Every question, cut by section

A country's citizens working abroad remit large amounts of wages home, and its firms hold substantial overseas investments earning profit and interest. What does this imply about the relationship between the country's GNI and its GDP?

A saver earns 4% nominal interest on a fixed-rate savings account. Inflation over the same year turns out to be 6%. What is the real return on their savings, and who benefits from this outcome?

A country's government runs a budget surplus of £15bn (tax revenue exceeds government spending) in a given year. In the same year, the country's imports of goods and services exceed its exports of goods and services by £40bn.

Which of the following correctly identifies the country's trade position and its government's fiscal position, and correctly explains why they can differ? (VERIDIAN-original, in the style of a Section A extended-MCQ item — not a reproduction of any real past-paper question.)

A country's central bank cuts its policy interest rate from 4% to 1%. A survey published shortly afterward finds a sharp rise in households borrowing against the value of their homes to fund spending, and a separate business survey reports a sharp rise in confidence about future demand. The economy's price level has not changed over this period.

Explain the correct combined effect of this evidence on aggregate demand. (VERIDIAN-original, in the style of a Section C/D data-response question — not a reproduction of any real past-paper question.)

Nigeria's currency depreciated sharply against the US dollar in 2023. Separately, and unrelated to the currency move, the Nigerian government began a five-year programme investing in technical and vocational education across the country.

Explain, using the aggregate supply model, why these two events are likely to affect Nigeria's SRAS and LRAS differently.

A country's equilibrium level of real output rises because a rise in labour productivity lowers firms' unit costs at every level of output, with investment, government spending, exports and all four marginal propensities unchanged. Which of the following correctly explains why this rise should NOT be described using the multiplier?

A country's rapid growth over several years is achieved almost entirely by pushing actual output above its potential output for a sustained period, rather than by raising potential output itself. Which spec-named cost of growth is this scenario most directly and specifically likely to produce?

Which of the following is a MONETARY, rather than fiscal, policy instrument?

An economy's real GDP growth rate is −0.4% in Q1, +0.1% in Q2, and −0.6% in Q3. In which quarter(s), if any, did the economy enter a recession by the standard definition?

A qualified civil engineer works part-time stacking shelves at a supermarket because no engineering role is available locally, and she would like more hours than the supermarket currently gives her. Which term correctly describes her situation?

Households in a country have total disposable income of £900 billion. Of this, £774 billion is spent on consumption.

What is the savings ratio?

A government cuts the specific duty (a per-unit tax) on imported industrial energy, effective immediately for this year's production. Separately, in an unrelated policy, it announces a permanent cut to corporation tax specifically to encourage long-term capital investment. Which curve does each most directly shift?

An economy's multiplier is calculated as 4. Investment rises by £12 billion, with nothing else changing. What is the resulting change in national income?

An economy's potential (trend) growth rate is a steady 2.0% a year. Its actual real GDP growth was 1.0% in Year 1, 4.5% in Year 2, and 3.0% in Year 3. The output gap was exactly zero at the start of Year 1.

By the end of Year 2, has the output gap turned positive, stayed negative, or is it impossible to tell from this data? (VERIDIAN-original, testing the same trend-vs-actual reading skill confirmed in a real Section A output-gap question.)

A country's real GDP grows by 4% this year, driven mainly by rapid expansion of fossil-fuel-based heavy manufacturing, with a measurable rise in carbon emissions and local air pollution. Which conflict between macroeconomic objectives does this scenario most directly illustrate?

Why does the CPI weight each item in its basket by the share of household spending it typically receives, rather than averaging every item's price change equally?

A worker loses their factory job when production relocates overseas. Six months later they remain unemployed, because their factory-specific skills don't match any of the vacancies now advertised in their region — which are mostly in IT support. Which type of unemployment does this best illustrate?

House prices in a country rise sharply over a year. Wages, employment, and taxes are all unchanged. Which of the following best explains the resulting effect on consumption?

The general price level in an economy rises, with SRAS's underlying costs completely unchanged. What happens?

An economy's multiplier is 4. Government spending rises by £10 million, with nothing else changing. What is the resulting rise in national income?

An economy's actual output is running above its estimated potential (trend) output — a positive output gap. Based on what you already know about scarce resources, what is this most likely to cause?

A government cuts corporation tax to encourage more private investment. A different government instead builds new technical colleges and pays for workers to train there. Both are supply-side policies. What is the key difference between them?

Country A's central bank cuts its base interest rate sharply to boost a slowing economy, which currently has a negative output gap. In the same budget, Country A's government separately introduces new tax credits for firms that invest in expanding their production capacity.

Using aggregate demand and aggregate supply, explain why economists would expect the interest-rate cut to put upward pressure on the price level in the short run, while the investment tax credits could raise real output without necessarily raising the price level at all. (VERIDIAN-original, in the style of a Section C/D data-response question — not a reproduction of any real past-paper question.)

A country's statistics agency tracks three spending categories in its CPI basket. Category weights (share of average household spending) and this year's price changes are: Food — weight 25%, price change +4%; Housing — weight 45%, price change +6%; Leisure — weight 30%, price change −2%.

Calculate this year's CPI inflation rate, and explain why a household that spends unusually little on housing would likely experience a different inflation rate from the one calculated. (VERIDIAN-original, written in the pattern of a confirmed 4-mark 'explain, with reference to the data' question type — not a reproduction of any real past-paper question.)

A country's exports of goods total £340bn and its imports of goods total £410bn. Its exports of services total £180bn and its imports of services total £120bn.

What is the country's trade in goods and services balance?

A government increases spending on flood defences after an independent review finds that construction upstream is imposing uncompensated flood risk on landowners further down the same river, while a separate, unrelated local campaign has spent several years lobbying for this specific site to be prioritised over other flood-risk areas.

Which spec-named influence on government expenditure does the review's finding best illustrate?

A country experiences a sustained rise in net migration of working-age adults who join the labour force. Assuming no other changes, what is the most likely effect?

An economy has a marginal propensity to consume of 0.5, a marginal propensity to tax of 0.10, and a marginal propensity to import of 0.15. The government raises its spending by £30 billion, with nothing else changing.

Calculate the resulting change in national income, using both the MPC and the MPW routes to check your answer agrees.

A government points to 'improved public services' as a benefit of the recent rise in real GDP. Under which condition does that benefit actually follow?

A government funds a new national retraining programme, paying the full cost for unemployed workers to gain technical qualifications, at no cost to the workers or to any single employer. Which type of policy is this?

An identical basket of goods costs $100 in the US and 3,000 rupees domestically. The market exchange rate is 75 rupees per dollar. What does this imply?

A government tightens the eligibility rules for unemployment-related benefits, so fewer people who are actually out of work qualify to claim them. The Labour Force Survey is conducted exactly as before. What happens to the ILO unemployment rate and the claimant count?

A country's firms spend £58 billion on new capital equipment and buildings this year (gross investment). Depreciation — the wearing out of existing capital — is estimated at £21 billion over the same period.

What is net investment, and what does it say about the economy's capital stock?

Classical economists assume wages and prices are fully flexible in both directions. What does this assumption imply about where output settles once wages have had time to fully adjust?

An economy's marginal propensity to consume (MPC) is 0.75. What is the size of the multiplier?

Which of the following is most likely to raise an economy's POTENTIAL growth rate, rather than only its actual growth rate?

A government's tax revenue this year is $430bn. Its spending is $450bn.

This information, on its own, is evidence about which macroeconomic objective?

Which of the following is the most complete definition of Purchasing Power Parity?

Two labour-market measures of unemployment exist in most countries: the ILO measure (via a Labour Force Survey) and the claimant count (via benefit records). Which of the following is the main reason these two measures usually give different unemployment figures for the same country in the same month?

Why does the AD curve slope downward from left to right?

A country's currency depreciates by 15% against its major trading partners' currencies. In the same period, one of its manufacturing sectors wins a large increase in overseas orders after a widely-reported industry award for product reliability — a development unrelated to the currency move.

Which determinant of the net trade balance does the reliability award illustrate, as distinct from the currency depreciation?

Which of the following is classified as a withdrawal from the circular flow of income?

A country's central bank cuts interest rates, boosting consumer spending and business borrowing. Real GDP rises by 3% over the following year, with no change to the economy's underlying productive capacity. Is this actual growth, potential growth, or both?

A government's demand-side stimulus succeeds in lowering the unemployment rate. Based on the short-run Phillips curve, what does this predict for inflation?

A central bank announces a large programme of quantitative easing, buying government bonds from commercial banks. What is the most direct, first effect of this policy?

A sharp rise in global oil prices raises firms' production and transport costs across the economy. The price level rises while real output falls. Which type of inflation does this describe?

A national minimum wage is raised well above the market-clearing wage for unskilled labour, and firms respond by hiring fewer unskilled workers than before, even though demand for the goods those workers help produce hasn't changed. Which type of unemployment does this describe?

A country experiences a sustained rise in average house prices over several years.

Whose consumption is the resulting wealth effect most likely to directly raise?

A firm's average unit production cost is £50, of which £20 is imported raw materials priced in US dollars and the rest is domestic cost. The firm's domestic currency then depreciates by 15% against the US dollar, with no change in the dollar price of the materials themselves and no change in any domestic cost.

What is the firm's new unit cost? (VERIDIAN-original calculation, testing the same SRAS cost channel confirmed as real exam context — oil/energy and exchange-rate stems — not a reproduction of any specific past question.)

An economy has MPS = 0.2, MPT = 0.15, and MPM = 0.05. Investment rises by £8 billion, with nothing else changing. What is the resulting change in national income?

Brazil's real GDP growth slowed well below its estimated potential growth rate for several consecutive quarters, leaving the economy with a sizeable negative output gap and rising cyclical unemployment. The government raises public infrastructure spending, partly funded by borrowing, while the central bank cuts interest rates at the same time.

Explain, using the concept of the output gap, why this combination of expansionary demand-side policies is less likely to generate significant inflation while Brazil's negative output gap persists than the same policies would be if applied to an economy already at a positive output gap. (VERIDIAN-original scenario, using Brazil as a genuine negative-output-gap exam context — confirmed as a repeated Section B focus, e.g. October 2021 ER Q10 — not a reproduction of any single past-paper question.)

Country B's inflation rate rises sharply relative to its trading partners' over the year, while its real GDP growth rate stays roughly unchanged from the year before.

Which conflict between macroeconomic objectives does this scenario most directly illustrate, and through what channel?

A country's real GDP was £500bn last year and £515bn this year. What is its real GDP growth rate this year?

A headline reads: 'Government borrowing falls to zero as the budget moves into balance, even as the trade deficit widens to a record high.' Is this headline internally consistent?

The price level in an economy falls. Nothing else in the economy changes. What happens to the AD curve?

In the short run, a firm's wage costs are fixed by an existing contract. The general price level then rises, with the firm's wage bill unchanged. What happens to the firm's incentive to produce more output?

Which of the following is best classified as wealth, rather than income?

An economy's actual real GDP this year is $520bn. Its estimated potential (trend) real GDP is $500bn. What is its output gap, and what does that most likely signal?

An essay evaluating conflicts between macroeconomic objectives is written to an excellent standard — precise mechanism, a correct diagram, a named country — but discusses only the inflation/unemployment conflict. What is the highest KAA level it can reach?