Exam Question Responses

Question 1

What are the limitations of GDP per capita?

Answer 1

• The figures do not take account of the hidden economy (some people may have a much higher income)
• non monetised output e.g. Stay at home parents
• non monetary factors e.g. Pollution
• GDP is not distributed on a per capita basis - it is an average
• type of spending e.g NHS, security

Question 2

How does a fall in income tax affect unemployment?

Answer 2

• Reduced income tax
• more disposable income
• more spent on goods and services
• increased demand for labour
• more firms employ labour as it is derived from demand her goods
• fall in unemployment