Paper 2: The National and Global Economy · 9EC0/02
Edexcel A A-level Paper 2, June 2018
All 15 written questions and 5 multiple choice questions from Edexcel A A-level Paper 2 (June 2018), The National and Global Economy. Case studies: Globalisation and Inequality. Each question shows its marks and topic, with an examiner insight on 7, and opens the question paper and mark scheme at the right page.
Section A
Q1(a)
Which one of the following is most likely to decrease as a result of CETA?
- AEconomic growth in EU countries
- BExports from EU countries to Canada
- CImports from Canada to EU countries
- DTariffs on European exports to Canada
Show the answer
The answer is D.
TopicEconomic growthInternational economics
Q1(b)
With reference to the theory of comparative advantage, explain how CETA may increase the GDP of both the EU and Canada.
Mark splitKnowledge 2Application 1Analysis 1
Q2(a)
Which one of the following would be most likely to cause aggregate demand to increase?
- Afall in:
- Bnet trade (X–M)
- Cthe marginal propensity to consume
- Dthe marginal propensity to save
Show the answer
The answer is D.
TopicAggregate demand
Q2(b)
Draw an aggregate demand and aggregate supply diagram illustrating the likely impact of a rise in interest rates on the price level and real output.
Mark splitKnowledge 2Application 2
TopicAggregate demandAggregate supplyMacroeconomic objectives and policy
Q3(a)
Calculate the percentage change in the United States current account deficit on the balance of payments between 1998 and 2006.
Mark splitApplication 2
TopicMeasures of economic performanceInternational economics
Q3(b)
Explain the term ‘current account of the balance of payments’.
Mark splitKnowledge 2
TopicMeasures of economic performanceInternational economics
Q3(c)
Using the chart on page 6, which one of the following may be inferred about the United States balance of payments?
- AThe current account deficit decreased between 2001 and 2006
- BThe current account surplus increased between 2001 and 2006
- CThere was a current account deficit for the entire period shown
- DThere was a current account surplus for the entire period shown
Show the answer
The answer is C.
TopicMeasures of economic performanceInternational economics
Q4(a)
Explain one likely reason why the 2019 budget surplus target was abandoned.
Mark splitKnowledge 1Analysis 1
Q4(b)
Explain the likely impact of abandoning the budget surplus target on the UK national debt.
Mark splitKnowledge 1Analysis 1
TopicMacroeconomic objectives and policyRole of the state in the macroeconomy
Q4(c)
If a government takes decisions to target a budget surplus, this is an example of:
- Acontractionary monetary policy
- Bdiscretionary fiscal policy
- Cexpansionary fiscal policy
- Dexpansionary monetary policy
Show the answer
The answer is B.
Q5(a)
Explain one likely reason why consumer demand for bank loans has increased.
Mark splitKnowledge 1Analysis 1
Q5(b)
Which one of the following is most likely to result from an increase in bank lending to individuals?
- AAn improvement in net trade (X–M)
- BAn increase in consumption
- CAn increase in unemployment
- DDeflation
Show the answer
The answer is B.
TopicMeasures of economic performanceAggregate demand
Q5(c)
Calculate the index number for the total value of bank lending in 2016 using 2015 as a base year.
Mark splitApplication 2
Section B
Case study
Globalisation and Inequality
Extracts: A: Lessons from globalisation · B: Tackling inequality
In the extracts: East Asia and Sub-Saharan, Africa, Globalisation and Inequality, Sub-Saharan Africa East, Bank of England, European Union, UK Chancellor, Proportion, World War, Achieving
Q6(a)
With reference to the information provided, explain the distinction between absolute poverty and relative poverty.
Mark splitKnowledge 2Application 2Analysis 1
Examiner insight
- What to cover
- Define absolute poverty as income below a fixed subsistence line, such as the international dollar per day measure. Define relative poverty as income below a set share of median income in that country. Apply the data given.
- Watch out
- Giving two textbook definitions without applying them to the poverty figures provided.
Q6(b)
With reference to the information provided and your own knowledge, examine two factors that might explain the differing rates of decline in absolute poverty in East Asia and Sub-Saharan Africa.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 2
Examiner insight
- What to cover
- Compare two factors. East Asia gained from export led manufacturing, inward FDI and investment in education. Sub Saharan Africa faced primary product dependency, weak institutions, conflict and poor infrastructure, slowing the fall in poverty.
- Evaluation
- Judge which factor explains more of the gap. Depends on the time period and on data quality, and regional averages hide wide differences between individual countries.
- Watch out
- Listing general causes of poverty without comparing the two regions the question names.
Q6(c)
With reference to Extract A, discuss two macroeconomic policies, apart from protectionism, that a government could use to reduce the negative effects of globalisation.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
Examiner insight
- What to cover
- Choose two policies, such as retraining and education spending to cut structural unemployment, and progressive taxation with benefits to redistribute income. Explain the chain from each policy to the named negative effect of globalisation.
- Diagram
- AD and LRAS diagram for the supply side policy. Show LRAS shifting right, giving higher real output and a lower price level. Label both axes.
- Evaluation
- Weigh effectiveness against opportunity cost, time lags and the risk of deterring inward investment. Depends on government finances and on how mobile workers and firms are.
- Watch out
- Discussing tariffs or quotas when the question explicitly excludes protectionism.
Q6(d)
Assess the view that ‘some level of inequality is desirable to maintain an appropriate incentive structure in the economy’ (Extract B, lines 19 and 20).
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
Examiner insight
- What to cover
- Explain the incentive argument in Extract B. Wage differentials reward skills, effort and risk taking, so people train, work harder and start businesses. This raises labour mobility, productivity and economic growth.
- Evaluation
- Weigh against lower social mobility, poverty traps, and weaker consumption because low income households have a higher marginal propensity to consume. Depends on how wide the income gap already is.
- Watch out
- Arguing all inequality is bad without engaging with the incentive argument the question quotes.
Q6(e)
Discuss the role of the financial sector in the growth and development of developing countries.
Mark splitKnowledge 3Application 3Analysis 3Evaluation 6
TopicEmerging and developing economiesThe financial sector
Examiner insight
- What to cover
- Explain the financial sector's functions: mobilising savings into investment, providing credit and microfinance to small firms, sharing risk through insurance, and easing trade payments. Link each to capital accumulation, productivity and development.
- Diagram
- AD and LRAS diagram. Show investment shifting AD right and LRAS right, giving higher real output and greater productive capacity. Label the price level and real GDP.
- Evaluation
- Weigh against financial instability, speculation, asymmetric information and moral hazard, and limited rural access. Depends on regulation and institutional quality. Compare with aid, education or infrastructure instead.
- Watch out
- Describing what banks do without linking it to growth and development outcomes.
Section C
Q7
In 2016 the UK Chancellor of the Exchequer announced that the government would spend an extra £23 billion on innovation and infrastructure over the following five years. Evaluate the likely economic effects of this planned increase in government expenditure.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
Examiner insight
- What to cover
- Cover both sides. Government spending raises AD, with a multiplier effect lifting output and employment. Then explain that better infrastructure and innovation raise productivity and shift LRAS right over the long run.
- Diagram
- AD and LRAS diagram. Show AD shifting right with the multiplier, then LRAS shifting right, giving higher real output with limited pressure on the price level. Label both shifts.
- Evaluation
- Weigh against the larger fiscal deficit, crowding out of private investment, long construction lags and an uncertain multiplier size. Depends on spare capacity and project quality. Give a judgement.
- Watch out
- Treating the extra £23 billion only as a demand injection and ignoring the supply side effects.
Q8
The British pound fell by over 10% to a 30-year low against the US dollar after the UK voted to leave the European Union. To what extent will this depreciation impact on future economic growth in the UK?
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicEconomic growthInternational economics
Examiner insight
- What to cover
- Explain the chain: a weaker pound makes UK exports cheaper abroad and imports dearer, so net exports rise, AD shifts right and real GDP grows, with a multiplier effect on jobs and incomes.
- Diagram
- AD and AS diagram. Show AD shifting right from higher net exports, giving higher real output and a higher price level. Label the output gap and the slope of SRAS.
- Evaluation
- Weigh against the Marshall Lerner condition, the J curve lag, dearer imported raw materials shifting SRAS left, and lower real incomes. Depends on elasticities and on business confidence after the vote.
- Watch out
- Assuming exports automatically rise without testing the Marshall Lerner condition or the import cost effect.
Question text is quoted from the question papers, © Pearson Edexcel, 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.