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Economics IGCSEPDF 83
118 pagesrevision 46932
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Question 2.2 (6 Marks)
Analysetheconflicting nature of the macroeconomic aims of
economic growth
and a stable
Balance of Payments
Question 2.3 (8 Marks)
Discuss whether the aim of environmental sustainability
should take priority over the aim of
achieving low unemployment.
Solved Answers (Note Form)
Q2.1: Price Stability and Measurement (4 Marks)
K: Price stability is the macroeconomic aim of maintaining a low and stable rate of
increase in the general price level (low inflation).
A: It is measured using the Consumer Price Index (CPI), which tracks the average
change in the price of a fixed 'basket' of goods and services typically purchased by
households.
A: The goal is to keep inflation within a narrow target band (e.g., 2%–3%) to ensure the
value of money is largely predictable.
Q2.2: Conflict between Growth and BOP Stability (6
Marks)
K: Growth aims for increased Real GDP; BOP stability aims to balance the inflow and
outflow of funds internationally.
A: Rapid economic growth leads to rising national income and consumer affluence.
An: Consumers use this higher income to buy more goods, particularly a greater volume
of imports from abroad.
An: Since imports rise faster than exports, the country experiences a widening Current
Account Deficit (BOP instability).
E: This forces the government to often use policies that slow growth (e.g., higher interest
rates) to correct the deficit, illustrating the trade-off.
Q2.3: Sustainability vs. Low Unemployment Priority (8
Marks)
P1: Arguments for Sustainability Priority
○ K: Environmental damage (e.g., climate change) is an existential, long-term
threat that affects all future generations.
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