According to the continuity equation for an incompressible fluid, the mass flow rate at any two points in the tube must be equal. The continuity equation is:
\[
A_1 v_1 = A_2 v_2
\]
where \( A_1 \) and \( A_2 \) are the cross-sectional areas at points (1) and (2), and \( v_1 \) and \( v_2 \) are the velocities at points (1) and (2), respectively.
The cross-sectional area of the tube is given by:
\[
A = \pi r^2
\]
Let the radius at point (1) be \( r_1 = 2 \, \text{cm} \) and at point (2) be \( r_2 = 1 \, \text{cm} \). Substituting into the continuity equation:
\[
\pi r_1^2 v_1 = \pi r_2^2 v_2
\]
Simplifying:
\[
r_1^2 v_1 = r_2^2 v_2
\]
Substituting \( r_1 = 2 \, \text{cm}, r_2 = 1 \, \text{cm}, v_1 = 2 \, \text{m/s} \):
\[
(2^2)(2) = (1^2)(v_2)
\]
\[
8 = v_2
\]
Thus, the velocity of water leaving point (2) is \( \boxed{8} \, \text{m/s} \).