Section A
1) injection definition related to context (1) - investment
b) multipler calculation : sth like 4.7
c) which option would decrease multiplier - D: increase MPS/M/T (can't remember)
2) (a) draw Keynesian diagram (2)
(b) explain what spare capacity means (2) - unused resources in the economy
(c) which one causes movement along AS curve - (D) change in AD (1)
3) define price level (1)
(b) annotate diagram of impact of gov policy to encourage competition (2) - shift LRAS to the right
(c) Which one is gov interventionist to reduce unemployment - decrease in cooperation tax (1)
5. Define index number (1)
b) calculation (2)
Section B
6(a) how fall in exchange rate causes changes in inflation (4m).
fall in ex rate means imports more expensive - increase cost of production - cost-push inflation
most food imported - food prices increases
(b) explain 2 likely economic impacts of high inflation with reference to extract. (6m)
- the extract says "low fixed income ppl are mostly affected, wage rise is slow" inflation reduces their purchasing power and thus less "leaving them to spend less on relatively expensive goods”
- the other reason is from the extract says “rise in personal debt relative to income" - reduce saving I'm not sure...
(c) Explain one reason why CPI basket regularly revised (5m)
- changes in tastes and preferences - more ppl more healthier lifestyle -
- extract: in - non-dairy milk, out- cider, cigarettes
(d) Discuss the limitations of using GDP to compare living standards in the UK and other developing countries (10)
- Application - UK 2% Developing 4.5% in 2017; Shadow economy in developing countries 5 times that of UK economy
- GDP does not include Shadow economy , negative externalities, income distribution, but takes into account crime, prostitution
-For eval, I said other indicators could be used e.g. Green GDP, GNH
(e) evaluate the likely impact of changes in exports on economic growth. Use AD-AS diagram (15) I don’t feel like I have much content in writing this, like linking to Econ growth…
- Increase AD - high employment, higher income, higher standard living, multiplier effect (as X is a injection)
- eval - depends on magnitude, if imports no change - may not increase AD
(g) evaluate conflict of economic growth with 2 other macro objectives (20)
- one conflicting objective is with protection of the environment Eval: gov may subsidise firms to develop carbon free tech, investment in tech to allow firms to improve production method e.g. use renewable energy.
- 2nd conflicting objective is balance in current account; eval - supply side polices such as education to make workforce more productive and more innovation so exports may become more competitive in the long run, so may improve current account balance...