The National Economy in a Global Context · 7135/2

AQA AS Paper 2, June 2024

All 12 written questions and 20 multiple choice questions from AQA AS Paper 2 (June 2024), The National Economy in a Global Context. Case studies: Troubling times for the UK economy and The levelling-up agenda. 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

Troubling times for the UK economy

Extracts: Inflation and the growth in average weekly real earnings, · Is inflation out of control? · Concerns about government borrowing?

Q25Explain10 marks
Extract B (lines 11–12) states: ‘In response, as inflation rose above the target rate, the Bank of England's Monetary Policy Committee acted by increasing Bank Rate.’
Explain how an increase in Bank Rate may lead to a reduction in the rate of inflation.

TopicEconomic performanceInflation & deflationMoney & bankingMonetary policy & interest rates

Examiner insight

What to cover
A higher Bank Rate reduces borrowing and spending and strengthens the pound, so AD falls and inflation falls.
Diagram
AD/AS diagram.
Watch out
Explain the transmission mechanism.
Question paper p.17Mark scheme p.10Insert p.1Open in the toolPractise the AD/AS diagram
Q26Evaluate25 marks
Extract C (lines 17–18) states: ‘These policies could restrict economic growth in the short term and increase the likelihood of the economy going into recession.’
Use the extracts and your knowledge of economics to evaluate policies that might help an economy to recover from a recession.

TopicEconomic performanceEconomic growth & cycle

Examiner insight

What to cover
Policies: fiscal stimulus, lower interest rates, and supply-side policies.
Diagram
AD/AS diagram.
Evaluation
Judge by cost, debt and time lags.
Watch out
Use the extracts.
Question paper p.19Mark scheme p.11Insert p.1Open in the toolPractise the AD/AS diagram

Context 2

The levelling-up agenda

Extracts: Employment and inactivity rates, February 2023, and · Is the UK Government serious about levelling up? · Why is levelling up so important?

Q31Explain10 marks
Extract F (lines 1–2) states: ‘Unless the UK Government provides additional support, the outlook for some poorer regions may be gloomy. They often suffer from structural unemployment’.
Explain why some regions of the UK suffer from structural unemployment.

TopicEconomic performanceUnemployment

Examiner insight

What to cover
Structural unemployment comes from the decline of traditional industries, skills mismatch and geographical immobility.
Watch out
Explain causes clearly.
Question paper p.27Mark scheme p.16Insert p.1Open in the tool
Q32Assess25 marks
Extract F (lines 5–6) states: ‘As part of its long-term plan, the government has 12 levelling-up ‘missions’ or objectives. These include raising pay, employment and productivity throughout the UK’.
Use the extracts and your knowledge of economics to assess the view that the government should increase the amount of spending allocated to poorer regions of the UK.

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

Examiner insight

What to cover
More regional spending can reduce inequality and raise productivity.
Diagram
LRAS shifting right.
Evaluation
Consider cost, effectiveness and opportunity cost. Judge using the data.
Watch out
Use the extracts.
Question paper p.29Mark scheme p.17Insert p.1Open in the tool
Q21 mark
Between 2021 and 2022, the weight applied to the restaurant and hotels sector in the Consumer Prices Index rose from 97 to 102.
As a result of this change, it must be true that
  1. Aaverage prices in the restaurant and hotels sector rose by just over 5% between 2021 and 2022.
  2. Brestaurant and hotel prices rose by less than the overall average for consumer prices in 2021.
  3. Cthe proportion of average consumer expenditure relating to restaurants and hotels rose in 2022.
  4. Dtotal consumer expenditure on restaurant and hotel services was higher in 2022 than in 2021.
Show the answer

The answer is C.

TopicMeasuring macroeconomic performancePrice indices & inflation measurement

Question paper p.2Mark scheme p.3Open in the tool
Q31 mark
Table 1 shows selected data for a country for 2022 and 2023.
Table 1
2022 2023 Exports ($bn) 10 Government spending ($bn) 12 Investment ($bn) 40 The country’s national income was in equilibrium in 2022 and 2023. All other things being equal, which one of the following is most likely to have occurred in this country in 2023 to maintain equilibrium national income?
  1. AA decrease in tax revenue
  2. BA fall in the value of imports
  3. CA rise in the budget deficit
  4. DAn increase in savings
Show the answer

The answer is D.

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

Question paper p.3Mark scheme p.3Open in the tool
Q41 mark
An aggregate demand and short-run aggregate supply diagram is used to illustrate the effect of a rise in imports of goods and services into an economy. All other things being equal, which one of the following would be shown on the diagram?
  1. AA leftward movement along the aggregate demand curve
  2. BA leftward movement along the short-run aggregate supply curve
  3. CA rightward shift of the aggregate demand curve
  4. DA rightward shift of the short-run aggregate supply curve
Show the answer

The answer is B.

TopicHow the macroeconomy works (AD/AS)Aggregate demand

Question paper p.3Mark scheme p.3Open in the toolPractise the AD/AS diagram
Q51 mark
All other things being equal, which one of the following is the most likely cause of a reduction in a country’s surplus on its balance of payments on current account?
  1. AA depreciation in the exchange rate
  2. BContractionary fiscal policy
  3. CFalling labour productivity
  4. DGrowth in export markets
Show the answer

The answer is C.

TopicThe international economyBalance of payments

Question paper p.4Mark scheme p.3Open in the tool
Q61 mark
Disinflation exists when
  1. Aan economy experiences a fall in the cost of living.
  2. Bdeflation has occurred for two or more successive quarters.
  3. Cnominal incomes are rising more slowly than prices.
  4. Dthe price level is rising less quickly than previously.
Show the answer

The answer is D.

TopicEconomic performanceInflation & deflation

Question paper p.4Mark scheme p.3Open in the tool
Q81 mark
Figure 1 shows the rate of unemployment in an economy over a period of time.
Figure 1
At which one of the following points was the economy most likely to be in the recovery phase of the economic cycle?
  1. APoint A
  2. BPoint B
  3. CPoint C
  4. DPoint D
Show the answer

The answer is C.

TopicEconomic performanceEconomic growth & cycleUnemployment

Question paper p.5Mark scheme p.3Open in the tool
Q101 mark
Country W is operating at its normal capacity level of output. When one of its trading partners experiences economic growth, this leads to a rise in demand for Country W’s exports.
All other things being equal, what is the most likely consequence of this for Country W?
  1. AA fall in employment and a reduction in cost-push inflation
  2. BA negative output gap and a period of disinflation
  3. CA positive output gap and an increase in demand-pull inflation
  4. DAn increase in unemployment and a fall in the price level
Show the answer

The answer is C.

TopicEconomic performanceEconomic growth & cycleTrade & comparative advantage

Question paper p.6Mark scheme p.3Open in the tool
Q111 mark
Which one of the following explains the operation of the accelerator process in an economy?
  1. AIncreasing investment leads to a rise in aggregate demand
  2. BNational income increases as a result of rising investment
  3. CNational income rises as a result of an increase in aggregate demand
  4. DRising national income leads to an increase in investment
Show the answer

The answer is D.

TopicHow the macroeconomy works (AD/AS)Aggregate demand

Question paper p.7Mark scheme p.3Open in the tool
Q121 mark
A government is considering how to fund additional spending on healthcare. One option is to raise the rate of tax charged on the whole of firms’ profits from 19% to 25%.
All other things being equal, for every 10 firms earning profits of £1 million, by how much could the government increase its spending on healthcare without affecting the budget balance?
  1. A£60 000
  2. B£250 000
  3. C£600 000
  4. D£2 500 000
Show the answer

The answer is C.

TopicFiscal policy and supply-side policiesFiscal policy & public finances

Question paper p.7Mark scheme p.3Open in the tool
Q131 mark
Figure 2 shows the aggregate demand (AD), short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) curves for an economy.
Figure 2
All other things being equal, which one of the following is the most likely consequence for firms if an increase in government spending shifts the aggregate demand curve from AD1 to AD2?
  1. AIncrease in spare capacity
  2. BLess corporation tax is paid
  3. CMore goods are exported
  4. DShortages of skilled labour
Show the answer

The answer is D.

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

Question paper p.8Mark scheme p.3Open in the tool
Q141 mark
Which one of the following statements regarding UK monetary policy is true?
  1. AThe central bank considers the government’s fiscal policy when setting Bank Rate.
  2. BThe central bank is responsible for setting the rate of corporation tax.
  3. CThe central bank sets the target rate of inflation as measured by the Consumer Prices Index.
  4. DThe central bank’s decisions do not affect the government’s budget balance.
Show the answer

The answer is A.

TopicFinancial markets and monetary policyMonetary policy & interest rates

Question paper p.8Mark scheme p.3Open in the tool
Q161 mark
A government is concerned that aggregate demand is growing faster than the productive capacity of the economy. In addition, the deficit on its balance of payments on current account has worsened.
Which one of the following policies is most likely to both reduce aggregate demand and help improve the balance of payments position?
  1. AA reduction in interest rates to cut mortgage repayments and lower the exchange rate
  2. BA reduction in taxes on company profits to encourage more innovation and investment
  3. CAn increase in government borrowing to fund infrastructure spending and improve productivity
  4. DAn increase in tax rates and a reduction in welfare payments to create a budget surplus
Show the answer

The answer is D.

TopicHow the macroeconomy works (AD/AS)Aggregate demandBalance of paymentsFiscal policy & public finances

Question paper p.9Mark scheme p.3Open in the tool
Q171 mark
Figure 3 shows the demand (D) and supply (S) curves for a good in a market.
Figure 3
The diagram shows a shift of the supply curve for the good from S1 to S2 caused by the removal of a subsidy. All other things being equal, which one of the following is the most likely consequence of this action?
  1. AA change in the pattern of economic activity
  2. BA decrease in the budget surplus
  3. CA reduction in the balance of payments deficit
  4. DAn increase in direct tax revenue
Show the answer

The answer is A.

TopicFiscal policy and supply-side policiesFiscal policy & public finances

Question paper p.10Mark scheme p.3Open in the toolPractise the subsidy diagram
Q181 mark
Between October 2022 and July 2023, the value of the US Dollar (US$) in terms of the Swiss Franc (CHF) changed from US$ 1 = CHF 1 to US$ 1 = CHF 0.87.
All other things being equal, this means that
  1. Athe Swiss Franc and the US Dollar are no longer in equilibrium.
  2. Bthe Swiss Franc has become weaker against the US Dollar.
  3. Cthe volume of exports from Switzerland to the USA is likely to increase.
  4. Dthe volume of imports to Switzerland from the USA is likely to increase.
Show the answer

The answer is D.

TopicThe international economyExchange rates

Question paper p.11Mark scheme p.3Open in the tool
Q191 mark
Table 2 shows the indices of labour productivity and real GDP for Country A and Country B for 2 years.
Table 2
Index of labour productivity Index of real GDP Year 1 Year 2 Year 1 Year 2 Country A 100 110 100 120 Country B 100 105 100 110 Which one of the following can be concluded from the data?
  1. AIn Year 2, labour productivity and real GDP were higher in Country A than Country B.
  2. BIn Year 2, real GDP per capita was higher in Country A than Country B.
  3. CLabour productivity and real GDP grew more quickly in Country A than Country B over the period.
  4. DReal GDP per capita grew more quickly in Country A than in Country B.
Show the answer

The answer is C.

TopicMeasuring macroeconomic performanceGDP & national incomeProductivity & efficiency

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.