Unit 2: Economics in Action · 2520U20-1
WJEC AS Unit 2, June 2016
All 13 written questions from WJEC AS Unit 2 (June 2016), Economics in Action. Case studies: Recession tests russia's resilience and Wales bottom of the uk's wealth table. 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.
Case study
RECESSION TESTS RUSSIA'S RESILIENCE
In the extracts: Russia, Russian, Central Bank, GDP, World Trade Organisation, Russian Inflation Rates, Russian GDP Annual, Exchange Rates, Bank of Russia, United States
Q1(a)
According to Figure 2, calculate the percentage fall in the world price of oil between 1st June 2014 and 1st January 2015. Show your workings.
Mark splitApplication 2
Q1(b)
Using a demand and supply diagram, explain why 'the world price of oil fell dramatically between June 2014 and January 2015' (line 5).
Mark splitKnowledge 2Application 2
Q1(c)
Discuss the view that consumers, workers and firms will always benefit if their country adopts free trade policies.
Mark splitKnowledge 3Analysis 3Evaluation 4
TopicInternational trade and exchange rates
Examiner insight
- What to cover
- There are no application marks here, so it is a theory question. Take consumers, workers and firms in turn and give the gains and the losses of free trade for each: lower prices and choice, comparative advantage and export jobs, structural unemployment, import competition.
- Evaluation
- Attack the word always. Gains and losses depend on which industries a country has a comparative advantage in, the speed of adjustment, and whether the winners compensate the losers.
- Watch out
- Full marks needed all three agents dealt with, and both sides for each. The best answers took each agent in turn under its own heading.
- How it went in the exam
- Examiners noted that no contextual answer was required for this one, but it still had to cover three separate economic agents.
Q1(d)
Using an exchange rate diagram, explain why the Russian rouble collapsed between 2014 and 2015 (lines 32-33).
Mark splitKnowledge 2Application 4
Q1(e)
Discuss the likely effectiveness of Russia's monetary policy in its attempt to support the rouble.
Mark splitAnalysis 4Evaluation 4
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Explain the two tools the data signposts: raising interest rates to attract hot money and buying roubles on the foreign exchange market with reserves. Show each shifting demand for the currency and supporting the rate.
- Diagram
- Foreign exchange market for the rouble: demand shifting right, or supply shifting left, raising the exchange rate.
- Evaluation
- Weigh the cost of high interest rates on Russian output and investment, the limited size of the reserves, the collapse in confidence, the oil price and sanctions, and the capital controls that were signposted but rarely used.
- Watch out
- Evaluation was the weak point. Throwaway lines such as there is a time lag or it depends how much rates change earned almost nothing, especially as the actual rate changes were given in the data.
- How it went in the exam
- Examiners flagged that very few candidates mentioned capital controls even though the data pointed to them. The strongest evaluation came from the context of the article.
Q1(f)
To what extent should low inflation be the main macroeconomic objective for Russia?
Mark splitApplication 2Analysis 4Evaluation 4
TopicMacroeconomic objectives and policyMeasuring economic performance
Examiner insight
- What to cover
- Build two developed arguments for low inflation as Russia's priority, using the hooks in the data: rising poverty, falling confidence, a contraction in aggregate demand, uncompetitive export prices.
- Evaluation
- Set inflation against the other objectives for Russia, in particular growth, unemployment and the current account, and judge which matters most given a recession and a currency collapse.
- Watch out
- Answers that listed the macro objectives from generic notes without developing them for Russia scored poorly. Any objective could reach full marks if it was argued in the Russian context.
- How it went in the exam
- Examiners confirmed candidates were not expected to know the detailed costs of inflation, which sits in A2, and were not penalised for leaving them out.
Case study
WALES BOTTOM OF THE UK'S WEALTH TABLE
In the extracts: Wales, Welsh, GVA, Gross Value Added, GDP, IWA, Conservative Shadow Assembly, Manchester Business School, Institute of Welsh Affairs, Office for National North
Q2(a)
Explain what is meant by: "Using an index figure of 100 for the UK as a whole, Wales scored just 72.2" (lines 11-12).
Mark splitKnowledge 2
TopicAggregate demandInternational trade and exchange rates
Q2(b)
Explain, using an example, why William Graham believes that the 3.4% increase in GVA per person isn't quite as good as it sounds (lines 22-24).
Mark splitKnowledge 2
TopicAggregate demandInternational trade and exchange rates
Q2(c)
Explain what is meant by the 'multiplier process' (lines 26-27).
Mark splitKnowledge 2
TopicAggregate demand
Q2(d)
With reference to economic theory, explain two possible reasons for the differences in the average gross weekly wages within Wales shown in Figure 4.
Mark splitKnowledge 2Application 2Analysis 2
TopicAggregate demandInternational trade and exchange rates
Q2(e)
Evaluate the Welsh government's claim that its long-term economic plan has been a success.
Mark splitApplication 2Analysis 4Evaluation 4
TopicAggregate demandInternational trade and exchange rates
Examiner insight
- What to cover
- Take the positive Welsh data and link it to the specific long term plan set out at lines 19 to 21. Explain the mechanism by which the plan would produce that outcome, rather than just noting that the numbers improved.
- Evaluation
- Two strong lines: question whether the Welsh data is as good as it looks (low base, index values, GVA not GDP), and argue the economy improved despite the plan rather than because of it, given the UK wide recovery.
- Watch out
- Marks at the top end depended entirely on explaining the link between the plan and the data. Listing good figures was not enough.
- How it went in the exam
- Examiners said most candidates attempted this and many gained good marks, with the top band turning on that one link.
Q2(f)
Discuss whether a policy of borrowing heavily to invest in capital projects is always likely to benefit employment levels and economic growth.
Mark splitKnowledge 2Analysis 2Evaluation 4
TopicEconomic growth and the economic cycle
Examiner insight
- What to cover
- No application marks, so argue in theory. Pick two macroeconomic objectives and show how borrowing to fund capital projects helps and hinders each: the multiplier and growth, jobs in construction, crowding out, debt interest, inflation.
- Evaluation
- Attack always. It depends on the productivity of the project, the state of the cycle, the interest rate on the debt and whether the spending is capital or current.
- Watch out
- Full marks required two separate objectives, each with both sides. The best answers took the objectives one at a time.
- How it went in the exam
- Examiners grouped this with Q1(c) as a longer answer question carrying no AO2 marks, so Welsh context was optional.
Q2(g)
To what extent will an increase in interest rates by the Bank of England be harmful for the Welsh economy?
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Work through the transmission mechanism of a rate rise, then apply each step to Wales: mortgage costs and consumption, investment by Welsh firms, the exchange rate and Welsh exporters, and the structure of the Welsh economy.
- Diagram
- AD and AS with AD shifting left, or a simple loanable funds or exchange rate diagram supporting one link.
- Evaluation
- Judge the size of the rise, the interest elasticity of Welsh spending, household debt and saving levels in Wales, and the benefit of lower inflation and higher returns to savers.
- Watch out
- Many answers were correct on monetary policy in general but carried no Welsh context, often because time ran out at the end of the paper. Answers without context could not reach the higher skills bands.
- How it went in the exam
- Examiners tied the weak context here to time pressure in the last question of the paper. Plan the time so the final question still gets applied analysis.
Question text is quoted from the question papers, © WJEC CBAC Ltd, 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.