The National Economy in a Global Context · 7135/2

AQA AS Paper 2, June 2020

All 12 written questions and 20 multiple choice questions from AQA AS Paper 2 (June 2020), The National Economy in a Global Context. Case studies: The UK retail industry and Conflicting economic objectives. Each question shows its marks and topic, with an examiner insight on 4, and opens the question paper and mark scheme at the right page.

Question paperMark schemeInsert

Context 1

The UK retail industry

Extracts: UK retail sales, percentage change on same month a year · The changing retail industry · Aggregate demand and economic activity

Q25Explain10 marks
Extract C (lines 3–4) states: ‘Household consumption accounts for approximately 60% of aggregate demand so has a vital role to play in the economy.’
Explain two factors that could cause a fall in consumption.

TopicHow the macroeconomy works (AD/AS)Aggregate demand

Examiner insight

What to cover
Factors: higher interest rates, lower confidence, lower real incomes, falling house prices.
Watch out
Explain two factors clearly.
Question paper p.16Mark scheme p.10Insert p.1Open in the toolPractise the AD/AS diagram
Q26Assess25 marks
Extract C (line 1) states: ‘So, is the changing retail industry and the decline in the high street bad news for the economy?’
Use the extracts and your knowledge of economics to assess whether the changes taking place in the retail industry are likely to cause lasting damage to UK macroeconomic performance.

TopicEconomic performanceMacro objectives & conflictsAggregate demand

Examiner insight

What to cover
Retail changes affect jobs, spending and growth.
Diagram
AD/AS diagram.
Evaluation
Consider online growth and new jobs. Judge using the data.
Watch out
Use the extracts.
Question paper p.18Mark scheme p.11Insert p.1Open in the tool

Context 2

Conflicting economic objectives

Extracts: UK car production for export and home markets, · UK manufacturing and the objectives of macroeconomic · Conflicting objectives…or not?

Q31Explain10 marks
Extract E (lines 9–10) states: ‘Inevitably, the volume of exports will fall, and it is highly likely that the trade deficit will increase further.’
Explain two factors that could cause a fall in the volume of UK exports.

TopicThe international economyTrade & comparative advantage

Examiner insight

What to cover
Factors: a stronger pound, lower world demand, lower competitiveness and trade barriers.
Watch out
Explain two factors clearly.
Question paper p.26Mark scheme p.16Insert p.1Open in the tool
Q32Assess25 marks
Extract F (lines 13–17) states: ‘... it is not easy for a government to achieve all of its macroeconomic objectives at the same time... if confidence improves and the manufacturing industry picks up, it will be difficult to avoid more inflationary pressures.’
Use the extracts and your knowledge of economics to assess the view that as the rate of economic growth increases, a rise in inflation is inevitable.

TopicEconomic performanceEconomic growth & cycleInflation & deflation

Examiner insight

What to cover
Growth can raise inflation when the economy is near capacity.
Diagram
AD/AS diagram.
Evaluation
With spare capacity or supply-side growth, inflation need not rise. Judge using the data.
Watch out
Use the extracts.
Question paper p.28Mark scheme p.17Insert p.1Open in the toolPractise the AD/AS diagram
Q11 mark
An economy experiences a positive supply-side shock. Other things remaining equal, the impact on the economy is most likely to be
  1. Ahigher inflation and faster economic growth.
  2. Bhigher output and lower inflation.
  3. Clower employment and slower economic growth.
  4. Dlower unemployment and a larger budget deficit.
Show the answer

The answer is B.

TopicHow the macroeconomy works (AD/AS)Aggregate supply

Question paper p.2Mark scheme p.3Open in the tool
Q31 mark
Figure 1 shows aggregate demand (AD) curves for an economy.
Figure 1
Which one of the following is most likely to cause the aggregate demand curve to shift from AD1 to AD2?
  1. AA fall in imports
  2. BA fall in the price level
  3. CA reduction in the budget deficit
  4. DA rise in the exchange rate
Show the answer

The answer is A.

TopicHow the macroeconomy works (AD/AS)Aggregate demand

Question paper p.3Mark scheme p.3Open in the tool
Q41 mark
Which one of the following statements about the consumer price index (CPI) is correct?
  1. AA fall in the CPI means that the real value of money is falling
  2. BAn increase in the CPI means that the rate of inflation is rising
  3. CThe CPI measures changes in the prices of goods and services bought by households
  4. DThe weights used in the CPI reflect changes in the quality of goods and services
Show the answer

The answer is C.

TopicMeasuring macroeconomic performancePrice indices & inflation measurement

Question paper p.3Mark scheme p.3Open in the tool
Q51 mark
An economy has recently recovered from a recession and closed its negative output gap.
The government would now like to increase the trend rate of economic growth.
Which one of the following policies is likely to be the most effective?
  1. AExpansionary fiscal policy
  2. BExpansionary monetary policy
  3. CRedistributive policies
  4. DSupply-side policies
Show the answer

The answer is D.

TopicEconomic performanceEconomic growth & cycle

Question paper p.4Mark scheme p.3Open in the tool
Q71 mark
An economy is experiencing short-run economic growth accompanied by falling unemployment. This is due to rising aggregate demand following the introduction of an expansionary fiscal policy.
Which one of the following is most likely to help the economy avoid rising inflation?
  1. AA fall in the exchange rate and falling productivity
  2. BA fall in the exchange rate and rising productivity
  3. CA rise in the exchange rate and falling productivity
  4. DA rise in the exchange rate and rising productivity
Show the answer

The answer is D.

TopicThe international economyExchange ratesInflation & deflation

Question paper p.4Mark scheme p.3Open in the tool
Q81 mark
Figure 2 shows the aggregate demand (AD) curves and short-run aggregate supply (SRAS) curves for an economy.
Figure 2
Which one of the following combinations of events is most likely to cause aggregate demand to shift from AD1 to AD2 and short-run aggregate supply from SRAS1 to SRAS2?
  1. AA fall in income tax and lower raw material prices
  2. BA fall in net exports and higher labour productivity
  3. CA rise in money wages and a rise in household saving
  4. DAn increase in VAT and a rise in household wealth
Show the answer

The answer is C.

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

Question paper p.5Mark scheme p.3Open in the tool
Q91 mark
A government wishes to reduce the surplus on the current account of the balance of payments. Which one of the following sets of policies is likely to be the most successful?
Change in the exchange Change in the budget rate surplus
  1. ADecrease Decrease
  2. BDecrease Increase
  3. CIncrease Decrease
  4. DIncrease Increase
Show the answer

The answer is C.

TopicThe international economyBalance of paymentsExchange ratesFiscal policy & public finances

Question paper p.6Mark scheme p.3Open in the tool
Q101 mark
In which one of the following situations is there most likely to be cyclical unemployment in an economy?
  1. AAbsence of an output gap
  2. BGenerous unemployment benefits
  3. CMany firms with excess capacity
  4. DWidespread investment in labour-saving equipment
Show the answer

The answer is C.

TopicEconomic performanceUnemployment

Question paper p.6Mark scheme p.3Open in the tool
Q111 mark
At the start of the year, the national debt for an economy was £920 billion. In the previous year, the budget deficit was £60 billion. In the current year, government spending is projected to fall by £20 billion and tax revenues to increase by £10 billion from last year’s levels.
Other things remaining equal, the expected size of the national debt at the end of the current year is
  1. A£890 billion.
  2. B£950 billion.
  3. C£960 billion.
  4. D£980 billion.
Show the answer

The answer is B.

TopicFiscal policy and supply-side policiesFiscal policy & public finances

Question paper p.6Mark scheme p.3Open in the tool
Q121 mark
Figure 3 shows an economy’s aggregate demand (AD) and short-run aggregate supply (SRAS) curves.
Figure 3
The initial equilibrium price level is at OP1. Which one of the following is most likely to be responsible for both the cost–push and demand-pull inflationary pressures that raise the price level to OP2?
  1. AA fall in interest rates
  2. BA fall in the exchange rate
  3. CA rise in direct taxes
  4. DA rise in indirect taxes
Show the answer

The answer is B.

TopicHow the macroeconomy works (AD/AS)Aggregate demandAggregate supplyInflation & deflation

Question paper p.7Mark scheme p.3Open in the tool
Q131 mark
Other things remaining the same, the current account deficit of an economy’s balance of payments is most likely to
  1. Abecome smaller as domestic inflation falls below foreign inflation rates.
  2. Bdeteriorate when there is an upturn in economic activity overseas.
  3. Cimprove when there is a rise in the exchange rate.
  4. Dincrease when there is an improvement in the economy’s international competitiveness.
Show the answer

The answer is A.

TopicThe international economyBalance of payments

Question paper p.7Mark scheme p.3Open in the tool
Q141 mark
Which statement applies to progressive taxes, but does not apply to proportional or regressive taxes?
As income falls
  1. Aa larger percentage of income is taken in tax.
  2. Ba smaller percentage of income is taken in tax.
  3. Cless income is taken in tax.
  4. Dthe same percentage of income is taken in tax.
Show the answer

The answer is B.

TopicFiscal policy and supply-side policiesFiscal policy & public financesInequality & poverty

Question paper p.8Mark scheme p.3Open in the tool
Q151 mark
Figure 4 shows the performance of an economy through time.
Figure 4
As the economy moves from point A to point B, it can be concluded that
  1. Athe economy has completed one economic cycle.
  2. Bthe level of GDP per head has risen.
  3. Cthe rate of economic growth has increased.
  4. Dthe trend rate of growth is higher.
Show the answer

The answer is A.

TopicEconomic performanceEconomic growth & cycle

Question paper p.8Mark scheme p.3Open in the tool
Q161 mark
Output of the UK economy is at the normal capacity level and the Bank of England decides to implement measures to restrict the supply of credit to households. The most likely reason for this policy is that
  1. Aearnings are increasing fast.
  2. Bhouse prices are falling.
  3. Cproductivity is growing more quickly.
  4. Dthe exchange rate is appreciating.
Show the answer

The answer is A.

TopicFinancial markets and monetary policyMonetary policy & interest rates

Question paper p.9Mark scheme p.3Open in the tool
Q171 mark
Table 1 shows the index of export prices, the current monetary value of a country’s exports and the calculated value, to the nearest £ billion, of the value of its exports at 2017 prices.
Table 1
Value of the country’s Current monetary value Year Index of export prices exports at 2017 prices of exports (£ billion) (£ billion) 2016 180 90 ?
2017 200 100 200 2018 240 110 218 2019 300 120 ?
Which one of the following is correct?
  1. AThe value of the country’s exports in 2016 at 2017 prices, to the nearest £ billion, was £162 billion
  2. BThe value of the country’s exports in 2016 at 2017 prices, to the nearest £ billion, was £198 billion
  3. CThe value of the country’s exports in 2019 at 2017 prices, to the nearest £ billion, was £240 billion
  4. DThe value of the country’s exports in 2019 at 2017 prices, to the nearest £ billion, was £250 billion
Show the answer

The answer is D.

TopicThe international economyTrade & comparative advantage

Question paper p.9Mark scheme p.3Open in the tool
Q181 mark
Figure 5 shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves for an economy.
Figure 5
Which one of the following policies is most likely to have caused aggregate demand to shift from AD1 to AD2, and long-run aggregate supply to shift from LRAS1 to LRAS2?
  1. AA lower rate of corporation tax
  2. BA reduction in the money supply
  3. CAn increase in state pensions
  4. DAn increase in the exchange rate
Show the answer

The answer is A.

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

Question paper p.10Mark scheme p.3Open in the tool
Q191 mark
If the current account of the balance of payments is in surplus, then
  1. Athe exchange rate of the country’s currency must be appreciating.
  2. Bthe net value of trade in goods and services plus the net value of primary and secondary income must be positive.
  3. Cthe total of all money flows into the economy must be greater than the total of all money flows out.
  4. Dthe value of exports of goods and services must be greater than the value of imports of goods and services.
Show the answer

The answer is B.

TopicThe international economyBalance of payments

Question paper p.11Mark scheme p.3Open 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.