Paper 2: The National and Global Economy · 9EC0/02
Edexcel A A-level Paper 2, June 2024
All 13 written questions and 5 multiple choice questions from Edexcel A A-level Paper 2 (June 2024), The National and Global Economy. Case studies: The UK Economy. 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)
With reference to the chart above, which one of the following is correct?
- Afell in 2015
- Bfell throughout the time period shown
- Cwere the highest in Q1 2017
- Dwere the highest in Q2 2020
Show the answer
The answer is D.
Q1(b)
In Q4 of 2015 average household disposable income was £26 300. Calculate the total amount of money saved by the average household in Q4 of 2015.
Mark splitApplication 2
Q1(c)
Explain one likely reason for the change in total household savings from Q1 2020 to Q2 2020.
Mark splitKnowledge 1Analysis 1
Q2(a)
Which one of the following is the percentage point fall in investment between April 2020 and July 2020?
- A0.1
- B0.6
- C2.1
- D8.9
Show the answer
The answer is C.
TopicAggregate demand
Q2(b)
With reference to the data, explain one likely effect of the fall in investment in 2020.
Mark splitKnowledge 2Application 1Analysis 1
TopicAggregate demand
Q3(a)
With reference to the information above, explain what is meant by ‘market rigging’.
Mark splitKnowledge 2Application 1Analysis 1
TopicThe financial sector
Q3(b)
Which one of the following is a role of financial markets? To:
- Adiscourage saving
- Bpromote moral hazard
- Cprovide forward markets
- Drestrict free trade
Show the answer
The answer is C.
TopicThe financial sectorInternational economics
Q4(a)
Which one point on the trade cycle diagram above illustrates a boom?
Show the answer
The answer is C. Open the question paper to read the options.
TopicEconomic growth
Q4(b)
In July 2020 a survey estimated that the marginal propensity to consume in the UK was 0.1. (Source: adapted from https://ifs.org.uk/uploads/WP202035-MPCs-through- COVID-spending-saving-and-private-transfers.pdf ) Calculate the total increase in aggregate demand from an increase in government spending of £60 million.
Mark splitKnowledge 2Application 2
TopicAggregate demand
Q5(a)
Explain the likely impact of this tariff on the steel market in the US.
Mark splitKnowledge 2Application 1Analysis 1
Q5(b)
Which one of the following is likely to give the US a comparative advantage in steel production? An increase in:
- Acorporation tax in the US
- Beconomic growth in the US
- Cthe productivity of US steel workers
- Dthe wages of US steel workers
Show the answer
The answer is C.
TopicEconomic growthInternational economics
Section B
Case study
The UK Economy
Extracts: A: Freeze in income tax thresholds from 2023 onwards · B: UK Monetary Policy Decisions
In the extracts: Income, GDP, Brazil, Wales and Northern Ireland, Bank of England Mervyn, UK Monetary Policy, Autumn Statement, Central Bank, Personal Up, Additional
Q6(a)
With reference to Figure 4 and your own knowledge, explain the distinction between a progressive and a regressive tax.
Mark splitKnowledge 2Application 2Analysis 1
Examiner insight
- What to cover
- A progressive tax takes a rising proportion of income as income rises, such as UK income tax. A regressive tax takes a falling proportion, such as VAT. Use Figure 4 to identify which is which.
- Watch out
- Defining progressive as simply paying more tax, rather than paying a higher proportion of income.
Q6(b)
With reference to Figure 4 and Extract A, examine the likely impact of the ‘freeze in income tax thresholds’ (Extract A line 1) on aggregate demand.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 2
TopicAggregate demand
Examiner insight
- What to cover
- Frozen thresholds cause fiscal drag, as rising nominal wages pull workers into higher tax bands. Disposable income falls, so consumption falls and AD shifts left, with a multiplier effect on output.
- Diagram
- AD/AS diagram with AD shifting left; label the lower real output and lower price level.
- Evaluation
- Depends on the size of the tax rise relative to income, the marginal propensity to consume, and whether households save less to protect spending. Other AD components may offset it.
- Watch out
- Treating the freeze as no tax change because rates are unchanged, which misses fiscal drag entirely.
Q6(c)
Assess whether a fiscal deficit and national debt should be a cause for concern for the UK government.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicRole of the state in the macroeconomy
Examiner insight
- What to cover
- Set out the concerns: rising debt interest crowds out other spending, heavy borrowing can raise interest rates and crowd out private investment, and future taxpayers carry the burden and credit rating risk.
- Diagram
- AD/AS diagram showing deficit financed spending shifting AD right, or a loanable funds diagram showing higher interest rates.
- Evaluation
- Weigh the deficit supporting AD and jobs in a downturn, the debt to GDP ratio rather than the absolute figure, low UK borrowing costs, and whether borrowing funds investment. Judge.
- Watch out
- Confusing the fiscal deficit, a yearly flow, with the national debt, the accumulated stock.
Q6(d)
With reference to Extract B, discuss the use of quantitative easing in preventing deflation.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
TopicMeasures of economic performanceMacroeconomic objectives and policy
Examiner insight
- What to cover
- QE buys assets, so yields fall, the money supply and asset prices rise, and lending, consumption and investment increase. AD shifts right, raising the price level and stopping a deflationary spiral.
- Diagram
- AD/AS diagram with AD shifting right below full capacity; label the rise in the price level and in real output.
- Evaluation
- Weigh weak transmission when confidence is low, the liquidity trap, asset price inflation and inequality, and time lags. Depends on whether deflation is demand or supply driven. Conclude.
- Watch out
- Never explaining why deflation is harmful, so the purpose of preventing it is left unproven.
Q6(e)
Discuss supply-side policies the UK government could introduce to stimulate economic growth.
Mark splitKnowledge 3Application 3Analysis 3Evaluation 6
TopicEconomic growthMacroeconomic objectives and policy
Examiner insight
- What to cover
- Choose market based policies such as tax cuts and deregulation, and interventionist ones such as education, training and infrastructure. Show each raising UK productivity and shifting LRAS right, so output grows without inflation.
- Diagram
- AD/AS diagram with LRAS shifting right; label higher real output and a lower price level.
- Evaluation
- Weigh cost and opportunity cost, long time lags, uncertain results and rising inequality from market based measures. Depends on whether the economy is demand or supply constrained. Conclude.
- Watch out
- Offering demand side measures such as interest rate cuts and labelling them supply side policies.
Section C
Q7
In 2021 Brazil’s current account deficit on the balance of payments was US$46.12 billion. The Central Bank of Brazil intervened to sell its own currency, the real, on September 23rd 2022. This was the first time it has intervened in foreign currency markets since December 2021. (Source adapted from: https://www.statista.com/statistics and https://www.centralbanking. com/central-banks/reserves/foreign-exchange/7953193/brazil-makes-first-fx-intervention- of-the-year) Evaluate macroeconomic policies that could be used to reduce a current account deficit. Refer to a country of your choice in your answer.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicMeasures of economic performanceInternational economicsThe financial sector
Examiner insight
- What to cover
- Cover expenditure switching through depreciation or protectionism, expenditure reducing through tighter fiscal or monetary policy, and supply side policies raising competitiveness. Apply each to a named country such as Brazil.
- Diagram
- Foreign exchange diagram showing the real depreciating, or AD/AS with AD shifting left; label price and quantity.
- Evaluation
- Weigh the Marshall Lerner condition, the J curve lag, imported inflation, lost growth and jobs from deflationary policy, and retaliation. Judge which policy best suits the country chosen.
- Watch out
- Failing to name and apply a specific country, which throws away the application marks.
Q8
In 2020, exports as a share of world GDP were 12% higher than in 2000, almost twice as high as 50 years ago. (Source adapted from: https://www.dhl.com/content/dam/dhl/global/dhl-spotlight/ documents/pdf/2021-gci-update-report.pdf ) Evaluate the possible factors contributing to globalisation.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
Examiner insight
- What to cover
- Explain the drivers: cheaper container shipping, better communications technology, trade liberalisation through the WTO, the growth of multinationals and global supply chains, and deregulated capital flows. Link each to rising exports as a share of world GDP.
- Evaluation
- Weigh which factor matters most, and whether globalisation has stalled as protectionism and supply chain disruption grew. Consider time period and the difficulty of isolating one cause. Conclude.
- Watch out
- Drifting into the effects of globalisation rather than the factors that caused it.
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.