AQA AS ECONOMICS Paper 2 The National Economy in a Global Context MAY 2023

AQA AS ECONOMICS Paper 2 The National Economy in a Global Context Monday 22 May 2023 Morning Time allowed: 1 hour 30 minutes Materials For this paper you must have: • the Insert • a calculator. Instructions • Use black ink or black ball-point pen. Pencil should only be used for drawing. • Fill in the boxes at the top of this page. • Answer all questions in Section A. • Answer either Context 1 or Context 2 in Section B. • You will need to refer to the Insert provided to answer Section B. • You must answer the questions in the spaces provided. Do not write outside the box around each page or on blank pages. • If you need extra space for your answer(s), use the lined pages at the end of this book. Write the question number against your answer(s). • Do all rough work in this book. Cross through any work you do not want to be marked. Information • The maximum mark for this paper is 70. • The marks for questions are shown in brackets. • No deductions will be made for wrong answers. Section A Answer all questions in this section. box Only one answer per question is allowed. For each question completely fill in the circle alongside the appropriate answer. CORRECT METHOD WRONG METHODS If you want to change your answer you must cross out your original answer as shown. If you wish to return to an answer previously crossed out, ring the answer you now wish to select as shown. 0 1 Which one of the following is an injection into the circular flow of income? [1 mark] A Consumer expenditure B Exports C Imports D Wages 0 2 In which one of the following situations is an increase in aggregate demand most likely to result in higher inflation? [1 mark] A Household savings are increasing B Mortgage interest rates are high C Resources are fully employed D Unemployment is rising Table 1 shows the Consumer Price Index (CPI) for an economy over a period of time. Table 1 box Year CPI 2008 110 2011 108 2014 116 2017 124 2020 130 Which one of the following can be concluded from Table 1? [1 mark] A The price of a representative basket of goods rose throughout the period. B The rate of inflation from 2011 to 2014 was the same as from 2014 to 2017. C The standard of living reached its highest level in 2020. D The value of money rose between 2008 and 2011. Turn over for the next question Turn over ► A government decides to increase the minimum wage at a time when the rest of the world is coming out of recession. These events cause short-run aggregate supply (SRAS) to shift from SRAS1 to SRAS2 and aggregate demand (AD) to shift from AD1 to AD2. If the initial macroeconomic equilibrium is E1, which one of the following diagrams shows the correct new equilibrium E2? box [1 mark] 0 5 Which one of the following is a direct tax? [1 mark] A Corporation tax B Fuel tax C Import tax D Vehicle tax 0 6 Table 2 shows the components of a country’s national income in 2021. Table 2 £bn Consumer expenditure 22 Investment 10 Government expenditure 8 Exports 11 Imports 9 It can be concluded from the data in Table 2 that aggregate supply in 2021 must have been [1 mark] A £21bn. B £40bn. C £42bn. D £60bn. Turn over ► 0 7 Which one of the following is most likely to be used to identify a phase of the economic cycle? [1 mark] A Firms’ capacity utilisation B Structural unemployment C The economy’s productive potential D The exchange rate 0 8 An economy has a low rate of economic growth and high unemployment. Which one of the following sets of policies would be most likely to increase growth and reduce unemployment whilst avoiding a rise in inflation? [1 mark] A A cut in income tax and lower interest rates B Higher interest rates and an appreciation in the exchange rate C Higher welfare benefits and an increase in the money supply D Increased expenditure on training and an investment subsidy 0 9 Figure 1 shows the production possibility curve for an economy producing services and manufactured goods. Figure 1 The economy moves from point W to point Z. It can be concluded that [1 mark] A imports of manufactured goods have risen. B the international competitiveness of services has increased. C the pattern of economic activity has changed. D unemployment in manufacturing has increased. Turn over for the next question *07* Turn over ► Table 3 shows the planned change in government spending, the size of the output gap and the size of the multiplier in four economies, W, X, Y and Z. Table 3 Change in government spending (£bn) Output gap (£bn) Multiplier W –80 +100 1.25 X –150 –225 1.5 Y +200 +350 1.75 Z –300 +150 2 All other things being equal, in which one of the economies, W, X, Y or Z, will the planned change in government spending eliminate the economy’s output gap? box [1 mark] A W B X C Y D Z 1 1 A government wishing to reduce inflation through the use of fiscal policy could [1 mark] A cut government borrowing. B decrease income tax. C raise interest rates. D reduce the budget surplus. 1 2 Table 4 shows the percentage change in real GDP in an economy in the four years 2016 to 2019. Table 4 Year Change in real GDP (%) 2016 4.2 2017 3.1 2018 2.6 2019 1.1 Over the period 2016 to 2019, which one of the following can be concluded from Table 4? [1 mark] A Aggregate demand decreased B Real national income increased C Structural unemployment increased D The inflation rate decreased 1 3 The national debt is the sum of all past and current borrowing, less repayments, undertaken by [1 mark] A firms and government. B firms, government and households. C government. D households and firms. Turn over ► 1 4 Which one of the following is most likely to be an instrument of industrial policy? [1 mark] A An increase in manufacturing productivity B Government grants for firms with growth potential C Higher investment by firms in research and development D Investment by firms in artificial intelligence An economy experiences a low trend rate of economic growth, no output gap and a fall in total hours worked. In these circumstances, which one of the following combinations of events is most likely to occur? [1 mark] National output Cyclical unemployment Labour productivity A Falling Absent Increasing B Falling Present Decreasing C Rising Absent Increasing D Rising Present Decreasing 1 6 The UK economy experiences a change in its foreign exchange rate from £1 = $1.60 to £1 = $1.75. Which one of the following is the most likely effect on the UK economy? [1 mark] A A decrease in employment B A fall in the budget deficit C A reduction in productivity D Higher raw material prices 1 7 An economy is experiencing deflation and high employment. The most likely cause of this situation is a [1 mark] A deficit on the balance of payments. B government budget surplus. C negative demand-side shock. D positive supply-side shock. 1 8 Which one of the following is an example of a contractionary fiscal policy designed to reduce inflation while, at the same time, minimising the negative impact on the economy’s potential for long-run economic growth? [1 mark] A A decrease in the budget deficit and replacement of a sugar tax with a tax on savings B An increase in interest rates and replacement of food subsidies with subsidies for innovation C An increase in the budget surplus and a switch from spending on pensions to spending on new airports D Restrictions on bank lending and a switch from spending on arts degrees to spending on apprenticeships Turn over for the next question Turn over ►