March Mock Year 12

Question 1

Define the term national income

Answer 1

The monetary value of goods and services produced in an economy over a period of time

Question 2

Define the term circular flow of income

Answer 2

The circular flow is the money flowing around the economy from households to firms and injections and leakages go through the economic cycle which can be spending and saving

Question 3

Explain what is meant by spare capacity in an economy

Answer 3

When there is unemployment and businesses are not making full use of their capacity and there are unused factors of production. There are no supply constraints and no inflationary pressures

Question 4

Four chain of reasonings when we are in a recession

Answer 4

1) increase in AD leads to an increase in UNEMPLOYMENT

2) spare capacity means there are no supply constraints therefore NO INFLATIONARY PRESSURES

3) buying less imports means a DECREASE in the CURRENT ACCOUNT DEFICIT

4) increase in the budget deficit means we are BORROWING MORE to pay for BENEFITS

Question 5

Define the term interest rate

Answer 5

The cost of borrowing

Question 6

Explain one reason why the claimant count and the ILO measure of unemployment differ (5 marker)

Answer 6

The claimant count and ILO survey are both measures of unemployment. The claimant count means urea it through the number of unemployed people claiming the job seeker allowance where as the ILO is a survey which measures all unemployed for a minimum of four weeks and are ready to start working in the next two. APPLY DATA GIVEN. This is because not all unemployed people claim benefits so do not account for the claimant count. Also there is always people between jobs and not claiming benefits. You cannot claim the claimant count with savings and not everyone wants the claimant count allowance benefit.

Question 7

Explain the likely impact of migration on the UK economy (5 marker)

Answer 7

DRAW GRAPHS (SRAS and AD shifting right on a new classicalist graph, show the negative output gap/ unemployment - AD shifting right from AD to AD1 and price levels rising on the SRAS) ✅KAA

An increase in immigration leads to an increase in workers and consumers. APPLY DATA. More workers means an increase in productive potential. There will be an increase in LRAS due to the increase in workers which leads to an increase in AD due to the rise in consumers.

Question 8

what is a supply constraint?

Answer 8

when there are limitations on the amount of stock a market can deliver