AQA A Level Economics Paper 3: Economic principles and issues June 2023 question paper 7136/3

Figure 1 shows the demand for lemons.

The fall in price and increase in the quantity demanded of lemons could have been caused by

The environment is a scarce resource. A consequence of this is that

Table 1 shows the price of a packet of peanuts and the number of packets of cashew nuts sold in a shop in one month. The price of a packet of cashew nuts is unchanged.

When the price of a packet of peanuts rises from £0.80 to £0.84, the cross elasticity of demand for cashew nuts with respect to the price of peanuts is

The change in nominal national income per head is an unsatisfactory indicator of the change in the living standards of a country’s citizens over a period of time. The main reason is that nominal national income per head does not take into account

Figure 2 shows the injections into and withdrawals from the circular flow of income of an economy which is in macroeconomic equilibrium.

In the economy, net exports are –$50bn. Which one of the combinations, A, B, C or D,

A central bank has raised interest rates as part of monetary policy.

Which one of the following policy objectives is this most likely to assist the government in achieving?

Following flooding, described by the Environment Agency as a ‘once in a century event’, there is a sharp increase in the number of residents of a large town who buy additional flood insurance.

Which one of these combinations of biases in decision making are the residents most likely to have experienced?

Figure 3 shows the marginal cost (MC) and average total cost (ATC) curves for a firm in the short run in a perfectly competitive market.

It also shows the firm’s marginal revenue (MR) and average revenue (AR) curves.

What changes can be expected as the market moves into the long run?

In 2020, the market leader sold around three times as many vacuum cleaners in the UK as its closest rival. The market leader’s dominance was built on technical innovation, protected by legal patents. However, rivals have developed their own designs and are now challenging the market leader.

What feature of competitive markets does this illustrate?

A £2 billion rise in government spending has led to an increase of £5 billion in national income.

All other things being equal, what is the value of the marginal propensity to consume?

An economy operating at its long-run productive capacity at the start of 2020 has a trend rate of growth of 6% per year. Real GDP increases by 2% in 2021 and 10% in 2022.

Which one of the following accurately describes the position of the economy at the end of

The quantity theory of money can be explained using Irving Fisher’s equation of exchange, MV=PQ. Monetarist economists believe that the theory helps to explain inflation because some parts of the equation are normally stable.

Which parts of the equation do monetarist economists normally consider to be stable?

Table 2 shows the relationship between the number of workers employed by a firm and the total output of a product. The amount of other factors of production employed remains the same.

For this firm, diminishing marginal returns to labour occur when the

A firm faces a downward sloping demand curve. The firm discovers that any increase or decrease from its current level of output leads to a fall in total revenue. This means that at its current output marginal revenue is

Which one of the following is the most likely result of a divorce of ownership from control in an organisation?

Figure 4 shows a short-run Phillips curve (SRPC) and a long-run Phillips curve (LRPC).

Government intervention moves the economy from position A to position B and then the economy moves from position B to position C.

Which one of the following is most likely to explain the movement from position B to position C?

Which one of the following is a role of the UK’s Office for Budget Responsibility?

Which one of the following is a policy that the Bank of England is most likely to undertake if it wants to increase the money supply?

Carrots and potatoes are grown using the same factors of production. Figure X shows the demand (D_C) and supply (S_C) curves for carrots. Figure Y shows the demand (D_P) and supply (S_P) curves for potatoes. A change in people’s preferences shifts the demand for carrots from D_C1 to D_C2. As a result, the supply of potatoes shifts from S_P1 to S_P2.

Which one of the following statements correctly explains the changes shown in Figures X and Y ?

Figure 5 shows the marginal private and social benefit (MPB and MSB) curves and the marginal private and social cost (MPC and MSC) curves for a product.

The socially optimal level of output for this product is

Which one of the following would be classified as a debit item in the secondary income section of the current account of the UK balance of payments?

Table 3 below shows the amount of coffee or tea that two countries can produce with a given amount of resources.

Which one of the following statements is supported by the data in Table 3 ?

Table 4 shows the value of the pound sterling in euros and Canadian dollars at the beginning of 2021 and 2022.

According to the data in Table 4, between the beginning of 2021 and the beginning of 2022, the Canadian dollar

Regulatory capture describes a situation in which

Figure 6 shows the supply of labour (S_L) and demand for labour (D_L) in a perfectly competitive labour market.

All other things being equal, which one of the following combinations would mean that wages in this labour market are likely to increase from W₁?

Which one of the following is most likely to affect the elasticity of demand for labour in a particular occupation?

Figure 7 shows the income distribution of a country in Year 1 and Year 2.

From Figure 7, it can be concluded that income distribution has become

Figure 8 shows the aggregate demand curve (AD) and the long-run aggregate supply curves (LRAS) for an economy.

A redistribution of government spending from spending on welfare towards the funding of research and development shifts the long-run aggregate supply curve from

Which one of the following is the most likely effect of this policy?

Which one of the following is an example of moral hazard resulting from the regulation of a financial system?

Figure 9 shows the government budget balance for an economy from 2019 to 2023.

All other things being equal, between 2019 and 2023, the national debt of this economy increased by

Turn over for Section B

To what extent, if at all, do the data suggest that the Sri Lankan economy is more economically developed than the economies of Bangladesh and Pakistan?

Explain possible reasons for fluctuations in the world market price of tea.

After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the government of Sri Lanka cut its spending to reduce its debt?

Justify your recommendation.