National and International Economy · 7136/2

AQA A-level Paper 2, November 2021

All 14 written questions from AQA A-level Paper 2 (November 2021), National and International Economy. Case studies: National debt and government spending and South Korea’s economy. Each question shows its marks and topic, with an examiner insight on 10, and opens the question paper and mark scheme at the right page.

Question paperMark scheme

Summer exams were cancelled, so this paper was sat in the autumn series. The paper itself is headed June.

Context 1

National debt and government spending

Extracts: Government debt: a Greek tragedy · The end of government cutbacks in the UK?

Q3Explain9 marks
Extract B (line 9) states: ‘The government spending cuts also severely damaged private-sector jobs.’
With the help of a diagram, explain how a reduction in government spending could increase unemployment in the private sector.

TopicEconomic performanceUnemploymentFiscal policy & public finances

Examiner insight

What to cover
Lower government spending reduces AD. Private firms that supply the government lose orders, and lower incomes reduce consumption, so output and jobs fall (the multiplier).
Diagram
AD/AS diagram with AD shifting left.
Watch out
Explain the multiplier effect.
Question paper p.3Mark scheme p.8Open in the toolDraw it: AD/AS diagram
Q4Evaluate25 marks
Extract C (lines 17–18) states: ‘Some argue that the UK should increase taxes rather than add to the national debt.’
Using the data in the extracts and your knowledge of economics, evaluate the view that an increase in a country’s national debt is damaging for its economy.

TopicFiscal policy and supply-side policiesFiscal policy & public finances

Examiner insight

What to cover
Higher debt can raise interest costs, reduce confidence and crowd out private investment.
Evaluation
Debt can fund investment and support growth when interest rates are low. Judge by the size of the debt, interest rates and use of the money.
Watch out
Use Greece and the UK from the extracts.
Question paper p.3Mark scheme p.10Open in the tool

Context 2

South Korea’s economy

Extracts: South Korea: a model for development? · Is South Korea’s miracle economic performance over?

Q7Explain9 marks
Extract E (line 14) states: ‘Investment in R&D has been an important driver of economic growth and industrial progress.’
With the help of a diagram, explain how investment in research and development (R&D) can help to increase the long-run growth rate of an economy.

TopicEconomic performanceEconomic growth & cycleAggregate supply

Examiner insight

What to cover
R&D creates new technology and raises productivity. LRAS shifts right, so the long-run growth rate rises.
Diagram
LRAS shifting right.
Watch out
Explain long-run growth clearly.
Question paper p.5Mark scheme p.13Open in the toolDraw it: AD/AS diagram
Q8Evaluate25 marks
Extract F (lines 7–8) states: ‘Economists said the data reinforced the view that the slump in South Korea’s trade-reliant economy would continue beyond this year’.
Using the data in the extracts and your knowledge of economics, evaluate policies which could be used to boost South Korea’s exports and increase its trade surplus.

TopicThe international economyTrade & comparative advantage

Examiner insight

What to cover
Policies: currency depreciation, supply-side policies to raise productivity, trade agreements, export promotion.
Evaluation
Judge by global demand, cost and time lags. Use South Korea's data.
Watch out
Use South Korea's data in the extracts.
Question paper p.5Mark scheme p.15Open in the tool
Q9Essay 1Explain15 marks
Explain how a government or central bank can intervene to prevent the value of its currency rising.
Essay stimulus. Since 1992, the UK has had a floating exchange rate, and between August and December 2019, the pound sterling rose by around 10%. In the recent past, several nations, such as Japan, Switzerland and China, have actively intervened to influence the value of their currencies.

TopicThe international economyExchange ratesMonetary policy & interest rates

Examiner insight

What to cover
To stop a currency rising: the central bank sells its currency and buys foreign currency, cuts interest rates, or the government uses capital controls.
Diagram
Currency market diagram with supply of the currency shifting right.
Watch out
Explain both government and central bank methods.
Question paper p.6Mark scheme p.17Open in the tool
Q10Essay 1Evaluate25 marks
Evaluate the possible impact on the cost of living and the standard of living in the UK of a sustained rise in the value of the pound sterling against other currencies, such as the euro and the US dollar.
Essay stimulus. Since 1992, the UK has had a floating exchange rate, and between August and December 2019, the pound sterling rose by around 10%. In the recent past, several nations, such as Japan, Switzerland and China, have actively intervened to influence the value of their currencies.

TopicThe international economyExchange rates

Examiner insight

What to cover
A stronger pound lowers import prices, so the cost of living falls.
Evaluation
It can reduce export demand, output and jobs, so living standards may fall. Judge by how long the rise lasts and how open the economy is.
Watch out
Separate the cost of living from the standard of living.
Question paper p.6Mark scheme p.18Open in the tool
Q11Essay 2Explain15 marks
Explain the main causes of rising consumption in an economy.
Essay stimulus. The savings ratio is the proportion of national income that is saved. The UK savings ratio reached 10.6% in 2015 but fell to 3.9% in 2017. This indicates rising consumption and a fall in savings across the economy. Economists debate whether or not this change in consumption and savings is beneficial.

TopicHow the macroeconomy works (AD/AS)Aggregate demand

Examiner insight

What to cover
Consumption rises with higher disposable income, consumer confidence, wealth (house prices), lower interest rates and easier credit.
Watch out
Explain each cause.
Question paper p.6Mark scheme p.19Open in the toolPractise the AD/AS diagram
Q12Essay 2To what extent25 marks
To what extent do you agree that a fall in savings is beneficial for the UK economy?
Justify your answer.
Essay stimulus. The savings ratio is the proportion of national income that is saved. The UK savings ratio reached 10.6% in 2015 but fell to 3.9% in 2017. This indicates rising consumption and a fall in savings across the economy. Economists debate whether or not this change in consumption and savings is beneficial.

TopicHow the macroeconomy works (AD/AS)Aggregate demand

Examiner insight

What to cover
Lower saving raises consumption and AD in the short run.
Evaluation
It can reduce funds for investment and raise household debt. Judge by the state of the economy.
Watch out
Give a justified judgement.
Question paper p.6Mark scheme p.20Open in the toolPractise the AD/AS diagramPractise the multiplier diagram
Q13Essay 3Explain15 marks
Explain the role of commercial banks in the economy.
Essay stimulus. Commercial banks provide financial services for both individuals and businesses. In 2007–08, the financial crisis led many to argue for tighter regulation of the banks to prevent problems in financial markets affecting the real economy. However, financial markets are not the only source of cyclical instability. Governments can use a variety of policies to try to create a more stable economy.

TopicFinancial markets and monetary policyMoney & banking

Examiner insight

What to cover
Commercial banks take deposits, lend to households and firms, create credit, provide payment services and allocate savings to investment.
Watch out
Explain credit creation clearly.
Question paper p.7Mark scheme p.21Open in the tool
Q14Essay 3Assess25 marks
Assess policies which can be used to reduce cyclical instability in the UK.
Essay stimulus. Commercial banks provide financial services for both individuals and businesses. In 2007–08, the financial crisis led many to argue for tighter regulation of the banks to prevent problems in financial markets affecting the real economy. However, financial markets are not the only source of cyclical instability. Governments can use a variety of policies to try to create a more stable economy.

TopicEconomic performanceEconomic growth & cycleMonetary policy & interest ratesFiscal policy & public finances

Examiner insight

What to cover
Policies: fiscal policy, monetary policy and automatic stabilisers smooth the economic cycle.
Diagram
AD/AS diagram.
Evaluation
Judge by time lags, debt levels and the zero lower bound.
Watch out
Define cyclical instability.
Question paper p.7Mark scheme p.22Open in the tool

Question text is quoted from the question papers, © AQA, for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.