AQA A-level Economics 7136 - P3 (Economic principles and issues) - 04th June 2019

am I the only one who said how government spending increases Ad and the benefits of that

And Q30.
Was index value 107?

10 marker:
Can show increase in affordability but limitiations:
1. Doesn't show whole of 2007
2. Doesn't show banks' willingness to lend mortgages
3. Real GDP per capita issues
4. Only showing the incomes of house purchasers is stupid because they actually have enough money to buy houses, what about people who can't?
Overall, data needs to be improved to come to a better conclusion, maybe nominal wage rise for the bottom 40% of incomes?
15 marker:
Diagrams I drew: Economic cycle, shift right in AD
Economic cycle: initially in bust, people not willing to make a significant investment on houses and banks unwilling to lend.
AD: From recovery, small POG or NOG leads to increase in willingness to lend and invest in buying a house. So shift right, drives up prices and quantity bought and sold. BUT: further shift right due to speculation and a increase in inelasticity due to rise in price of rent, a substitute.
25 marker: Had to rush!
Diagram: subsidy
Should intervene: Subsidy, reduce COP of producers, can use to buy better technology, allows for greater dynamic efficiency so maybe LRAS rises. But, what if subsidy used to pay wages or shareholders, where's the subsidy coming from. Is it healthcare or education? And since the primary governmental objective in economics is to maximise economic utility, this doesn't do it, especially if they can't afford houses.
Had to rush second point: deregulation in planning laws, could allow for costs reduce as less spent to ensure laws being met. But what if health and safety laws? Maybe injury or death could occur? Not good!
Didn't have enough time for a judgement, on a 25 marker is 20 the max you can get with no judgement?

I thought for the 15 marker price of houses were increasing

It’s 13 marks if u don’t do conclusion

For the 25 marker I put that the government should intervene through the help to buy because that makes housing more affordable. Housing is a durable good and an asset so it would reduce the inequality in the distribution of income and wealth. This is also a macro objective. Drew a Lorenz curve but I think I labelled wrong. Did anyone do this?

I also said they should intervene and instead use rent controls such as maximum pricing but this could lead to black markets and unregulated housing etc.
Increasing affordability means more people have money to spend on imports and that would have negative impact of the current account balance of payments.
Overall gov should spend to help subsidise to increase house for long run benefit on the market whilst help to buy to help affordability??

Am I completely off?

Wasn’t the 25 mark question on government spending in the housing market rather than government intervention

government spending i.e subsidies is a form of government intervention.

Who says it would've been done via subsidies? The government can directly give out contracts for companies to build houses and pay for them. The extracts made no mention of subsidies, just spending on helping first time buyers and such.

I said subsidies is an example of government spending, I didn't say it's the example that had to be used in the exam. And by the way, schemes such as a universal credit is a subsidy, which was mentioned in Extract E.

Yeah that's what I wrote about. I wrote about the inelastic supply of housing makes increases in demand cause high increases in price, and also about how the low bank rate over the time period allowed for asset prices to rise via the monetary transmission mechanism. I forgot what I wrote about for my third point, memory of a goldfish

Yh I said about subsidies as a form of GOV spending to resolve the clear housing market failure

Omg noooo I talked about the impacts of government spending on macro economics performance 😭😭😭

Theres a black market for housing????