Cambridge International (CAIE) AS Paper 1, November 2025

1. AGovernment expenditure is an injection into the circular flow of income.
2. BGovernment expenditure in India in 2022 was 29% of gross domestic product.
3. CThe best policy measure to reduce inflation is a reduction in government expenditure.
4. DThe United States of America is the country with the highest military expenditure.

TopicEconomic methodology4.2 Introduction to the circular flow of income

1. Aa former nationalised rail network which has been privatised
2. Ba good that has an opportunity cost
3. Cthe building of a new toll road which charges all users the same toll
4. Dthe provision of street lighting which improves a locality

TopicClassification of goods and services

1. AConsumers have limited influence on what is produced.
2. BProfit is the motive for increasing output.
3. CResources are owned by the government.
4. DThere is limited competition in the market.

TopicResource allocation in different economic systems

1. Aa decrease in the wages paid to apprentice engineers
2. Ba decrease in the number of students studying engineering degrees
3. Ca decrease in the number of top grade engineering degrees awarded
4. Da decrease in the length of an engineering apprenticeship to four years

TopicScarcity, choice and opportunity cost4.3 Aggregate demand and aggregate supply analysis

1. AThe PPC shifts from ST to SV.
2. BThe PPC shifts from ST to SW.
3. CThe PPC shifts from ST to UT.
4. DThe PPC shifts from ST to UW.

TopicProduction possibility curves

1. Athe amount of a consumer’s income less the amount paid in income tax
2. Bthe amount of a consumer’s income less the amount paid for goods and services
3. Cthe amount of a consumer’s income received in bonuses and overtime pay
4. Dthe amount a consumer is willing to pay for a product less the amount actually paid

TopicConsumer and producer surplus2.4 The interaction of demand and supply

1. AX-axis: quantity; Y-axis: income
2. BX-axis: quantity; Y-axis: price
3. CX-axis: price; Y-axis: income
4. DX-axis: income; Y-axis: quantity

TopicDemand and supply curves

1. A$0
2. B$50
3. C$100
4. Devery price along the demand curve

TopicPrice elasticity, income elasticity and cross elasticity of demand

1. AIt is an inferior good.
2. BIt is a necessity.
3. CIt is a normal good.
4. DIt has close substitutes.

TopicPrice elasticity, income elasticity and cross elasticity of demand

1. Aeasy to produce: yes; cheap to store: yes; perishable: yes
2. Beasy to produce: yes; cheap to store: no; perishable: no
3. Ceasy to produce: no; cheap to store: yes; perishable: no
4. Deasy to produce: no; cheap to store: no; perishable: yes

TopicMethods and effects of government intervention in markets

1. Aprice: decrease; sales: decrease
2. Bprice: decrease; sales: increase
3. Cprice: increase; sales: decrease
4. Dprice: increase; sales: increase

TopicMethods and effects of government intervention in markets

TopicMethods and effects of government intervention in markets2.4 The interaction of demand and supply

1. Aprices of drinks: decrease; price of sugar: decrease
2. Bprices of drinks: decrease; price of sugar: increase
3. Cprices of drinks: increase; price of sugar: decrease
4. Dprices of drinks: increase; price of sugar: increase

TopicMethods and effects of government intervention in markets

1. Aan increase in food and energy subsidies
2. Ban increase in structural unemployment
3. Can increase in the national minimum wage
4. Dan increase in the top rate of income tax

TopicAddressing income and wealth inequality4.5 Unemployment

1. Aconsumer spending on goods
2. Bexpenditure on a government construction project
3. Cspending by households on holidays abroad
4. Drepayment of loans to commercial banks

TopicIntroduction to the circular flow of income

1. Aemployment: falls; general price level: falls
2. Bemployment: falls; general price level: unchanged
3. Cemployment: unchanged; general price level: falls
4. Demployment: unchanged; general price level: unchanged

TopicAggregate demand and aggregate supply analysis

1. Agovernment campaigns to encourage household savings
2. Bconsumption of domestic instead of foreign goods
3. Ca decrease in the budget surplus
4. Dinvestment in knowledge-based enterprises

TopicAggregate demand and aggregate supply analysis

1. Afiscal policy: ✓; monetary policy: ✗; supply-side policy: ✗
2. Bfiscal policy: ✓; monetary policy: ✓; supply-side policy: ✗
3. Cfiscal policy: ✓; monetary policy: ✗; supply-side policy: ✓
4. Dfiscal policy: ✗; monetary policy: ✗; supply-side policy: ✓

TopicSupply-side policy5.2 Fiscal policy5.3 Monetary policy

1. Aincreasing the rate of interest to reduce consumer spending
2. Bmanaging a reduction of the money supply
3. Cusing credit restrictions to regulate lending by commercial banks to households
4. Drestricting wage increases in the private and public sectors

TopicMonetary policy4.6 Price stability

1. Ato improve living standards
2. Bto improve business confidence
3. Cto increase inflationary pressures
4. Dto increase consumer choice

TopicEconomic growth

1. Athe central bank increasing the money supply
2. Bthe central bank causing an appreciation of the country’s foreign exchange rate
3. Cthe central bank increasing controls on credit lending
4. Dthe central bank increasing the minimum lending rate of interest

TopicMonetary policy

1. Ainterest rate: falls; AD curve: shifts left
2. Binterest rate: rises; AD curve: shifts left
3. Cinterest rate: falls; AD curve: shifts right
4. Dinterest rate: rises; AD curve: shifts right

TopicAggregate demand and aggregate supply analysis5.3 Monetary policy

1. Aan increase in government expenditure on training
2. Ban increase in indirect taxes on demerit goods
3. Can increase in import tariffs
4. Dan increase in interest rates

TopicUnemployment4.6 Price stability3.2 Methods and effects of government intervention in markets

1. Ato discourage the consumption of a particular good
2. Bto distribute disposable income more evenly
3. Cto increase the disposable income of households
4. Dto reduce demand for healthcare services

TopicAddressing income and wealth inequality

1. Ahigh levels of pollution
2. Blarge deficit on the current account of the balance of payments
3. Clarge deficit in the government’s budget balance
4. Dmore congestion on the roads

TopicEconomic growth6.3 Current account of the balance of payments

1. Acompetitiveness of the country’s products
2. Blevel of employment in the country
3. Cprices of exports from the country
4. Drate of inflation in the country

TopicCurrent account of the balance of payments6.4 Exchange rates4.3 Aggregate demand and aggregate supply analysis

1. AExport prices fall whilst import prices rise.
2. BExport prices rise by the same amount as import prices.
3. CExport prices rise slower than import prices.
4. DExport prices rise whilst import prices stay the same.

TopicThe reasons for international trade2.4 The interaction of demand and supply

TopicAggregate demand and aggregate supply analysis6.4 Exchange rates2.1 Demand and supply curves

1. Aexports: fall; imports: fall
2. Bexports: fall; imports: unchanged
3. Cexports: unchanged; imports: fall
4. Dexports: unchanged; imports: rise

TopicFiscal policy

1. Aconsumer surplus: increases by VUT; government revenue: decreases by WVTX
2. Bconsumer surplus: increases by VUT; government revenue: decreases by WVQ3Q2
3. Cconsumer surplus: increases by P1VUP2; government revenue: decreases by WVTX
4. Dconsumer surplus: increases by P1VUP2; government revenue: decreases by WVQ3Q2

TopicProtectionism2.4 The interaction of demand and supply