2023 paper 2

Question 1

Illustrate on
a diagram
the effect of
an increase
in the base
rate

Answer 1

• LRAS and AD
• Inward shift AD
• Due to increased costs of production

Question 2

What is the
most likely
effect of an
increase in
the base
rate?

Answer 2

Decrease in demand pull inflation

Question 3

Multiple
choice on
employment

Answer 3

B 1%

Question 4

Explain the reasons for changes in
unemployment with reference to
the figure

Answer 4

• Due to trade cycle
• More unemployment during recession, less during growth
• Relaxation of covid policies causing an increase in economic growth

Question 5

Calculate
the
forecasted
GDP

Answer 5

£2129419.55 million

Question 6

What is the likely effect of a fall in MPC on GDP?

Answer 6

• Multiplier formula: 1/1-MPC
• Lower consumption means lower multiplier
• GDP falls

Question 7

What is a likely cost of falling GDP?

Answer 7

• Higher unemployment
• Due to fall in AD and lower demand for labour

Question 8

Calculate USA debt ratio

Answer 8

• Debt/gdp x 100
• 123.5%

Question 9

What is the most likely potential economic growth?

Answer 9

Technological advances

Question 10

Most likely example of increase in consumption

Answer 10

(D) Buying more clothes

Question 11

Explain the link between fiscal deficit and national debt

Answer 11

• Budget deficit is where gov spending is greater than tax revenue
• Borrowing to finance excess spending over taxes

Question 12

What is the most likely effect of increased government borrowing

Answer 12

(A) Inequality

Question 13

5 Marker
What is meant by regional trade agreement

Answer 13

• Free trade amongst regional countries
• E.g reduce protectionist measures such as tariffs
• Allows countries to increase exports and thus regional trade

Question 14

8 Marker
Causes of high transport costs

Answer 14

1. Poor roads, increase lorries breaking down - increasing costs
2. Lack of roads, longer journeys, higher fuel costs

Question 15

12 Marker
Improving transport links on economic growth

Answer 15

1. Improves mobility of labour
2. More FDI, leads to employment
3. Leads to economic growth
4. EVAL: MNC’s might take advantage of lack of environmental and labour laws

Question 16

10 Marker
Assess two benefits of debt relief for the Angolan economy

Answer 16

1. More finance availible for investment
2. Some spending may take longer to see effects (education)
3. Appreciation of Kwanza due to less outflows, boost oil revenues from neighbouring countries

Question 17

15 Marker
Market based policies to improve development

Answer 17

1. Free floating exchange rate attracts FDI’s as exchange rate less likely to be poorly managed
2. Decreasing coorperation tax, encourages FDI as investors will see higher rate of return from investment, growing firms leading to more jobs

Question 18

25 Marker
Policies to reduce inflation other than monetary policy

Answer 18

1. Increasing income tax
   EV: Decrease economic growth
2. Subsidise industries, fall in price
   EV: High opportunity cost

Question 19

APP subsidy example for 25 marker

Answer 19

• UK government subsidise electric car manufacturing