Pearson Edexcel International GCSE Economics: Supply-side policy and trade-offs (4EC1) – 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 sections 2.1.2 c (Supply-side policy) and 2.1.3 a (trade-offs between macroeconomic objectives) of the Pearson Edexcel International GCSE Economics (4EC1) specification, Issue 3, February 2026. The specification has a single tier of entry. All data are invented and the countries and firms are fictional.

Links: study guide, revision notes, Edexcel IGCSE Economics hub, printable checklist and the free 10-minute diagnostics.

Questions

1. Define the term supply-side policy. [2]

2. A furniture workshop in Country B has 250 workers who make 15,000 chairs a month. After a training programme, the same workers make 16,500 chairs a month. Calculate the percentage change in productivity. [3]

3. A worker in Country B earns 3,000 a month before tax. The government cuts the income tax rate from 20% to 16%.

(a) Calculate the worker’s monthly net pay before and after the cut, and the percentage rise in net pay. [3] (b) Explain one reason why the cut may fail to raise total output. [2]

4. Region B in Country B has a labour force of 120,000 and 15,600 people unemployed. A regional policy of grants for new factories leads to 3,600 unemployed people finding work.

(a) Calculate the unemployment rate before and after the policy. [3] (b) Explain how the grants could reduce unemployment in the region. [3]

5. Explain one way in which privatisation, and one way in which deregulation, could increase a country’s output. [4]

6. A firm in Country B makes a profit of 90,000. The business tax rate falls from 30% to 24%.

(a) Calculate the profit the firm keeps before and after the change, and the difference. [3] (b) Explain why lower business tax may not raise investment. [2]

7. In Country C the labour force is 4,000,000. In Year 1, 300,000 are unemployed and inflation is 2.0%. In Year 2, a rise in government spending leaves 200,000 unemployed and inflation is 4.5%.

(a) Calculate the unemployment rate in each year. [2] (b) Explain, using the data, the trade-off between unemployment and inflation. [4]

8. Country D’s gross domestic product (GDP) at current prices rises from 1,000 to 1,113. Its price index rises from 100 to 105.

(a) Calculate real GDP in Year 2 and the percentage growth in real GDP. [3] (b) Explain why fast growth may lead to inflation. [2]

9. Country A’s real GDP rises from 400 to 440 billion. Its emissions rise from 60 to 63 million tonnes.

(a) Calculate emissions per billion of GDP in each year, to 3 decimal places. [2] (b) Explain why there is a trade-off between growth and environmental protection even though emissions per unit of output have fallen. [4]

10. In Country G, exports were 200 and imports 180. After a period when prices at home rose faster than prices abroad, exports are 190 and imports are 198.

(a) Calculate the trade balance before and after. [2] (b) Explain how higher domestic inflation could cause this change. [4]

11. Country E has a labour force of 6,000,000 and 9% unemployment. Inflation is 2%. Most of the unemployed lost jobs in a declining heavy industry in the north, where unemployment is 14%. The government plans to spend on training courses (to be completed in two years) and a new rail link to the north (five years to build).

Evaluate whether these policies would reduce unemployment in Country E without causing higher inflation. [10]

Answers

1. Government policy to raise the economy’s productive capacity [1] by improving the quantity, quality or efficiency of resources such as labour and capital [1]. [2] Examiner insight: Give the aim and the means. A definition that only says “government policy” leaves nothing for the second point.

2. Productivity before = 15,000 / 250 = 60 chairs per worker [1]. After = 16,500 / 250 = 66 [1]. Change = (66 - 60) / 60 x 100 = 10% [1]. [3] Examiner insight: Show both productivity figures before the percentage. It makes your method easy to follow if one number slips.

3. (a) Before: 3,000 x 0.80 = 2,400 [1]. After: 3,000 x 0.84 = 2,520 [1]. Rise = 120 / 2,400 x 100 = 5% [1]. (b) Workers may not change how much they work [1], because hours are fixed by employers or because no more jobs are available [1]. (Accept: workers may reach their desired income sooner and work fewer hours.) [5] Examiner insight: “Explain” needs a reason and a link. Say why behaviour might not change, not only that it might not.

4. (a) Before: 15,600 / 120,000 x 100 = 13% [1]. Unemployed after = 15,600 - 3,600 = 12,000 [1]. After: 12,000 / 120,000 x 100 = 10% [1]. (b) Grants lower the cost of opening a factory in the region [1]. Firms locate there and need workers [1]. Hiring reduces the number unemployed, and wages spent locally create further demand for local jobs [1]. [6] Examiner insight: Three-part chains (policy, firms’ response, effect on unemployment) read better than a list of benefits.

5. Privatisation: private owners seek profit, so cut waste and costs [1], raising output per unit of resources used [1]. Deregulation: fewer rules make it easier for new firms to enter [1], so competition and the number of producers rise, increasing total output [1]. [4] Examiner insight: Give each policy its own link to output. Naming the two policies without a chain does not answer “explain”.

6. (a) Before: 90,000 x 0.70 = 63,000 [1]. After: 90,000 x 0.76 = 68,400 [1]. Difference = 5,400 [1]. (b) Firms invest only if they expect to sell more [1]; if demand is weak, they may use extra profit for dividends or save it instead [1]. [5] Examiner insight: Read whether the question wants profit kept or tax paid. Here the firm keeps 70% before and 76% after, so multiply by those shares.

7. (a) Year 1: 300,000 / 4,000,000 x 100 = 7.5% [1]. Year 2: 200,000 / 4,000,000 x 100 = 5% [1]. (b) Higher government spending raises demand [1], so firms hire more and unemployment falls from 7.5% to 5% [1]. As spare workers run out, firms offer higher wages [1], and higher costs are passed on in prices, so inflation rises from 2.0% to 4.5% [1]. [6] Examiner insight: Use figures from the table in the answer. Both rates should appear, with the direction of each change stated.

8. (a) Real GDP = 1,113 / 105 x 100 [1] = 1,060 [1]. Real growth = 60 / 1,000 x 100 = 6% [1]. (b) Fast growth in demand can be greater than the economy can supply [1], so shortages and competition for resources push prices up [1]. [5] Examiner insight: Do not report 11.3% as growth. That is nominal growth, which includes price rises.

9. (a) Before: 60 / 400 = 0.150 [1]. After: 63 / 440 = 0.143 [1]. (b) Output has risen by 10% and emissions by 5% [1]. Emissions per unit have fallen, but total emissions are still higher [1], so pollution and resource use have still increased [1]. Reducing emissions further would need limits or taxes that raise costs for firms and could slow growth [1]. [6] Examiner insight: Separate total pollution from pollution per unit. The question asks about both and rewards the contrast.

10. (a) Before: 200 - 180 = +20 [1]. After: 190 - 198 = -8 [1]. (b) Higher prices at home make exports more expensive for foreign buyers [1], so they buy less and export earnings fall [1]. Imports become cheaper compared with home goods [1], so domestic buyers buy more imports. The balance moves from surplus to deficit [1]. [6] Examiner insight: Cover both exports and imports. A full answer shows the effect on each side of the balance.

11. Knowledge and chains (up to 4): the unemployment is structural [1], caused by a lack of the right skills and of jobs where the unemployed live. Training raises skills and productivity, so workers can fill vacancies [1]. The rail link cuts transport costs and attracts firms to the north [1], creating jobs there [1]. Application (up to 3): with 9% of 6,000,000 unemployed, 540,000 people are affected [1]. Inflation is 2%, so there is room to expand [1]. The north is at 14%, well above the national rate, so the rail link targets the right area [1]. Evaluation (up to 3): the training takes two years and the rail link five, so unemployment will not fall quickly [1]. Both cost the government a great deal, which has an opportunity cost [1]. Judgement: because the policies raise productive capacity rather than demand, they are likely to cut unemployment with little pressure on prices, but the benefit depends on firms moving north and training matching the jobs on offer [1]. [10] Examiner insight: Use the facts in the question (the north, the dates, the 14%). Finish with a judgement on which factor decides the result.

Where marks are usually lost

• Describing a policy without linking it to output or productivity.
• Mixing up supply-side policy with spending or interest rates.
• Calculating the tax paid when the question asks for the amount kept.
• Reporting nominal growth as real growth.
• Writing percentage change when percentage points are asked for, or the reverse.
• Treating the trade-off as “both rise” or “both fall” with no mechanism.
• Ignoring the effect on tax revenue when discussing tax cuts.
• Ending a ten-mark answer without a judgement based on the argument above it.

Next steps

• Re-read the revision notes and the study guide.
• Visit the Edexcel IGCSE Economics hub and tick off the checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Pearson Edexcel International GCSE in Economics (4EC1) Specification, Issue 3, February 2026, first teaching September 2017, Pearson Education Limited. Sections 2.1.2 c and 2.1.3 a.