Answer one question. Each question is worth [25 marks].

1. (a) Explain the differences between price elasticity of demand (PED) and cross-elasticity of demand (XED).

(b) Discuss the usefulness of price elasticity of demand (PED) and cross-elasticity of demand (XED) to businesses trying to increase their sales revenue.

2. (a) Explain three factors that could cause an economy to go into recession.

(b) Evaluate the effectiveness of governments using demand-side policies to take an economy out of a recession.

3. (a) Explain the benefits a country might experience from an increase in free trade.

(b) Evaluate the reasons why countries try to restrict free trade through protectionism.

4. (a) Explain the differences between foreign direct investment (FDI) and aid.

(b) Evaluate the view that aid is an effective means to achieve economic growth and development in less-developed countries (LDCs).




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