toys. [5]

(g) Discuss whether or not a surplus on the current account of its balance of payments would (f)
(f) benefit the Danish economy. [6]

(h) Discuss whether or not more people working from home will benefit an economy. [6]

Asif Farooq 0321-2915945 3


O Level Economics

SECTION B
Answer three questions.
2 Since 2016, South Korea’s population has declined, due to a falling birth rate, and a high
proportion of its population is now aged over 64. The South Korean government has used
tax revenue to give cash incentives to couples to have more children. However, many
parents have chosen to have fewer children and spend more on each child to ensure they
get a good education. South Korea now has fewer but larger schools.

(a) Identify two benefits people may gain from a good education. [2]

(b) Explain two reasons for a change in the amount of tax revenue a government (f) (f) (f) (f)
(f) receives. [4]

(c) Analyse the economies of scale a school may gain from an increase in its size. [6]

(d) Discuss whether or not having a high proportion of a country’s population over the age of
(f) 64 is a benefit to its economy. [8]

3 Some firms in Monaco have experienced external growth. Firms in Monaco pay high wages.
Workers in Monaco benefit from fiscal policy which contributes to high employment. Their
government does impose VAT on food, including fruit. Some economists have suggested
that instead of taxing fruit, governments should provide free fruit to consumers.

(a) Define external growth of firms. [2]

(b) Explain two reasons why low-skilled workers may be highly paid. [4]

(c) Analyse how fiscal policy can increase employment. [6]

(d) Discuss whether or not a government should provide free fruit to consumers. [8]

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O Level Economics

4 In 2021, the Suez Canal was blocked by one of the world’s biggest container ships. This
affected some firms’ profits and caused a shortage in a number of products. The delivery of
luxury chocolate and salt, for example, was delayed. These two goods have differences in
their price elasticity of demand. The disruption to international trade created particular
difficulties for those countries which import most of the food they consume.

(a) Define a shortage. [2]

(b) Explain two ways a firm can increase its profit. [4]

(c) Analyse the reasons why the price elasticity of demand for one brand of luxury (f) (f) (f)
(f) chocolates is likely to be different from that of salt. [6]

(d) Discuss whether or not a country should import most of the food it consumes. [8]

5 New Zealand is a high-income country with a low unemployment rate and a surplus of
imports over exports. Recently, its government has made some important economic
decisions. In 2022, it banned everyone born after 2008 from buying cigarettes. A year
before, it gave permission for firms to explore for oil in the country.

(a) Define unemployment rate. [2]

(b) Explain two reasons why a government may discourage cigarette smoking. [4]

(c) Analyse why a country’s exports may decrease. [6]

(d) Discuss whether or not the discovery of oil in a country will benefit its economy. [8]

Asif Farooq 0321-2915945 5

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