AQA A-level Paper 3, November 2021

TopicMarket failure and government interventionExternalities

TopicMarket failure and government interventionExternalitiesGovernment intervention (micro)

TopicMarket failure and government interventionExternalities

1. Adiscrimination in the labour markets for non-graduates.
2. Bthe higher marginal revenue productivity of graduates.
3. Cthe higher price elasticity of demand for graduates.
4. Dthe relatively low elasticity of supply of non-graduates.

TopicThe labour marketLabour demand & supply

1. Acan have microeconomic as well as macroeconomic effects on the economy.
2. Bcan increase the potential output of an economy but not its trend rate of growth.
3. Ccannot be used to correct market failures and improve the operation of markets.
4. Ddo not affect competitiveness or the current account of the balance of payments.

TopicFiscal policy and supply-side policiesSupply-side policies

1. Anegative externalities in production and consumption.
2. Bnegative externalities in production and positive externalities in consumption.
3. Cpositive externalities in production and consumption.
4. Dpositive externalities in production and negative externalities in consumption.

TopicMarket failure and government interventionExternalities

1. AEconomic growth increases and the deficit on the balance of payments on current account is eliminated
2. BInflation declines to match its target rate and the government’s budget position moves into balance
3. CThe distribution of income becomes more equal as economic growth increases
4. DThe government’s budget deficit increases as the rate of unemployment is reduced

TopicEconomic performanceMacro objectives & conflicts

1. ACountry 1 has the highest living standards of the four countries
2. BCountry 2 has a higher rate of growth than countries 3 and 4
3. CCountry 3 is the least developed of the four countries
4. DCountry 4 has the highest life expectancy and literacy rates

TopicThe international economyDevelopmentLiving standards & wellbeing

1. AH - H2
2. BH2KLH1
3. CG2 - G1
4. DH1 - H2

TopicEconomic methodology and the economic problemOpportunity costPPB / PPC

1. Aa threat to financial stability because it holds no capital.
2. Ban investment bank because it holds non-interest bearing cash.
3. Cearning large profits because most of its assets are loans.
4. Dmost likely to be a commercial bank because its main liabilities are customer deposits.

TopicFinancial markets and monetary policyMoney & banking

1. Ainferior goods.
2. Bmerit goods.
3. Cprivate goods.
4. Dpublic goods.

TopicMarket failure and government interventionPublic goodsMarket failure (general)Government intervention (micro)

1. AOFHJ
2. BFGH
3. COPHJ
4. DQHJ

TopicMarket failure and government interventionGovernment intervention (micro)Demand & supply

1. Aplanned borrowing by more than £100 billion.
2. Bprojected income and borrowing by £100 billion.
3. Cprojected income by £100 billion and reducing new borrowing by £100 billion.
4. Dprojected tax revenue by more than £100 billion.

TopicFiscal policy and supply-side policiesFiscal policy & public finances

1. Abuy the motorbike because they believe the price is justified by its condition.
2. Bknow more about the motorbike’s market value than the dealer.
3. Cmaximise their utility by buying a cheaper used motorbike from a different dealer.
4. Dnot buy the motorbike because they do not know as much about the motorbike as the dealer.

TopicIndividual economic decision makingImperfect information

1. AA decline in the capital stock resulting from a significant decline in bank funding for business investment
2. BAn increase in net foreign investment by firms following a reduction in the rate of inflation
3. CAn unexpected reduction in the rate of interest following a fall in the rate of inflation
4. DThe growth of government borrowing to fund increased expenditure on infrastructure

TopicHow the macroeconomy works (AD/AS)Aggregate demand

1. Aaccepting the default choice.
2. Bacting irrationally by ignoring an economic incentive.
3. Cbeing anchored by a previous financial decision.
4. Dusing a rule of thumb to make the choice.

TopicIndividual economic decision makingBehavioural economics

1. AConsumption will increase since house prices will rise and increase wealth.
2. BInvestment will increase as the return on investment projects rises.
3. CSavings will increase as interest rates rise in real terms.
4. DThe exchange rate will fall as a result of increased capital inflows.

TopicFinancial markets and monetary policyMonetary policy & interest ratesInflation & deflation

1. Aelastic.
2. Binelastic.
3. Cperfectly elastic.
4. Dunitary elastic.

TopicThe labour marketMinimum wageInequality & poverty

1. Ahave a marginal revenue of £0.25.
2. Bincrease its average revenue by 20%.
3. Cmake supernormal profits in the long run.
4. Dsell 180 boxes per day in the short run.

TopicMarket structuresPerfect competitionRevenue & profit

1. A2.4%
2. B3.7%
3. C3.8%
4. D4.0%

TopicEconomic performanceUnemployment

1. A20 200
2. B20 400
3. C50 200
4. D50 400

TopicMarket failure and government interventionIndirect taxes & subsidiesFiscal policy & public finances

1. Alevel of investment.
2. Bmarginal propensity to save.
3. Crate of interest.
4. Dvalue of the multiplier.

TopicHow the macroeconomy works (AD/AS)Aggregate demand

1. AA decrease in the cost of producing the good
2. BA decrease in the price of the good
3. CAn increase in the price of the good
4. DAn increase in the scale of its operation

TopicMarket structuresMonopolistic competition

1. Afirm is a price taker and will reduce its supply if the market price falls below Pe.
2. Bfirm is making abnormal profits but this will not attract new firms into the market because the firm has a monopoly.
3. Cfirm is maximising its abnormal profit and has no incentive to expand its production.
4. Dfirm’s abnormal profit will lead it to expand its production and shift its market supply curve to the right.

TopicMarket structuresMonopoly & market powerRevenue & profit

1. Aproductivity growth combined with a larger than expected decrease in inflation.
2. Bthe exchange rate combined with an unexpected fall in business confidence.
3. Cthe government’s budget surplus combined with a downturn in world trade.
4. Dthe marginal propensity to consume combined with a fall in the exchange rate.

TopicEconomic performanceEconomic growth & cycle

1. AA decrease in the number of firms in the industry
2. BA reduction in firms’ unit costs of production
3. CThe elimination of entry barriers into the industry
4. DThe invention of a product that did not previously exist

TopicProduction, costs and revenueTechnological change

1. AA fall in the price of tea and a rise in productivity in coffee production
2. BA rise in the price of coffee and an increase in the cost of producing tea
3. CAn increase in competition in the market for tea and a fall in the price of coffee
4. DThe removal of a subsidy to tea producers and a fall in the price of coffee

TopicPrice determination in a competitive marketDemand & supplyCross elasticity

1. Aa negative output gap equal to £4 billion.
2. Ba negative output gap equal to £6 billion.
3. Ca positive output gap equal to £4 billion.
4. Da positive output gap equal to £6 billion.

TopicEconomic performanceEconomic growth & cycle

1. Acompanies issue new shares to the public and financial institutions.
2. Bdealers are able to trade foreign currencies.
3. Clong-term company securities and government bonds are traded.
4. Dshort-term finance is provided for companies and governments.

TopicFinancial markets and monetary policyMoney & banking

1. Ajob security for qualified workers in the industry.
2. Bthe average wage rate in the industry.
3. Cthe productivity of workers in the industry.
4. Dthe qualifications required by the industry.

TopicThe labour marketLabour demand & supply

1. A£395 billion.
2. B£475 billion.
3. C£525 billion.
4. D£605 billion.

TopicMeasuring macroeconomic performanceGDP & national income

1. Agovernment expenditure on public goods.
2. Bincome tax to reduce consumer expenditure.
3. Cquotas on exports of demerit goods.
4. Dtariffs to raise the price of imports.

TopicThe international economyBalance of paymentsProtectionism & trading blocs

1. AA depreciation of the currency and an increase in interest rates
2. BA fall in the prices of raw materials and an increase in investment
3. CAn increase in exports and the rate of Value Added Tax
4. DAn increase in the supply of money and the level of money wages 30

TopicHow the macroeconomy works (AD/AS)Aggregate demandAggregate supply