The National Economy in a Global Context · 7135/2

AQA AS Paper 2, June 2023

All 12 written questions and 20 multiple choice questions from AQA AS Paper 2 (June 2023), The National Economy in a Global Context. Case studies: Inflation and International trade. 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

Inflation

Extracts: UK inflation rate (%), measured by CPI, January 2018 to · Achieving the inflation target of 2% · Are very low interest rates good for the economy?

Q24Draw4 marks
Extract B (lines 14–15) states: ‘In the UK, government policy, such as the temporary reduction in VAT, an indirect tax, from 20% to 5%, also helped to reduce inflation.’
Draw an AD/AS diagram to show the impact of a reduction in indirect taxation on real national income and the price level in an economy.

TopicHow the macroeconomy works (AD/AS)Aggregate demandAggregate supplyFiscal policy & public finances

Question paper p.16Mark scheme p.9Insert p.1Open in the toolDraw it: AD/AS diagram
Q25Explain10 marks
Extract B (lines 7–9) states: ‘With this in mind, the government sets the target rate of inflation that the Bank of England’s Monetary Policy Committee (MPC) has to achieve.’
Explain two factors considered by the Bank of England’s MPC when setting Bank Rate.

TopicFinancial markets and monetary policyMoney & bankingMonetary policy & interest rates

Examiner insight

What to cover
Factors: inflation expectations, growth, wage growth, the exchange rate and spare capacity.
Watch out
Explain two factors clearly.
Question paper p.17Mark scheme p.10Insert p.1Open in the toolPractise the AD/AS diagram
Q26Assess25 marks
Extract C (lines 18–19) states: ‘It remains to be seen whether very low interest rates are good for the economy.’
Use the extracts and your knowledge of economics to assess the view that very low interest rates are good for the UK economy.

TopicFinancial markets and monetary policyMonetary policy & interest rates

Examiner insight

What to cover
Low interest rates support borrowing, spending and growth.
Diagram
AD/AS diagram.
Evaluation
Consider asset bubbles, savers and little room for further cuts. Judge using the data.
Watch out
Use the extracts.
Question paper p.19Mark scheme p.11Insert p.1Open in the toolPractise the AD/AS diagram

Context 2

International trade

Extracts: UK monthly balance of trade in goods and services · The trade balance: an overlooked objective of government · Should the trade balance receive more attention?

Q31Explain10 marks
Extract F (lines 1–2) states: ‘Many economists believe that the trade balance reflects the strength or weakness of a country’s international competitiveness’.
Explain how a fall in a country’s international competitiveness may affect economic growth in the economy.

TopicThe international economyTrade & comparative advantageEconomic growth & cycle

Examiner insight

What to cover
Lower competitiveness reduces exports and raises imports, so AD and growth fall.
Diagram
AD/AS diagram.
Watch out
Explain the link clearly.
Question paper p.27Mark scheme p.16Insert p.1Open in the tool
Q32Evaluate25 marks
Extract F (lines 6–7) states: ‘However, there is a great deal that can be done to improve the balance of trade in goods and services.’
Use the extracts and your knowledge of economics to evaluate policies that may be used to achieve a sustained improvement in the UK’s balance of trade in goods and services.

TopicThe international economyBalance of paymentsTrade & comparative advantage

Examiner insight

What to cover
Policies: supply-side (productivity), exchange rate changes, trade agreements.
Diagram
AD/AS diagram.
Evaluation
Judge by effectiveness and time lags.
Watch out
Use the extracts.
Question paper p.29Mark scheme p.17Insert p.1Open in the tool
Q31 mark
Table 1 shows the Consumer Price Index (CPI) for an economy over a period of time.
Table 1
Year CPI 2008 110 2011 108 2014 116 2017 124 2020 130 Which one of the following can be concluded from Table 1?
  1. AThe price of a representative basket of goods rose throughout the period.
  2. BThe rate of inflation from 2011 to 2014 was the same as from 2014 to 2017.
  3. CThe standard of living reached its highest level in 2020.
  4. DThe value of money rose between 2008 and 2011.
Show the answer

The answer is D.

TopicMeasuring macroeconomic performancePrice indices & inflation measurementInflation & deflation

Question paper p.3Mark scheme p.3Open in the tool
Q41 mark
A government decides to increase the minimum wage at a time when the rest of the world is coming out of recession. These events cause short-run aggregate supply (SRAS) to shift from SRAS1 to SRAS2 and aggregate demand (AD) to shift from AD1 to AD2.
If the initial macroeconomic equilibrium is E1, which one of the following diagrams shows the correct new equilibrium E2?
  1. A(see diagram in paper)
  2. B(see diagram in paper)
  3. C(see diagram in paper)
  4. D(see diagram in paper)
Show the answer

The answer is C.

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

Question paper p.4Mark scheme p.3Open in the toolPractise the AD/AS diagram
Q61 mark
Table 2 shows the components of a country’s national income in 2021.
Table 2
£bn Consumer expenditure Investment Government expenditure Exports Imports It can be concluded from the data in Table 2 that aggregate supply in 2021 must have been
  1. A£21bn.
  2. B£40bn.
  3. C£42bn.
  4. D£60bn.
Show the answer

The answer is C.

TopicHow the macroeconomy works (AD/AS)Circular flowAggregate demand

Question paper p.5Mark scheme p.3Open in the tool
Q81 mark
An economy has a low rate of economic growth and high unemployment.
Which one of the following sets of policies would be most likely to increase growth and reduce unemployment whilst avoiding a rise in inflation?
  1. AA cut in income tax and lower interest rates
  2. BHigher interest rates and an appreciation in the exchange rate
  3. CHigher welfare benefits and an increase in the money supply
  4. DIncreased expenditure on training and an investment subsidy
Show the answer

The answer is D.

TopicEconomic performanceEconomic growth & cycleUnemploymentInflation & deflation

Question paper p.6Mark scheme p.3Open in the tool
Q91 mark
Figure 1 shows the production possibility curve for an economy producing services and manufactured goods.
Figure 1
The economy moves from point W to point Z. It can be concluded that
  1. Aimports of manufactured goods have risen.
  2. Bthe international competitiveness of services has increased.
  3. Cthe pattern of economic activity has changed.
  4. Dunemployment in manufacturing has increased.
Show the answer

The answer is C.

TopicEconomic performanceEconomic growth & cyclePPB / PPC

Question paper p.7Mark scheme p.3Open in the tool
Q101 mark
Table 3 shows the planned change in government spending, the size of the output gap and the size of the multiplier in four economies, W, X, Y and Z.
Table 3
Change in government Output gap (£bn) Multiplier spending (£bn) W –80 +100 1.25 X –150 –225 1.5 Y +200 +350 1.75 Z –300 +150 All other things being equal, in which one of the economies, W, X, Y or Z, will the planned change in government spending eliminate the economy’s output gap?
  1. AW
  2. BX
  3. CY
  4. DZ
Show the answer

The answer is A.

TopicFiscal policy and supply-side policiesFiscal policy & public financesEconomic growth & cycle

Question paper p.8Mark scheme p.3Open in the tool
Q121 mark
Table 4 shows the percentage change in real GDP in an economy in the four years 2016 to 2019.
Table 4
Year Change in real GDP (%) 2016 4.2 2017 3.1 2018 2.6 2019 1.1 Over the period 2016 to 2019, which one of the following can be concluded from Table 4?
  1. AAggregate demand decreased
  2. BReal national income increased
  3. CStructural unemployment increased
  4. DThe inflation rate decreased
Show the answer

The answer is B.

TopicEconomic performanceEconomic growth & cycle

Question paper p.9Mark scheme p.3Open in the tool
Q151 mark
An economy experiences a low trend rate of economic growth, no output gap and a fall in total hours worked. In these circumstances, which one of the following combinations of events is most likely to occur?
Cyclical Labour National output unemployment productivity
  1. AFalling Absent Increasing
  2. BFalling Present Decreasing
  3. CRising Absent Increasing
  4. DRising Present Decreasing
Show the answer

The answer is C.

TopicEconomic performanceEconomic growth & cycleUnemployment

Question paper p.10Mark scheme p.3Open in the tool
Q161 mark
The UK economy experiences a change in its foreign exchange rate from £1 = $1.60 to £1 = $1.75.
Which one of the following is the most likely effect on the UK economy?
  1. AA decrease in employment
  2. BA fall in the budget deficit
  3. CA reduction in productivity
  4. DHigher raw material prices
Show the answer

The answer is A.

TopicThe international economyExchange rates

Question paper p.10Mark scheme p.3Open in the tool
Q171 mark
An economy is experiencing deflation and high employment.
The most likely cause of this situation is a
  1. Adeficit on the balance of payments.
  2. Bgovernment budget surplus.
  3. Cnegative demand-side shock.
  4. Dpositive supply-side shock.
Show the answer

The answer is D.

TopicEconomic performanceUnemploymentInflation & deflation

Question paper p.11Mark scheme p.3Open in the tool
Q181 mark
Which one of the following is an example of a contractionary fiscal policy designed to reduce inflation while, at the same time, minimising the negative impact on the economy’s potential for long-run economic growth?
  1. AA decrease in the budget deficit and replacement of a sugar tax with a tax on savings
  2. BAn increase in interest rates and replacement of food subsidies with subsidies for innovation
  3. CAn increase in the budget surplus and a switch from spending on pensions to spending on new airports
  4. DRestrictions on bank lending and a switch from spending on arts degrees to spending on apprenticeships
Show the answer

The answer is C.

TopicFinancial markets and monetary policyMonetary policy & interest ratesInflation & deflationFiscal policy & public finances

Question paper p.11Mark scheme p.3Open in the tool
Q191 mark
Figure 2 shows the aggregate demand curve (AD), short-run aggregate supply curves (SRAS) and long-run aggregate supply curve (LRAS) for an economy.
Figure 2
The short-run aggregate supply curve shifts from SRAS1 to SRAS2. Which one of the following is the most likely cause of the resulting increase in real national output?
  1. AAn increase in bank lending to households
  2. BAn increase in government expenditure
  3. CProductivity rising faster than money wages
  4. DThe action of the multiplier
Show the answer

The answer is C.

TopicHow the macroeconomy works (AD/AS)Aggregate supply

Question paper p.12Mark 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.