Cambridge A Level Economics 9708 — 2025 May/June Paper 1 · Variant 1

Question 1

1 Which statement about a free vaccination programme is normative? A It will help raise life expectancy. B It is likely to improve the welfare of society. C It will result in lower spending on other medical services. D Tax revenues generated through improved economic activity will exceed the spending on vaccination.

Accepted Answer

B

Question 2

2 The diagram shows the production possibility curves of two countries, X and Y. country X 60 capital 50 goods 40 country Y 0 0 20 60 100 consumer goods What can be concluded from the diagram? A Both countries have decreasing opportunity cost in the production of consumer goods. B Both countries should produce 40 units of capital goods and 20 units of consumer goods. C Country Y has constant opportunity cost in the production of consumer goods. D Country Y is producing more consumer goods than country X.

Accepted Answer

C

Question 3

3 Which goods are least likely to be allocated by market forces in a mixed economy? A hospitals B railways C street lighting D television programmes

Accepted Answer

C

Question 4

4 In 2020, there was a worldwide pandemic. High-income countries quickly developed a vaccine. Low-income countries built high-tech factories to manufacture large quantities of the vaccine for export. What explains this international division of labour? high-income countries low-income countries A availability of specialists in lower costs of production research and development B scarce human resources over-supply of unskilled labour C many people tended to many people tended to avoid the disease catch the disease D no government control strict government control over resource allocation over resource allocation

Accepted Answer

A

Question 5

5 How can a public good become a private good? A Consumers are dissatisfied with the performance of state-run services. B New technological developments make the good excludable. C The government privatises the industry producing the good. D The price of the good increases so it becomes more profitable.

Accepted Answer

B

Question 6

6 What is not a function of the price mechanism? A to act as a signal to firms when allocating resources B to maximise consumer surplus C to provide an incentive to firms to produce goods D to ration scarce resources

Accepted Answer

B

Question 7

7 Cars and petrol (gasoline) are in joint demand. What is the effect of an increase in the price of cars on the demand for petrol? A B price price P2 P1 P1 P2 D D O Q2 Q1 O Q1 Q2 quantity quantity C D price price D1 D2 D2 D1 O quantity O quantity

Accepted Answer

C

Question 8

8 What would best explain why the price elasticity of supply (PES) is likely to be lower for fresh vegetables grown within a country compared to the PES of goods manufactured in that country? A Alternative supplies can be flown in from foreign producers. B A positive price change encourages a positive output change along the supply curve. C Fresh vegetables has a horizontal supply curve. D There is a seasonal time lag involved in planting and harvesting more fresh vegetables.

Accepted Answer

D

Question 9

9 The diagram shows the demand for and supply of a product. S1 S2 price P1 P2 D O Q1 Q2 quantity What could cause supply to shift from S1 to S2? A a fall in the price of the product B a fall in labour costs C a rise in the price of the product D a rise in labour costs

Accepted Answer

B

Question 10

10 The diagram shows the demand for and supply of a product. Which area shows producer surplus? price S A B C D D O quantity

Accepted Answer

B

Question 11

11 What is an example of wealth? A interest received B profits C property D incomes

Accepted Answer

C

Question 12

12 Too much sugar causes an increase in a consumer’s weight. A government has introduced a ‘sugar tax’ on the consumption of soft drinks that have a high sugar content. How might this policy help to reduce the number of overweight people? A Consumers switch to cheaper brands of soft drink with a high sugar content. B Consumers switch to other high-sugar substitute goods, such as alcohol or sweets. C The price elasticity of demand for soft drinks is inelastic. D The tax revenue is spent on education about the dangers of soft drink consumption.

Accepted Answer

D

Question 13

13. A...... To... price set below the market equilibrium will cause a ...... 22.26. of the product, and a
settee 3...... price set above the market equilibrium will cause a ......4...... of the product.

Which words complete gaps 1, 2, 3 and 4?

1 2 3 4
A maximum shortage minimum surplus
B maximum surplus minimum shortage
Cc minimum shortage maximum surplus
D minimum surplus maximum shortage

Accepted Answer

A

Question 14

14 The diagram shows the demand for and supply of eye tests provided by opticians. S price P3 P2 P1 D O Q1 Q2 quantity Which policy would enable the government to increase the number of eye tests from OQ1 to OQ2? A a maximum price of OP3 per test B a minimum price of OP2 per test C a subsidy paid to opticians of P3-P2 per test D a subsidy paid to opticians of P3-P1 per test

Accepted Answer

D

Question 15

15 What is an example of a transfer payment? A a household moving savings from one bank account to another B a monthly repayment on a loan used to buy a new cooker C the amount paid to transport goods from one city to another D grants paid to students by the government

Accepted Answer

D

Question 16

16 Which statement correctly describes an increase in real GDP? A Nominal GDP rising faster than nominal income. B Nominal GDP rising faster than the rate of inflation. C The rate of inflation rising faster than aggregate demand. D The rate of inflation rising faster than nominal income.

Accepted Answer

B

Question 17

17 An open economy with a government sector is in equilibrium. Households in this economy save $100 million and firms spend $150 million on investment. Which combination of the budget balance and the current account balance would lead to an equilibrium position on the circular flow of income? budget balance current account balance A $100m deficit $50m deficit B $100m deficit $50m surplus C $100m surplus $50m deficit D $100m surplus $50m surplus

Accepted Answer

D

Question 18

18 An economy’s manufacturing share of real GDP fell from 30% in 1990 to 12% in 2023. Which type of unemployment would have resulted from this? A cyclical B frictional C structural D voluntary

Accepted Answer

C

Question 19

19 Which statement is not correct? A The long-run aggregate supply curve can be downward sloping. B The long-run aggregate supply curve can be horizontal. C The long-run aggregate supply curve can be upward sloping. D The long-run aggregate supply curve can be vertical.

Accepted Answer

A

Question 20

20 The price of a pack of six eggs rises from $1.00 to $1.32 over a year. Consumer prices, as measured by the consumer price index, rise by 10% over the same period. What is the real price of a pack of six eggs at the end of the year? A $1.00 B $1.10 C $1.20 D $1.32

Accepted Answer

C

Question 21

21 What is not an example of monetary policy? A a rise in import tariffs on manufactured goods B a rise in interest rates by the central bank C a rise in credit regulations D a rise in the money supply

Accepted Answer

A

Question 22

22 A government decides to raise most of its revenues from indirect taxes. What would increase the effectiveness of this policy? A an increasing trend towards bartering of goods B increasing interest rates on household savings C increasing occurrence of informal markets in the economy D placing taxes on goods and services which have a price-inelastic demand

Accepted Answer

D

Question 23

23 A government uses expansionary monetary policy over a three-year period. Which combination identifies the likely impact of such a policy? real GDP price level unemployment A falling rising falling B rising rising rising C rising rising falling D rising falling rising

Accepted Answer

C

Question 24

24 What is not an example of an expansionary supply-side policy? A a reduction in government spending on training B an increase in support for technological improvement C a reduction in payments to the unemployed D an increase in privatisation of industry

Accepted Answer

A

Question 25

25 The table shows the amount of tax paid on three different levels of income. Which combination shows a proportional income tax system? tax paid on annual tax paid on annual tax paid on annual income of $10000 income of $20000 income of $40000 A 1000 1000 1000 B 1000 1500 2000 C 1000 2000 4000 D 1000 2500 8000

Accepted Answer

C

Question 26

26 Why does the value of a country’s terms of trade have no monetary units? A It cannot be calculated accurately enough. B It includes more than one currency. C It is a ratio of two index numbers. D It measures change over time.

Accepted Answer

C

Question 27

27 Which statement correctly describes a tariff? A It is a complete ban on imports. B It is a minimum price for domestic producers. C It is a payment to exporters. D It is a tax imposed on imports.

Accepted Answer

D

Question 28

28 A country has a persistent deficit on the current account of its balance of payments. What is most likely to improve the situation in the long run? A a lowering of the level of import duties B a reduction in the level of income tax C the introduction of expansionary monetary policy D the use of grants to encourage new investment by firms

Accepted Answer

D

Question 29

29 Primary income and secondary income are components of the current account of the balance of payments. Which option correctly identifies an example of primary income and secondary income? primary income secondary income A government transfers income from profits earned abroad B income from profits earned abroad dividends earned on foreign shares C income from profits earned abroad government transfers D workers’ remittances income from profits earned abroad

Accepted Answer

C

Question 30

30 The table shows the change in the value of UK sterling over a three-month period. June Sept £1 = $1.38 £1 = $1.32 What is likely to be the short-term impact of the change in the value of UK sterling on the UK economy? A increased disinflation B increase in cost-push inflation C more purchasing power of money D reduced demand-pull inflation

Accepted Answer

B

Cambridge A Level Economics 9708 — 2025 May/June Paper 1 · Variant 1

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · Which statement about a free vaccination programme is normative?

Q2 · The diagram shows the production possibility curves of two countries, X and Y

Q3 · Which goods are least likely to be allocated by market forces in a mixed economy?

Q4 · In 2020, there was a worldwide pandemic

Q5 · How can a public good become a private good?

Q6 · What is not a function of the price mechanism?

Q7 · Cars and petrol (gasoline) are in joint demand

Q8 · What would best explain why the price elasticity of supply (PES) is likely to be lower…

Q9 · The diagram shows the demand for and supply of a product

Q10 · The diagram shows the demand for and supply of a product

Q11 · What is an example of wealth?

Q12 · Too much sugar causes an increase in a consumer’s weight

Question 13

Q14 · The diagram shows the demand for and supply of eye tests provided by opticians

Q15 · What is an example of a transfer payment?

Q16 · Which statement correctly describes an increase in real GDP?

Q17 · An open economy with a government sector is in equilibrium

Q18 · An economy’s manufacturing share of real GDP fell from 30% in 1990 to 12% in 2023

Q19 · Which statement is not correct?

Q20 · The price of a pack of six eggs rises from $1.00 to $1.32 over a year

Q21 · What is not an example of monetary policy?

Q22 · A government decides to raise most of its revenues from indirect taxes

Q23 · A government uses expansionary monetary policy over a three-year period

Q24 · What is not an example of an expansionary supply-side policy?

Q25 · The table shows the amount of tax paid on three different levels of income

Q26 · Why does the value of a country’s terms of trade have no monetary units?

Q27 · Which statement correctly describes a tariff?

Q28 · A country has a persistent deficit on the current account of its balance of payments

Q29 · Primary income and secondary income are components of the current account of the balance…

Q30 · The table shows the change in the value of UK sterling over a three-month period

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