GCSE Worksheets Student Version

Activities and Exercises
for GCSE Economics
Amy Chapman & Innes Robinson
Anforme Limited
Contents
The basic economic problem

True or false . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Crossword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Data
response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Demand and supply

Missing words . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Shifts in the demand and supply curves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Crossword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Which curve, which way? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Costs, revenues and profits

Definitions of key terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Objectives and consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
How firms grow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Market failure
Crossword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Poster design task . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Saving, borrowing and managing your money

Crossword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Economic growth
The economic cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The causes of economic growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Circle the correct option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Unemployment
Fill in the blanks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Costs of unemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Policies to reduce unemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Inflation
True or false . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Complete the flow diagram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Consequences and cures of inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Fiscal policy
Activities & Exercises for GCSE Economics iii

Match the definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Direct and indirect taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
The government budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Taxation of alcohol speech writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Create a test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Monetary policy
Which statement is correct? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Complete the flow diagram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Supply side policies

True or false . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
How policies increase supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Policies that affect labour and industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Match the head to the tail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Sorting the policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
The UK in recession: policy choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Balance of payments
Exports and imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Calculate the balance of payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Exchange rates
True of false . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
The value of the pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Protectionism
Protectionist policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Evaluate methods of protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
The Euro
Article for a newspaper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
The European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Globalisation
For and against . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Absolute advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Costs and benefits of trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Data response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Activities & Exercises for GCSE Economics iv

Activities & Exercises
for GCSE Economics
Amy Chapman
Head of Economics and Business Studies,
Cheltenham College.
Innes Robinson
Head of Economics and Director of the Business School,
Highbury Grove School, Islington.
Published by Anforme Ltd., Stocksfield Hall, Stocksfield, Northumberland NE43 7TN. Tel: 01661 844000 Fax:
01661 844111 e-mail: anforme@aol.com www.anforme.co.uk ISBN 978-1-905504-40-4 March 2010
The basic economic problem
Activity 1 – True or false
Statement True or False
1. Farming is a primary sector business ___________
2. The NHS is a private organisation ___________
3. A hairdressing salon is a secondary sector business ___________
4. Thomas Cook holidays is a tertiary sector business ___________
5. Opportunity cost occurs because of the basic economic problem ___________
6. Oil is a scarce resource ___________
7. Our wants are scarce ___________
8. Capital is money ___________
Activities & Exercises for GCSE Economics 1

The basic economic problem: Activity 2 – Crossword
1 2 3
6 7
8 9
10
11
12 13
14
15
16
ACROSS
1. The basic economic problem is about ____________ resources. (6)
3. The basic economic problem is about ____________ wants. (8)
5. Next best alternative foregone. (11,4)
7. Sector of industry which provide services. (8)
8. Human input into the production process. (6)
14. Someone who risks their ideas and money when starting a business. (12)
15. Scarce resources means that these have to be made. (7)
16. What has to be met for basic survival. (5)
DOWN
2. Machinery is an example of this. (7)
4. Type of economy where both the government and private firms allocate resources. (5)
6. The sector of industry which includes extraction of raw material. (7)
9. When an individual, group or country produce what they are best at. (14)
10. What to produce is a question asked when ____________ resources. (10)
11. Natural resources on the planet. (4)
12. Organisations owned and run by individuals or groups are called this. (7)
13. Organisations owned and run by the government are in this sector of the economy. (6)

The basic economic problem: Data response
1.Tick the two correct statements: (2)

More machinery was introduced to help with specialisation
Roy’s cars is in the public sector
Roy’s cars is a primary sector organisation
Production rose when specialisation was introduced
2.(i) For the two incorrect statements rewrite them to make them correct. (2)
(ii) Explain why they were incorrect. (2)
3.Using the newspaper article describe an opportunity cost Roy’s cars may face. (2)
4.Explain what is meant by specialisation. (2)
5.Using the article explain how the workers have specialised. (4)
6.Explain how profits may have soared with the introduction of specialisation at
Roy’s cars. (6)
7.Discuss the costs and benefits of specialisation for Roy’s cars. (10)
Total marks = 30

5
Demand and supply
Activity 1 – Fill in the missing words
Demand is the quantity a buyer is ____________ and able to buy at a given price in a given
period of time. The demand curve is ____________-sloping. There is an ____________
relationship between price and quantity i.e. as price rises quantity demanded ____________ .
A change in the price of the good itself causes a ____________ along the demand curve.
Supply is the quantity a producer is willing and able to supply at a given price in a given period of
time. The supply curve is ____________ -sloping. There is a ____________ relationship between
price and quantity supplied i.e. as price ____________ quantity supplied also rises.
A change in the price of the good itself causes a movement along the supply curve.
A market is where the forces of demand and supply allocate resources. Where the demand and supply
curves meet it is called the ____________ . This is also the market-clearing ____________ .
Word Box
downward equilibrium falls
inverse positive price rises
willing movement upward

Demand and supply: Activity 2 – Shifts in the demand and supply curves
For each scenario decide whether it will cause the demand or supply curve to shift, then will
it shift right or left. The final part of step one is to briefly explain why this will happen. Once
this step one is complete use the demand and supply diagram to show how it will affect price
and quantity.
1.
This will cause the
________ curve to
shift to the ________
because
____________________
I want to buy ____________________
an iPhone because ____________________
all my friends ____________________
have one. ____________________
____________________
____________________
____________________ Market for iPhones
____________________
____________________
2. The UK national minimum wage has increased, I now have to pay my workers more.
(Market for cars)
3. I like to drink fizzy drinks, I don’t mind drinking either Pepsi or Coke. Coke have
decreased their price. (Market for Pepsi)
4. The government have increased the tax on petrol. (Market for petrol)

8
Demand and supply: Activity 3 – Crossword
1
2 3
4 5 6
7 8
10
11
12
13
ACROSS
1. Demand is said to be this if the buyer is both willing and able. (9)
4. The quantity a producer is willing and able to produce at a given price. (6)
6. A tax on spending. (8)
10. Price x Quantity sold. (5,7)
11. A sum of money given to a firm by the government to reduce the price paid by
consumers. (7)
12. Demand is this when it is very responsive to a change in price. (7)
13. Price elasticity of supply for sporting events. (9,9)
DOWN
1. The responsiveness of demand or supply to a change in price. (10)
2. The relationship between price and quantity demanded. (7)
3. One seller in a market. (8)
5. Percentage change in quantity demanded divided by Percentage change in price

as an acronym. (3)
7. An increase in this factor input cost will cause the supply curve to shift to the left. (5)
8. An increase in this long term determinant of demand will cause the demand curve
to shift to the right. (10)
9. When demand and supply meet. (11)

Demand and supply: Activity 4 – Which curve, which way?
The situations below relate to the market for private new houses for sale. Put a tick in the
correct column identifying whether the situation will affect the demand or supply curve,
causing a shift right or left.
Which curve? Shift
Demand Supply Right Left
1. Construction workers wages increase
2. Cost of renting increases
3. Cost of bricks falls
4. New government legislation allows

planning permission to be quicker
5. Increase in the cost of solicitors

fees when buying a house
6. Bank of England reduce interest

rates by 0.5%
7. The government offers new house

builders a subsidy to increase the
number of new houses.
8. Increase in the population
9. A new house builder called

My eco home enters the market
10. Average incomes in the UK fall

Demand and supply: Data response
Thousands of fans turned out to see the Spice Girls burst onto the stage at London’s O2
arena for their first UK concert in December 2007.
Kicking off the UK leg of their 19-date reunion world tour Geri Halliwell was reported to have
said: “What a crowd! We love you London!”
They went on to perform all their biggest hits during a two-hour show that included eight
costume changes.
More than a million people registered for the chance to get tickets for the show, which sold
out in 38 seconds!
At £75 a ticket and a capacity of 23,000 at the O2 the Spice Girls made a lot of money.
1.Explain what is meant by the term demand. (2)
2.Using the Spice Girls concert tickets as an example, explain what is meant by
effective demand. (4)
3.Explain what is meant by price elasticity of supply. (3)
4.With the aid of a demand and supply diagram explain why the price elasticity
of supply for the O2 arena is said to be perfectly inelastic. (5)
5. “UK government announces new tax on concert tickets.” With the aid of a
demand and supply diagram explain how the new tax would affect the market
for Spice Girl tickets. (5)
6.Price elasticity of demand for the Spice Girls was very price inelastic.
With the aid of a demand and supply diagram explain what this means. (5)
7.With the aid of a demand and supply diagram explain how a maximum price
set below the equilibrium would affect the demand for Spice Girls tickets. (6)
Total marks = 30

Costs, revenues and profits
Activity 1 – Link the definitions with the key terms
Total Average Variable

Profit
Revenue Revenue Cost
Average Fixed Total

Cost Cost Cost
A Fixed costs + Variable costs E Costs that vary directly with output
B Costs that do not vary with output F Total cost

Output
C Price x Quantity
G Total revenue – Total cost
D Total revenue
Output
Activity 2 – Objectives and consequences
Link the objective to the strategy used to achieve it and then think of a problem arising from
the strategy and fill in the final box:
Objective Strategy Problem
Decrease Lower
total cost price
Increase Find a cheaper

productivity raw material
Increase Workers
sales specialise

Costs, revenues and profits: Activity 3 – How firms grow, fill in the blanks
_______________
_______________
Backward
vertical
integration
Horizontal
integration Production
_______________ Honda car process
manufacturer
_______________
_______________ _______________
_______________ _______________
Ice cream _______________

company
_______________

Costs, revenues and profits: Data response
Jasmin and Ryan own and run a cake-making business. Jasmin and Ryan rent a shop on the
High Street in Cheltenham, the rent is £200 a week. They also have a loan from the bank. To
make the cakes Jasmin orders the ingredients every week from a wholesaler firm. She must buy
flour, sugar, eggs, butter and icing. Jasmin has calculated that the variable cost per cake is 15p.
1.State one fixed cost that Jasmin and Ryan must pay. (1)
2.State one variable cost that Jasmin and Ryan must pay. (1)
3.Explain what is meant by total cost. (2)
4.Fill in the blanks in the following table: (10)
Price Quantity Fixed Variable Total Total Profit

(£) costs (£) costs (£) costs (£) revenue (£) (£)
0.50 0 0 300
0.50 50 7.50
0.50 100 315 50

0.50 250 300
0.50 500 250

0.50 750 112.50 -37.50
0.50 1000 300
5.Using the table above calculate average revenue when Jasmin and Ryan
sell 500 cakes a week. Show your working. (2)
6.Using the table above calculate average cost when Jamin and Ryan make
50 cakes a week. Show your working. (2)
7.What is meant by productivity? (2)
8.Explain the difference between production and productivity. (2)
9. Jasmin and Ryan can make 750 cakes a week but Jasmin is concerned that this
amount is not enough to make a profit. Discuss how Jasmin could increase
the number of cakes she makes every week. (8)
Total marks = 30

Market failure
Activity 1 – Crossword
1
5 6
7 8
10
ACROSS
1. The benefit to the individual of consuming or producing. (7,7)
4. A negative by-product of production and/or consumption felt by a third party. (8,11)
5. The market failure occurring when there is just one seller in the market. (8)
6. An example of a demerit good. (7)
7. A good that would be over-consumed and over-provided if left to the free market. (7,4)
9. An example of a public good. (7)
10. Example of a merit good (as an acronym). (3)
DOWN
1. A good which is non-rivalrous and non-excludable. (6,4)
2. A good that would be under-consumed and under-provided if left to the free market.
(5,4)
3. Private cost + negative externality when added together. (6,4)
8. One method of government intervention when there is environmental degradation.

(5,3)

Market failure: Activity 2 – Design a poster
Imagine you work for the National Health Service and you are trying to stop the negative
externalities associated with smoking. Design a poster to warn people of the dangers.
Use pictures to make your poster stand out. Use the information below to help you.
According to Cancer Research UK, Passive smokers who are exposed to

passive smokers are 20-30 per cent tobacco smoke breathe in over 400
more likely to develop lung cancer chemicals, and over 60 are known or
than people not exposed to smoke. suspected to be carcinogenic
(cancer-causing).
Treating smokers “Children of parents who smoke Smoking is the

costs the NHS in inhale between 60 to 150 biggest cause of
England £2.7bn cigarettes’ worth of nicotine a litter in the UK.
a year. year, or about 1.5 cigarettes’
worth of nicotine each week.”
Negative Externalities
of Smoking

Market failure: Activity 3 – Data response
Smoking is estimated to have cost the NHS £2.7bn in 2008. Due to this and other negative
externalities, the government is looking at a number of policies to reduce smoking in the UK.
Cigarette packs already have anti-smoking slogans on the front and smokers pay over £9bn
a year in tax. Other measures have been suggested such as putting cigarettes under the
counter and removing branding and logos from the packaging. Many observers feel people
will still smoke. Paul, a smoker for 20 years says ‘the only way the government can stop
smokers is to ban cigarettes, I’m addicted.’
Source: ‘Smoking “costs the NHS billions”’, BBC News, Thursday 11 June, 2009.
1.Explain what is meant by the term negative externality. (2)
2.According to the article, how much has smoking cost the NHS in 2008? (1)
3.According to the article, how much do smokers pay in tax per year? (1)
4.State one other negative externality associated with smoking. (1)
5.State two strategies mentioned in the text that aim to reduce the consumption
of cigarettes. (2)
6.Explain the negative externalities associated with the production or consumption

of two other products. (6)
7.Explain how an improvement in healthcare produces positive externalities. (6)
8.Explain one other strategy the government could use to reduce smoking. (3)
9.“The only way the government can stop smokers is if they ban cigarettes.“
Do you agree with this statement. Give reasons for your answer. (8)
Total marks = 30

Suggested answers
Saving, borrowing and managing your money
Activity 1 – Crossword
This is a crossword with a difference, the answers are already there! You have to think of the
clues to complete it.
1 S 2 I
A N
` O V
3 E RD R A F T
4
H I E
I N R
5MO R T G A GE E
E S
P BU
6 D G E T
U R
7AP R A
C T
H E
8 L O AN
S
9 C R E D I T CA R D
ACROSS
3.
5.
6.
7.
8.
9.
DOWN
1.
2.
4.

Saving, borrowing and managing your money: Activity 2 – Data response
The number of mortgages approved for house purchases in the UK rose to its highest level in
more than a year in June 2009 to 47,584. The figure is up 74% on November 2009, when the
number of approvals for homebuyer loans dropped to just 27,000, and is the highest since
April last year. The rise in approvals for purchases may have been driven by an increase in
the number of first-time buyers able to enter the market, as lenders have begun to offer
higher loan-to-value mortgages again. Lender reports of rising house prices may also have
encouraged buyers back into the market.
However, despite the increase the number of buyers remains well below the high it reached
at the top of the property market. This is in part due to the large deposit required. Many
lenders require a 25% deposit. This can be very difficult for home buyers, especially first time
buyers who have not had long to save the money. Many first time buyers have to take out
extra personal loans to pay the other costs associated with buying a house.
1.What is meant by the term mortgage? (2)
2.What is meant by the term interest rate? (2)
3. Why do banks require a deposit when people buy a house and take out a mortgage? (2)
4. Explain, using an example why it will be difficult for first time buyers to save the
deposit required to buy a house. (4)
5.Explain, using an example, what is meant by opportunity cost? (4)
6.State two costs associated with buying a house. (2)
7. When people buy their first house there are a number of things they must pay
for every month, such as gas and electricity. They must therefore draw up a budget.
What is meant by the term budget? (2)
8.In addition to those mentioned above state six items that might appear in a
first time buyer’s budget. (6)
9.Using your answers in question 7 decide which items are necessities and which
are luxuries, using the table below. (6)
Necessities Luxuries
__________________________ __________________________
__________________________ __________________________
__________________________ __________________________
__________________________ __________________________
__________________________ __________________________
Total marks = 30

Economic growth
Activity 1 – The Economic Cycle
The cycle is made up of four sections. Label the diagram using the words below.
Boom Recession Recovery Slump

Output
B_________
R_________
S_________
R_________
Time
Use an arrow to match up the boxes to the correct section of the business cycle and fill in the
missing words.
GDP is starting to ____________ . People GDP is still rising but at a slower

are spending less which means less ____________ . The government may
____________ and ____________ will decrease ____________ ____________
be produced. Firms will need fewer to encourage people to keep
workers. This is called ____________ ____________ and stop a ____________ .
____________ . There may be
___________ as companies reduce
their prices to increase ____________ .
Word Box Word Box

deflation goods decline services interest rates rate recession
demand cyclical unemployment spending
When GDP is rising more ____________ GDP starts to recover after a

and services will be made which could ____________ . Businesses will start
lead to a reduction in ____________ . taking on workers and consumers will be
____________ will be high as people more prepared to ____________ . This
will go out and spend. Too much increase in growth could have been
demand however could cause prices to caused by the government reducing
rise which is called ____________ . ____________ ____________ to
stimulate ____________ .
Word Box Word Box

inflation demand goods spend interest rates demand
unemployment recession

Economic growth: Activity 2 – The causes of economic growth
Economic growth is when the productive capacity of a country increases. It can be achieved
by improving the quality or increasing the quantity of resources. It is measured using GDP,
which is the total amount of goods and services produced in a country in a year.
Put the following strategies for increasing economic growth into the correct column.
Improved education Increasing the minimum wage More business investment
Training Reducing benefits New technology
Cutting down forests Make more machines Increased efficiency
Improve the quality of resources Increase the quantity of resource

________________________________________ ________________________________________
________________________________________ ________________________________________
________________________________________ ________________________________________
________________________________________ ________________________________________
________________________________________ ________________________________________
Activity 3 – Circle the correct option
An increase in GDP is more likely to cause
Prices to fall Prices to rise
Why do you think this will happen?
An increase in GDP is more likely to lead to
Pollution An improvement in
living standards
Why do you think this will happen?

Economic growth: Data response
China’s growth of GDP rose very rapidly from $268bn to $3280bn from 1987 to 2007. This
was in part the result of investment in capital goods which has allowed the country to make
better use of its huge population. The country has seen the benefits of this growth with living
standards increasing as more of the population are able to afford healthcare and food.
However China is now considered to be the world’s biggest emitter of CO 2. There are also
worries that increased international trade has forced many Chinese people into low paid jobs
where working standards are very poor. Worryingly for the Chinese government, there have
been signs recently that the bubble in the economy has burst with unemployment rising as
their export market slows down.
Source: ‘China grows faster amid worries’, BBC News, Thursday 16 July 2009.
1.Explain what is meant by the term economic growth? (3)
2.(i) State two benefits of economic growth that are mentioned in the information
above. (2)
(ii) State two costs of economic growth that are mentioned in the information
above. (2)
3.China’s growth has been caused by an improvement in the quality of their capital
resources. Explain one other way of increasing economic growth. (5)
4.Using the data and your own economic knowledge, do you think the Chinese
population has benefited from economic growth? (8)
5.The data suggests China’s economic growth is slowing down. Evaluate the
possible options for the Chinese government to stimulate economic growth. (10)
Total marks = 30

32
Unemployment
Activity 1 – Fill in the blanks
A person is unemployed when they are _____________ and _____________ to work but do not have
a job. Unemployment can be measured in two ways. Using the C_____________ C_____________ or
the L_____________ F_____________ S_____________ (I_____________ ).
Word Box
ableILOlabour count survey
claimant willing force
The information below shows different types of unemployment. Fill in the boxes using the
word box provided.
There are no I can work

jobs around here, for hours and
I’m moving to I don’t need
London! breaks!
Word Box
Seasonal Cyclical Regional
Technological Sectoral

Unemployment: Activity 2 – Costs of unemployment
Sort the following into cost to the individual, cost to the government and cost to the local
area. Try to add some of your own.
Lack of self-esteem
Crime may increase
Less money from income tax
Cost to the Cost to the Cost to the

local area individual government
1. ____________________ 1. ____________________ 1. ____________________

____________________ ____________________ ____________________
2. ____________________ 2. ____________________ 2. ____________________
____________________ ____________________ ____________________
3. ____________________

36
Unemployment: Activity 3 – Policies to reduce unemployment
Different policies are required to solve different types of unemployment. Match up the correct
response for each type of unemployment. Then explain how these policies will reduce
unemployment.
A. General Motors given huge ‘bail-out’.
B. Government promises more money towards education and training.
C. The job centre opens up online.
D. Bank of England cuts interest rates to 0.5%.
E. Millions spent on improving Belfast’s town centre.
Policy used How this will help reduce unemployment

(A-E)
Cyclical D If interest rates are cut, demand will increase as more

people spend. Companies will have to produce more to
cope with demand and they will have to take on workers.
Frictional
Sectoral
Regional
Technological

38
Unemployment: Data response
In January 2009 UK unemployment reached a record high. This has been caused by firms
letting workers go as they had lower demand for their products. Steve from CGL Motors
remarked, “I had the worst Christmas sales in 10 years, I had to lose some workers to stop
myself from going bankrupt!” Many of the job cuts were made in the North East of England
where unemployment rose to 8.6%. Workers in the area are struggling to cope. Sally, an
unemployed hairdresser from Middlesbrough said, “It was bad enough losing my job, but
there doesn’t seem to be any information on how to get another one.”
The government has pledged to increase spending on training and recently the Bank of
England dropped the base rate to 0.5%. Ian from Nottingham is still furious that not enough is
being done. “I’ve got a mortgage to pay and have received no help. My house also got
broken into last week – what is this country coming to?”
Source: ‘UK unemployment hits 1.92 million’, BBC News, Wednesday 21 January, 2009.
1.Tick the types of unemployment that are shown in the data. (2)
Seasonal Cyclical Sectoral
Regional Technological Frictional
2.State the level of the base rate in the extract. (1)
3.State two consequences of unemployment that are shown in the data (2)
4.State two ways in which unemployment is measured. (2)
5.Explain how a reduction in the base rate is intended to reduce unemployment. (3)
6. In the extract, Sally is finding it hard to get information about new jobs.
Explain the type of unemployment this will cause and discuss two ways in
which the problem could be solved. (5)
7.Explain how an increase in spending on training could reduce unemployment

in the North East. (3)
8.Explain two consequences of unemployment for the government. (4)
9.In the data the government have tried two solutions to reduce unemployment.
Evaluate whether these policies will be effective or if other solutions are required. (8)
Total marks = 30

Inflation
It’s not inflation unless every product increases in price ___________
Inflation will cause everyone to spend more ___________
Inflation is measured by looking at every price of every product ___________
An increase in the price of oil could cause inflation ___________
The Bank of England try to control inflation using interest rates ___________
Pensioners are delighted when there is inflation because their

savings are worth more ___________
Inflation is measured by taking a ‘basket of goods’ which contains

the most typical goods of a typical consumer ___________
The Bank of England’s key strategy is to try to control inflation using taxes ___________
When my favourite chocolate bar increases in price it’s called inflation ___________
Inflation is a sustained rise in the general price level ___________

42
Inflation: Activity 2 – Complete the flow diagram by writing these labels in the
correct boxes
As demand outstrips supply, firms put up their prices
Businesses have to put up their prices to maintain their profit margins
The prices of raw materials increase
There are only so many goods for them to buy
Costs for business firms increase
People have more money to spend causing demand to increase
Cost push Demand pull

inflation inflation
Prices
44
Inflation: Activity 3 – Consequences and cures of inflation In
the speech bubble, explain how inflation will affect the person.
Fixed income
Menu costs
Pensioner Restaurant owner
Less spending International

competitiveness
Shopper Tourist
Activities & Exercises for GCSE Economics
46
Inflation: Data response
6%
5%
4%
3%
2%
1%
0
Feb May Aug Nov Feb May Aug Nov Feb
2007 2007 2007 2007 2008 2008 2008 2008 2009
Source: ‘Oil prices up after record falls’, BBC News, Friday 31 October 2008.
1.Describe the trend of inflation in the graph. (2)
2.The graph above shows the retail price index. Explain how this is measured. (2)
3.Using the information above, explain what is meant by cost push inflation. (2)
4.Explain why pensioners will be worried about rising inflation. (2)
5.Explain two possible reasons for falling inflation in 2009. (4)
6.The Bank of England’s target rate of inflation is 2%. Discuss the possible methods
the Bank and the government could have used to reduce inflation in 2008. (8)
7.“Inflation only brings problems to the economy.” Do you agree with this
statement? Give reasons for your answer. (10)
Total marks = 30
48
Fiscal policy
Activity 1 – Match the tax with its correct definition
Council Tax A tax which is paid on the things of value you leave
behind when you die.
VAT A tax placed on your annual income.
A tax placed on households based on the estimated

Corporation Tax value of the property and the number of people living
in it.
A tax on the profits of companies and other organisa-

Excise Duties
tions including clubs, societies and associations.
A tax on the consumption of goods and services.

National Insurance
A tax placed on an individual good or service. The

government often place higher excise duties on
Income Tax goods such as alcohol and cigarettes.
A tax placed on wages and salaries which is used to

Inheritance Tax fund state benefits.
Direct or indirect – Select whether the taxes above are direct or indirect taxes and write in
the lines below.
Direct taxes Indirect taxes
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
50
Fiscal policy: Activity 2 – Direct and indirect taxes
Income tax is direct as it comes directly out of a person’s salary. It is considered to be

progressive as the higher the income of the taxpayer, the larger the percentage of their total
income paid in tax. For example someone earning less than £6,000 will not have to pay any
income tax but someone earning over £40,000 will have to pay 40% on anything over that
amount. The advantage is it is easy for the government to collect however some well off
people feel they have to pay too much. Another example of a direct tax is corporation tax.
VAT is an example of an indirect tax as it is a tax on what people spend rather than what
they earn. Indirect taxes can be used to try to stop people consuming or producing products
which are bad for them which is one of the reasons cigarettes are so highly taxed. Indirect
taxes are often considered to be regressive as the higher income earners pay a lower
percentage of their income in tax compared to low income earners.
Use the information above to sort the statements into direct and indirect taxes.
Direct or Indirect
Often considered to be progressive ___________
Placed on a person’s income ___________
A good way of reducing consumption of goods

which have negative external effects ___________
Income tax ___________
Placed on profits of companies ___________
Often considered to be regressive ___________
VAT ___________
Easy for the government to collect ___________
52
Fiscal policy: Activity 3 – The Government budget
Government spending by function in 2009-10

Total managed expenditure: £671bn
Other expenditure £72bn
Debt interest £28bn
Public order Social protection £189bn
and safety £35bn
Housing and
environment £29bn
Industry, agriculture,
employment and
training £20bn Personal social
Defence £38bn services £31bn
Education £88bn Health £119bn
Transport £23bn
What are the three main areas What percentage What percentage
of government spending? of government of government
spending is on spending is on
1. _________________________________
transport? health?
2. _________________________________
3. _________________________________
Government receipts in 2009-10

Total receipts: £496bn
Other £67bn
Council tax £25bn Income tax £141bn
Business rates £24bn
VAT £64bn
National insurance £98bn

Corporation tax £35bn
Excise duties £44bn
What are the three main areas What percentage of taxation

of government revenue? is income tax?
1. _________________________________
2. _________________________________
3. _________________________________
What percentage of taxation What proportion of total

is VAT? government spending is
matched by tax receipts?

Fiscal policy: Data response
UK government borrowing a record 2% increase in both alcohol and

£90bn in the financial year 2008-09 tobacco tax
50% income tax rate for people The government’s benefits bill
earning £150,000 in 2011 rose 1.8%
Unemployment, which has risen to

Fuel duty to rise by 2p a litre 2.1 million, has contributed to the
9% fall in income tax revenue
1.Explain the difference between progressive and regressive taxes. (4)
2.Explain the difference between direct and indirect taxes, giving an example of each. (6)
3.State one example of a progressive tax using the information above. (1)
4.State one example of a regressive tax using the information above. (1)
5.One reason for the high price of alcohol and tobacco is the high level of taxation.
Do you think this high tax is justified? Give reasons for your answer. (6)
6.Using the information above, explain how a recession can cause an increase in
the budget deficit. (4)
7. The UK government may have to increase taxes in order to improve education

and training to make UK workers more employable. Do you think this should
come from direct or indirect taxes? Give reasons for your answer. (8)
Total marks = 30

56
Fiscal policy: Activity 4 – Taxation of alcohol
The Chancellor has been invited to meet with a pub group for a debate with landlords about
taxation of alcohol using excise duties.
You must first write a speech for the chancellor explaining why a tax on alcohol is needed.
Use the information below and your own economic knowledge to help you.
Around 6% of road casualties and

Alcohol is estimated to be
17% of all deaths on the road occur
responsible for at least 33,000
when someone has been drinking
deaths in the UK each year
over the legal limit
An estimated 17 million working

days are lost each year due to
Measures will raise £66bn by 2012
people missing work due to the
effects of alcohol

You must now write a speech for the pub group which opposes the tax. Try to think of other
options to reduce alcohol consumption instead of a tax.
A record 2,000 British pubs have

Alcohol tax will have a negative
closed with the loss of 20,000 jobs
effect on less well off people as
since the chancellor, Alistair Darling,
it is a regressive tax
increased beer tax in the 2008 budget
75,000 more jobs in the drinks

industry are at risk

Fiscal policy: Activity 5 – Create a test
Create a test for the person sitting next to you. Make up three questions about direct and
indirect taxes using the information above.
Question:
Answer:
Question:
Answer:
Question:
Answer:

Monetary policy
Activity 1 – Which of these statements are correct?
Put a tick in the box next to the correct statement.
A. The interest rate is decided by the government
B. The interest rate is decided by the Bank of England
C. The interest rate is decided by the tax payers
A. Interest rates may not move if there is inflation
B. Interest rates may be increased if there is inflation
C. Interest rates may be reduced if there is inflation
A. The government’s target for inflation is 3.5%
B. The government’s target for inflation is 5%
C. The government’s target for inflation is 2%
A. A reduction in interest rates will most likely lead to an increase in growth
B. A reduction in interest rates will most likely weaken a country’s currency
C. A reduction in interest rates will cause both of the above to happen

61
Monetary policy: Activity 2 – Fill in the blanks in this flow diagram
If interest rates go up
Fewer people will buy using S _________ will _________ as

c_________ as it will cost _________ money in the bank will gain a
to pay back. _________ amount of interest.
Mortgage interest repayments are _________. People

Firms are also less likely to spend
will have less _________ income.
less on i_________.
This means there be less

s_________ in the economy.
This dampens inflationary

pressure.

63
Monetary policy: Activity 3 – Interest rates
Scenario 1 – Inflation is well above the UK target of 2%.
Should the Bank of England: Increase interest rates? Decrease interest rates?
Explain how this decision will affect the following groups.
Savers Mortgage payers
People will be _________ likely to ____________________________________

save as they will get a _________ rate
____________________________________
of interest on their money. This will
_________ demand in the economy ____________________________________
causing the inflation rate to _________.
____________________________________
Shoppers Business investment
Demand for goods will _________ as ____________________________________

fewer people will use credit cards
because the cost of paying back ____________________________________
the money will _________. This will ____________________________________
reduce demand causing the
inflation rate to _________. ____________________________________
65
Scenario 2 – The country is in a deep recession with very low demand.
Should the Bank of England: Increase interest rates? Decrease interest rates?
Explain how this decision will affect the following groups.
Savers Mortgage payers
____________________________________ Mortgage payers will pay a _________

rate of interest which will _________
____________________________________
their disposable _________. This
____________________________________ should help to _________ demand in
the economy which would increase
____________________________________
_________ _________.
Shoppers Business investment
Businesses will be more encouraged

____________________________________
to invest because they will pay a
____________________________________ _________ rate of interest on any
machines they bought on credit. This
____________________________________
will _________ demand in the
____________________________________ economy, and provide jobs for
workers. This should help stimulate
____________________________________
_________ _________.
67
Monetary policy: Data response
18
16
14
12
UK Base Rate, %
10
0 ’72 ’74 ’76 ’78 ’80 ’82 ’84 ’86 ’88 ’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08’09
1.Explain what is meant by interest rates. (2)
2.Briefly describe the trends in the base rate shown in the graph. (3)
3.Interest rate control is part of which of the following policies? (1)

Policy Tick
Fiscal policy
Monetary policy
Supply-side policies
4.Who decides the base rate? (1)
5.State the government’s target rate for inflation. (1)
6.Explain how an increase in interest rates would affect inflation? (4)
7.Explain two reasons why a drop in interest rates will increase demand
in the economy. (8)
8. The graph shows that the Bank of England reduced interest rates to 0.5% in 2009.
Evaluate the impact of this decision on the government’s main macroeconomic
objectives. (10)
Total marks = 30
69
Supply side policies
Activity 1 – True of false
True or False
Supply side polices aim to increase demand in the market ___________
Supply side policies aim to increase supply in the economy ___________
Supply side policies cause cost push inflation ___________
Supply side policies reduce demand pull inflation ___________
Increasing unemployment benefit will increase supply of labour in the market ___________
A cut in income tax will increase supply of labour in the market ___________
A decrease in corporation tax would encourage investment ___________
Education and training would have no effect on supply in the market ___________
Reducing the power of trade unions is a supply side policy ___________
Privatisation can lead to more efficient production and

increased competitiveness ___________

71
Supply side policies: Activity 2 – Explain how the following polices increase supply
Policy How this will increase supply
Lower rates of income tax Lowering income tax would provide an __________
for people to work because they would get to keep
a higher percentage of the money they earn. This
will increase output in the economy.
Education and training
Remove barriers to entry in an industry Removing barriers to entry will allow small firms to enter
a market which will increase the amount of goods and
services being produced and the increased __________
should make companies more
__________.
Reduce corporation tax
Privatisation Privatisation is the transfer of control from __________

to the private sector. This will increase supply
because privately-owned companies are more
efficient because they aim to make a __________.
Reduce state welfare benefits
Word Box
profit efficientcompetition
incentive public
Activity 3 – Sort the six policies above into factors that affect labour and
factors that affect industry
Labour Industry
________________________________________ ________________________________________
________________________________________ ________________________________________
________________________________________ ________________________________________
73
Supply side policies: Activity 4 – Match the head to the tail
Monetary policy involves increase a country’s productive capacity by

changes … making markets and industries more efficient
Supply side policies aim government spending and borrowing which

to … aim to influence economic activity
Fiscal policy involves in interest rates and the money supply which
changes in taxation … influence demand in the economy
Activity 5 – Sort the following policies into monetary,

fiscal or supply side policies
Policy Monetary, fiscal or supply side
An increase in government spending ____________________
Rules limiting the power of trade unions ____________________
A decrease in the rate of unemployment

benefit ____________________
Measures to remove barriers to entry ____________________
A fall in the bank of England base rate ____________________
Financial incentives such as EMA to

encourage students to attend collage ____________________
Increasing the money supply ____________________
A reduction in corporation tax ____________________
75
Supply side policies: Activity 6
Scenario – The UK economy is in a deep recession with low demand and high
unemployment in the economy. Exports are struggling due to a lack of productivity and
efficiently in UK companies
Explain how you would solve this issue using monetary, fiscal and supply side policies.
Monetary policy A reduction in the base rate would reduce the amount people have to
pay on their m__________ and on anything they buy on c__________. It
would also discourage s__________ as you would get a lower rate of
interest. This should increase d__________ in the economy leading to
economic growth and a reduction in u__________.
Fiscal policy
Supply side policy

77
Supply side policy: Data response
On 10th June 2009 the Rail, Maritime and Transport (RMT) Union called a strike, asking for
improved pay and guaranteed jobs. Millions of commuters were affected as their normal
route to work was closed. The strike cost London an estimated £100 million as Oxford Street
saw 100,000 less customers and refunds had to be given to football fans that were unable to
attend the England game at Wembley. The RMT strike increases unit labour costs and
reduces efficiency making the tube more expensive for consumers. The Mayor of London,
Boris Johnson aims to make tube workers sign a declaration in their contract that they will
not strike which will hopefully stop any future action. This would be considered a supply side
policy as it aims to improve efficiency.
Source: ‘Tube strike disruption continues’, BBC News, Thursday 11 June, 2009.
Supply side polices in the 2009 budget
Funding to give people work Money available for over 50,000

experience in growing industries new places in sixth forms
Training or a job available for

£750 million to help emerging
under-25s who have not been
technology industries
in work for over 1 year
1. Define the term supply side polices. (2)
2.Using examples from above, explain two supply side policies that aim to improve quantity
and quality of labour in the economy. (6)
3.Explain two supply side policies that aim to improve the productivity of industry in the
economy. (6)
4.Explain why reducing the power of the Rail, Maritime and Transport (RMT) Union is
considered a supply side policy. (4)
5. Supply side policies are the only way to reduce a trade balance deficit. Do you agree?
Give reasons for your answer and try to discuss the following other options:
– Encourage a fall in the value of the £ sterling
– Increase interest rates
– Introduce tariffs (12)
Total marks = 30

79
Balance of payments
Activity 1 – Match, explain and fill in the blanks
Below are four causes of a balance of a payment deficit.
1. Match up the solutions below to the cause of the deficit.
2. Explain how these solutions could work and describe the possible drawbacks.
3. Use the word box to fill in the blanks.
Possible solutions to a balance of payments deficit
Increase interest rates Increase spending on education

and training
Introduce tariffs on foreign Encourage the pound sterling

goods to fall against other currencies
Word Box
tariffs training economic growth education
weaker unemployment competitive
Cause of balance of Possible solution How this solution Possible

payments deficit (pick from table above) could help drawbacks
Poor quality goods An increase in spending on High costs.

__________ and __________ Not guaranteed to work.
would make UK goods more Takes time to have an
__________ abroad which effect.
would encourage spending
on UK goods.
Strong pound A __________ pound would make If done using a fall in

UK exports cheaper for interest rates it could
customers abroad. cause demand to
increase. Goods won’t
be any better than they
were before.
Cheap goods from abroad Other countries would not

be happy about an
increase in __________ and
could do the same back
to the UK.
Economic growth in the UK Reducing __________

causing an increase in __________ could have a
spending on imports negative impact as there
would be less spending in
the UK economy which
could increase
__________.
81
Balance of payments: Activity 2 – Balance of Payments
At GCSE the most important part of the balance of payments is called the __________
__________. It consists of two main areas. Trade in __________ and trade in __________.
Economists use the current account to see how many goods and services the UK is
importing and exporting in a year. For a number of years the UK has been importing more
goods and services than it exports. This is called a current account __________.
For each of the situations below state whether it is example of an import or export.
(Hint: is money flowing into or out of the UK?)
Situation Import or Export
A company from Manchester sells a table to a customer in Paris ____________
A UK consumer buys a Mercedes from Germany ____________
A UK consumer buys an insurance service from the USA ____________
HSBC sells banking services to a company based in Korea ____________
A UK individual goes on holiday to Japan ____________
An Italian tourist visits the UK ____________

Balance of payments:
Activity 3 – Calculate the balance of payments for the following examples
A Exports Imports
(£ millions) (£ millions)
Goods 84,000 102,000
Services 100,000 116,000
Country A – (Show your working)
B Exports Imports
Goods 112,000 95,000
Services 96,000 102,000
Country B – (Show your working)
C Exports Imports
Goods 120,000 162,000
Services 92,000 106,000
Country C – (Show your working)
D Exports Imports
Goods 109,000 42,000
Services 21,000 50,000
Country D – (Show your working)
1. Which country has the biggest surplus on its current account?
2. Which country has the biggest deficit on its current account deficit?

Balance of payments: Data response
Some good has come from the economic crisis that hit Britain in 2009. Exports have soared
12.8% on the back of the weakened British pound. Imports have also dropped 5.4%. These
have combined to shrink the UK’s deficit from £7.8 billion to £7.3 billion. However there are
still worries that demand could deteriorate in USA and Europe as their own economic
problems increase.
0 0
-2
-1
-4
-6
-2
Percentages
£billion
-8
-3
-10
-12 -4
-14 Current Balance (lhs)

Current Balance as percentage of GDP (rhs)
-16 ’04 ’05 ’05 ’05 ’05 ’06 ’06 ’06 ’06 ’07 ’07 ’07 ’07 ’08 ’08 ’08 ’08 -5
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32 Q4 Q1 Q2 Q3 Q4
Source: ONS
1.State the current UK Balance of Payments using the information above. (1)
2.Describe the trend in the UK balance of payments since 2004. (2)
3.Explain what is meant by the current account on the balance of payments. (3)
4.What is meant by a deficit on the current account? (2)
5.Explain how the weakened pound caused exports to increase and imports
to decrease. (4)
6.Explain how a high minimum wage could cause a balance of payments deficit. (4)
7.Explain one other cause of a balance of payments deficit. (4)
8.Discuss the advantages and disadvantages of possible solutions to a

balance of payments deficit. (10)
Total marks = 30

Exchange rates
Using the data below and your own economic knowledge decide whether the following
statements are true or false.
2.1
2.0
1.9
£sterling
1.8
1.7
per
Dollars
1.6
1.5
1.4
1.3
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
’08 ’08 ’08 ’08 ’08 ’08 ’08 ’08 ’09 ’09 ’09 ’09 ’09 ’09
Source: Bank of England
An exchange rate is the value of one currency in terms of another ___________
In January 2009 the £1 was worth $2.20 ___________
The value of a currency is determined by the demand and supply of

that currency ___________
Between May 2008 and January 2009 the value of the £ weakened ___________
January 2009 would have been a good time for a UK citizen to go on

holiday to the USA ___________
In July 2008 I would have received more dollars for my pounds compared
with January 2009 ___________
When the £ is weak exports are less competitive abroad ___________
I am a person from the UK going on holiday to the USA. The best time for
me to go would be January 2009 ___________
The interest rate in the UK affects the value of the £ ___________

Exchange rates: Activity 2 – Fill in the blanks
An increase in interest rates in the UK will lead to more US money being __________ in UK
banks. This is because it is more __________ to save in UK banks as they will get a
__________ return on their savings.
US dollars must be __________ for UK pounds. This means that there is an __________
demand for pounds. This causes the value of the pound against the dollar to __________.
We say that the pound has __________ against the dollar.
Word Box
strengthened exchanged increased
beneficial better saved increase
Activity 3 – How the value of the pound is determined
Using the diagram below to explain how an increase in the UK interest rate would affect the
value of the pound. (Hint – use the information in Activity 2 to help you.)
P
S
P1
D1
Q1 Q

91
Exchange rates: Data response
The British are being missed in France this summer as they stay away in numbers that have
sparked dismay in the French tourist industry. As the value of the pound against the euro has
weakened, British holidaymakers have found it too expensive to go on holiday in France.
A hotel in Lyon, which in the summer months is usually full of Britons has had to act following
concerns.
“We’ve lost half our British holidaymakers,” said the manager. “And since the beginning of
July, their absence is being felt enormously.” The hotel has had to cut the price of its rooms –
from €85 to €75 – in an attempt to fill the hotel.
1.If £1 = €1.16 how much cheaper in pounds will the hotel room be when the
price is reduced? Show your working. (3)
2.Explain what is meant by the term exchange rate. (3)
3.With the aid of a demand and supply diagram explain how the value of the
pound is determined. (3)
4.(i) State two factors which might cause the value of the pound to strengthen. (2)
(ii) Using one of the factors you gave in 4.(i) explain how it would cause the
value of the pound to strengthen. (3)
5.If the pound is said to be weak against the euro what does this mean?
You may want to use examples in your answer. (6)
6.Is reducing the price of hotel rooms the best method for the hotel to use to
attract more British tourists? Give reasons for your answer. (10)
Total marks = 30

Protectionism
Activity 1 – Protectionist policies
How would the following react to the UK imposing protectionist policies?
Tick the relevant face ☺☹ Explain why they would react this way
A small start up car company Protectionist policies would allow the firm to
__________ without having to worry about
__________ from large __________ firms.
The textile sector in the UK which

cannot compete with the cheap
labour costs of foreign firms
Domestic consumers Protectionist policies would limit domestic

consumers’ __________ and may cause them
to pay higher __________ because domestic
firms may be less __________ and unable to
have as low prices as were previously
available from abroad.
Chinese companies
A microchip company worried Some countries __________ firms so they can

about ‘dumping’ of cheap imports produce goods below the price of non-
subsidised firms in competitor companies.
This would make it impossible for the
microchip firm to __________. Protectionist
policies would stop these firms from being
able to __________ their goods in the market.
Workers in developing countries
Inefficient firm with a huge Protectionist policies allow monopoly

monopoly producers to be __________ as they face
no competition. This is bad for consumers
as goods may be more __________ and
__________ quality.
Word Box
dump choice prices multinational subsidise competitive
expensive compete inefficient grow lower competition

Match the type of protectionist policy to the definition
Quotas A tax placed on imported goods
Government providing tax break, cheap finance or other

Regulations
aid to make domestic firms more competitive
Tariffs A ban on goods and services from a country
A restriction on the number of goods and services that

Embargoes
can be imported into a country
Tactics that make it difficult to export to a country,

Subsidies
e.g. demanding a complex set of forms to be filled in

Protectionism: Activity 2 – Evaluate methods of protection
Imagine you are the international advisor for the president of a developing country. You have
decided to use tariffs, subsidies, quotas or regulations to protect your infant industries from
multinational competition and to create jobs. You must write a report explaining the
advantages and disadvantages of each option and make a judgement as to which one the
president should use. Use the information provided to help you.
Managing Director of Zoom,

President of the United States
your country’s new car industry
If you put tariffs on our goods,
Tariffs will allow us to compete with
we will do the same for you!
international firm’s prices
Struggling start up
International car firm
clothing company
Following ridiculous regulations and filling in
If we were given cheap finance, we
complex forms makes exporting to some countries a
may be able to buy the machines to
nightmare!
compete in the international market
WTO
Report If you use subsidies
we will find out and
Tariffs
Advantages Disadvantages fine you
News report
Subsidies
Advantages Disadvantages There are reports
that corruption is
rife in countries
using quota
systems, with
Quotas officials taking
Advantages Disadvantages
bribes to increase
quotas
Regulations
Advantages Disadvantages
Consumer
I buy foreign goods
as they are cheaper
and much better
Judgement quality. Tariffs and
quotas will force me
to buy domestic
goods

Protectionism: Data response
The global recession of 2009 could cause a rush to protectionist policies as countries try to
protect their own markets using policies such as tariffs and quotas. There are worries that
this would affect developing countries the most as they would be unable to access the large,
wealthy markets that they rely on. The graph below shows the severe drop in trade in
merchandise goods since the economic crisis. Protectionism would have a negative effect on
consumers who may have to accept higher prices and less choice. Large companies will not
be able to benefit from economies of scale whilst growth in the world economy could slow as
countries no longer specialise and then trade.
Quarterly world merchandise export developments, 2005-09
(2005 Q1 = 100, in current US dollars)

190
180
170
160
150
140
130
120
110
100
’05 ’05 ’05 ’05 ’06 ’06 ’06 ’06 ’07 ’07 ’07 ’07 ’08 ’08 ’08 ’08 ’09
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32 Q4 Q1 Q2 Q3 Q4 Q1
Source: WTO
1.Describe the changes in world trade for merchandise goods from 2005 to 2009. (3)
2.Explain the advantages of using protectionist policies during a recession. (4)
3.Explain three methods of protectionism. (9)
4.Explain why protectionist polices could cause higher prices and less choice
for consumers. (4)
5.Using protectionist policies will have a beneficial effect on an economy.

Do you agree? Give reasons for your answer. (10)
Total marks = 30

The Euro
Activity 1
Imagine that you are the economics editor for a major British newspaper. You have been
asked to write an article for the front page which explains the advantages and disadvantages
of joining the Euro.
You must come up with a conclusion which is based upon your argument. Use the
information boxes to help you.
UK tourist UK consumer
“Joining will mean I won’t have to pay the “Prices would be transparent.
transaction costs involved with changing I could easily see if something is
currency.” cheaper abroad.”
UK car firm American car firm

“Finally we could look towards the long term without worrying “We would be much
about exchange rate risk.” more interested in
investing in the UK if
they joined the Euro.”
THE DAILY NEWS
www.dailynews.com The worldʼs favourite newspaper
UK Citizen
Headline
“The pound is as
important as the
Queen. We cannot
Advantages of joining the EU let it go!”
Summary of main arguments
The Bank of
England
“How will we control
inflation if we can no
longer change our
interest rates?”
The Treasury
Disadvantages of joining the EU Conclusion
“It will cost a
fortune to design,
and distribute the
new currency. Has
no one thought of
these transitional
costs?”

Activity 2 – The European Union
1. Shade in the member states of the EU on the map.
2. Shade in the other European countries in a different colour.
3. 16 of the EU members use the Euro. Write down as many as you can in the box below.
Member states of EU
Other European countries

EU: Data response
The American president Barack Obama recently backed Turkey’s troubled bid for EU
membership. He said “Turkish membership would broaden and strengthen Europe’s
foundation.”
However, not everyone agrees with this view. The French president said “I have always been
opposed to this entry and I remain opposed”
The issue of Turkey joining the EU has divided opinions for a number of years. Supporters
argue that Turkey’s strong economic growth and large workforce make them excellent
additions to the community.
Those against the move argue that Turkey is still a poor country with low living standards
compared to the EU and as such would become an economic drain on other EU countries
especially as a flood of migrants would be expected to move from Turkey to more
prosperous areas of the EU.
The Turkish question does not look like one which will be answered soon, despite Mr
Obama’s wishes.
Source: ‘Obama reaches out to Muslim world’, BBC News, Monday 6 April 2009.
1.How many countries are there in the EU? (1)
2.Name five members of the European Union. (3)
3.Name two countries who have adopted the Euro. (2)
4.Explain one reason why Obama would like Turkey to join the EU. (2)
5.Explain two main features of the European single market. (4)
6.Explain how Turkey’s strong economic growth and large workforce could be
beneficial to other EU countries. (4)
7.Discuss the impact on the Turkish economy if they were to join the EU. (6)
8.Evaluate the impact of Turkey joining the EU on British companies. (8)
Total marks = 30

Globalisation
Activity 1 – Fill in the blanks
Globalisation is the rapid increase in ___________ ___________ , coupled with the growth of
large ___________ ___________. The pace of globalisation has exploded in the past 25 years
for a number of reasons. Improvements in ___________ such as the ___________ has allowed
companies to spread across the globe with products designed, produced and sold in a number of
different countries. Reduced costs of ___________ has also had a big impact as have reductions
in ___________ ___________. Many view globalisation as positive pointing towards increased
___________ ___________ in developed countries and improved ___________
___________. However there are opponent to globalisation who believe ___________
___________ are being take advantage of with workers receiving ___________
___________ and poor ___________ ___________.
Word Box
economic growth communication transport developing countries
internet low pay working conditions trade barriers
international trade living standards multi-national companies

Globalisation: Activity 2 – For and against
Imagine you are an anti-globalisation protester. You must try to think of arguments that
counter the pro-globalisation arguments below.
Pro globalisation argument Opposing view from anti globalisation

protester
Large firms will be able to take advantage
of economies of scale leading to cheaper
prices
More choice of products There is less choice as companies such as
Coca Cola dominate
Income will be shared between all
countries so there will be smaller
differences in wealth
Countries will become more dependent
on each other so there may be fewer wars
Now imagine you are a large multinational company. You must try to think of arguments
that counter the anti-globalisation arguments below.
Opposing view from large Anti globalisation argument

multinational company
Globalisation causes pollution in developing
countries
Large multinational companies take

advantage of cheap labour and provide
poor working conditions and low salaries
to their workers in developing countries
People are more understanding of Globalisation takes away the culture of
different countries as they are able to developing countries
visit them

Globalisation: Activity 3 – International trade
Absolute advantage – State which of the following countries has an absolute advantage in
the production of each product.
Without trade using 50% of resources on each product.
Spain Germany China France
Oranges 320 140 Wine 210 600
Cars 250 400 Clothes 900 120
Germany has an absolute advantage in ________ China has an absolute advantage in

________
Spain has an absolute advantage in ________ France has an absolute advantage in ________
If each country was to specialise, how many more goods would be produced?
Spain Germany Total China France Total
Oranges 640 0 Wine
Cars 0 800 Clothes
________ more oranges would be produced ________ more wine would be produced
________ more cars would be produced ________ more clothes would be produced

Globalisation: Activity 4 – Costs and benefits of trade
Explain the following benefits of international trade in one sentence for each aspect.
Economies of scale
Choice
Specialisation
Innovation
Increased competition
Explain the following costs of international trade.
Loss of monetary policy

Overdependence
Loss of employment
Pollution
Loss of culture
Extension – To what extent do you agree that the benefits of international trade
outweigh the costs? Justify your answer. (10)

Globalisation: Activity 5
International trade and globalisation – Data response
Poverty, on the other hand, is

The richest 10% of households in the world
widespread across the developing
have as much yearly income as the bottom
countries – which have over 80% of
90%.
the world’s population.
Competition from international trade

The rich are concentrated in the US, Europe forces firms to be more efficient.
and Japan, with the richest 1% alone owning Poverty, on the other hand, is
40% of the world’s wealth. widespread across the developing
countries – which have over 80% of
the world’s population.
International trade gives more choice International trade allows countries to

to consumers. specialise in producing goods and
services that they have an absolute
advantage in.
1.Use the boxes above to explain two advantages of international trade. (4)
2.Explain what is meant by globalisation (3)
3.Use the information above and your own economic knowledge to explain
the costs of globalisation. (4)
4.Explain what is meant by absolute advantage. (2)
5.Explain the role of the WTO. (3)
6. The case for international trade is stronger than the case against. Do you
agree? In your answer you could refer to particular groups such as:
– Consumers
– Firms
– Developing countries (14)
Total marks = 30

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Activities and Exercises

for GCSE Economics

Amy Chapman & Innes Robinson

The basic economic problem

Demand and supply

Costs, revenues and profits

Saving, borrowing and managing your money

Activities & Exercises for GCSE Economics iii

Supply side policies

Activities & Exercises for GCSE Economics iv

Activity 1 – True or false

Statement True or False

1. Farming is a primary sector business ___________

2. The NHS is a private organisation ___________

3. A hairdressing salon is a secondary sector business ___________

4. Thomas Cook holidays is a tertiary sector business ___________

5. Opportunity cost occurs because of the basic economic problem ___________

6. Oil is a scarce resource ___________

7. Our wants are scarce ___________

8. Capital is money ___________

Activities & Exercises for GCSE Economics 1

3. The basic economic problem is about ____________ wants. (8)

5. Next best alternative foregone. (11,4)

7. Sector of industry which provide services. (8)

8. Human input into the production process. (6)

15. Scarce resources means that these have to be made. (7)

16. What has to be met for basic survival. (5)

6. The sector of industry which includes extraction of raw material. (7)

10. What to produce is a question asked when ____________ resources. (10)

11. Natural resources on the planet. (4)

Activities & Exercises for GCSE Economics 2

1.Tick the two correct statements: (2)

4.Explain what is meant by specialisation. (2)

Activities & Exercises for GCSE Economics 4

Activity 1 – Fill in the missing words

Activities & Exercises for GCSE Economics 6

Activities & Exercises for GCSE Economics 7

6. A tax on spending. (8)

10. Price x Quantity sold. (5,7)

12. Demand is this when it is very responsive to a change in price. (7)

13. Price elasticity of supply for sporting events. (9,9)

2. The relationship between price and quantity demanded. (7)

3. One seller in a market. (8)

5. Percentage change in quantity demanded divided by Percentage change in price

9. When demand and supply meet. (11)

Activities & Exercises for GCSE Economics 9

Which curve? Shift

Demand Supply Right Left

1. Construction workers wages increase

2. Cost of renting increases

3. Cost of bricks falls

4. New government legislation allows

5. Increase in the cost of solicitors

6. Bank of England reduce interest

7. The government offers new house

8. Increase in the population

9. A new house builder called

10. Average incomes in the UK fall

Activities & Exercises for GCSE Economics 10

1.Explain what is meant by the term demand. (2)

3.Explain what is meant by price elasticity of supply. (3)

Activities & Exercises for GCSE Economics 12

1. 1. 1.