Paper 2: The UK Economy – Performance and Policies · 8EC0/02
Edexcel A AS Paper 2, June 2024
All 15 written questions and 5 multiple choice questions from Edexcel A AS Paper 2 (June 2024), The UK Economy – Performance and Policies. Case studies: UK monetary policy since the Global Financial Crisis of 2008. Each question shows its marks and topic, with an examiner insight on 6, and opens the question paper and mark scheme at the right page.
Section A
- AActual economic growth
- BNegative output gap
- CPositive output gap
- DPotential economic growth
Show the answer
The answer is A.
TopicNational incomeEconomic growthMeasures of economic performance
TopicAggregate demand
TopicAggregate demand
- A0.2
- B0.8
- C1.3
- D5.0
Show the answer
The answer is D.
TopicAggregate demand
Show the answer
The answer is C. Open the question paper to read the options.
TopicLabour market
TopicLabour market
TopicAggregate demand
TopicAggregate demandAggregate supply
- AA decrease in business expectations
- BA decrease in government regulations
- CAn increase in the demand for exports
- DAn increase in the rate of economic growth
Show the answer
The answer is A.
TopicAggregate demandEconomic growth
Show the answer
The answer is B. Open the question paper to read the options.
Section B
Case study
UK monetary policy since the Global Financial Crisis of 2008
Extracts: A: Has monetary policy worked?
In the extracts: MPC, Global Financial Crisis, Inflation, Monetary Policy Committee, Great Depression, Bank of England, USA Federal, Households, Conversely, Partington
TopicAggregate demandAggregate supply
Examiner insight
- What to cover
- Higher real wages raise disposable income and consumption, shifting AD right. They also raise firms' labour costs, shifting SRAS left. Show both effects on output and the price level.
- Diagram
- AD/AS: AD shifts right and SRAS shifts left. Label price level, real GDP and each new equilibrium.
- Evaluation
- The net effect depends on which shift is larger, on whether productivity growth offsets the wage cost, on spare capacity and on the time period.
- Watch out
- Real wages are wages adjusted for inflation, so a nominal rise below inflation is a real cut.
TopicEconomic growth
Examiner insight
- What to cover
- Give two developed characteristics using the data, such as two consecutive quarters of falling real GDP, rising cyclical unemployment, falling investment and confidence, or a negative output gap.
- Watch out
- The fall must be in real GDP, and the two characteristics must be genuinely different.
TopicMacroeconomic objectives and policyMeasures of economic performanceAggregate demand
Examiner insight
- What to cover
- A weaker pound raises the sterling price of imported energy, raw materials and finished goods. Firms' costs rise and they pass this on, so imported cost-push inflation follows.
- Watch out
- Only one reason is credited, and it must run through the higher sterling cost of imports.
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Set out factors the MPC weighs against the 2% CPI target: inflation expectations, the output gap and growth, unemployment and spare capacity, the exchange rate, credit growth and global conditions.
- Evaluation
- Judge which factors carry most weight and how reliable the forecasts are. Depends on lags of up to two years and on whether a shock looks temporary or persistent.
- Watch out
- The MPC hits a 2% CPI target set by the Chancellor; it does not choose the target itself.
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Show expansionary fiscal or monetary policy shifting AD right, raising growth and employment but risking demand-pull inflation, a wider current account deficit and a larger budget deficit.
- Diagram
- AD/AS: AD shifts right toward LRAS along an upward sloping SRAS. Label the rise in price level and real GDP.
- Evaluation
- Whether conflicts appear depends on spare capacity, the size of the stimulus and the elasticity of AS. With a large negative output gap, output can rise with little inflation.
- Watch out
- Name the specific objectives that clash rather than asserting that inflation must rise.
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Judge MPC performance from 2008 to 2019 against the 2% CPI target and the secondary aim of supporting growth and employment. Use the data on inflation, Bank Rate and quantitative easing.
- Diagram
- AD/AS: loose monetary policy shifts AD right after 2008. Label the price level and real GDP.
- Evaluation
- Weigh target misses caused by oil prices and the weaker pound against the recovery in employment. Depends on shocks outside MPC control, on policy lags and on the limits of near zero rates.
- Watch out
- Judge the whole 2008 to 2019 period against the target, not one year in isolation.
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.