l-FORM TP 2018190
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022160201
MAY/JUNE 2OI8
CARIBBEAN EXAMINATIONS COUNCIL
CARIBBEAN ADVANCED PROFICIENCY EXAMINATION@
ECONOMICS
UNIT2-Paper02
2 hours 30 minutes
READ THE FOLLOWING INSTRUCTIONS CAREF'ULLY.
I
.
This paper consists ofTHREE questions, one from each module. AnswerALL questions.
2.
Write your answers in the spaces provided in this booklet.
3.
Do NOT write in the margins.
4.
You may use a silent, non-programmable calculator to answer questions.
5
If you need to rewrite any answer and there is not enough space to do so on the
original page, you must use the extra lined page(s) provided at the back of this booklet.
Remember to draw a line through your original answer.
6.
If you use the extra page(s) you MUST write the question number clearly in the box
provided at the top of the extra page(s) and, where relevant, include the question
part beside the answer.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO
SO.
Copyright @ 2017 Caribbean Examinations Council
All rights reserved.
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0221602003
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AnswerALL questions.
MODULE
l.
(a)
l:
MODELS OF THE MACROECONOMY
Define EACH of the following terms
(i)
Value added
[2 marksl
(ii)
Gross investment
[2 marksl
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0221602004
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(b)
Outline THREE factors that influence aggregate demand
[6 marksl
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(c)
Figure I shows a graph of an aggregate demand curve.
Price level
Real domestic output
Figure
(i)
Label the three curves in Figure
-
(ii)
I
I to show the following information:
AD, is the aggregate demand curve in Year l.
[n Year 2, the curve shifts to AD, and falls back to AD, in Year
3.
[2 marksl
Outtine what will happen to equilibrium price and equilibrium quantity from
Year I to Year 2.
[2 marksl
(iii)
[n Year 3, assume that prices and wages are completely flexible downward. On
Figure l, identiS the equilibrium point and label it "b". Also, label the equilibrium
price, and quantity of output on the axes of the graph.
[3 marksl
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0221602006
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(d)
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Evaluate EACH of the following statements:
(i)
The expanding underground economy creates problems foreconomic policymakers.
[4 marksl
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Economists are concerned about'double counting'and the 'value added' in the
production process.
[4 marksl
Total25 marks
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0221602008
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-9MODULE 2: MACROECONOMIC PROBLEMS AND POLICIES
2.
(a)
Define the term 'frictional unemployment'
[2 marksl
(b)
State TWO limitations of monetary policy.
[2 marksl
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0221602009
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Thble I shows data on various segments of the population and total employment in
Year I and Year 2 for a hypothetical country. Use the data in Table I to answer the questions
that follow.
TABLE 1: DATAON VARIOUS SEGMENTS OFTHE POPULATION
Year
Year2
100 000
102 000
Population under l6 years old
t4 250
15 125
Retired population
23 750
23 250
Population of working age not seeking work
5 000
5 750
Pan-time workers seeking work
3 325
3 815
5t 245
51 450
Population
Employed population
(i)
1
Calculate the labour force participation rate (to one decimal place) in Year
I and
Year2.
[6 marksl
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(ii)
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Calculate the unemployment rate (to one decimal place) for Year
I and
Year 2.
[3 marksl
(iii)
Discuss how it is possible that the number of persons employed increased yet the
unemployment rate also increased rather than decreased.
[4 marksl
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Analyse how the money market responds to BOTH a shortage of money and a surplus
of
money.
[8 marksl
Total25 marks
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MODULE 3: GROWTH, SUSTAINABLE DEVELOPMENT
AND GLOBAL RELATIONS
3.
(a)
State TWO reasons why nations trade
[2 marksl
(b)
(i)
Outline ONE major component of the current account in the balance of payments
(BOP).
[2 marksl
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(ii)
Explain how the official reserves account is used in the balance of payments
[3 marksl
(c)
Explain the effects of import tariffs on EACH of the following:
(i)
Consumers from the importing country
(ii)
Producers from the importing country
[6 marksl
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(d)
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Analyse THREE consequences of balance of payments disequilibria.
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0221602015
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[12 marksl
Total25 marks
END OF TEST
IF yOU FINISH BEFORE TIME IS CALLED, CHECK YOIIR WORK ON TI{IS TEST.
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