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Economics IGCSEPDF 108
118 pagesrevision 46932
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Solved Past Paper Questions
Question: Explain two causes of inflation. [4]
Question: Discuss whether economic growth always leads to improved living
standards. [8]
Question: Analyse how fiscal policy could be used to reduce unemployment. [6]
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Expansionaryfiscal policy involves increasinggovernmentspending or cuttingtaxes to
stimulate demand.
In Pakistan, higher public spending on infrastructure projects creates direct jobs and
encourages growth in private sectors like cement and transport.
Reducing income tax increases disposable income, boosting consumer spending, while lower
corporate taxes encourage firms to expand and hire more workers.
However, excessive spending may cause inflation if the economy is near full capacity.
Economicgrowthreferstoanincrease in realGDP and oftenimproves livingstandards through
higher incomes and employment.
In Pakistan, growth in manufacturing and services has created jobs and increased government
revenue, allowing more spending on education and health.
However, not all groups benefit equally — income inequality may rise, and pollution or inflation
can reduce real welfare.
Therefore, growth generally improves living standards but depends on equitable income
distribution and sustainable policies.
Onecause is demand-pull inflation, whichoccurs when aggregate demand increases faster than
supply. In Pakistan, strong consumer demand or higher government spending can raise prices.
Another cause is cost-push inflation, where rising wages or imported oil prices increase firms’
production costs, leading to higher prices.