Cambridge A Level Economics: Economic growth: measurement, causes and consequences (9708) – 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 4.4 (Economic growth), outcomes 4.4.1 to 4.4.5, of the Cambridge International AS & A Level Economics 9708 syllabus for examination in 2026, 2027 and 2028. They are AS Level content, assumed knowledge for A Level Papers 3 and 4. All countries and figures are invented, and money is in currency units (cu), with cu bn meaning billion. Read the study guide and revision notes first. The course hub and checklist show the rest of the syllabus, and the free diagnostics help you find weak spots.

Questions

1. Define economic growth. [2]

2. Country L is an invented economy. Real output rose from 810 cu bn in Year 1 to 842.4 cu bn in Year 2. Find the percentage growth in output. [2]

3. Country M has a price index of 100 in Year 1, the base year. Nominal GDP was 1,800 cu bn in Year 1 and 2,019.6 cu bn in Year 2. The price index in Year 2 was 110.

(a) Find real GDP for Year 2. [2] (b) Find the percentage change in real output. [2] (c) Find the percentage change in nominal GDP. [1]

4. Using your answers to question 3, explain why the growth of nominal GDP gives a misleading picture of Country M’s economic growth. [3]

5. Country N has real GDP of 3,600 cu bn in Year 1 and 3,708 cu bn in Year 2. Its population is 24.00 million in Year 1 and 24.72 million in Year 2.

(a) Calculate the growth rate of real GDP. [1] (b) Calculate real GDP per person, in cu thousand, in each year. [2] (c) Comment on what the figures show about output per person. [2]

6. Country O has real GDP of 800 cu bn in Year 1. Real GDP then grows by 6% in Year 2, falls by 3% in Year 3 and grows by 4% in Year 4.

(a) Calculate real GDP in each of Years 2, 3 and 4, to 2 decimal places. [3] (b) Calculate the total percentage growth between Year 1 and Year 4, to 2 decimal places. [2] (c) Explain why the answer to (b) is not the sum of the three annual rates. [1]

7. Country P has real GDP of 280 cu bn and grows by 5% in a year. Country Q has real GDP of 2,000 cu bn and grows by 1.5% in the same year.

(a) Calculate the increase in real GDP in each country. [2] (b) Comment on which country has performed better. [2]

8. The government of an economy with spare capacity increases spending on road building. Using AD/AS analysis, explain how this may cause economic growth in the short run, and why the effect on the price level depends on how close the economy is to full capacity. [5]

9. Explain how investment in education and in new technology can raise an economy’s long-run rate of economic growth. [6]

10. The table shows figures for Country R. Real GDP is in constant prices, and the price index is 100 in Year 1.

Year	Nominal GDP (cu bn)	Price index
1	1,000.00	100
2	1,081.60	104
3	1,122.70	109
4	1,204.00	112
5	1,319.24	118

(a) Calculate real GDP for each of Years 2 to 5. [4] (b) Calculate the growth rate of real GDP in Year 3, to 1 decimal place, and say what it shows. [2] (c) Calculate the growth rate of nominal GDP in Year 3, to 1 decimal place, and explain why it differs from your answer to (b). [2] (d) Calculate the total growth in real GDP between Year 1 and Year 5. [2]

11. Explain two reasons why a rise in real GDP may not match the change in a country’s living standards. [4]

12. Evaluate whether economic growth always improves the welfare of a country’s citizens. [10]

Answers

1. A rise in the volume of goods and services that an economy produces [1], measured over time by the percentage change in real GDP [1]. [2] Examiner insight: Credit for this kind of definition depends on naming real output and a time period. Writing only “more money” or “higher GDP” leaves out price adjustment.

2. Change = 842.4 − 810 = 32.4 [1]. Growth = 32.4 / 810 × 100 = 4.0% [1]. [2] Examiner insight: Dividing by the later year instead of the earlier one gives a different answer. State the base year in your working.

3. (a) Real GDP = 2,019.6 / 110 × 100 [1] = 1,836.0 cu bn [1]. (b) Growth = (1,836 − 1,800) / 1,800 × 100 [1] = 2.0% [1]. (c) Nominal growth = (2,019.6 − 1,800) / 1,800 × 100 = 12.2% [1]. [5] Examiner insight: Showing the deflating step is the safest route. A growth rate found from nominal figures does not answer a question about real growth.

4. Nominal GDP is measured at current prices, so it rises when prices rise as well as when output rises [1]. The price index rose from 100 to 110, so prices rose by 10% [1]. Nominal GDP grew by 12.2%, but real GDP grew by only 2.0%, so most of the apparent growth was higher prices and not more output [1]. [3] Examiner insight: Use the figures from the previous part. A general statement that nominal GDP “includes inflation” is stronger when backed by the numbers.

5. (a) Growth = 108 / 3,600 × 100 = 3.0% [1]. (b) Year 1: 3,600 / 24.00 = 150.0 cu thousand [1]. Year 2: 3,708 / 24.72 = 150.0 cu thousand [1]. (c) Real GDP per person did not change (0% growth) [1], although total real GDP grew by 3.0%, because the population also grew by 3.0% [1]. On this measure living standards did not rise. [5] Examiner insight: A comment should compare the two growth rates. Saying only “per capita is 150” does not explain why it is different from the total growth rate.

6. (a) Year 2: 800 × 1.06 = 848.00 [1]. Year 3: 848 × 0.97 = 822.56 [1]. Year 4: 822.56 × 1.04 = 855.46 [1]. (b) Total change = 855.4624 − 800 = 55.4624 [1], so growth = 55.4624 / 800 × 100 = 6.93% [1]. (c) Each year’s percentage applies to a different starting level, so the rates compound and do not add (the sum would be 7%) [1]. [6] Examiner insight: Answers that keep the unrounded value until the last step avoid small rounding differences in the final percentage.

7. (a) P: 280 × 0.05 = 14 cu bn [1]. Q: 2,000 × 0.015 = 30 cu bn [1]. (b) P has the faster growth rate (5% against 1.5%) [1], but Q adds more output in absolute terms (30 against 14), because it starts from a much larger base [1]. [4] Examiner insight: A reasoned comment names both the percentage and the absolute change. Picking one country without stating the measure used is less convincing.

8. Government spending (G) is a component of AD [1], so more spending shifts the AD curve to the right [1]. With spare capacity, the SRAS curve is relatively flat, so firms can raise output [1] and the price level rises little [1]. Closer to full capacity, SRAS is steeper, so the same rise in AD raises real GDP by less and raises the price level by more [1]. [5] Examiner insight: Strong answers say which curve shifts and where, then describe both equilibrium changes. Stating that growth “happens” without the AD shift is incomplete.

9. Education raises the skills and productivity of workers [1], so each worker produces more in the same time [1]. New technology allows more output from the same inputs [1]. Both increase the economy’s productive capacity, shifting LRAS to the right or the PPC outward [1]. Spending on these also adds to AD in the short run [1]. Because capacity itself rises, growth can be sustained and is not limited by spare capacity running out [1]. [6] Examiner insight: Each cause needs a link to output. Noting the difference between a rise in output per worker and a rise in total output adds depth.

10. (a) Year 2: 1,081.60 / 104 × 100 = 1,040 [1]. Year 3: 1,122.70 / 109 × 100 = 1,030 [1]. Year 4: 1,204.00 / 112 × 100 = 1,075 [1]. Year 5: 1,319.24 / 118 × 100 = 1,118 [1]. (b) (1,030 − 1,040) / 1,040 × 100 = −1.0% [1]. Real output fell (negative growth) [1]. (c) (1,122.70 − 1,081.60) / 1,081.60 × 100 = 3.8% [1]. Nominal GDP rose because prices rose by about 4.8% (index 104 to 109), more than offsetting the fall in real output [1]. (d) (1,118 − 1,000) / 1,000 × 100 = 11.8% [1] in real terms over the four years, which is not the sum of the annual rates [1]. [10] Examiner insight: Keep a working table for the real figures. Using them for later parts avoids repeating the deflating step.

11. Reason 1: GDP excludes much unpaid and informal output [1], so measured growth may be a poor guide to the change in what people actually have [1]. Reason 2: GDP is an average and says nothing about distribution [1], so if the gains go to a few households, most people’s living standards may not rise [1]. [4] Examiner insight: Each reason needs a developed link to living standards. A list of limitations without explanation tends to earn less.

12. Benefit: higher real GDP means more goods and services and higher average real incomes [1]. More output raises employment and tax revenue [1], which can fund health and education [1]. Costs: if demand-led growth is near full capacity it may cause inflation [1]; growth can raise resource use and pollution [1]; the gains may be unequal, so inequality may widen [1]. Evaluation: the answer depends on the source of growth, since growth from higher productivity is less likely to raise prices [1]; on distribution, which decides who gains [1]; and on time and starting point, since a low-income economy may gain more from extra output and environmental costs may appear later [1]. Conclusion: growth usually improves welfare, but not always, and the outcome depends on how the growth is generated and shared [1]. [10] Examiner insight: A conclusion that answers “always” directly, with a stated condition, tends to improve an evaluation. A list of pros and cons with no judgement usually does not.

Where marks are usually lost

• Calculating growth from nominal GDP when the question asks about real growth.
• Dividing by the later year instead of the earlier year.
• Adding annual growth rates over several years instead of compounding.
• Quoting a per capita figure with no comparison to total growth.
• Giving a number with no unit or percentage sign, or the wrong rounding.
• Describing an AD shift without saying whether there is spare capacity.
• Listing causes of long-run growth without linking them to LRAS or the PPC.
• Listing consequences without any judgement about who gains or when.

Next steps

• Review the revision notes and the study guide.
• Check your coverage on the printable checklist and the course hub.
• Take one of the free 10-minute diagnostics.
• Book a free trial class at /trial/.

Official syllabus

Cambridge International AS & A Level Economics 9708 syllabus for examination in 2026, 2027 and 2028, published by Cambridge University Press & Assessment (Cambridge International Education). Sections 4.4.1 to 4.4.5.