CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS
Exam-style questions and sample answers have been written by the authors. In examinations, the way marks are awarded
may be different.
Coursebook answers
Chapter 2
Economics in context
• Learners’ own answers. The Business section of a good newspaper or a specialist business newspaper
(paper copy or online) should generate a good number of key economic terms.
• Learners’ own answers.
Activities
Activity 2.1
Learners’ answers might include:
1 a The price of onions increased by 5 rupees a kilo this month due to a prolonged drought.
b 10% increase in spending by the Indian government on the railways leads to a 20% increase in
A
total employment which is higher than for any other area of government spending.
c ata shows that for some planned economies income inequality is higher than in some
D
market economies.
2
Positive statements provide a greater degree of certainty. Normative statements by definition
are subjective.
Activity 2.2
Learners’ own answers. The presentation builds upon the second task in the Economics in context feature.
The content of the presentation should consist of a summary of the main points of the article chosen and
a few reasons why these points are likely to be of interest to economists.
Think like an economist
Learners’ discussion might include:
UK:
a Consumers are not as attracted by low interest rates as might be expected. Consumers are
reluctant to spend borrowed money on expensive ‘Big Ticket’ consumer goods such as cars and
electronics goods even though savings are losing value when left in banks.
b The chief executive is unwilling to commit new capital investment due to uncertain future
economic prospects.
c The Finance Minister is likely to get criticism from savers and would not be willing to reduce
interest rates further.
Japan: Negative interest rates mean that money held in banks as savings is actually losing value.
a Consumers tend to hold back on many purchases in anticipation of further price reductions.
b The chief executive would be wise to look to invest elsewhere in an economy where economic
prospects are more certain than in Japan.
c The Finance Minister is likely to look to other policies to stimulate the economy.
1 Cambridge International AS & A Level Economics - Bamford & Grant © Cambridge University Press 2021
CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK ANSWERS
The economist’s models are a simplified view of what can be expected. The problem is that what is expected
does not necessarily match reality. This is especially true of Japan’s economic experience over many years.
Exam-style questions: Multiple choice
1
B All other options include statements that involve a value judgement.
2
A A normative statement is one that is subjective and cannot be tested using real world evidence.
2 Cambridge International AS & A Level Economics - Bamford & Grant © Cambridge University Press 2021
