Economics Specimen answers
Script Ref Topic/Skill 2017 Paper Page
A B
Efficiency (A2) Unit 4: Q2(a)
3 5
C D
Efficiency (Phillips Curve) (A2) Unit 4: Q4(a)
6 7
Case study E F
Application (Example 1) (A2) Unit 3: Q9 8 10 11
G H
Application (Example 2) (A2) Unit 3: Q11 12 13
I J
Application (Example 3) (A Level) Component 2: Q1(f)
14 15
K L M
Evaluation (A Level) Comp 3: Q5(b)
16 21 24
N O P
Essay writing (A2) Unit 4: Q4(b) 27 30 33
1
2
Script A: Efficiency Explain, using an appropriate diagram, the ways in which a firm may be regarded as efficient. [10]
3
Script A
4
Script B: Efficiency Explain, using an appropriate diagram, the ways in which a firm may be regarded as efficient. [10]
Script C: Efficiency (Phillips Curve) Explain, using diagrams, the shape of the short-run and long-run Phillips curves. [10]
5
6
Script D: Efficiency (Phillips Curve) Explain, using diagrams, the shape of the short-run and long-run Phillips curves. [10]
Application (Japan case study)
7
8
Script E: Application (Example 1)
9
10
Script F: Application (Example 1)
11
Script G: Application (Example 2)
12
Script H: Application (Example 2)
13
Script I: Application (Example 3) Discuss whether it is right to suggest that "the European Central Bank and the Bank of Japan should continue expanding their programmes of quantitative easing". [12]
QE involves a government or central bank buying financial assets from commercial banks and financial institutions to lead to increased spending in the economy, therefore increasing AD. It could be argued that with economic growth being weak in both Japan and the Eurozone that QE should continue as it is needed to dramatically increase AD
The increase in demand will lead to AD increasing from AD1 to AD2. Furthermore more money within the economy and more lending. More people will be borrowing money to invest, which will also increase LRAS from LRAS1 to LRAS2, so rising AD and AS will mean economic growth. However with economic growth still relatively weak and with a ‘healthy recovery’ only in countries such as the UK, confidence could be extremely weak in Japan and the Eurozone meaning that with weak animal spirits, banks may hold onto the case to increase their financial resources rather than lending money. At the same time consumers may have little confidence because of the weak growth and therefore QE won’t increase consumer spending.
It could be argued that QE must continue as monetary policy cannot be used any other way because ‘interest rates in Japan and the Eurozone are close to zero’ and fiscal policy can also not be used due to high levels of government debt in both areas, restricting the power of fiscal policy as they cannot afford to keep borrowing with the opportunity cost of servicing high debts being reduced government spending. It may be beneficial to increase the money supply further as monetarists argue that the money supply is directly linked to the level of inflation. The quantity theory of money is MV=PT, however as V (velocity) and T (aggregate transactions) are fixed we are left with money supply = price level and therefore increasing the money supply could lead to inflationary pressure which could lead to higher inflation which will allow the low inflation the developed economies of the world fear by removing the deflationary spiral that falling oil prices are risking. Overall QE should continue as Japan and the Eurozone face periods of weak growth and therefore monetary and fiscal policy are already employed. However with QE having been going on for a while it is apparent that the demand side policies may not be as effective as hoped. Both the Eurozone and the Bank of Japan should explore supply side policies which could greatly aid economic growth, education which for instance improves the quality of human capital and could attract more FDI helping to encourage further growth to end the deflationary spiral. AO2: 4 AO3: 4 AO4: 3 11/12
14
QE is when the government purchases financial assets in exchange for money to boost the economy. The government printing money to buy bonds means that the price of bonds will go up meaning that there will be more valuable assets because bond prices will go up. At the same time banks will have more cash to lend, so interest rates will go down meaning that people will borrow more. The government purchase financial assets will also increase the money supply and push aggregate demand up, which would be useful in times of deflation which is happening through low oil prices and ‘economic growth in both areas being so weak’. The increase in money supply will mean there’s more money chasing goods, forcing prices to increase. This is due to Fisher’s equation MV=PT where V and T are stable. So change in M will have an effect on P.
However this does have an effect on inflation as AD increases through consumption to AD2, increasing national income from Y1 to Y2 and price from P1 to P2. Therefore if too much money is made, this can cause hyperinflation. AO2: 1 AO3: 4 AO4: 1 6/12
Script J: Application (Example 3) Discuss whether it is right to suggest that "the European Central Bank and the Bank of Japan should continue expanding their programmes of quantitative easing". [12]
Script K: Evaluation 'UK CURRENT ACCOUNT DEFICIT REACHES 5.2 % OF GDP IN 2015' To what extent should a government be concerned by a large current account deficit? [20]
15
16
Script K
17
Script K
18
Script K
19
Script K
20
Script L: Evaluation 'UK CURRENT ACCOUNT DEFICIT REACHES 5.2 % OF GDP IN 2015' To what extent should a government be concerned by a large current account deficit? [20]
21
Script L
22
Script L
23
Script M: Evaluation 'UK CURRENT ACCOUNT DEFICIT REACHES 5.2 % OF GDP IN 2015' To what extent should a government be concerned by a large current account deficit? [20]
24
Script M
25
Script M
Script N: Essay writing To what extent are supply side policies effective in reducing unemployment in an economy? [20]
26
27
Script N
28
Script N
29
Script O: Essay writing To what extent are supply side policies effective in reducing unemployment in an economy? [20]
30
Script O
31
Script O
32
Script P: Essay writing To what extent are supply side policies effective in reducing unemployment in an economy? [20]
33
Script P
34
Script P
