Edexcel A · Theme 4: A global perspective · 4.5 Role of the state in the macroeconomy

Edexcel A Economics past paper questions: Role of the state in the macroeconomy

Every Edexcel A question on Role of the state in the macroeconomy from 2017 to 2024: 2 essays, 3 data response questions, 3 short answer questions and 2 multiple choice questions. It covers Macroeconomic objectives and policy, Aggregate demand and Poverty and inequality. Each question links to its paper, mark scheme and examiner report.

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SubtopicsMacroeconomic objectives and policy 1Aggregate demand 1Poverty and inequality 1

Essay questions on role of the state in the macroeconomy

A-level Paper 2, June 2019, Q8Optional25 marks
Japan’s budget deficit for 2017/18 is expected to be 4.6% of GDP. Its national debt is forecast to increase to above 250% of GDP by 2019. Evaluate the impact of a large fiscal deficit and national debt on a country’s economy.

Examiner insight

What to cover
Explain that deficit spending raises AD and real output in the short run with a multiplier. Then explain rising debt interest payments, their opportunity cost, crowding out of private investment, and a possible credit rating downgrade.
Watch out
Confusing the deficit, a yearly flow, with the national debt, the stock built up over time.
Question paper p.28Mark scheme p.20Examiner report p.56Open in the tool
A-level Paper 3, June 2017, Q2(e)Optional25 marks

Case study: The UK economy

With reference to the information provided and your own knowledge, evaluate the microeconomic and macroeconomic effects of a government policy of cutting public expenditure rather than raising taxes as a means of reducing a fiscal deficit.

Examiner insight

What to cover
Cover both sides. Macro: spending cuts shift AD left with a larger multiplier than tax rises, cutting growth and employment. Micro: public sector jobs, benefit recipients and specific markets are hit, worsening inequality.
Watch out
Discussing only spending cuts, when the question requires them to be weighed against raising taxes.
Question paper p.22Mark scheme p.21Examiner report p.52Open in the tool

Data response questions on role of the state in the macroeconomy

A-level Paper 2, June 2024, Q6(c)Assess10 marks

Case study: The UK Economy

Assess whether a fiscal deficit and national debt should be a cause for concern for the UK government.

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.
Watch out
Confusing the fiscal deficit, a yearly flow, with the national debt, the accumulated stock.
Question paper p.16Mark scheme p.18Examiner report p.32Open in the tool
A-level Paper 3, November 2021, Q2(a)Explain5 marks

Case study: The German economy

Explain one reason why a country such as Germany wants to avoid an increase in the national debt relative to GDP (Figure 2).

Examiner insight

What to cover
A rising debt to GDP ratio raises the interest burden, which crowds out other government spending and may raise the cost of future borrowing. Link to Germany's fiscal rules and the figure.
Watch out
Confusing the national debt with the annual budget deficit. The question is about the stock relative to GDP.
Question paper p.22Mark scheme p.15Open in the tool
A-level Paper 3, June 2017, Q2(b)8 marks

Case study: The UK economy

With reference to Figures 4 and 5 and your own knowledge, examine the relationship between the national debt as a proportion of GDP and the fiscal deficit.

Examiner insight

What to cover
Explain that each year of fiscal deficit adds to the national debt stock. The debt to GDP ratio can still fall if nominal GDP grows faster than the debt. Use Figures 4 and 5 to show this.
Watch out
Saying a smaller deficit means the national debt falls, when debt keeps rising while any deficit remains.
Question paper p.22Mark scheme p.15Examiner report p.37Open in the tool

Short answer questions on role of the state in the macroeconomy

Multiple choice questions

  1. A-level Paper 2, June 2023, Q5(c)

    Which one of the following is the most likely consequence of an increase in the US national debt?

  2. A-level Paper 2, November 2021, Q4(b)

    Government spending on the High Speed 2 rail link is an example of which of the following?

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.