Practise 92 real questions on The macroeconomy (further) from 2021 to 2026. See the answer and explanation as soon as you answer.
The macroeconomy (further) is one of the 11 main topics in our A Level Economics (Cambridge (CAIE) 9708) question bank, and about 10% of its real questions come from it. Tayyari Karo has 92 real questions on this topic from 2021 to 2026, from Paper 3, Paper 4; 69 are multiple choice and marked instantly, and the rest are structured questions with a model answer. By difficulty: 52 medium, 26 hard, 14 easy.
Work through the questions below, then open the explanation for each one. Redo the ones you missed a few days later.
These are real past-paper questions. Think of your answer first, then open the explanation.
In 2008, the inflation rate reached more than 1 million % in Zimbabwe. This hyperinflation led to some Zimbabweans refusing Zimbabwean dollars as payment for goods and services. Which characteristic of money does this mean the Zimbabwean dollar was losing?
Answer: B. general acceptability
Refusing the currency in payment means it was losing general acceptability.
An economy has a positive output gap. What is happening to economic growth and the general price level?
Answer: B. economic growth: above trend growth rate; general price level: rising
A positive output gap means actual output exceeds potential output, implying the economy has been growing above its trend rate, and this excess demand typically puts upward pressure on the general price level (rising).
What is most likely to result from a decrease in the natural rate of unemployment?
Answer: B. a decrease in the level of government payments to the unemployed
The natural rate of unemployment (structural + frictional) can be reduced by supply-side measures that increase the incentive to accept work, such as reducing the generosity of unemployment/welfare benefits, which reduces voluntary/frictional unemployment.
What could cause the official statistics for the national income per head of a developing country to overstate the true level of economic well-being of its inhabitants?
Answer: D. if there is extreme income inequality
National income per head is an average; if income distribution is extremely unequal, most people receive far less than the average figure suggests, so the statistic overstates the well-being of most inhabitants. (Barter and subsistence agriculture tend to cause national income to be understated, not overstated.)
Which statement about unemployment is correct?
Answer: B. Frictional unemployment is caused by a lack of information on jobs in the labour market.
Frictional unemployment arises from the time it takes for workers between jobs to find new employment, partly due to imperfect information about available jobs. (Cyclical unemployment is caused by a deficiency in aggregate demand; structural unemployment by occupational immobility/changing industry structure; and voluntary unemployment arises when workers choose not to accept jobs at the going wage rate.)
What describes the multiplier process, as it operates within a closed economy with no government sector?
Answer: D. When investment changes, there will be a greater change in equilibrium National Income.
The multiplier process describes how an initial change in an injection such as investment leads to successive rounds of respending, producing a final change in equilibrium national income that is greater than the initial change in investment itself.
The additional income from natural resource extraction leads to increased spending on domestic and imported goods and services. Explain how the extraction of natural resources in Ghana will 'create further employment in other sectors through the multiplier effect'. [4]
The multiplier is the total (eventual) increase in national income/output (1 mark) resulting from an increase in injections into the circular flow of income (1 mark). Applied to the case study: new jobs in the oil sector create new incomes (1 mark), which in turn generates a further round of spending, jobs and income throughout the economy (1 mark). (Marking guide: 2 marks for understanding the multiplier concept, 2 marks for applying it to the Ghana case study.)
4 marks: 2 for multiplier theory, 2 for case-study application.
Explain what economists mean by the marginal propensity to consume and consider the importance of this concept in relation to government macroeconomic policy. [12]
The marginal propensity to consume (MPC) is the proportion of any additional income received that is spent on consumption. Basic Keynesian theory assumes MPC is constant regardless of income level, though it is more realistic to assume MPC falls as income rises. Government macroeconomic policy goals include high employment, high growth, low/stable inflation, a stable balance of payments/exchange rate, and income redistribution; MPC can be linked to each. E.g. …
The full model answer is in the app.
| Session | Paper 3 | Paper 4 |
|---|---|---|
| May/June 2026 | 7 | 1 |
| May/June 2025 | 5 | 1 |
| October/November 2025 | 5 | 2 |
| May/June 2024 | 5 | – |
| October/November 2024 | 6 | 3 |
| May/June 2023 | 6 | – |
| May/June 2022 | 10 | 4 |
| October/November 2022 | 10 | 4 |
| May/June 2021 | 8 | 3 |
| October/November 2021 | 7 | 5 |
92 real A Level Economics (9708) questions on The macroeconomy (further) from 2021 to 2026, from Paper 3, Paper 4. Each one shows the year, session and paper it came from.
Yes. Every question shows the correct answer and a short explanation the moment you answer.
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