Paper 2: The National and Global Economy · 9EC0/02
Edexcel A A-level Paper 2, November 2021
All 15 written questions and 5 multiple choice questions from Edexcel A A-level Paper 2 (November 2021), The National and Global Economy. Case studies: Trade and aid in Rwanda. 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)
Which one of the following is a withdrawal from the circular flow of income?
- AExports
- BGovernment spending
- CInvestment
- DTaxation
Show the answer
The answer is D.
TopicAggregate demandNational income
Q1(b)
Calculate the total final increase in US aggregate demand as a result of the President’s ‘expansionary fiscal policies’, assuming no other changes.
Mark splitApplication 2
TopicAggregate demand
Q1(c)
Explain the impact of annual fiscal deficits on the US national debt.
Mark splitKnowledge 1Analysis 1
Q2(a)
Which one of the following diagrams illustrates the impact of an increase in net exports along a Keynesian long-run aggregate supply curve?
Show the answer
The answer is A. Open the question paper to read the options.
TopicAggregate demandAggregate supply
Q2(b)
Using the classical long-run aggregate supply curve, explain what will happen in the long run to real output if aggregate demand increases.
Mark splitKnowledge 1Analysis 1
TopicAggregate supplyAggregate demand
Q2(c)
Explain the likely impact on aggregate demand of a fall in average house prices.
Mark splitKnowledge 1Analysis 1
TopicAggregate demand
Q3(a)
Which one of the following has been the overall change in the British pound to US dollar exchange rate from 1st January 2018 to 1st January 2019?
- AAppreciation
- BDepreciation
- CDevaluation
- DRevaluation
Show the answer
The answer is B.
Q3(b)
Explain the likely impact of the change in the exchange rate of the pound shown in the graph from 1st January 2018 to 1st January 2019 on the UK current account of the balance of payments.
Mark splitKnowledge 2Application 1Analysis 1
TopicInternational economicsMeasures of economic performance
Q4(a)
Explain one likely impact of this project on aggregate supply in the UK.
Mark splitKnowledge 2Application 1Analysis 1
TopicAggregate supply
Q4(b)
Government spending on the High Speed 2 rail link is an example of which of the following?
- AAutomatic stabilisers
- BCapital expenditure
- CCurrent expenditure
- DTransfer payments
Show the answer
The answer is B.
TopicRole of the state in the macroeconomyAggregate demand
Q5(a)
From the data in the graph above, which one of the following may be deduced?
- AFrance’s rate of inflation was lower than Germany’s in 2017
- BGermany’s GDP is smaller than France’s in every year shown
- CIn every year that France’s GDP fell compared to the previous year,
- DThe GDP of both Germany and France fell between 2015 and 2016
Show the answer
The answer is C.
Q5(b)
Calculate the percentage change in Germany’s nominal GDP from 2016 to 2017.
Mark splitApplication 2
Q5(c)
Explain one reason why Purchasing Power Parities are used.
Mark splitKnowledge 1Analysis 1
Section B
Case study
Trade and aid in Rwanda
Extracts: A: Rwandan tariffs on imports of used clothing · B: Development in Rwanda
In the extracts: Rwanda, Rwandan, African, GDP, European Central, Kigali, Bank, Overseas Development Institute, Development in Rwanda Rwanda, Europe and North America
Q6(a)
Using the data in Figures 1 and 2, calculate the change in the level of total aid funding to Rwanda between 2011 and 2012.
Mark splitKnowledge 1Application 2Analysis 2
TopicEmerging and developing economies
Examiner insight
- What to cover
- Add the aid components for each year from both Figures, then subtract the 2011 total from the 2012 total. Show the working clearly and state the change with units and direction.
- Watch out
- Reading only one Figure, so part of total aid is missed, or giving a bare number with no units or sign.
Q6(b)
With reference to the information provided, examine two likely benefits for the Rwandan economy of the growth in the country’s population.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 2
Examiner insight
- What to cover
- Choose two, such as a larger labour force raising Rwandan productive capacity, and a bigger domestic market allowing economies of scale and stronger consumption. Chain each through to output and growth.
- Diagram
- LRAS or production possibility frontier shifting right to show a larger labour force raising productive capacity.
- Evaluation
- Depends on whether jobs and capital grow with the population. Rapid growth can cut GDP per head and strain schools, housing and farmland in Rwanda.
- Watch out
- Confusing a bigger population with higher GDP per capita, so the benefits are overstated.
Q6(c)
With reference to the information provided, assess the likely impact on the Rwandan economy of the change in aid received between 2017 and 2018.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicEmerging and developing economies
Examiner insight
- What to cover
- State from the data whether aid rose or fell, then trace the effect on government spending, AD, infrastructure and human capital, and on the savings gap and current account.
- Diagram
- AD/AS diagram showing AD shifting with the change in aid funded spending, and LRAS shifting if aid funds infrastructure.
- Evaluation
- Weigh the size of the change relative to Rwandan GDP, aid dependency and corruption risk, and the lag before human capital raises output. Judge how significant the change really is.
- Watch out
- Ignoring the data and writing a general essay on whether aid works.
Q6(d)
Discuss the likely impact on Rwandan consumers and clothing manufacturers of the increase in the tariff on imports of second-hand clothes. Use an appropriate diagram to support your answer.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
Examiner insight
- What to cover
- The tariff raises the price of imported second-hand clothes, so imports and quantity demanded fall. Rwandan clothing manufacturers gain output and revenue, consumers lose surplus, and government gains tariff revenue.
- Diagram
- Tariff diagram: domestic supply and demand, world supply, world price plus tariff; label the fall in imports, the rise in domestic output, government revenue and lost consumer surplus.
- Evaluation
- Weigh infant industry growth and jobs against higher prices for poor households and possible retaliation or lost trade access. Depends on price elasticity of demand and how fast domestic supply can expand.
- Watch out
- Drawing the tariff diagram but leaving the areas unlabelled, so the consumer and producer effects earn no analysis marks.
Q6(e)
Discuss policies, other than import tariffs, that the Rwandan government could use to develop its manufacturing industries.
Mark splitKnowledge 3Application 3Analysis 3Evaluation 6
Examiner insight
- What to cover
- Suggest subsidies, energy and transport infrastructure, education and training, export processing zones, attracting foreign direct investment, or a competitive exchange rate. Explain how each cuts unit costs or raises Rwandan capacity.
- Diagram
- Subsidy diagram or LRAS shifting right, labelling lower unit costs and higher output.
- Evaluation
- Weigh the cost and opportunity cost of spending from a small tax base, time lags and the risk of government failure. Conclude which policy suits Rwanda best.
- Watch out
- Slipping into tariffs or quotas, which the question rules out.
Section C
Q7
The European Central Bank introduced a new round of quantitative easing (QE) in March 2020, purchasing up to €750 billion of assets. The objective of this QE was to reduce the serious risks to the effectiveness of monetary policy resulting from a significant recession. The European Central Bank’s target for inflation remains at ‘below but close to 2%’. (Source adapted from: https://www.ecb.europa.eu/press/pr/date/2020/html/ecb. pr200318_1~3949d6f266.en.html) Evaluate the effectiveness of quantitative easing during ‘a significant recession’.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicMacroeconomic objectives and policyEconomic growthThe financial sector
Examiner insight
- What to cover
- Explain the mechanism: the central bank buys assets, asset prices rise and yields fall, banks gain liquidity, so lending, investment and wealth driven consumption rise. AD shifts right towards the 2% inflation target.
- Diagram
- AD/AS diagram with AD shifting right from a negative output gap; label the price level and real output.
- Evaluation
- Weigh weak transmission when confidence and bank lending are low, the liquidity trap, asset price inflation and rising wealth inequality, and the difficulty of unwinding. Depends on the depth of the recession. Judge.
- Watch out
- Describing QE as printing money for the government, which confuses it with fiscal policy.
Q8
It has been estimated that if climate change led to the world’s temperature rising 2.5 °C compared to the temperature in 2010, then global GDP per capita would be 15% lower by 2100. If temperatures rise by 4 °C compared to the temperature in 2010, then by 2100 global GDP per capita would decline by more than 30%. (Source adapted from: https://www.nature.com/articles/s41586-018-0071-9) Evaluate the potential trade-offs between environmental protection and other macroeconomic objectives.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicMeasures of economic performanceMacroeconomic objectives and policy
Examiner insight
- What to cover
- Show the conflicts: green taxes and regulation raise firms costs and shift SRAS left, so inflation rises and growth and employment fall, and international competitiveness weakens. Use the GDP per capita losses in the stimulus.
- Diagram
- AD/AS diagram with SRAS shifting left from higher environmental costs; label the higher price level and lower real output.
- Evaluation
- Weigh short run costs against long run gains, since unchecked warming cuts global GDP per head by 15% or more. Green investment may raise LRAS and jobs. Depends on time period. Conclude.
- Watch out
- Treating the environment as a standalone objective and never showing the trade-off with growth, inflation or employment.
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.