AQA GCSE Economics: Government objectives, conflicts and ethical considerations (8136) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover section 3.2.2.1, Economic objectives of the government, in the AQA GCSE Economics (8136) specification for first teaching from September 2017. There are no tiers. All countries, firms and numbers are made up. For explanations, see the study guide and revision notes. Other links: the AQA GCSE Economics hub, the checklist and the free diagnostics.

Questions

1. State the four principal economic objectives of the government. [4]

2. In Country A there are 1.35 million unemployed people and a labour force of 15 million. The CPI rose from 120.0 to 126.6 during the year. (a) Calculate the unemployment rate. [2] (b) Calculate the rate of inflation. [2]

3. Country G exported goods worth 48 and services worth 27 (billion units). It imported goods worth 61 and services worth 19. Calculate its current account balance, and say whether it is in deficit or in surplus. [4]

4. Explain how a rise in interest rates to reduce inflation could conflict with another government objective. [4]

5. Country H raised interest rates. Its figures are below.

Indicator	Year 1	Year 2
Inflation (%)	6.4	2.8
Unemployment (%)	4.2	6.7
Real GDP growth (%)	3.5	0.9
Current account (% of GDP)	−2.8	−1.2

Calculate the change in each indicator, and state which objectives moved in the government’s favour. [5]

6. Explain one way in which pursuing economic growth could harm a group of people. [3]

7. In Country J, the first 10,000 of income is untaxed and income above that is taxed at 25%. Worker X earns 20,000 and worker Y earns 60,000. (a) Calculate the tax paid by each worker as a percentage of their income. [3] (b) Explain whether this tax reduces inequality. [2]

8. Country K raises the price of fuel by 20% through a tax. Household H has an income of 24,000 and spends 1,500 on fuel. Household L has an income of 96,000 and spends 3,000 on fuel. Spending on fuel does not change. (a) Calculate the extra cost to each household as a percentage of income. [3] (b) Explain how the policy supports one government objective but conflicts with another. [3]

9. Define sustainability and explain why a government might give it priority over short-term growth. [4]

10. A government is deciding whether to allow a new quarry in a village. Explain one ethical consideration it should take into account. [4]

11. In Country M, the government raises interest rates from 3% to 4.5%. A homeowner has a 200,000 loan. A saver has 10,000 in a savings account paying the new rate. (a) Calculate the extra yearly interest paid by the homeowner and the extra interest earned by the saver. [2] (b) Explain two ways in which different groups are affected by the change. [4]

12. Country N has high unemployment and low inflation. A commentator says: “The government should do whatever it takes to cut unemployment, even if prices rise.” Evaluate this view. [9]

Answers

1. Full employment [1], price stability [1], economic growth [1], balance of payments [1]. [4] Examiner insight: Name each objective precisely. Wording such as “stable prices” is a fair match for price stability, but vague phrases like “a good economy” do not identify an objective.

2. (a) 1.35 / 15 × 100 [1] = 9.0% [1]. (b) (126.6 − 120.0) / 120.0 × 100 [1] = 5.5% [1]. [4] Examiner insight: Show the formula and substitution. A correct answer with working is safe, but a wrong answer with no working gives an examiner nothing to credit.

3. Exports = 48 + 27 = 75 [1]. Imports = 61 + 19 = 80 [1]. Balance = 75 − 80 = −5 [1]. This is a deficit [1]. [4] Examiner insight: Keep the sign and name the result. A bare 5 hides whether the country is in surplus or deficit, so write −5 and the word deficit.

4. Higher interest rates make borrowing dearer [1], so spending and investment fall [1]. Firms sell less and may cut jobs [1], so unemployment rises, conflicting with full employment [1]. [4] Examiner insight: A chain of linked steps usually earns more than a list. Make each step lead to the next, ending on the objective that is harmed.

5. Inflation −3.6 percentage points [1]. Unemployment +2.5 [1]. Growth −2.6 [1]. Current account improved by 1.6 [1]. Price stability and the balance of payments moved in the government’s favour [1]. [5] Examiner insight: A fall in inflation can be “good” while a fall in growth is “bad”. Judge each change against its objective, not by whether the number went up or down.

6. Growth can involve more production and pollution [1]. Residents near factories or roads may suffer worse health or lower quality of life [1], and the costs are borne by people who do not gain from the extra output [1]. [3] Examiner insight: Name a specific group and say how they lose. “It harms people” is too general to develop.

7. (a) X: tax = 25% × 10,000 = 2,500, so 2,500 / 20,000 = 12.5% [1]. Y: tax = 25% × 50,000 = 12,500, so 12,500 / 60,000 = 20.8% [1]. Both calculated using the 10,000 allowance [1]. (b) Yes, it is progressive, because the higher earner pays a larger percentage [1]. Incomes after tax are 17,500 and 47,500, so Y earns 2.71 times X after tax, against 3.0 times before [1]. [5] Examiner insight: Compare percentage rates, not just the amounts in money. A bigger sum of tax from a richer person does not show a progressive tax on its own.

8. (a) H: extra cost = 20% × 1,500 = 300, so 300 / 24,000 = 1.25% [1]. L: 20% × 3,000 = 600, so 600 / 96,000 = 0.625% [1]. The poorer household pays the larger share [1]. (b) It supports managing environmental change by making fuel dearer, which discourages use [1]. It conflicts with reducing inequality, because the lower-income household loses a bigger share of income [1], so the policy is regressive in effect [1]. [6] Examiner insight: A good answer links the calculation back to an objective. Use your numbers from part (a) as evidence in part (b).

9. Sustainability means using resources so that people today are supported without leaving later generations with less to rely on [1]. Growth that uses up resources or damages the climate may leave future people worse off [1]. A government may therefore accept slower growth now [1] to protect output and living standards later [1]. [4] Examiner insight: A definition needs the idea of later generations to be complete. Then use it in the explanation.

10. The quarry may create jobs and income [1], but dust, noise and loss of countryside affect residents who did not choose this [1]. It is a question of fairness: those who gain are not those who pay [1], so the government should weigh the harm to residents and to future generations against the economic gain [1]. [4] Examiner insight: Ethical points score when they are tied to the situation. Name who gains, who loses and why that is a matter of fairness.

11. (a) Homeowner: 200,000 × 1.5% = 3,000 more per year [1]. Saver: 10,000 × (4.5% − 3%) = 150 more [1]. (b) Borrowers pay more [1], so they have less to spend and may cut back on other purchases [1]. Savers gain income [1], but the gain is much smaller than the borrower’s loss in this example, so total spending is likely to fall [1]. [6] Examiner insight: Use the figures you have just calculated to compare the two groups, rather than only saying one gains and one loses.

12. Points for the view:

• Unemployment costs workers their income and skills [1], and the government loses tax and pays benefits [1].
• With low inflation, there is room for demand to rise before prices become a problem [1]. Points against:
• “Whatever it takes” may mean heavy spending or very low rates, which could push inflation up [1] and draw in imports, worsening the current account [1].
• Prices rising hurt savers and people on fixed incomes [1].
• Ethical concerns: it may harm future generations through debt or environmental damage [1]. Judgement:
• It depends on how high inflation is, how much spare capacity exists and how long the policy lasts [1]. A reasoned conclusion such as “unemployment is the priority while inflation is low, but ‘whatever it takes’ goes too far” with a reason [1]. [9] Examiner insight: Evaluation needs a conclusion that weighs the points against each other and uses the context given. A balanced list with no judgement leaves marks unclaimed.

Where marks are usually lost

• Not showing the formula or working in calculation questions.
• Giving the sign of the current account balance but not naming it as a deficit or surplus.
• Mixing up a percentage change and a percentage-point change.
• Describing the intended effect of a policy and forgetting the conflict.
• Writing about “the poor” or “the environment” without saying how they are affected.
• Stating an ethical view with no link to the situation in the question.
• Concluding with a summary rather than a judgement.
• Treating a progressive and a regressive tax as the same thing.

Next steps

• Revise with the revision notes and re-read the study guide.
• Check coverage on the checklist and see the AQA GCSE Economics hub.
• Take one of the all free 10-minute diagnostics.
• Want a teacher’s help? Book a free trial class.

Official syllabus

AQA GCSE Economics (8136) specification, for first teaching from September 2017, published by AQA: section 3.2.2.1 Economic objectives of the government.