AQA AS Economics 7135/2 Paper 2 (June 2026).
These are model answers based on the mark
scheme.
SECTION A
0 1 Define the term ‘injections’ in the context of the circular flow of income.
[2 marks]
Answer:
Injections are additions to the circular flow of income from outside the domestic economy (1
mark), which include investment (I), government spending (G), and exports (X) (1 mark for
naming at least two or providing the concept).
0 2 Using the data, calculate the output gap in the UK economy for 2019 (Real GDP =
£2,120bn, Potential GDP = £2,180bn). Give your answer to 2 decimal places.
[2 marks]
Answer:
Output gap = \( \frac{\text{Real GDP} - \text{Potential GDP}}{\text{Potential GDP}} \times 100 \)
= \( \frac{2120 - 2180}{2180} \times 100 \)
= \( \frac{-60}{2180} \times 100 \)
= -2.75% (2 marks for correct answer with minus sign and 2 decimal places; 1 mark for correct
method but wrong sign/rounding).
0 3 Explain one reason why the MPC might use QE rather than lowering the Bank Rate to
stimulate aggregate demand.
[3 marks]
Answer:
- Lowering the Bank Rate may be ineffective if it is already close to zero (liquidity trap), as banks
cannot reduce rates below zero significantly (1 mark).
- QE involves the central bank purchasing government bonds, injecting money directly into the
financial system (1 mark).
, - This lowers long-term interest rates, raises asset prices, and increases lending, stimulating AD
when conventional monetary policy has exhausted its scope (1 mark).
0 4 Calculate the percentage change in the UK current account deficit on trade in goods
between 2018 (£140bn) and 2019 (£147bn).
[2 marks]
Answer:
Change = \( 147 - 140 = +7 \) (deficit increased)
Percentage change = \( \frac{7}{140} \times 100 \) = 5% (2 marks for 5%, 1 mark for correct
method but £7bn instead of %).
0 5 Explain how a depreciation of the pound sterling could reduce a deficit in the UK current
account.
[4 marks]
Answer:
- Depreciation makes UK exports cheaper in foreign currency (1 mark) and imports more
expensive in sterling (1 mark).
- This leads to an increase in export volume and a decrease in import volume (1 mark).
- If the Marshall–Lerner condition holds (sum of price elasticities of demand for imports and
exports > 1), the value of exports rises relative to imports, improving the current account deficit
(1 mark).
0 6 Explain how a rise in business confidence could affect the level of investment and the LRAS.
[7 marks]
Answer:
Effect on investment (3–4 marks):
- Higher business confidence means firms expect higher future demand and profits.
- This increases expected rate of return on capital projects.
- More investment is undertaken (new machinery, technology, factories).
- Investment increases both in volume and as a % of GDP.
Effect on LRAS (3–4 marks):
- Higher investment increases the capital stock.
- This raises the productive capacity of the economy.
- LRAS shifts right (outwards) on a diagram (can be referenced).
These are model answers based on the mark
scheme.
SECTION A
0 1 Define the term ‘injections’ in the context of the circular flow of income.
[2 marks]
Answer:
Injections are additions to the circular flow of income from outside the domestic economy (1
mark), which include investment (I), government spending (G), and exports (X) (1 mark for
naming at least two or providing the concept).
0 2 Using the data, calculate the output gap in the UK economy for 2019 (Real GDP =
£2,120bn, Potential GDP = £2,180bn). Give your answer to 2 decimal places.
[2 marks]
Answer:
Output gap = \( \frac{\text{Real GDP} - \text{Potential GDP}}{\text{Potential GDP}} \times 100 \)
= \( \frac{2120 - 2180}{2180} \times 100 \)
= \( \frac{-60}{2180} \times 100 \)
= -2.75% (2 marks for correct answer with minus sign and 2 decimal places; 1 mark for correct
method but wrong sign/rounding).
0 3 Explain one reason why the MPC might use QE rather than lowering the Bank Rate to
stimulate aggregate demand.
[3 marks]
Answer:
- Lowering the Bank Rate may be ineffective if it is already close to zero (liquidity trap), as banks
cannot reduce rates below zero significantly (1 mark).
- QE involves the central bank purchasing government bonds, injecting money directly into the
financial system (1 mark).
, - This lowers long-term interest rates, raises asset prices, and increases lending, stimulating AD
when conventional monetary policy has exhausted its scope (1 mark).
0 4 Calculate the percentage change in the UK current account deficit on trade in goods
between 2018 (£140bn) and 2019 (£147bn).
[2 marks]
Answer:
Change = \( 147 - 140 = +7 \) (deficit increased)
Percentage change = \( \frac{7}{140} \times 100 \) = 5% (2 marks for 5%, 1 mark for correct
method but £7bn instead of %).
0 5 Explain how a depreciation of the pound sterling could reduce a deficit in the UK current
account.
[4 marks]
Answer:
- Depreciation makes UK exports cheaper in foreign currency (1 mark) and imports more
expensive in sterling (1 mark).
- This leads to an increase in export volume and a decrease in import volume (1 mark).
- If the Marshall–Lerner condition holds (sum of price elasticities of demand for imports and
exports > 1), the value of exports rises relative to imports, improving the current account deficit
(1 mark).
0 6 Explain how a rise in business confidence could affect the level of investment and the LRAS.
[7 marks]
Answer:
Effect on investment (3–4 marks):
- Higher business confidence means firms expect higher future demand and profits.
- This increases expected rate of return on capital projects.
- More investment is undertaken (new machinery, technology, factories).
- Investment increases both in volume and as a % of GDP.
Effect on LRAS (3–4 marks):
- Higher investment increases the capital stock.
- This raises the productive capacity of the economy.
- LRAS shifts right (outwards) on a diagram (can be referenced).
