Edexcel iGCSE Economics Paper 2 October 2025

Question 1g

In March 2024, after 15 years of negotiations, India announced a free trade agreement with four European countries: Switzerland, Iceland, Norway and Liechtenstein. The free trade agreement is expected to create one million jobs over the coming years.

Explain one advantage of free trade for a business in a country such as Iceland. (3 marks)

Free trade can include measures such as removing tariffs. This lowers costs for importing goods and services, which in turn reduces prices. As a result, businesses can increase output, potentially boosting profits.

Question 1h

The South Korean Government is to introduce deregulation to boost the growth of industries, such as artificial intelligence (AI) and biotechnology. The country will create a regulation-free zone where firms can develop technologies without any barriers.

With reference to the data above and your knowledge of economics, analyse the advantages of deregulation for a country such as South Korea. (6 marks)

Deregulation is a supply-side policy. Supply-side policies are government measures aimed at increasing aggregate supply in the economy. Deregulation, specifically, involves reducing barriers to entry. This encourages more firms to enter the market and increases competition. The resulting competition incentivises firms to be more productive, and as productivity rises, the economy can experience greater economic growth and disinflation.

Question 3d

Globalisation has transformed the world. Centuries ago, it brought exotic spices and goods from distant parts of the globe. More recently, it has allowed people to work, communicate and travel more easily. Fewer tariffs and quotas are one of the reasons for an increase in globalisation.

With reference to the data above and your knowledge of economics, analyse why fewer tariffs and quotas have resulted in an increase in globalisation. (6 marks)

Globalisation is the increasing integration of economies around the world. Tariffs and quotas are examples of protectionism, barriers to free trade. Removing tariffs reduces taxes on imports, making trade cheaper and easier. As a result, countries can specialise and work together rather than acting alone. (Quotas and add more examples...)

Question 4b

France is Europe’s second largest consumer base with a high-income population. The French retail market is highly developed and its luxury sector is well known around the world. When exporting to France, UK firms must consider factors such as quality in order to be successful in this very competitive market.

With reference to the data above and your knowledge of economics, analyse why an improvement in the quality of UK goods may result in a positive impact on the UK’s current account.

A current account deficit is when the value of imports exceeds the value of exports. This can improve if the quality of UK goods increases. As the quality of UK goods improves, they become more attractive to buyers than imports from other countries, so exports rise. Additionally, higher-quality UK goods make consumers less likely to import similar goods from abroad, so imports can fall as well.

Question 4c

As part of its fiscal policy, the UK Government has promised additional funding and increased pay for doctors over the next five years to help the country’s struggling healthcare system. The UK public healthcare system is under considerable strain. For several months hospitals have been dealing with a lack of staff and long waiting times for medical care, with surgeries postponed or cancelled. At the end of April 2024, 7.6 million people were still waiting for treatment. The UK’s healthcare system is paid for by taxpayers to provide free access to hospital and doctor services for all citizens. The government is unsure how this additional investment will be funded and currently spends around 9.3% of its gross domestic product (GDP) on healthcare.

With reference to the data above and your knowledge of economics, evaluate the possible economic benefits of increasing government expenditure on healthcare for a country such as the UK.

One benefit of greater spending on healthcare is that it increases economic growth. More spending on health care can be considered an example of fiscal policy, as the extract notes. Fiscal policy is the use of government spending or taxation to influence aggregate demand in the economy. The extract mentions that the government will spend more to increase the pay for doctors in the UK. This increases their disposable income, which boosts consumption and, in turn, supports economic growth.

Another benefit of spending on health care is reduced waiting times, as the extract mentions. When people wait less, they take fewer sick days and are more available to work, boosting productivity and output for firms and helping increase aggregate supply in the economy. It also lowers the amount of time people must take off work due to illness, which can reduce unemployment.

However, one disadvantage of increased healthcare spending is that it raises the budget deficit. A deficit occurs when government spending exceeds tax revenue. If a country runs a deficit every year, national debt grows. National debt is harmful because it leads to lower living standards in the future, as governments must cut spending and devote more of their budget to debt repayment and interest.