IGCSE Economics Paper-1: Specimen Questions with Answers 13 - 14 of 27

Question number: 13

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MCQ▾

Question

Which aim of government policy is most likely to be achieved by an increase in interest rates?

Choices

Choice (4)

a.

Economic growth

b.

Greater equality of income

c.

Full employment

d.

Price stability

Answer

d.

Explanation

  • If interest rate is getting increased, cost of borrowing is also getting increased. It most likely act as a disadvantage to firms which try to get loan. This will decrease investment and economic growth. When there is decrease in investment, there will be decrease in employment. Option C is also eliminated. It didn’t mention anything about taxation or providing subsidies.

  • Option B is also eliminated as it didn’t mention anything about redistribution of income. When interest rate increases, saving will get increased. It decreases spending & borrowing.

  • As aggregate demand decreases, demand pull inflation will be under the control. Price stability will be attained.

Question number: 14

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Short Answer Question▾

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Ireland has attracted a significant number of foreign multinational companies (MNCs) to set up production in the country. These firms employ approximately 10 % of the country’s labour force and make a high proportion of Ireland’s exports. The surplus on the current account of Ireland’s balance of payments fell in 2016 while government spending rose.

Explain two reasons why someone may want to work for an MNC. (Marks 4)

Explanation

  • It may provide high wages or salary to the person. With that money he/she can demand more products than before. This will increase his/her standard of living.

  • It may provide good working condition. Good working atmosphere with limited working time will attract more people to work in MNC.

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