Paper 2: The National and Global Economy · 9EC0/02
Edexcel A A-level Paper 2, June 2022
All 12 written questions and 5 multiple choice questions from Edexcel A A-level Paper 2 (June 2022), The National and Global Economy. Case studies: UK Government spending 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)
Using the information above, calculate the total reduction in the UK’s GDP from a fall in government spending of £20 million.
Mark splitApplication 3Analysis 1
TopicAggregate demand
Q1(b)
Which one of the following is an injection into the circular flow of income?
- AImports
- BInvestment
- CSavings
- DTaxation
Show the answer
The answer is B.
TopicNational incomeAggregate demand
Q2(a)
With reference to the chart, which one of the following is true? Average UK house prices:
- Afell in August 2020
- Bfell in November 2018
- Crose the fastest in May 2021
- Dstayed constant in 2018
Show the answer
The answer is C.
Q2(b)
With reference to the chart on the previous page, explain the likely impact of an increase in average house prices on UK consumption.
Mark splitKnowledge 2Application 1Analysis 1
TopicAggregate demand
Q3(a)
With reference to the chart above, explain the likely impact of a reduction in the base interest rate on UK investment.
Mark splitKnowledge 2Application 1Analysis 1
TopicAggregate demandMacroeconomic objectives and policy
Q3(b)
Which one of the following would be most likely to result from lower base interest rates?
- Afall in:
- Bthe external value of the pound
- Cthe level of employment
- Dthe rate of economic growth
Show the answer
The answer is B.
TopicEconomic growthMacroeconomic objectives and policy
Q4(a)
At point Z on the diagram, which one of the following is likely to occur? An increase in:
- Aabsolute poverty
- Bbudget deficit
- Ccyclical unemployment
- Dinflation
Show the answer
The answer is D.
TopicMacroeconomic objectives and policyPoverty and inequality
Q4(b)
With reference to the graph, explain the difference between automatic stabilisers and discretionary fiscal policy.
Mark splitKnowledge 3Application 1
TopicMacroeconomic objectives and policyRole of the state in the macroeconomy
Q5(a)
With reference to the information above, explain one role of financial markets.
Mark splitKnowledge 2Application 1Analysis 1
TopicThe financial sector
Q5(b)
Which one of the following would be a risk if ‘only minimal checks were made on borrowers’ in this loan scheme?
- AAsymmetric information
- BCrowding out
- CMarket rigging
- DSpeculation
Show the answer
The answer is A.
TopicThe financial sectorRole of the state in the macroeconomy
Section B
Case study
UK Government spending and inequality
Extracts: A: Regional inequality in the UK · B: Public sector spending on infrastructure · C: Options for UK tax rises in the future
In the extracts: London, Gini, United States, Aberystwyth, England, Public, Wales, China, GDP, Haxby in Yorkshire and Blyth
Q6(a)
Using a Lorenz curve diagram, explain how income inequality is measured using the Gini coefficient. Refer to Extract A in your answer.
Mark splitKnowledge 2Application 2Analysis 1
Examiner insight
- What to cover
- Define the Lorenz curve as cumulative share of income plotted against cumulative share of population. The Gini is area A divided by area A plus B, running from 0 to 1, with higher values meaning more inequality.
- Diagram
- Lorenz curve: 45 degree line of perfect equality, the UK curve bowed below it, area A between them and area B beneath the curve, axes in cumulative percentages.
- Watch out
- Drawing the curve above the line of equality, or quoting a Gini value without explaining the areas it comes from.
Q6(b)
With reference to Figure 1 and Extract A, examine two likely causes of income inequality within the UK.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 2
Examiner insight
- What to cover
- Pick two causes, such as differences in skills and education widening wage differentials, and unemployment or low paid part time work. Use the Figure 1 data on the UK income distribution.
- Diagram
- Two labour market diagrams: limited supply of skilled labour giving a high wage against abundant unskilled labour at a low wage.
- Evaluation
- Depends on the size of each cause and the time period, since education raises wages only with a long lag. Taxes and benefits offset part of market inequality.
- Watch out
- Explaining the consequences of inequality rather than its causes, and quoting no data from Figure 1.
Q6(c)
With reference to Figure 2, assess whether an increase in real income improves subjective happiness within the UK.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicMeasures of economic performance
Examiner insight
- What to cover
- Explain that higher real income raises consumption and material living standards, so reported wellbeing should rise. Use Figure 2 to say whether the relationship holds and whether extra income adds less happiness.
- Evaluation
- Weigh the Easterlin paradox, relative income and diminishing marginal utility, plus longer hours and stress. Happiness data are subjective and hard to compare. Judge how strong the link really is.
- Watch out
- Ignoring Figure 2 and simply asserting that money cannot buy happiness with no economic reasoning.
Q6(d)
With reference to Extract C and your own knowledge, discuss methods the UK government could use to increase tax revenue.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
TopicMacroeconomic objectives and policyPoverty and inequality
Examiner insight
- What to cover
- Suggest raising income tax or VAT rates, widening the base by freezing thresholds, higher corporation or wealth taxes, and cutting avoidance. Link each method to the revenue gain and the behavioural response.
- Diagram
- Indirect tax diagram: supply shifting up by the tax, with the tax revenue area and the consumer and producer burden labelled. A Laffer curve also works.
- Evaluation
- Weigh disincentive effects, avoidance and emigration, and the regressive impact of VAT. Depends on price elasticity of demand and current tax rates. Conclude which method raises most revenue.
- Watch out
- Explaining why the government needs more revenue instead of discussing the methods of raising it.
Q6(e)
With reference to Extract B, discuss the benefits of an increase in infrastructure spending on the UK economy. Use an aggregate demand and aggregate supply diagram to support your answer.
Mark splitKnowledge 3Application 3Analysis 3Evaluation 6
TopicAggregate demandAggregate supply
Examiner insight
- What to cover
- Infrastructure spending raises AD directly, then the multiplier raises income and consumption further. Better transport and broadband cut firms costs and raise productivity, shifting LRAS right, so growth comes without inflation.
- Diagram
- AD/AS diagram with AD shifting right and LRAS shifting right; label the price level, real output and the multiplied AD shift.
- Evaluation
- Weigh opportunity cost, higher borrowing, long time lags and crowding out. Depends on the multiplier size, spare capacity and whether projects are well chosen. Give a clear judgement.
- Watch out
- Shifting AD right only and forgetting the long run supply side gain that infrastructure is meant to deliver.
Section C
Q7
Both China and the United States have been gradually increasing the tariffs imposed on each other’s exports as their trade dispute continues. The IMF estimated that the trade dispute between China and the United States would reduce global GDP growth by 0.8 percentage points by the end of 2020. (Source: adapted from https://www.theguardian.com/business/2019/oct/15/imf-recession- world-growth-forecast-central-banks) Evaluate the likely impact of an increase in protectionism on the global economy.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicInternational economicsEconomic growth
Examiner insight
- What to cover
- Tariffs raise import prices, cut trade volumes and divert trade away from comparative advantage. Global output and AD fall and supply chain costs rise, consistent with the IMF estimate of 0.8 percentage points lost growth.
- Diagram
- Tariff diagram: world price, world price plus tariff, falling imports, government revenue and the two welfare loss triangles labelled.
- Evaluation
- Weigh protection of infant industries, jobs and strategic sectors, plus tariff revenue. Depends on retaliation, elasticity of demand for traded goods and time period. Reach a supported judgement.
- Watch out
- Only narrating the US and China dispute and never analysing the effects on the wider global economy.
Q8
With global economic growth slowing and inequality rising, the case against globalisation is strengthening. But there are also many benefits to globalisation. Global trade and international trade agreements allow countries to focus on their strengths and share expertise, as well as reducing risk through diversification. (Source: adapted from https://www.ft.com/content/ 7b365844-9b75-11ea-adb1-529f96d8a00b) Evaluate the likely impact of globalisation on the global economy.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicInternational economicsEconomic growthPoverty and inequality
Examiner insight
- What to cover
- Explain the gains first: specialisation by comparative advantage, lower prices, economies of scale, foreign direct investment, technology transfer, faster growth and falling absolute poverty. Then build the costs.
- Diagram
- AD/AS diagram showing LRAS shifting right and a lower price level, or a production possibility frontier shifting outward.
- Evaluation
- Weigh rising inequality, structural unemployment, environmental damage and loss of sovereignty against growth. Depends on the country, the time period and whether gains are redistributed. Conclude.
- Watch out
- Listing facts about globalisation with no chain of reasoning to global output, prices or living standards.
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.