IGCSE Economics Paper-2: Specimen Questions with Answers 5 - 6 of 100


Inflation has dire economic consequences. Inflation is regarded as a serious social and economic problem.

Question 5 (5 of 5 Based on Passage)


Write in Short

Short Answer▾

What is inflation?


  • Inflation is defined as “A state in which the value of money is falling. ” Inflation is commonly understood as situation of substantial and rapid general increase in the level of prices and consequent deterioration in the value of money over period.
  • Price indices are used to measure the behavior of general price. The trends of price reveal the course of inflation or deflation in the economy. According to Lerner, “a price rise which is unforeseen and uncorrected is inflationary”

  • Thus, inflation is statically measured in terms of percentage increase in the price index as rate per unit of time- usually a year or a month. The common feature of inflation is a price rise, the degree of which may measure by price indices.


In an economy there are many large firms. But small firms remain small.

Question 6 (1 of 5 Based on Passage)


Describe in Detail


Give two reasons why a private limited company is changed into a public limited company.


Circumstances under which a private company is converted into a public limited company are as follows:

  • Conversion by default: A private company has limited number of members to 50 and the right to transfer shares is restricted it also does not offer an invitation to public subscription to its shares. If by chance any of these stated conditions of a company being a private company is violated a company becomes public company by default.
  • Conversion by operation of law: By the operation of law a private company can be converted into a public company if not less than 25% of paid up share capital of a company is held by one or more public company or if the average turnover of a company for three consecutive years exceeds ₹ 25 crore, or when a private company holds not less than 25% of paid up capital of public company, or if a private company invites accepts or renews deposit from the public then a private company by the operation of the law becomes a public company.

The other reason for conversion is a private company out of its own will choose to converts itself into a public company.

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