1 mark
ContextIn October 2019 the annual rate of inflation in the UK was 1.5%, as measured by the Consumer Prices Index (CPI), and 2.1%, as measured by the Retail Prices Index (RPI).
Define the term ‘inflation’.
AS · November 2020 · Paper 2
The UK Economy – Performance and Policies
80 marks21 questionsExam date 14 May 2020
Questions in exam order
21 total2 marks
ContextIn October 2019 the annual rate of inflation in the UK was 1.5%, as measured by the Consumer Prices Index (CPI), and 2.1%, as measured by the Retail Prices Index (RPI).
Explain one likely cause of inflation.
AS Paper 2, November 2020, Q1(c)Multiple choice
1 mark
ContextIn October 2019 the annual rate of inflation in the UK was 1.5%, as measured by the Consumer Prices Index (CPI), and 2.1%, as measured by the Retail Prices Index (RPI).
From the above data, it can be deduced that the percentage point difference between CPI and RPI was:
A0.0
B0.2
C0.4
D0.6
1 mark
Illustrate the shape of the Classical long-run aggregate supply (AS) curve on the diagram below.
Diagram needed. Open the original question paper for the diagram
2 marks
Explain the reason for the shape of the Classical long-run AS curve.
AS Paper 2, November 2020, Q2(c)Multiple choice
1 mark
Which one of the following is an example of a market-based supply-side policy?
AA reduction in unemployment benefits
BConstruction of new transportation links
CGovernment-funded apprenticeship schemes
DIncreased government spending on healthcare
AS Paper 2, November 2020, Q3(a)Multiple choice
1 mark
ContextThe UK’s net monthly balance of trade in goods and services, by value, January 2014 to January 2018, is shown in the chart below. £billions …
Which one of the following can be inferred from the above chart over the period shown?
AThe government was spending more than it received in taxation
BThe UK’s balance of trade, by value, was always in equilibrium
CThe value of imports was greater than the value of exports
DThe value of inflows was greater than the value of outflows
3 marks
ContextThe UK’s net monthly balance of trade in goods and services, by value, January 2014 to January 2018, is shown in the chart below. £billions …
Explain one likely reason for the UK’s balance of trade in goods and services over the period shown. Refer to the chart on page 6 in your answer.
1 mark
ContextIn August 2018 the Monetary Policy Committee of the Bank of England raised the UK’s base interest rate from 0.5% to 0.75%.
Define the term ‘interest rate’.
2 marks
ContextIn August 2018 the Monetary Policy Committee of the Bank of England raised the UK’s base interest rate from 0.5% to 0.75%.
Annotate the aggregate demand (AD) and short-run aggregate supply (SRAS) diagram below to show the possible impact of a rise in the base interest rate on the equilibrium level of real output and the price level.
Diagram needed. Open the original question paper for the diagram
AS Paper 2, November 2020, Q4(c)Multiple choice
1 mark
ContextIn August 2018 the Monetary Policy Committee of the Bank of England raised the UK’s base interest rate from 0.5% to 0.75%.
Which one of the following demand-side policies best explains a rise in the base interest rate?
AContractionary fiscal policy
BContractionary monetary policy
CExpansionary fiscal policy
DExpansionary monetary policy
1 mark
ContextThe table below shows the UK’s Gross National Income (GNI) between 2014 and 2017. Gross National Year Income (£ million)
Define the term ‘Gross National Income’.
AS Paper 2, November 2020, Q5(b)Multiple choice
1 mark
ContextThe table below shows the UK’s Gross National Income (GNI) between 2014 and 2017. Gross National Year Income (£ million)
Which one of the following represents the ratio of Gross National Income in 2015 to Gross National Income in 2017?
A1 : 1.03
B1 : 1.05
C1 : 1.08
D1 : 1.11
2 marks
ContextThe table below shows the UK’s Gross National Income (GNI) between 2014 and 2017. Gross National Year Income (£ million)
Using 2014 as the base year, calculate the index number for 2016. You are advised to show your working.
4 marks
Case study · UK government budget and household consumption
With reference to Figure 1, explain the term ‘balanced government budget’.
5 marks
Case study · UK government budget and household consumption
Explain the likely effect of a fall in the exchange rate of the British pound on aggregate demand. Refer to Extract A in your answer.
6 marks
Case study · UK government budget and household consumption
With reference to Figure 2 and Extract A, explain two likely influences on the level of UK real household consumption.
10 marks
Case study · UK government budget and household consumption
Assess the likely impact on the UK economy of an ‘increase in consumption’ (Extract A, lines 5–6). Use an aggregate demand and aggregate supply diagram in your answer.
Diagram needed. Open the original question paper for the diagram
15 marks
Case study · UK government budget and household consumption
Discuss the factors that might explain why ‘the UK’s forecast long-term trend rate of growth was reduced’ (Extract B lines 9–10).
Optional20 marks
Case study · UK government budget and household consumption
Evaluate supply-side policies that could be used to increase the UK’s rate of economic growth.
Optional20 marks
Case study · UK government budget and household consumption
Evaluate the likely macroeconomic effects of the UK government pursuing a policy of reducing its budget deficit.
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