Paper 2: The National and Global Economy · 9EC0/02
Edexcel A A-level Paper 2, November 2020
All 14 written questions and 5 multiple choice questions from Edexcel A A-level Paper 2 (November 2020), The National and Global Economy. Case studies: Trade and Development Issues in Africa. 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.
Summer exams were cancelled, so this paper was sat in the autumn series. The paper itself is headed with the original May date.
Section A
Q1(a)
Total real UK GDP in 2016 was £200 000 million. With reference to the chart above, calculate the total real UK GDP for 2017. You are advised to show your working.
Mark splitApplication 2
Q1(b)
Explain the term ‘real gross domestic product’.
Mark splitKnowledge 2
Q1(c)
With reference to the chart on page 2, which one of the following is correct over the period shown?
- AGDP per capita was highest in 2014
- BInflation rose in 2015
- CThe UK economy grew at the fastest rate in 2014
- DThe UK economy was in recession in 2015
Show the answer
The answer is C.
Mark splitApplication 1
TopicMeasures of economic performanceEconomic growth
Q2(a)
If the value of the multiplier is 1.8, which one of the following will be the total increase in GDP from the redevelopment, assuming other things are equal?
- A£64 million
- B£115 million
- C£207 million
- D£230 million
Show the answer
The answer is C.
TopicAggregate demand
Q2(b)
Using the example above, explain how the multiplier process leads to an increase in aggregate demand.
Mark splitKnowledge 2Application 1Analysis 1
TopicAggregate demand
Q3(a)
Explain the role of the IMF in providing financial assistance to countries such as Argentina.
Mark splitKnowledge 2Application 1Analysis 1
TopicThe financial sector
Q3(b)
Which one of the following is most likely to happen to Argentina’s currency value as a result of capital flight, assuming it is operating with a floating exchange rate system?
- AAppreciation
- BDepreciation
- CDevaluation
- DRevaluation
Show the answer
The answer is B.
Q4(a)
Calculate the percentage change in the number of UK unemployed persons between April and July 2018. You are advised to show your working.
Mark splitApplication 2
Q4(b)
Explain one likely reason for the increase in the number of people unemployed in the UK over the time period shown.
Mark splitKnowledge 1Analysis 1
Q4(c)
Which one of the following types of unemployment is most likely to be caused by a technological change in an industry?
- ACyclical
- BReal wage
- CSeasonal
- DStructural
Show the answer
The answer is D.
Q5(a)
Draw an aggregate demand and aggregate supply diagram to show the likely impact of this new bridge on the price level and real output in the region.
Mark splitKnowledge 2Application 2
TopicAggregate demandAggregate supply
Q5(b)
Which one of the following would be most likely to solve a negative output gap problem in a domestic economy? An increase in
- Agovernment funding to the World Bank
- Bgovernment spending on foreign aid
- Cgovernment spending on public transport
- Dincome tax
Show the answer
The answer is C.
TopicAggregate demandNational incomeEmerging and developing economies
Section B
Case study
Trade and Development Issues in Africa
Extracts: A: Cheap cocoa is costing farmers dear · B: Sub‐Saharan Africa is becoming more integrated
In the extracts: African, Saharan Africa, Ivory Coast, Fairtrade, Nigeria and South Africa, Nigerian, Brazil, Cheap, Trade and Development Issues, African Continental Free
Q6(a)
With reference to Figure 1 and Extract A, explain the likely impact of a Fairtrade scheme on agricultural communities.
Mark splitKnowledge 2Application 2Analysis 1
TopicAggregate demand
Examiner insight
- What to cover
- Treat Fairtrade as a guaranteed minimum price above the free market price for cocoa. Higher and more stable farm incomes, as Extract A shows, fund investment in schools, health and farm equipment in cocoa communities.
- Diagram
- Optional minimum price diagram for cocoa: demand and supply, world equilibrium price, minimum price drawn above it, with the excess supply labelled.
- Watch out
- Students describe Fairtrade as charity and never link the guaranteed price to higher producer revenue and community investment.
Q6(b)
Examine two ways, apart from Fairtrade schemes, in which cocoa farmers could boost their incomes despite the falling price of cocoa.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 2
TopicAggregate demand
Examiner insight
- What to cover
- Choose two routes, such as processing cocoa into chocolate to add value, diversifying into other crops, or forming a cooperative to raise bargaining power. Chain each to higher revenue or lower unit costs.
- Evaluation
- Depends on farmers access to capital and training, and on the time needed to diversify. Demand for cocoa is price inelastic, so extra output may cut price and revenue.
- Watch out
- Offering two versions of the same idea, or drifting back into Fairtrade, which this question excludes.
Q6(c)
Discuss the problems for the Ivory Coast of dependency on cocoa for a large proportion of their exports. Refer to Figure 2 in your answer.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
TopicAggregate demand
Examiner insight
- What to cover
- Link cocoa price volatility in Figure 2 to unstable export revenue, a swinging current account, unpredictable government tax revenue and weak investment. Add the long run decline in commodity terms of trade.
- Diagram
- Commodity market with price inelastic demand and supply and a shifting supply curve, showing how small supply changes cause large price swings.
- Evaluation
- Weigh the problems against cocoa jobs, export earnings and the Ivory Coast comparative advantage. Depends on the size of price swings, buffer stocks or a stabilisation fund, and how fast diversification is possible.
- Watch out
- Listing general problems of developing countries without tying each one to reliance on a single commodity.
Q6(d)
Nigeria is considering joining the African Continental Free Trade Agreement. Assess policies the Nigerian government could use in response to the concerns of the country’s ‘manufacturers and trade unions’ (Extract B paragraph 3) if they join this trading bloc.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
Examiner insight
- What to cover
- The concern is import competition destroying infant manufacturing and jobs. Offer Nigerian policies such as subsidies, retraining, infrastructure and energy investment, and explain how each cuts unit costs or eases the adjustment for workers.
- Diagram
- Subsidy diagram: supply shifting right, lower price, higher output, with the subsidy per unit and total cost to government labelled.
- Evaluation
- Weigh the taxpayer cost and opportunity cost, the risk of government failure and dependency, against trade creation gains from joining. Depends on how quickly Nigerian firms can raise productivity.
- Watch out
- Describing the costs of joining a trading bloc instead of assessing specific Nigerian government policy responses.
Q6(e)
Discuss the likely benefits of increased economic integration for sub‐Saharan African countries.
Mark splitKnowledge 3Application 3Analysis 3Evaluation 6
TopicAggregate demand
Examiner insight
- What to cover
- Build a chain from integration to trade creation, comparative advantage, a larger market allowing economies of scale, more foreign direct investment, faster growth, higher incomes and more tax revenue for development.
- Diagram
- Aggregate demand and aggregate supply diagram showing exports and investment shifting AD right and LRAS right over time.
- Evaluation
- Weigh trade diversion, lost tariff revenue and uneven gains between members. Depends on transport links, existing tariff levels and political stability. End with a judgement on the net benefit.
- Watch out
- Writing about globalisation in general rather than regional integration between sub-Saharan African countries.
Section C
Q7
In 2018, the United States Government cut the corporation tax rate (tax on company profits) from 35% to 21%. Income tax rates for US citizens were also reduced: for example, the top rate of income tax was cut from 39.6% to 37%. (Source adapted from: https://www.nytimes.com/) Evaluate the likely impact of cutting tax rates as a policy to increase economic growth.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicEconomic growth
Examiner insight
- What to cover
- Show the demand side first: lower income tax raises disposable income and consumption, lower corporation tax raises retained profit and investment, with a multiplier effect. Then add supply side incentives to work and invest.
- Diagram
- AD/AS diagram with AD shifting right and LRAS shifting right; label the price level, real output and the output gap.
- Evaluation
- Weigh multiplier size, spare capacity, crowding out, a bigger fiscal deficit and worse inequality. Depends on the marginal propensity to consume, business confidence and time lags. Give a supported final judgement.
- Watch out
- Asserting that the Laffer curve proves tax cuts raise revenue, without saying this depends on the starting tax rate.
Q8
In terms of income distribution and wealth distribution Brazil is one of the most unequal countries in the world. Its income Gini coefficient is 0.449 and it is ranked number 2 in the world for its wealth inequality. Evaluate possible economic causes of income and wealth inequalities within a country such as Brazil. (Source: https://www.gfmag.com/)
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
Examiner insight
- What to cover
- Explain causes: wage gaps from skills and education, unemployment, regressive tax and benefit systems, unequal land and asset ownership, and returns on capital outgrowing wages. Apply to the Brazilian Gini of 0.449.
- Diagram
- Lorenz curve with the line of perfect equality and the Brazilian curve below it; label the areas used to calculate the Gini coefficient.
- Evaluation
- Weigh which cause matters most and whether income inequality drives wealth inequality or the reverse. Consider time period, the informal sector and the incentives trade-off. Reach a supported judgement.
- Watch out
- Drifting into the effects of inequality or into policies to reduce it, when the question asks only for causes.
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.