2024_AQA: A-level ECONOMICS Paper 2 National and International Economy (Merged Question paper and marking scheme): Monday 20 May 2024 A-level ECONOMICS

2024_AQA: A-level ECONOMICS Paper 2 National and International Economy (Merged Question paper and marking scheme): Monday 20 May 2024 A-level ECONOMICS Paper 2 National and International Economy Monday 20 May 2024 Materials For this paper you must have:  an AQA 12-page answer book  a calculator. Instructions Afternoon Time allowed: 2 hours  Use black ink or black ball-point pen. Pencil should only be used for drawing.  Write the information required on the front cover of your answer book. The Paper Reference is 7136/2.  In Section A, answer EITHER Context 1 OR Context 2.  In Section B, answer ONE essay. Information  The marks for questions are shown in brackets.  The maximum mark for this paper is 80.  There are 40 marks for Section A and 40 marks for Section B. Advice  You are advised to spend 1 hour on Section A and 1 hour on Section B. A-level Economics Paper 2 – National and International Economy Key Areas to Revise for May 2025 Overview: Paper 2 focuses on macroeconomic and international economic theory, examining topics like national income, inflation, unemployment, economic growth, and international trade. You’ll need to demonstrate knowledge of economic policies, global economic issues, and the role of international institutions. Key Areas to Revise: 1. Macroeconomic Objectives:  Economic Growth: o Understand the concept of economic growth and how it is measured (GDP, GNP). Be familiar with the factors that contribute to economic growth, such as investment, technological advancement, labor force expansion, and productivity improvements. o Review both short-term and long-term growth and the factors that can influence each.  Unemployment: o Understand the different types of unemployment: frictional, structural, cyclical, and seasonal. o Be familiar with the causes of unemployment, such as economic recessions, structural changes in the economy, and changes in labor demand. o Know the implications of unemployment on the economy, such as lost output, lower tax revenue, and social costs.  Inflation: o Study the causes of inflation: demand-pull and cost-push inflation. o Be able to define inflation and understand how it is measured (CPI, RPI). o Understand the consequences of inflation, such as reduced purchasing power, uncertainty, and potential negative impacts on economic growth and income distribution.  Balance of Payments: o Understand the components of the balance of payments (current account, capital account). o Know how a trade surplus or deficit affects the economy and the implications for currency value and international relations. o Be able to explain the causes and consequences of current account imbalances and how governments may address them. 2. Fiscal and Monetary Policy:  Fiscal Policy: o Understand how the government uses fiscal policy (government spending and taxation) to manage the economy. o Study the effects of government spending on aggregate demand and the implications of taxation changes on household consumption and business investment. o Be aware of the concept of budget deficits and surpluses, and how government debt impacts economic stability.  Monetary Policy: o Review the role of central banks in managing monetary policy, especially in controlling inflation and managing economic growth. o Understand the tools of monetary policy, such as interest rates, open market operations, and quantitative easing. 3. Aggregate Demand and Aggregate Supply: 4. Economic Growth and Development: 5. International Economics and Globalization: 6. Policies to Address Economic Issues: 7. Economic Issues in the Global Context: 7136/2 IB/H/Jun24/G4001/E8 2 Section A Answer EITHER Context 1 OR Context 2. EITHER Context 1 Productivity and living standards Total for this context: 40 marks Study Extracts A, B and C and then answer all parts of Context 1 which follow. Extract A: Indicators of economic performance and living standards, selected nations, 2021 Productivity (GDP per hour worked, US $) Productivity change 2010 2021 (%) Life expectancy at birth Gini coefficient (years) Estonia 42.9 +28.8 Expected years of schooling (years) CO2 emissions per capita (tonnes) 77.1 Hungary 39.9 +16.7 0.308 15.9 7.9 74.5 UK 59.1 +3.5 0.300 15.0 5.0 80.7 Extract B: The UK’s productivity puzzle 0.351 17.3 4.9 Source: OECD & WHO, 2022 The economist Paul Krugman once wrote that “Productivity isn’t everything, but, in the long-run, it is almost everything”. Productivity is a key determinant of living standards because it affects the amount of goods and services that can be produced, and therefore consumed, from the resources that are available. Historically, productivity has increased over time, which has contributed to real wage rises and improved living standards. Although productivity can be measured in several different ways, one common way is GDP per hour worked. When economies move through their economic cycles, it is not unusual for productivity to fall during downturns, as happened in 2008–2009. However, the persistently low rate of growth of productivity that the UK has experienced since 2010 is unusual. Productivity growth in other nations, including Estonia and Hungary, has been much higher. The UK’s low rate of productivity growth is often referred to as ‘The UK’s productivity puzzle’. If the pre-2007 trend in productivity growth had continued, UK productivity would now be over 30% higher than it is today. Many economists have tried to provide reasons for the productivity puzzle. Among the suggestions are low levels of investment and the impact of the financial crisis on banks’ willingness to lend to new businesses. More people working beyond normal retirement age has led to an older workforce and may have affected productivity. These factors may be relevant but they do not provide a complete explanation for the weakness in UK productivity growth. So, what can be done to raise productivity? Investing in human capital to improve people’s skills and supporting improvements in technology should help. Creating a stable economy and effective use of the tax and benefits system are also key factors in driving productivity growth. IB/H/Jun24/7136/2 5 10 15 20 Source: News reports, 2022 3 Extract C: Falling living standards in the UK? According to the Office for Budget Responsibility (OBR), in 2022, the UK faced its biggest fall in living standards on record as the surging cost of living reduced real wages. The OBR also forecast a significant increase in unemployment. Energy and food bills had risen dramatically due to shocks to the economy, such as labour shortages, a depreciation of the pound and the war in Ukraine. Inflation was at a 41-year high and average real household income was expected to fall by 7%, back to the level it was in 2013. The rising cost of living led to industrial action by workers trying to achieve pay increases that compensated for the rise in prices. In response to the rise in inflation, the Bank of England increased Bank Rate. The rise in Bank Rate meant that financial institutions raised the rate of interest on mortgages. As a result, it has been forecast that house prices are likely to fall by around 9% over the next two years. In his Autumn Statement of 2022, the UK Chancellor of the Exchequer, Jeremy Hunt, announced tax rises and cuts in public spending even though the UK economy was expected to contract in 2023. The cuts in public spending are likely to damage public services and came at a time when poverty and inequality appeared to be rising with life expectancy falling. Some have argued that tackling these issues, to prevent a further fall in living standards, is more important than introducing measures to increase productivity. 5 10 15 Source: News reports, 2022 0 1 Using the data in Extract A, calculate the ratio of the UK’s GDP per hour worked to $1 of GDP per hour worked in Hungary. Give your answer to two decimal places. [2 marks] 0 2 Explain how the data in Extract A show that higher productivity may result in higher living standards. [4 marks] 0 3 Extract C (lines 4–5) states ‘Energy and food bills had risen dramatically due to shocks to the economy, such as labour shortages, a depreciation of the pound…’ With the help of a diagram, explain how a depreciation of the pound may cause inflation. [9 marks] 0 4 Extract B (lines 4–5) states: ‘Historically, productivity has increased over time, which has contributed to real wage rises and improved living standards.’ Using the data in the extracts and your knowledge of economics, assess the view that the government should make raising productivity a priority in order to improve living standards in the UK. [25 marks] IB/H/Jun24/7136/2 Turn over ► 4 Do not answer Context 2 if you have answered Context 1. OR Context 2 Globalisation and deglobalisation Total for this context: 40 marks Study Extracts D, E and F and then answer all parts of Context 2 which follow. Extract D: Macroeconomic performance indicators, selected Southeast Asian economies, 2010 to 2021 GDP per capita (constant prices, PPP) Average annual growth rate 2010 2021 (%) Average unemployment rate 2010–2021 (%) Exports (% of GDP) Malaysia 9 041 11 371 4.3 3.4 Thailand 86.9 5 076 7 233 2.6 0.7 68.8 Vietnam 66.5 1 673 3 694 5.9 58.2 1.6 Note: PPP = Purchasing power parity Extract E: Made in Vietnam 54.2 93.3 Source: World Bank, 2022 Trade and foreign investment have helped Vietnam emerge from extreme poverty. Integration with global manufacturing has kept Vietnam’s economy growing even during the pandemic. In 2020, GDP rose by 2.9%, while many other countries experienced recession. The latest forecasts indicate an economic growth rate of over 8% in 2022. Vietnam’s openness to trade and investment has made the country an important link in the global economy and it has been one of the five fastest growing countries in the world over the past 30 years. Its record has been characterised by steady growth compared to boom-busts in similar nations. According to the World Bank, Vietnam is a lower-middle income economy but the government wants it to become a high-income economy by 2045. Vietnam’s development is often compared to that of China in the 1990s or early 2000s. Both are former command economies that now focus on export-led growth. However, Vietnam is very different in terms of the amount of foreign investment and its connection to global supply chains. Since 1990, Vietnam’s inflows of foreign direct investment have averaged 6% of GDP each year, more than twice the global average and a much higher percentage of GDP than China has ever recorded over a sustained period. As many countries in Southeast Asia developed and wages rose, multinational corporations (MNCs) were attracted by Vietnam’s low labour costs and stable exchange rate. A low rate of corporation tax has also contributed to both short-run and long-run economic growth. Vietnam is also a member of the ASEAN free trade area and has bilateral trade deals with the European Union and the USA. In the past decade, exports have risen by over 140%. However, Vietnam has become increasingly dependent on foreign companies for growth and employment, while foreign competition has meant that many domestic firms have struggled. 5 10 15 20 Source: News reports, 2022 IB/H/Jun24/7136/2 5 Extract F: A period of deglobalisation? After decades of growing integration and interdependence between nations, trade and investment flows between countries have been growing more slowly and, in some cases, falling. This process has been labelled ‘deglobalisation’ and is characterised by rising protectionism, reduced dependence on foreign imports and increased self-reliance by nations. However, could the rise in protectionism have boosted the Vietnamese economy in the short term? The trade war between the USA and China, which started in 2018, has probably helped Vietnam. It is estimated that, in 2019, US tariffs on imports from China resulted in the US buying $31bn more imports from other low-cost Asian countries rather than China. Vietnam supplied almost half of these imports. China’s rising labour costs, and the growing tensions between the world’s superpowers, make it easy to see why many big firms are relocating to Vietnam. Apple’s biggest suppliers, Foxconn and Pegatron, are building big factories in Vietnam, creating many jobs. Other big firms moving production from China to Vietnam include Dell, Hewlett Packard, Google and Microsoft. Some see deglobalisation as a threat. Many nations such as Vietnam rely on international trade and investment for employment and economic growth. If other countries start to protect their economies from Vietnamese imports, this could damage the economic development of Vietnam. The slowing, or reversal, of globalisation could mean that the benefits of specialisation and foreign direct investment are lost. 5 10 15 20 Source: News reports, 2022 0 5 Using the data in Extract D, calculate the percentage change in Vietnam’s GDP per capita between the years 2010 and 2021. Give your answer to one decimal place. [2 marks] 0 6 Explain how the data in Extract D show that Vietnam may have outperformed the other selected Southeast Asian economies between 2010 and 2021. [4 marks] 0 7 Extract E (lines 17–18) states: ‘A low rate of corporation tax has also contributed to both short-run and long-run economic growth.’ With the help of a diagram, explain how a low rate of corporation tax may cause short-run and long-run economic growth. [9 marks] 0 8 Extract F (lines 19–20) states: ‘The slowing, or reversal, of globalisation could mean that the benefits of specialisation and foreign direct investment are lost.’ Using the data in the extracts and your knowledge of economics, discuss the view that a slowing, or reversal, of globalisation would be harmful to developing economies such as Vietnam. [25 marks] IB/H/Jun24/7136/2 Turn over ► 6 Section B Answer one essay from this section. Each essay carries 40 marks. EITHER Essay 1 In November 2022, the Bank of England warned there was a risk that the UK was heading for a recession. This announcement came shortly after the money supply fell, following its rapid growth in 2020 and 2021. 0 9 Explain possible reasons why a country may enter a recession. [15 marks] 1 0 Assess whether an increase in the money supply is always damaging for an economy. [25 marks] OR Essay 2 In August 2022, the Office for National Statistics (ONS) announced that the unemployment rate had reached 3.5%, the lowest rate in almost 50 years. Some argue this is below the natural rate of unemployment (NRU) and that very high levels of employment may cause problems for the economy. 1 1 Explain the factors which determine the natural rate of unemployment. [15 marks] 1 2 Discuss the view that high levels of employment are always beneficial for an economy. [25 marks] IB/H/Jun24/7136/2 7 OR Essay 3 In November 2022, the UK government announced large public spending cuts and tax rises in order to reduce the budget deficit. Some economists worry that this may cause a negative multiplier effect and damage economic activity. 1 3 Explain how the multiplier and accelerator affect the overall level of economic activity. [15 marks] 1 4 Evaluate the view that increasing taxation is the best way to reduce a budget deficit. [25 marks] END OF QUESTIONS IB/H/Jun24/7136/2 8 IB/H/Jun24/7136/2 There are no questions printed on this page Copyright information For confidentiality purposes, all acknowledgements of third-party copyright material are published in a separate booklet. This booklet is published after each live examination series and is available for free download from . Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright-holders may have been unsuccessful and AQA will be happy to rectify any omissions of acknowledgements. If you have any queries please contact the Copyright Team. Copyright © 2024 AQA and its licensors. All rights reserved. A-level ECONOMICS 7136/2 Paper 2 National and International Economy Mark scheme June 2024 Version: 1.0 Final MARK SCHEME – A-LEVEL ECONOMICS – 7136/2 – JUNE 2024 Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation events which all associates participate in and is the scheme which was used by them in this examination. The standardisation process ensures that the mark scheme covers the students’ responses to questions and that every associate understands and applies it in the same correct way. As preparation for standardisation each associate analyses a number of students’ scripts. Alternative answers not already covered by the mark scheme are discussed and legislated for. If, after the standardisation process, associates encounter unusual answers which have not been raised they are required to refer these to the Lead Examiner. It must be stressed that a mark scheme is a working document, in many cases further developed and expanded on the basis of students’ reactions to a particular paper. Assumptions about future mark schemes on the basis of one year’s document should be avoided; whilst the guiding principles of assessment remain constant, details will change, depending on the content of a particular examination paper. No student should be disadvantaged on the basis of their gender identity and/or how they refer to the gender identity of others in their exam responses. A consistent use of ‘they/them’ as a singular and pronouns beyond ‘she/her’ or ‘he/him’ will be credited in exam responses in line with existing mark scheme criteria. Further copies of this mark scheme are available from Annotation Description ? Unsure/unclear/somewhat confusing KU APP Knowledge and understanding Application tick Analysis for questions 3,4,7,8,9,10,11,12,13,14 EVAL NR Evaluation Not relevant NAQ REP Not answering question Repetition BD Benefit of the doubt X tick Incorrect Correct for questions 1,2,5,6 Place marker Seen Copyright information AQA retains the copyright on all its publications. However, registered schools/colleges for AQA are permitted to copy material from this booklet for their own internal use, with the following important exception: AQA cannot give permission to schools/colleges to photocopy any material that is acknowledged to a third party even for internal use within the centre. Copyright © 2024 AQA and its licensors. All rights reserved. 2 MARK SCHEME – A-LEVEL ECONOMICS – 7136/2 – JUNE 2024 Level of response marking instructions Level of response mark schemes are broken down into levels, each of which has a descriptor. The descriptor for the level shows the average performance for the level. There are marks in each level. Before you apply the mark scheme to a student’s answer read through the answer and annotate it (as instructed) to show the qualities that are being looked for. You can then apply the mark scheme. Step 1 Determine a level Start at the lowest level of the mark scheme and use it as a ladder to see whether the answer meets the descriptor for that level. The descriptor for the level indicates the different qualities that might be seen in the student’s answer for that level. If it meets the lowest level then go to the next one and decide if it meets this level, and so on, until you have a match between the level descriptor and the answer. With practice and familiarity you will find that for better answers you will be able to quickly skip through the lower levels of the mark scheme. When assigning a level you should look at the overall quality of the answer and not look to pick holes in small and specific parts of the answer where the student has not performed quite as well as the rest. If the answer covers different aspects of different levels of the mark scheme you should use a best fit approach for defining the level and then use the variability of the response to help decide the mark within the level, ie if the response is predominantly level 3 with a small amount of level 4 material it would be placed in level 3 but be awarded a mark near the top of the level because of the level 4 content. Step 2 Determine a mark Once you have assigned a level you need to decide on the mark. The descriptors on how to allocate marks can help with this. The exemplar materials used during standardisation will help. There will be an answer in the standardising materials which will correspond with each level of the mark scheme. This answer will have been awarded a mark by the Lead Examiner. You can compare the student’s answer with the example to determine if it is the same standard, better or worse than the example. You can then use this to allocate a mark for the answer based on the Lead Examiner’s mark on the example. You may well need to read back through the answer as you apply the mark scheme to clarify points and assure yourself that the level and the mark are appropriate. Indicative content in the mark scheme is provided as a guide for examiners. It is not intended to be exhaustive and you must credit other valid points. Students do not have to cover all of the points mentioned in the Indicative content to reach the highest level of the mark scheme. An answer which contains nothing of relevance to the question must be awarded no marks. 3 MARK SCHEME – A-LEVEL ECONOMICS – 7136/2 – JUNE 2024 4 Section A Below is the levels of response marking grid to be used when marking any 25 mark question. Level of response Response Max 25 marks 5 Sound, focused analysis and well-supported evaluation that:  is well organised, showing sound knowledge and understanding of economic terminology, concepts and principles with few, if any, errors  includes good application of relevant economic principles to the given context and, where appropriate, good use of data to support the response  includes well-focused analysis with clear, logical chains of reasoning  includes supported evaluation throughout the response and in a final conclusion. 21–25 marks 4 Sound, focused analysis and some supported evaluation that:  is well organised, showing sound knowledge and understanding of economic terminology, concepts and principles with few, if any, errors  includes some good application of relevant economic principles to the given context and, where appropriate, some good use of data to support the response  includes some well-focused analysis with clear, logical chains of reasoning  includes some reasonable, supported evaluation. 16–20 marks 3 Some reasonable analysis but generally unsupported evaluation that:  focuses on issues that are relevant to the question, showing satisfactory knowledge and understanding of economic terminology, concepts and principles but some weaknesses may be present  includes reasonable application of relevant economic principles to the given context and, where appropriate, some use of data to support the response  includes some reasonable analysis but which might not be adequately developed or becomes confused in places  includes fairly superficial evaluation; there is likely to be some attempt to make relevant judgements but these aren’t well-supported by arguments and/or data. 11–15 marks 2 A fairly weak response with some understanding that:  includes some limited knowledge and understanding of economic terminology, concepts and principles is shown but some errors are likely  includes some limited application of relevant economic principles to the given context and/or data to the question  includes some limited analysis but it may lack focus and/or become confused  includes some evaluation which is weak and unsupported. 6–10 marks 1 A very weak response that:  includes little relevant knowledge and understanding of economic terminology, concepts and principles  includes application to the given context which is, at best, very weak  includes attempted analysis which is weak and unsupported. 1–5 marks MARK SCHEME – A-LEVEL ECONOMICS – 7136/2 – JUNE 2024 Section A Context 1 0 1 Total for this context: 40 marks Using the data in Extract A, calculate the ratio of the UK’s GDP per hour worked to $1 of GDP per hour worked in Hungary. Give your answer to two decimal places. Response [2 marks] Max 2 marks For the correct answer (1.48:1) to two decimal places. Also allow $1.48:$1 Also allow Hungary $1 : UK $1.48 (allow the symbols : or = or the word “to”) 2 marks For a correct answer but not to two decimal places. OR For the correct answer (1.48 or $1.48) but not displayed as a ratio. OR For an answer with the ratio displayed the wrong way round (1:1.48 or $1:$1.48) OR 1 mark For the correct method but the wrong answer, to two decimal places, displayed as a ratio. Calculation: 59.1/39.9 = 1.4812 = 1.48 (to 2 decimal places) = 1.48:1 MAXIMUM FOR QUESTION 01: 2 MARKS 5 MARK SCHEME – A-LEVEL ECONOMICS – 7136/2 – JUNE 2024 0 2 Explain how the data in Extract A show that higher productivity may result in higher living standards. [4 marks] Response: Max 4 marks  includes evidence that shows that higher productivity may result in higher living standards  clearly explains how this data is evidence that higher productivity may result in higher living standards 4 marks  includes evidence that shows that higher productivity may result in higher living standards  explanation of how this data is evidence that higher productivity may result in higher living standards. 3 marks  includes some limited evidence that shows that higher productivity may result in higher living standards  limited explanation of how this data is evidence that higher productivity may result in higher living standards. 2 marks  includes evidence that does not clearly show that higher productivity may result in higher living standards  no explanation of how this data is evidence that higher productivity may result in higher living standards. 1 mark Relevant issues include:  the meaning of productivity or living standards  explaining why higher productivity might be expected to result in higher living standards  the UK has the highest productivity rate ($59.1 GDP per hour worked) and has the highest life expectancy (80.7 years) indicating better healthcare provision  Hungary has the lowest productivity rate ($39.9 GDP per hour worked) and has the lowest life expectancy (74.5 years) indicating worse healthcare provision  the UK has the highest productivity rate ($59.1 GDP per hour worked) and has the longest expected years of schooling (17.3 years) indicating better education provision  Hungary has the lowest productivity rate ($39.9 GDP per hour worked) and has the lowest expected years of schooling (15.0 years) indicating worse education provision  the UK has the highest productivity rate ($59.1 GDP per hour worked) and has the lowest CO2 emissions per capita (4.9 tonnes) indicating lower pollution levels per person from production  Estonia has the second lowest productivity ($42.9 GDP per hour worked) which is only marginally higher than Hungary, but has the worst CO2 emissions per capita (7.9 tonnes) indicating higher pollution levels per person from production. MAXIMUM FOR QUESTION 02: 4 MARKS 6 MARK SCHEME – A-LEVEL ECONOMICS – 7136/2 – JUNE 2024 7 Extract C (lines 4–5) states ‘Energy and food bills had risen dramatically due to shocks to the economy, such as labour shortages, a depreciation of the pound…’ With the help of a diagram, explain how a depreciation of the pound may cause inflation. [9 marks] Level of response Response: Max 9 marks 3  is well organised and develops one or more of the key issues that are relevant to the question  shows sound knowledge and understanding of relevant economic terminology, concepts and principles  includes good application of relevant economic principles and/or good use of data to support the response  includes well-focused analysis with a clear, logical chain of reasoning  includes a relevant diagram that will, at the top of this level, be accurate and used appropriately. 7–9 marks 2  includes one or more issues that are relevant to the question  shows reasonable knowledge and understanding of economic terminology, concepts and principles but some weaknesses may be present  includes reasonable application of relevant economic principles and/or data to the question  includes some reasonable analysis but it might not be adequately developed and may be confused in places  may include a relevant diagram. 4–6 marks 1  is very brief and/or lacks coherence  shows some limited knowledge and understanding of economic terminology, concepts and principles but some errors are likely  demonstrates very limited ability to apply relevant economic principles and/or data to the question  may include some very limited analysis but the analysis lacks focus and/or becomes confused  may include a relevant diagram but the diagram is not used and/or is inaccurate in some respects. 1–3 marks An AD/AS diagram which shows SRAS shifting leftward is likely to be used. Equally, some candidates may just show AS shifting leftward. Some candidates may consider the effect of a depreciation on net trade and AD rising. 3 0 MARK SCHEME – A-LEVEL ECONOMICS – 7136/2 – JUNE 2024 Expected diagrams are: Relevant issues include:  definitions/explanations: depreciation, the exchange rate, inflation  explaining the causes of a depreciation of the currency  explaining the effect of a depreciation on raising the cost of imports  linking increased import costs to cost-push inflation  explaining the effect of a depreciation creating more competitive exports and rising AD  explaining the effects on domestic consumption and rising AD  linking rises in AD to demand-pull inflation  considering how elasticity affects the relative changes in imports and exports MAXIMUM FOR QUESTION 03: 9 MARKS 8 MARK SCHEME – A-LEVEL ECONOMICS – 7136/2 – JUNE 2024 0 4 Extract B (lines 4–5) states: ‘Historically, productivity has increased over time, which has contributed to real wage rises and improved living standards.’ Using the data in the extracts and your knowledge of economics, assess the view that the government should make raising productivity a priority in order to improve living standards in the UK. [25 marks] Areas for discussion include:  definitions/explanations: productivity, real wages, living standards  linking rising productivity to supply-side policies  explaining how the government could help raise pro