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Macroeconomic Objectives · Paper 1 — Free Economics HL Practice Questions

1FoundationSAQ-SIncome distribution8 marksPaper 1~12 min

A government report states that the Gini coefficient for Country Z decreased from

0.55

in 2010 to

0.45

in 2020.

(a)

Define the term income distribution. [2 marks]

(b)

Using the data, explain what the change in the Gini coefficient suggests about income distribution in Country Z. [2 marks]

(c)

Evaluate the extent to which a falling Gini coefficient alone is sufficient evidence that living standards have improved for the poorest households in Country Z. [4 marks]

Solutions

2MasterySAQ-SEconomic growth4 marksPaper 1~6 min

Country A has abundant natural resources (oil and minerals) but low levels of human capital. Country B has limited natural resources but a highly educated workforce and strong institutions. Both countries have similar population sizes.

(a)

Draw two fully labelled production possibilities curve (PPC) diagrams — one for Country A and one for Country B — showing each country's comparative advantage. Label the axes to reflect each country's dominant and non-dominant sector. [2 marks]

(b)

Explain, using the concept of factor endowments, why Country B is likely to experience more sustainable long-run economic growth than Country A. [2 marks]

Solutions

3MasterySAQ-SEconomic growth6 marksPaper 1~9 min

The nominal GDP of Country X was USD 500 billion in 2023 and USD 525 billion in 2024. The GDP deflator was

125

in 2023 and

130

in 2024.

\text{Real GDP} = \frac{\text{Nominal GDP}}{\text{GDP Deflator}} \times 100

(a)

Calculate the real GDP of Country X for 2023 and 2024. [2 marks]

(b)

Draw a correctly labelled production possibilities frontier (PPF) to show the effect of an increase in the quality of labour on the long-run productive capacity of Country X. [2 marks]

(c)

Explain why an increase in the quality of labour causes the change shown in your . [2 marks]

Solutions

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