AQA Macroeconomics: The National and International Economy — Past Paper Questions

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.

2.1.2 Macroeconomic Indicators

Explain how the data in Extract A show that higher productivity may result in higher living standards.

2.2.6 Determinants of LRAS · 2.1.4 Uses of National Income Data

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.

2.2.5 Determinants of SRAS · 2.3.3 Inflation and Deflation

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.

2.2.6 Determinants of LRAS

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.

2.1.2 Macroeconomic Indicators

Explain how the data in Extract D show that Vietnam may have outperformed the other selected Southeast Asian economies between 2010 and 2021.

2.6.5 Growth and Development

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.

2.5.1 Fiscal Policy · 2.5.2 Supply-Side Policies

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.

2.6.1 Globalisation

Explain possible reasons why a country may enter a recession.

2.3.1 Growth and the Economic Cycle

Assess whether an increase in the money supply is always damaging for an economy.

2.4.3 Central Banks and Monetary Policy · 2.3.3 Inflation and Deflation

Explain the factors which determine the natural rate of unemployment.

2.3.2 Employment and Unemployment

Discuss the view that high levels of employment are always beneficial for an economy.

2.3.2 Employment and Unemployment

Explain how the multiplier and accelerator affect the overall level of economic activity.

2.2.4 The Multiplier

Evaluate the view that increasing taxation is the best way to reduce a budget deficit.

2.5.1 Fiscal Policy

Explain why investment in infrastructure in the less-prosperous regions could help to improve the prosperity of people living in these regions.

2.5.2 Supply-Side Policies · 2.6.5 Growth and Development

After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the government intervene in the economy to try to reduce the differences in the economic prosperity of the various regions of the United Kingdom? Justify your recommendation.

2.5.2 Supply-Side Policies

Using the data in Extract A (Figure 1), calculate the difference between Ireland’s corporation tax rate and the mean corporation tax rate of the other five European nations. Give your answer to one decimal place.

2.5.1 Fiscal Policy

Explain how the data in Extract A (Figure 2), show that Ireland’s economy performed better than the economies of France and Spain in 2021.

2.3.1 Growth and the Economic Cycle

Extract C (line 13) states: ‘High economic growth rates allowed Ireland to run a budget surplus in 2018 and 2019.’ With the help of a diagram, explain how high economic growth could help to create a budget surplus.

2.5.1 Fiscal Policy

Extract B (lines 1–3) states: ‘Ireland has dropped its low-tax policy of the past 18 years, which had helped to persuade some of the world’s biggest companies, including Google and Facebook, to site their European headquarters in Ireland.’ Using the data in the extracts and your knowledge of economics, assess the view that a rise in Ireland’s corporation tax rate is likely to have a damaging effect on its macroeconomic performance.

2.5.1 Fiscal Policy · 2.6.1 Globalisation

Using the data in Extract D (Figure 3), calculate the value of bonds that had been purchased by November 2020 for every £1 worth of bonds purchased by November 2009. Give your answer in £s and to two decimal places.

2.4.3 Central Banks and Monetary Policy

Explain how the data in Extract D (Figure 4), show that the growth in quantitative easing (shown in Figure 3) may have been successful in helping the UK achieve its macroeconomic objectives since 2009.

2.4.3 Central Banks and Monetary Policy

Extract E (lines 4–5) states: ‘…banks in the UK decreased lending, reducing the availability of credit for households and firms. This damaged the real economy and created high unemployment.’ With the help of a diagram, explain how reduced availability of credit from banks may lead to increased unemployment.

2.4.2 Commercial and Investment Banks

Extract F (lines 18–19) states: ‘Some say that the use of QE is a dangerous addiction and its overuse can lead to problems in the future.’ Using the data in the extracts and your knowledge of economics, assess the view that the continued use of quantitative easing (QE) is damaging for the UK economy.

2.4.3 Central Banks and Monetary Policy

Explain the main causes of globalisation.

2.6.1 Globalisation

Assess the view that increased globalisation has been beneficial for the UK economy.

2.6.1 Globalisation

Explain the possible causes of a shift in the short-run aggregate supply curve to the left.

2.2.5 Determinants of SRAS

Evaluate how, in the long-run, governments could try to reconcile conflicts between the various objectives of economic policy.

2.3.4 Policy Conflicts

Explain possible causes of economic growth.

2.3.1 Growth and the Economic Cycle

Evaluate the view that economic growth usually leads to an improvement in living standards.

2.3.1 Growth and the Economic Cycle · 2.1.4 Uses of National Income Data

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?

2.6.5 Growth and Development

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.

2.6.5 Growth and Development

Using the data in Extract A (Figure 1), if 2015 is the base year, calculate the index of Egypt’s real GDP in 2018. Give your answer to one decimal place.

2.1.3 Uses of Index Numbers

Explain how the data in Extract A (Figures 1 and 2) show that nations with high and stable economic growth attract rising foreign direct investment (FDI) inflows.

2.6.5 Growth and Development · 2.6.1 Globalisation

Extract B (lines 18–19) states: ‘FDI can have many benefits. It should create employment, boost long-run economic growth and increase exports.’ With the help of a suitable diagram, explain how a rise in inward foreign direct investment (FDI) may lead to increased exports.

2.6.5 Growth and Development

Extract C (lines 13–14) states: ‘Some argue that African governments should be doing more to improve the living standards of their citizens, rather than relying on foreign firms.’ Using the data in the extracts and your knowledge of economics, assess the view that to improve the living standards of their citizens, African nations should pursue policies to attract foreign direct investment (FDI).

2.6.5 Growth and Development

Us ing th e data in Extract D (Figure 3), calculate the difference between the UK’s and Argentina’s mean unemployment rates over the period 2015 to 2018. Give your answer to two decimal places.

2.3.2 Employment and Unemployment

Explain how the data in Extract D (Figures 3 and 4) show that there may be a short-run trade-off between unemployment and inflation.

2.3.4 Policy Conflicts

Extract E (lines 7–9) states: ‘It was hoped that policy measures, including a reduction in tariffs... would help to reduce inflation’. With the help of a diagram, explain how a reduction in tariffs could help to reduce inflation.

2.6.2 Trade

Extract E (lines 15–17) states: ‘Policies were put in place to reduce the money supply and reduce government spending. The control of inflation became the main target of UK government macroeconomic policy.’ Using the data in the extracts and your knowledge of economics, evaluate the view that achieving a low and stable rate of inflation should be the main economic objective of governments.

2.4.3 Central Banks and Monetary Policy · 2.5.1 Fiscal Policy

Explain how expenditure-switching policies can be used to reduce a deficit on a country’s balance of trade in goods and services.

2.6.3 The Balance of Payments

Assess the view that floating exchange rates are always better than fixed exchange rates.

2.6.4 Exchange Rate Systems

Explain the main problems for an economy of having a large positive output gap.

2.3.1 Growth and the Economic Cycle

Evaluate the view that supply-side improvements in the UK economy can best be achieved through the use of interventionist policies.

2.5.2 Supply-Side Policies

Explain reasons for changes in the value of exports from the UK to the rest of the world.

2.6.2 Trade · 2.6.3 The Balance of Payments

Evaluate the view that international trade always benefits nations.

2.6.2 Trade

After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the UK government provides financial and other support to companies involved in the production of commercial aircraft? Justify your recommendation.

1.8.9 Government Intervention · 2.5.2 Supply-Side Policies

Using the data in Extract A (Figure 1), calculate the mean annual yield on long-term bonds in Greece over the years shown. Give your answer to one decimal place.

2.4.1 Financial Markets and Assets

Explain how the data in Extract A (Figures 1 and 2) show that in 2012 Greece was more likely to have a problem with its national debt than the UK.

2.5.1 Fiscal Policy

Extract B (line 9) states: ‘The government spending cuts also severely damaged private-sector jobs.’ With the help of a diagram, explain how a reduction in government spending could increase unemployment in the private sector.

2.5.1 Fiscal Policy · 2.2.4 The Multiplier

Extract C (lines 17–18) states: ‘Some argue that the UK should increase taxes rather than add to the national debt.’ Using the data in the extracts and your knowledge of economics, evaluate the view that an increase in a country’s national debt is damaging for its economy.

2.5.1 Fiscal Policy

Us ing th e data in Extract D (Figure 4), calculate South Korea’s rate of inflation for the year ended 31 December 2019. Give your answer to two decimal places.

2.3.3 Inflation and Deflation

Explain how the data in Extract D (Figures 3 and 4) show why the South Korean central bank may have been considering a further cut in its base rate of interest.

2.4.3 Central Banks and Monetary Policy

Extract E (line 14) states: ‘Investment in R&D has been an important driver of economic growth and industrial progress.’ With the help of a diagram, explain how investment in research and development (R&D) can help to increase the long-run growth rate of an economy.

2.2.6 Determinants of LRAS

Extract F (lines 7–8) states: ‘Economists said the data reinforced the view that the slump in South Korea’s trade-reliant economy would continue beyond this year’. Using the data in the extracts and your knowledge of economics, evaluate policies which could be used to boost South Korea’s exports and increase its trade surplus.

2.6.3 The Balance of Payments · 2.6.2 Trade

Explain how a government or central bank can intervene to prevent the value of its currency rising.

2.6.4 Exchange Rate Systems

Evaluate the possible impact on the cost of living and the standard of living in the UK of a sustained rise in the value of the pound sterling against other currencies, such as the euro and the US dollar.

2.3.3 Inflation and Deflation · 2.1.4 Uses of National Income Data

Explain the main causes of rising consumption in an economy.

2.2.3 Determinants of AD

To what extent do you agree that a fall in savings is beneficial for the UK economy? Justify your answer.

2.2.3 Determinants of AD · 2.2.1 The Circular Flow of Income

Explain the role of commercial banks in the economy.

2.4.2 Commercial and Investment Banks

Assess policies which can be used to reduce cyclical instability in the UK.

2.3.1 Growth and the Economic Cycle · 2.5.1 Fiscal Policy

Using the data in Extract A (Figure 1), calculate the mean unemployment rate for the UK from 2007–08 to 2017–18. Give your answer to one decimal place.

2.3.2 Employment and Unemployment

Explain how the data in Extract A (Figure 2) show that the UK has had poor real wage growth since 2008.

2.3.2 Employment and Unemployment · 2.1.4 Uses of National Income Data

Extract C (line 19) states: ‘Improving workers’ productivity is the key to increasing real GDP’. With the help of a diagram, explain how improving productivity should lead to rising real GDP.

2.2.6 Determinants of LRAS

Extract B (lines 13–14) states: ‘It can be argued that supply-side reforms have gone too far in creating a highly flexible workforce and the government needs to do more in terms of protecting the nation’s workers’. Using the data in the extracts and your knowledge of economics, evaluate the view that free market supply-side reforms to labour markets are beneficial to the UK economy.

2.5.2 Supply-Side Policies

Us ing th e data in Extract D (Figure 4), calculate how much was spent by the US on imports from China for every $1 it received from exports to China in 2018. Give your answer to two decimal places.

2.6.2 Trade

Explain how the data in Extract D (Figure 3) and (Figure 4) show why the US may have decided to implement protectionist policies.

2.6.2 Trade

Extract E (lines 10–11) states: ‘US tariffs on $200bn of Chinese imports came into effect in September.’ With the help of a diagram, explain how the imposition of a tariff may affect the volume of imports.

2.6.2 Trade

Extract F (lines 17–19) states: ‘Some argue that many developed countries that now champion free trade, only achieved economic prosperity through protectionist policies.’ Using the data in the extracts and your knowledge of economics, assess the view that developing economies, such as Brazil and China, should pursue protectionist policies to achieve greater economic development.

2.6.2 Trade · 2.6.5 Growth and Development

Explain the possible causes of a falling budget deficit.

2.5.1 Fiscal Policy

To what extent do you agree that reducing the budget deficit is more important to the UK’s macroeconomic performance than reducing the current account deficit on its balance of payments? Justify your answer.

2.5.1 Fiscal Policy · 2.1.1 Objectives of Government Policy

Explain how demand-side and supply-side shocks might increase unemployment in an economy.

2.3.2 Employment and Unemployment · 2.2.2 AD and AS Analysis

Evaluate the view that the main objectives of UK government macroeconomic policy can be achieved without conflicting with each other.

2.3.4 Policy Conflicts

Explain how an appreciation of its currency is likely to affect a country’s rate of economic growth.

2.6.4 Exchange Rate Systems · 2.3.1 Growth and the Economic Cycle

Evaluate the costs and benefits for a country of joining a currency union, such as the eurozone.

2.6.4 Exchange Rate Systems

To what extent, if at all, do the data suggest that living standards in the UK improved between 2007 and 2017? You must use the data in Extract B to support your assessment.

2.1.4 Uses of National Income Data

Explain how a sustained slowdown in the world economy is likely to affect living standards in the UK.

2.3.1 Growth and the Economic Cycle · 2.6.2 Trade

After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the government implement a further substantial increase in the National Living Wage? Justify your recommendation.

2.5.1 Fiscal Policy

Using the data in Extract A, calculate the GDP per capita for Costa Rica in 2015/2016 to the nearest dollar.

2.1.2 Macroeconomic Indicators

Explain how the data in Extract A indicate living standards may be higher in the UK than in the USA.

2.1.4 Uses of National Income Data

Extract B (lines 8–9) states ‘If injections into an economy’s circular flow of income increase, then this may generate multiple increases in GDP.’ With the help of a diagram, explain how an increase in injections may generate multiple increases in an economy’s GDP.

2.2.1 The Circular Flow of Income

Extract B (lines 13–15) states ‘If real GDP goes up, the economy is doing well; this is associated with higher incomes, more jobs and higher spending.’ Using the data in the extracts and your knowledge of economics, assess the view that to improve the living standards of their citizens, governments across the world should prioritise achieving economic growth.

2.1.4 Uses of National Income Data · 2.3.1 Growth and the Economic Cycle

Using the data in Extract D (Figure 3), calculate, to the nearest pound, the amount of income tax payable for someone in Scotland earning £13 500.

2.5.1 Fiscal Policy

Explain how the data in Extract D (Figure 2) show that the UK’s public finances have been improving since 2010.

2.5.1 Fiscal Policy

Extract E (lines 11–12) states ‘If growth could be increased, the budget deficit would fall much faster.’ With the help of a diagram, explain why a higher rate of economic growth is likely to reduce the budget deficit.

2.5.1 Fiscal Policy · 2.3.1 Growth and the Economic Cycle

Extract F (line 1) states ‘In most of the UK, reducing the budget deficit has focused on austerity rather than tax rises.’ Using the data in the extracts and your knowledge of economics, evaluate the view that there is a strong case for significant increases in UK income tax rates.

2.5.1 Fiscal Policy

Explain why the value of a currency may fall in a floating exchange rate system.

2.6.4 Exchange Rate Systems

Assess the view that a depreciation of the pound against other currencies is likely to improve the UK’s macroeconomic performance.

2.6.4 Exchange Rate Systems · 2.6.3 The Balance of Payments

Explain how the monetary policy transmission mechanism works when the Monetary Policy Committee (MPC) raises Bank Rate.

2.4.3 Central Banks and Monetary Policy

Evaluate the view that strict rules and regulations on financial markets are essential to help create a more stable economy.

2.4.4 Regulation of the Financial System

Explain the main causes of a rise in inflation.

2.3.3 Inflation and Deflation

Evaluate the view that inflation is always preferable to deflation.

2.3.3 Inflation and Deflation

After considering Extract E, and the original evidence in Extracts A, B, C and D, would you recommend that the Government should increase its spending on housing? Justify your recommendation.

1.8.9 Government Intervention · 2.5.1 Fiscal Policy

Using the data in Extract A (Figure 1), calculate the change in the effective exchange rate index, as a percentage, between November 2015 (point A) and November 2016 (point B). Give your answer to two decimal places.

2.6.4 Exchange Rate Systems

Extract B describes the trade figures as ‘disappointing’. Explain how the data in Extract A (Figure 2) show that the UK’s trade performance has been ‘disappointing’ given the fall in the value of the pound since November 2015.

2.6.3 The Balance of Payments

Extract C (lines 8–9) states ‘Trade deficits and surpluses may be self- correcting in a floating exchange rate system.’ With the help of a diagram showing the supply of and demand for a currency, explain how a floating exchange rate may help to correct a trade surplus.

2.6.4 Exchange Rate Systems · 2.6.3 The Balance of Payments

Extract B (lines 19–21) states ‘Although some argue that a current account deficit is not a problem, others point to the worryingly large and persistent nature of the deficit.’ Using the data in the extracts and your knowledge of economics, assess the impact of a persistent current account deficit on the macroeconomic performance of the UK economy.

2.6.3 The Balance of Payments

Using the data in Extract D (Figure 4), calculate the average amount saved per household in 2016 if average household income was £26 300. Give your answer to the nearest pound.

2.2.3 Determinants of AD

Explain how the data in Extract D (Figures 3 and 4) show that consumer confidence may have risen since 2014.

2.2.3 Determinants of AD

Extract E (lines 16–17) states ‘However, some argue that trying to maintain stable prices and low unemployment could create trade-offs.’ With the help of a diagram, explain why a trade-off between price stability and low unemployment might occur.

2.3.4 Policy Conflicts

Extract F (lines 10–12) states ‘The Austrian economist, Friedrich Hayek, highlighted artificially low interest rates and excessive credit creation as being the main causes of cyclical instability.’ Using the data in the extracts and your knowledge of economics, evaluate the view that maintaining low interest rates for a sustained period of time may be damaging to the UK’s macroeconomic stability.

2.4.3 Central Banks and Monetary Policy

Explain the main barriers that LEDCs face when attempting to achieve stable, long-term economic growth.

2.6.5 Growth and Development

Evaluate the view that MNCs play a positive role in the development of LEDCs.

2.6.5 Growth and Development · 2.6.1 Globalisation

Explain how fiscal policy can be used to try to improve the supply side of an economy.

2.5.1 Fiscal Policy · 2.5.2 Supply-Side Policies

Evaluate whether achieving a budget surplus is a desirable objective of economic policy.

2.5.1 Fiscal Policy

Explain the causes of cyclical and structural unemployment.

2.3.2 Employment and Unemployment

Assess the view that falling unemployment will inevitably lead to an improvement in the standard of living for people in the UK.

2.3.2 Employment and Unemployment · 2.1.4 Uses of National Income Data

Explain how a sustained low world market price for oil would be likely to affect the economic development of a less economically developed oil-producing country such as Nigeria or Venezuela.

2.6.5 Growth and Development · 2.6.2 Trade

After considering Extract E, and the original evidence in Extracts A, B, C and D, would you recommend to the members of OPEC that they continue to restrict the supply of oil to try to raise the world market price of oil? Justify your recommendation.

1.5.5 Oligopoly · 2.6.2 Trade

Using the data in Extract A (Figure 2), calculate, to two decimal places, the mean growth rate for India from 2010 to 2014.

2.3.1 Growth and the Economic Cycle

Explain why the data in Extract A (Figure 1) show that living standards in India have improved.

2.1.4 Uses of National Income Data

Extract B (lines 17–19) states ‘India still protects its economy with anti-dumping measures and export subsidies that are designed to promote economic growth.’ With the help of a diagram, explain how export subsidies may help promote economic growth in India.

2.6.2 Trade

Extract C (lines 2–3) states ‘More recently, India has begun to use more market-based strategies to help its development, including liberalising trade and privatisation.’ Using the data in the extracts and your knowledge of economics, evaluate the view that greater use of market-based strategies is the best way to improve the economic development of India.

2.6.5 Growth and Development

Using the data in Extract D (Figure 3), calculate, to two decimal places, the mean inflation rate for Japan from 2010 to 2015.

2.3.3 Inflation and Deflation

Explain how the data in Extract D (Figure 4) show that Japan has been less successful than the UK in achieving a stable rate of economic growth.

2.3.3 Inflation and Deflation · 2.1.1 Objectives of Government Policy

Extract E (lines 9–10) states ‘Improvements in productivity on the supply side of the economy could actually lead to more deflation.’ With the help of a diagram, explain how improvements in productivity could cause deflation.

2.2.6 Determinants of LRAS

Extract F (lines 19–20) states ‘What is not clear is what should be done if low inflation turns to bad deflation.’ Using the data in the extracts and your knowledge of economics, evaluate the view that monetary policy is the most effective way of tackling deflation in developed economies such as the UK and Japan.

2.3.3 Inflation and Deflation

Explain how government policies can reduce the natural rate of unemployment.

2.3.2 Employment and Unemployment · 2.5.2 Supply-Side Policies

Discuss the view that falling unemployment will inevitably lead to trade-offs with other macroeconomic policy objectives.

2.3.4 Policy Conflicts

Explain the possible reasons for changes in the pattern of trade between the UK and the rest of the world.

2.6.2 Trade

Evaluate the measures that might be taken to reduce a deficit on the current account of the UK’s balance of payments.

2.6.3 The Balance of Payments

Explain how changes in both government spending and taxation might affect the level of economic activity.

2.5.1 Fiscal Policy

Evaluate the economic consequences for the UK economy of a significant shift in the burden of taxation from direct taxes to indirect taxes.

2.5.1 Fiscal Policy

To what extent, if at all, do you consider that the UK manufacturing sector has been in decline since 2003? You must use the data in Extract B to support your assessment.

2.3.1 Growth and the Economic Cycle · 2.1.2 Macroeconomic Indicators

Explain why, in advanced economies, economic growth is usually accompanied by a fall in employment in manufacturing but an increase in employment in the service sector.

2.3.2 Employment and Unemployment · 2.6.5 Growth and Development

Taking into account Extract D, and the original evidence presented in Extracts A, B and C, would you recommend that the government should intervene to support the UK steel industry? Justify your recommendation.

2.5.2 Supply-Side Policies