AS Level Paper 2, Oct 2020

Q1(a) State what inflation means (2-mark definition).

Q1(b) Explain one factor that could plausibly push inflation upwards.

Q1(c) Given UK inflation of 1.5% on the CPI and 2.1% on the RPI in October 2019, identify the percentage point difference between them. (0.0 / 0.2 / 0.4 / 0.6)

Q2(a) Draw on the diagram provided the shape taken by a Classical long-run aggregate supply (LRAS) curve.

Q2(b) Explain why a Classical long-run AS curve takes the shape that it does.

Q2(c) Which supply-side measure is market-based? (lower jobless benefits / new transport infrastructure / state-funded apprenticeships / extra health spending).

Q3(a) Using the chart of UK monthly net trade (goods and services) from January 2014 to January 2018, select the valid inference.

Q3(b) Explain one plausible cause of the UK's trade balance in goods and services across the period charted.

Q4(a) Give the meaning of an interest rate (2-mark definition).

Q4(b) Mark up an AD/SRAS diagram showing how a higher base rate might move equilibrium real output and prices.

Q4(c) Which demand-side policy would a base rate increase represent? (tight fiscal / tight monetary / loose fiscal / loose monetary).

Q5(a) State what Gross National Income means (2-mark definition).

Q5(b) Using UK Gross National Income data 2014–2017, identify the ratio of GNI in 2015 to GNI in 2017.

Q5(c) With 2014 as base year, calculate Gross National Income's index number for 2016.

Q6(a) Using Figure 1, explain what a balanced government budget is.

Q6(b) Drawing on Extract A, explain how a weaker pound sterling would probably affect aggregate demand.

Q6(c) Explain two probable determinants of UK real household consumption, drawing on Figure 2 and Extract A.

Q6(d) Assess how a rise in consumption (Extract A) affects the UK economy, supporting your answer with an AD/AS diagram.

Q6(e) Discuss why forecasters cut the UK's long-run trend growth rate (Extract B).

Q6(f) Evaluate which supply-side measures might lift the UK's economic growth rate.

Q6(g) Evaluate the macroeconomic consequences if the UK government acted to shrink its budget deficit.