Lesson 2.5.1

2.5.1 Causes of growth Quiz: Pearson Edexcel Economics, Unit 2

20 questions

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Lesson 2.5.1, Causes of growth: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 2: Theme 2: The UK economy – performance and policies, written with Revision Ninja.

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The 20 questions

  1. Which phrase best describes actual economic growth in an economy?

    • Higher real output
    • Outward LRAS shift
    • Higher productive capacity
    • Lower inflation rate

  2. Which of the following describes potential economic growth?

    • Higher consumer spending
    • Increased productive capacity
    • Increased real output
    • Lower price level

  3. Which component of aggregate demand directly adds to the capital stock?

    • Consumption
    • Net exports
    • Government spending
    • Investment

  4. What is the primary driver of export-led economic growth?

    • Higher import taxes
    • Domestic consumption
    • Foreign demand
    • Government borrowing

  5. What key benefit does international trade offer that boosts economic growth?

    • Increased productivity
    • Higher tariff revenue
    • Reduced market size
    • Lower foreign investment

  6. What occurs when actual economic growth exceeds potential economic growth?

    • Positive output gap
    • Deflationary gap
    • Structural deficit
    • Negative output gap

  7. If actual growth exceeds potential growth, what pressure is created in the economy?

    • Inflationary pressure
    • Deflationary pressure
    • Fiscal pressure
    • Unemployment pressure

  8. Which factor is most likely to increase long-run potential output in an economy?

    • Increased interest rates
    • Technological innovation
    • Higher sales tax
    • Reduced government spending

  9. How can net inward migration raise an economy's potential economic growth?

    • Increases tax rates
    • Decreases total output
    • Reduces aggregate demand
    • Expands labour force

  10. Under what condition does a rise in export demand increase an economy's potential growth?

    • Consumer spending falls
    • Tax rates rise
    • Imports decrease
    • Capital investment rises

  11. Which policy directly improves the quality of labour to boost potential growth?

    • Increasing indirect taxes
    • Higher minimum wage
    • Education and training
    • Cutting unemployment benefits

  12. What is indicated when actual growth exceeds the long-term trend growth rate?

    • Falling price level
    • Expanding negative gap
    • Shrinking spare capacity
    • Growing unemployment

  13. How does higher investment in capital goods affect long-run potential growth?

    • Causes negative growth
    • Decreases potential growth
    • Increases potential growth
    • Has no effect

  14. Which policy is most likely to increase long-run economic growth?

    • Lowering interest rates
    • Cutting income tax
    • Increasing state pensions
    • Infrastructure investment

  15. Which factor is most likely to reduce an economy's long-run potential output?

    • Falling capital investment
    • Rising consumer confidence
    • Increased government spending
    • Lower income tax

  16. What must increase for potential economic growth to occur?

    • Consumer demand
    • Net exports
    • Government spending
    • Productive capacity

  17. How does reducing international trade barriers primarily support long-run growth?

    • Increasing productivity
    • Raising indirect taxes
    • Increasing import tariffs
    • Reducing exchange rates

  18. Which event represents actual growth rather than potential growth?

    • Increased labour force
    • Higher consumer spending
    • Technological innovation
    • Capital accumulation

  19. Which development increases potential growth through natural resources?

    • Taxing raw materials
    • Discovering oil reserves
    • Importing foreign oil
    • Subsidising energy consumption

  20. Unlike demand-led growth, long-run capacity-led growth is less likely to cause what?

    • Productivity gains
    • Structural unemployment
    • Demand-pull inflation
    • Current account surpluses

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