Unit 3: National income paper 1 exam-style questions

1. (a) Suggest three possible reasons why a government might measure national income?
[10 marks]

(b) Using real-world examples, evaluate the view that demand-side policies are the most
effective method of increasing the level of national income. [15 marks]

2. (a) Explain how deregulation of the labour market can stimulate economic growth. [10
marks]

(b) Using real-world examples, discuss why Keynes believed that an economy will remain
stuck in a permanent deflationary gap, without the use of a government fiscal stimulus
package. [15 marks]

3. (a) Describe reasons why an economy might go into recession. [10 marks]

(b) Using real-world examples, evaluate the effectiveness of a Keynesian demand-side

stimulus package in solving a recession. [15 marks]

4. (a) Explain how changes to the relative size of injections and leakages determine changes
to the size of the circular flow of national income. [10 marks]

(b) Using real-world examples, evaluate the use of national income statistics in making
comparisons of the standard of living over time. [15 marks]

5. (a) Explain two factors that might lead to increased levels of economic growth in an
economy. [10 marks]

(b) Using real-world examples, evaluate the argument that economic growth in an economy is
always good? [15 marks]

6. (a) Explain how a government can use fiscal policy to reduce the level of aggregate
demand in an economy? [10 marks]

(b) Using real-world examples, evaluate the view that demand-side policies are the most
effective method of increasing the level of national income. [15 marks]

7. (a) Explain two expansionary monetary policy tools available to a government or central
bank. [10 marks]

(b) Using real-world examples, evaluate the effectiveness of monetary policy in maintaining
a low rate of unemployment. [15 marks]