The economy of country A is in recession. To deal with the problems caused by the recession, the Government has cut interest rates and reduced taxes. These changes have had a big impact on businesses in country A. The Government has also introduced laws to protect employees at work. Some people have suggested that the Government should give grants and subsidies to private sector businesses to help them survive. What is meant by the term ‘recession’? Identify two ways in which consumers might be affected by a recession. Way 1: Way 2: Identify and explain two consequences of a fall in interest rates on businesses in country A. Consequence 1: Explanation: Consequence 2: Explanation: Identify and explain three ways by which employees can be protected at work by Government laws. Way 1: Explanation: Way 2: Explanation: Way 3: Explanation: Do you think that Governments should give financial support to private sector businesses to survive in a recession? Justify your answer.

0450_s11_qp_11

THEORY

2011

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Table 1 gives data about the economy of country A. Table 1 Year Interest rate (%) Average annual wages Unemployment (%) ($) Country A is experiencing an economic boom. Wages are rising fast and the Government thinks inflation will soon be a problem. Most business managers think that both interest rates and taxes will rise again soon. What is meant by ‘economic boom’? Identify two factors that may influence wage rates in a business. Factor 1: Factor 2: Identify and explain two problems to a business caused by high interest rates. Problem 1: Explanation: Problem 2: Explanation: Identify and explain two ways in which decisions in a business might be affected by a rise in taxes. Way 1: Explanation: Way 2: Explanation: Do you think that all businesses will be successful when a country has an economic boom? Justify your answer.

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THEORY

2013

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Nellis is a public limited company. It specialises in building large luxury houses. Over the past 3 years its profits have increased as the country is experiencing an economic boom. ‘It’s not all good news – the Government has announced plans to increase interest rates and introduce new legal controls to protect the environment’ said the Managing Director. He believes these new legal controls to protect the environment will only make businesses (such as Nellis) less profitable. What is meant by an ‘economic boom’? Identify two stages (other than boom) of the business cycle. Stage 1: Stage 2: Explain how a rise in interest rates might affect Nellis. Identify two stakeholder groups. Explain why each group is important to this business. Stakeholder group 1: Explanation: Stakeholder group 2: Explanation: The Managing Director believes that the new legal controls to protect the environment will only make businesses (such as Nellis) less profitable. Do you agree? Justify your answer.

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THEORY

2015

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The Government of country H is concerned about the effect of business activity on the environment. It wants to encourage sustainable development. To do this, it is planning to introduce laws to encourage environmentally-friendly production methods. A number of businesses will be affected by these new laws. The Government of country H has collected the data shown in Table 1. Gross Domestic Product (GDP) measures the value of the total output produced in a country in one year. The GDP of country H has risen from $625m in 2000 to $825m in 2011. Table 1: Percentage of GDP by different sectors % of GDP Primary sector Secondary sector Tertiary sector What is meant by ‘tertiary sector’? What is meant by ‘sustainable development’? Identify and explain two changes between 2000 and 2011 that are shown in Table 1. Change 1: Explanation: Change 2: Explanation: Identify and explain three ways a Government could encourage more businesses to set up in its country. Way 1: Explanation: Way 2: Explanation: Way 3: Explanation: Do you think that all businesses will be affected by the introduction of the new laws to encourage environmentally-friendly production methods? Justify your answer.

0450_s12_qp_11

THEORY

2012

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REW has won many awards for the design and style of its carpets and rugs. All the wool it uses is from local suppliers. REW’s objective for this year is to survive and remain in business. The Managing Director is concerned that the country’s Gross Domestic Product has been falling for some time. During the recession the Managing Director plans to start selling REW’s products in other countries. Market research suggests demand would be high. Table 2: Extract from REW’s accounts 1.5 Current ratio 1:1 1.2:1 Acid test ratio 16% 20% Profit margin What is meant by ‘Gross Domestic Product’? Identify two possible effects on businesses from falling Gross Domestic Product. Effect 1: Effect 2: Identify and explain two reasons why REW’s objectives might change over time. Reason 1: Explanation: Reason 2: Explanation: 1 8 Identify and explain the effect on REW of the changes in the following ratios. Change in acid test ratio: Explanation of effect: Change in profit margin: Explanation of effect: Do you think REW should start selling its products in other countries? Justify your answer. [ 1 8

0450_s19_qp_12

THEORY

2019

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The structure of the economy in country W has changed greatly in the last ten years. Primary sector activities have declined in importance, but a range of new tertiary sector businesses have started up. Output in the secondary sector has increased, but employment in this sector has fallen. These changes have caused social and economic problems, with many people finding it difficult to get jobs. The wages of workers in the primary sector businesses have been falling. What is meant by ‘primary sector activities’? Identify two examples of businesses that would be classified as being in the tertiary sector. Example 1: Example 2: Identify and explain two possible reasons why workers’ wages in primary sector businesses are falling. Reason 1: Explanation: Reason 2: Explanation: Identify and explain three possible causes of the structural changes that have occurred in country W. Cause 1: Explanation: Cause 2: Explanation: Cause 3: Explanation: Do you think that the Government should subsidise primary sector businesses to stop them from closing? Justify your answer.

0450_w11_qp_12

THEORY

2011

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Table 2 gives data about the economy of country C. Table 2 National income Year per person ($) Inflation (%) Unemployment (%) 1.5 The economy of country C is in recession. The Government wants to create more jobs by encouraging more businesses to start up. However some pressure groups are against this because they think that more businesses will cause more external costs. What is meant by ‘recession’? Identify two possible reasons why national income per person has fallen between 2010 and 2012. Reason 1: Reason 2: Identify and explain two ways that a Government could help new businesses to start up. Way 1: Explanation: Way 2: Explanation: Identify and explain three external costs that might be caused by an increase in the number of businesses in country C. Cost 1: Explanation: Cost 2: Explanation: Cost 3: Explanation: Do you think that new start-up businesses can be successful in country C? Justify your answer.

0450_w13_qp_11

THEORY

2013

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ANZ is a large multinational company which manufactures aeroplanes. Growth is an important objective for the company. ANZ wants to start producing in country P for the first time. The new factory will operate for 24 hours a day. A pressure group in country P believes that all business activity is bad for the environment. It wants the Government to do more to control business activity. What is meant by ‘pressure group’? Identify two measures a Government could use to control business activity. Measure 1: Measure 2: Identify and explain two reasons why objectives are important to businesses such as ANZ. Reason 1: Explanation: Reason 2: Explanation: Identify and explain three advantages for country P of ANZ’s decision to open a new factory. Advantage 1: Explanation: Advantage 2: Explanation: Advantage 3: Explanation: Do you think that all business activity is bad for the environment? Justify your answer.

0450_s13_qp_12

THEORY

2013

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The Government of country Z has decided to invest a large amount of capital in building a new road system. Some people don’t like the decision because of the social costs that it will create. However, most businesses think the decision is a good one. The business sector would also like to see the Government lower taxes on goods and remove some of the consumer protection and employment laws that it claims increase business costs. Identify two ways that employees may be protected at work by employment laws. Way 1: Way 2: Identify two reasons why Governments put taxes on goods. Reason 1: Reason 2: Identify and explain two reasons why many business managers think the decision to build more roads is a good one. Reason 1: Explanation: Reason 2: Explanation: Identify and explain three social costs that the road building programme might create. Cost 1: Explanation: Cost 2: Explanation: Cost 3: Explanation: The management of many businesses in the private sector think that consumer and employment legislation increases business costs. Do you think society would benefit from a reduction in such laws? Justify your answer.

0450_w11_qp_13

THEORY

2011

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Country W has a mixed economy. Herio is a Government economist. He said: ‘Business activity in the private sector can lead to external costs, such as pollution. It can also create external benefits. I believe that businesses that create external benefits should be encouraged and those that create external costs should be closed down.’ Country W has low economic growth and rising inflation. What is meant by ‘the private sector’? What is meant by ‘rising inflation’? Most businesses set objectives. Identify and explain two reasons why having objectives may be important for a business. Reason 1: Explanation: Reason 2: Explanation: Identify three external benefits and explain how business activity can create each benefit. Benefit 1: Explanation of how benefit is created: Benefit 2: Explanation of how benefit is created: Benefit 3: Explanation of how benefit is created: Herio believes businesses that create external costs should be closed down. Do you agree with him? Justify your answer.

0450_w12_qp_12

THEORY

2012

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