FRQ 1: Opportunity Cost and Resource Allocation
The government of Country X decides to build a high-speed rail system to boost economic growth. However, this project requires significant funding, leading to cuts in healthcare and education budgets.
a. Define opportunity cost and explain how it applies to the decision of Country X.
b. Discuss two potential short-term and two long-term economic consequences of reducing funding in healthcare and education to fund the rail system.
c. Evaluate whether the construction of the high-speed rail system is likely to lead to net positive economic consequences in the long run.
FRQ 2: Unemployment and Economic Output
During a global recession, Country Y experiences a sharp increase in unemployment, rising from 5% to 12%.
a. Explain the relationship between unemployment and economic output using the concept of the production possibilities curve.
b. Identify and explain two economic consequences of prolonged high unemployment for individuals and society.
c. Propose one fiscal policy and one monetary policy that could be implemented to reduce unemployment. Explain how each policy works.
FRQ 3: Inflation and Purchasing Power
Country Z experiences a rapid increase in the price level, with annual inflation reaching 15%.
a. Define inflation and describe how it impacts the purchasing power of money.
b. Explain two economic consequences of high inflation for businesses and consumers.
c. Discuss one potential trade-off the central bank might face when implementing a policy to reduce inflation.
FRQ 4: Trade and Economic Growth
Country A imposes tariffs on imported steel to protect domestic industries. This leads to retaliatory tariffs from its trading partners.
a. Define a tariff and explain its intended economic purpose.
b. Discuss two economic consequences of the steel tariffs for Country A’s consumers and producers.
c. Evaluate how the imposition of tariffs might impact Country A’s long-term economic growth.
FRQ 5: Income Inequality
In Country B, technological advancements have disproportionately increased incomes for highly skilled workers, widening the income gap between them and low-skilled workers.
a. Define income inequality and describe one measure used to assess it.
b. Identify two economic consequences of increased income inequality for Country B.
c. Suggest one policy to reduce income inequality and evaluate its potential benefits and drawbacks.
FRQ 6: Natural Disasters and Economic Recovery
A severe hurricane devastates the coastal regions of Country C, causing extensive damage to infrastructure and homes.
a. Explain how natural disasters can lead to a decrease in a country’s short-term economic output.
b. Discuss two economic consequences of the disaster for affected communities.
c. Evaluate the effectiveness of government spending on rebuilding efforts in promoting economic recovery and long-term growth.
The government of Country X decides to build a high-speed rail system to boost economic growth. However, this project requires significant funding, leading to cuts in healthcare and education budgets.
a. Define opportunity cost and explain how it applies to the decision of Country X.
b. Discuss two potential short-term and two long-term economic consequences of reducing funding in healthcare and education to fund the rail system.
c. Evaluate whether the construction of the high-speed rail system is likely to lead to net positive economic consequences in the long run.
FRQ 2: Unemployment and Economic Output
During a global recession, Country Y experiences a sharp increase in unemployment, rising from 5% to 12%.
a. Explain the relationship between unemployment and economic output using the concept of the production possibilities curve.
b. Identify and explain two economic consequences of prolonged high unemployment for individuals and society.
c. Propose one fiscal policy and one monetary policy that could be implemented to reduce unemployment. Explain how each policy works.
FRQ 3: Inflation and Purchasing Power
Country Z experiences a rapid increase in the price level, with annual inflation reaching 15%.
a. Define inflation and describe how it impacts the purchasing power of money.
b. Explain two economic consequences of high inflation for businesses and consumers.
c. Discuss one potential trade-off the central bank might face when implementing a policy to reduce inflation.
FRQ 4: Trade and Economic Growth
Country A imposes tariffs on imported steel to protect domestic industries. This leads to retaliatory tariffs from its trading partners.
a. Define a tariff and explain its intended economic purpose.
b. Discuss two economic consequences of the steel tariffs for Country A’s consumers and producers.
c. Evaluate how the imposition of tariffs might impact Country A’s long-term economic growth.
FRQ 5: Income Inequality
In Country B, technological advancements have disproportionately increased incomes for highly skilled workers, widening the income gap between them and low-skilled workers.
a. Define income inequality and describe one measure used to assess it.
b. Identify two economic consequences of increased income inequality for Country B.
c. Suggest one policy to reduce income inequality and evaluate its potential benefits and drawbacks.
FRQ 6: Natural Disasters and Economic Recovery
A severe hurricane devastates the coastal regions of Country C, causing extensive damage to infrastructure and homes.
a. Explain how natural disasters can lead to a decrease in a country’s short-term economic output.
b. Discuss two economic consequences of the disaster for affected communities.
c. Evaluate the effectiveness of government spending on rebuilding efforts in promoting economic recovery and long-term growth.