Edexcel A Level Economics A Paper 2: The national and global economy June 2022 question paper 9EC0/02

According to the Bank of England, the UK’s marginal propensity to consume is estimated to be 0.64.

(Source: adapted from https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2017/the-consumption-response-to-positive-and-negative-income-changes.pdf?)

Using the information above, calculate the total reduction in the UK’s GDP from a fall in government spending of £20 million.

Which one of the following is an injection into the circular flow of income?

Annual percentage change in average UK house prices

(Source: adapted from https://www.nationwide.co.uk/-/media/MainSite/ documents/about/house-price-index/2021/May_2021.pdf)

With reference to the chart, which one of the following is true?

Average UK house prices:

With reference to the chart on the previous page, explain the likely impact of an increase in average house prices on UK consumption.

Bank of England base interest rate, 2016–2020

(Source: adapted from https://www.bankofengland.co.uk/ monetary-policy/the-interest-rate-bank-rate)

With reference to the chart above, explain the likely impact of a reduction in the base interest rate on UK investment.

Which one of the following would be most likely to result from lower base interest rates?

A fall in:

The trade cycle

At point Z on the diagram, which one of the following is likely to occur?

An increase in:

With reference to the graph, explain the difference between automatic stabilisers and discretionary fiscal policy.

In May 2020, the UK government introduced a loan scheme to help small businesses survive the downturn in the economy. Small businesses could borrow up to £50 000 at an interest rate of 2.5% for up to 6 years from a bank. The government guaranteed 100% of the loans, to enable banks to issue them quickly, and only minimal checks were made on borrowers.

(Source: adapted from https://www.ft.com/content/1ca15db2-93e4-4e34-877d-110309cd9716)

With reference to the information above, explain one role of financial markets.

Which one of the following would be a risk if ‘only minimal checks were made on borrowers’ in this loan scheme?

Using a Lorenz curve diagram, explain how income inequality is measured using the Gini coefficient. Refer to Extract A in your answer.

With reference to Figure 1 and Extract A, examine two likely causes of income inequality within the UK.

With reference to Figure 2, assess whether an increase in real income improves subjective happiness within the UK.

With reference to Extract C and your own knowledge, discuss methods the UK government could use to increase tax revenue.

With reference to Extract B, discuss the benefits of an increase in infrastructure spending on the UK economy. Use an aggregate demand and aggregate supply diagram to support your answer.

Both China and the United States have been gradually increasing the tariffs imposed on each other’s exports as their trade dispute continues. The IMF estimated that the trade dispute between China and the United States would reduce global GDP growth by 0.8 percentage points by the end of 2020.

(Source: adapted from https://www.theguardian.com/business/2019/oct/15/imf-recession-world-growth-forecast-central-banks)

Evaluate the likely impact of an increase in protectionism on the global economy.

With global economic growth slowing and inequality rising, the case against globalisation is strengthening. But there are also many benefits to globalisation. Global trade and international trade agreements allow countries to focus on their strengths and share expertise, as well as reducing risk through diversification.

(Source: adapted from https://www.ft.com/content/ 7b365844-9b75-11ea-adb1-529f96d8a00b)

Evaluate the likely impact of globalisation on the global economy.

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