The diagram below shows an economy producing at point A on its PPF
All other things being equal, which one of the following would be most likely to move the
economy to point B?
Good Y
11.
GPL
B
A
PL1
PL2
Good X
A
B
C
D
12.
SRAS2
Which one of the following is most likely to shift out
the aggregate demand curve in the short run?
SRAS
A
An increased rate of innovation
B
A rise in productivity
SRAS1
C
A reduction in the savings ratio
D
Government plans to reduce
B the geographical mobility of labour
An increase in interest rates and a reduction in exports
An increase in household saving and a reduction in government spending
An increase in imports and a reduction in exports
An increase in investment and a depreciation of the exchange rate
Price level
X
D
A
The table below measures an index of constant price GDP per hour worked for a range of countries –
evidence of the productivity gap. C
AD1
France
Germany
Italy
2007
100.0
100.0
100.0
2008
99.3
99.6
98.9
2009
98.7
96.9
96.7
2010
100.2
98.5
99.0
AD
AD2
Japan
UK
USA
100.
100.0
100.0
99.5
100.5
97.8
10.9
99.3
105.5
100.0
Real
GDP
99.1
102.8
600
Based on the data above, which of the statements below is true
A
The level of productivity was the same in all countries in 2007
B
The USA experienced the largest increase in productivity of the period
C
Productivity was higher in Japan than in France in 2010
D
Only two of the countries experienced productivity growth over the period
500
400
£bn
13.
300
200
Page 4 Practice Paper - AQA Economics (AS) Paper 2 (A)
100
Extract C continued
turmoil in the latter part of the previous decade. Added to this, there is concern that the issue of debt is likely to rear
its head again: government debt levels are significantly higher now than they were in 2007 and with credit conditions
easing, rising real income and low unemployment, history suggest that the UK consumer is poised for another credit
fuelled spending ‘binge’. Government spending as a share of GDP is falling with the current government committed
to eliminate the deficit in this Parliament. Rightly or wrongly, the contribution (in GDP terms) of the state is likely to be
significantly less by 2020 than it was in 2010.
With global growth projections suggesting a softening recovery and countries such as China now growing at half
of their rate from the last 20 years, the prospects for UK export growth are bleak. With emerging market currencies
depreciating against sterling and sterling strength against a Euro which looks susceptible to further weakness, the
UK will need to focus on non-price competitiveness. Innovation, higher productivity and a plan to develop areas of
high value comparative advantage are going to be crucial if exports are going to make a significant contribution to
UK economic growth in the future. Given the UK’s labour laws, standards of living and lessons from history, we can’t
depreciate our way out of this mess so the challenge is for policy makers to create the right incentives for the UK to
prosper in an increasingly competitive and globalised world.
01
Define the term ‘trade deficit’. [3 marks]
02
Extract B states that demand for UK exports is price inelastic. Calculate the price elasticity of demand for UK
exports if the average price rises from £10 to £11 and demand falls by 1%. [4 marks]
03
Using Extract A, identify two significant points of comparison between changes in value of exports and
changes in the value of imports over the period shown. [4 marks]
04
Draw a bar chart to show the value of UK exports and imports for each year in the period shown. [4 marks]
05
Extract B mentions that UK trading partners are experiencing sluggish growth and hence demand for UK
exports is similarly sluggish. Explain the likely effects of this on the UK economy. [10 marks]
06
Using the data in the extracts and your knowledge, assess the view that increasing exports is vital for the
future performance of the UK economy. [25 marks]
Page 8 Practice Paper - AQA Economics (AS) Paper 2 (A)
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 diagram but the diagram is likely to be inaccurate in some respects or is
inappropriate.
1-3 marks
Relevant issues include:
N what is meant by sluggish growth and why this will result in sluggish growth for UK exports
N the relationship between sluggish growth, employment, income and demand for UK exports
N reference to inelastic PED for UK exports
N sluggish export growth and how it affects aggregate demand, UK growth, unemployment, inflation, Balance of Payments, fiscal position, negative multiplier effect
N sluggish growth abroad weakens a currency hence UK exports are relatively more expensive
N sectors/areas affected which are dependent on exports
MAXIMUM FOR QUESTION 05: 10 MARKS
06. Using the data in the extracts and your knowledge, assess the view that increasing exports is vital for
the future performance of the UK economy.
[25 marks]
Areas for discussion include:
N exports as an injection into the circular flow
N the main macroeconomic policy objectives
N factors that affect the growth of exports and imports
N impact on aggregate demand of exports growth
N importance of export growth against other determinants of AD
N multiplier effects
N the impact on unemployment
N the impact on short-run and long-run growth
N the impact on inflation
N the possible impact on the budget balance
N the implications for different sectors of the economy, e.g. manufacturing, services and construction and areas which
depend on exports
N the role of policy in shaping export growth
N application to recent changes and the current state of the UK economy
N other factors that influence the performance of the economy, e.g. productivity and other supply-side factors.
The use of relevant diagrams to support the analysis should be taken into account when assessing the quality of the
candidate’s response to the question.
Use the levels mark scheme on page 5 to award candidates marks for this question.
MAXIMUM FOR QUESTION 06: 25 MARKS
Page 14 Practice Paper - AQA Economics (AS) Paper 2 (A)