June 2018: AS Paper 2

Mark scheme

Examiner's comment

This question requires a short but precise definition of gross domestic product (GDP). It is important that candidates are clear in their answers. This candidate gives an accurate definition of Gross Domestic Product and as such achieves the 1 mark available. This candidate does not define Gross Domestic Product accurately and hence does not attain the 1 mark available.

Notes from the mark scheme and report

• the total value of goods and services produced in an economy (in a year)
• be precise

Mark scheme

Examiner's comment

This is a GDP per capita calculation question that candidates were able to answer relatively easily. Candidates need to be careful to read the question and the data carefully, as some candidates lost marks because they selected the wrong two pieces of data. This candidate achieves 2/2 marks. They have correctly calculated an answer of £28,766.73. This candidate achieves 0/2 marks. They have not correctly calculated the UK's GDP per capita.

Notes from the mark scheme and report

• GDP / population = 1 872 714 / 65.1 = £28 766.73
• some selected the wrong two figures

Quantitative skills: QS 1 (calculate, use and understand ratios and fractions); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

A

Mark scheme

Notes from the mark scheme and report

• higher real GDP per capita usually means higher living standards (A)
• rising unemployment is a cause of lower GDP, not an effect
• confidence and purchasing power would rise

Mark scheme

Examiner's comment

This question requires an accurate definition of a recession. Candidates were not asked to state the characteristics of a recession in this question. This candidate has an accurate definition of recession and as such achieves the 1 mark available. This candidate does not define recession accurately and hence does not attain the 1 mark available.

Notes from the mark scheme and report

• negative economic growth (falling real GDP) for two consecutive quarters
• do not list characteristics

Mark scheme

Examiner's comment

This question required candidates to explain only one characteristic of a recession. Many candidates listed several characteristics and did not often explain the characteristic they had identified. This candidate gets 2/2 marks. They have identified and explained a characteristic of a recession. This candidate gets 1/2 marks. They have only identified a characteristic of a recession but have not given an explanation.

Notes from the mark scheme and report

• one characteristic (rising unemployment, falling inflation, falling profits/investment, larger budget deficit) plus a reason
• many listed several without explaining one

Answer

B

Mark scheme

Notes from the mark scheme and report

• B is where actual GDP is below trend GDP = negative output gap
• A and D are on trend (no gap), C is above trend (positive gap)

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Mark scheme

Examiner's comment

In this question the marks are split as 1 for knowledge, 1 for application and 1 for analysis. The knowledge comes from identifying one factor that the MPC considers, the application for using the data, and analysis for some development building on the knowledge/factor identified. This candidate gets 3/3 marks. They have received the application mark for using the data accurately, the knowledge mark for identifying spare capacity as a factor and an analysis mark for developing this point. This candidate gets 1/3 marks. They have received the knowledge mark for identifying one factor but have not achieved marks for application and analysis.

Notes from the mark scheme and report

• one MPC factor (expected inflation, growth/spare capacity, confidence, house prices) developed
• data reference e.g. base rate cut from 5.5% in 2008 to 0.5% in 2009 during the financial crisis

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

C

Mark scheme

Notes from the mark scheme and report

• QE increases the money supply and AD so inflation is likely to rise (C)
• it raises growth and lowers unemployment, and does not reduce the money supply

Mark scheme

Examiner's comment

This question requires a clear definition of aggregate demand. Many were not able to provide an accurate definition and hence did not get the mark for this question. This candidate achieves the 1 mark as they go beyond mentioning that aggregate demand is the total demand, and provided the AD equation. This candidate does not define aggregate demand accurately and hence does not attain the 1 mark available.

Notes from the mark scheme and report

• total planned spending on goods and services in an economy at any given price level, AD = C + I + G + (X - M)
• 'total demand' alone is not enough
• report: "Many were not able to provide an accurate definition and hence did not get the mark"

Mark scheme

Examiner's comment

This question requires candidates to draw the effect of a rise in the cost of raw materialsin context of an AD/AS diagram. Marks were awarded as 1 mark for the leftward shift in SRAS and 1 mark for a new equilibrium showing higher price level and lower real output. Most candidates achieved the 2 marks on this question. This candidate achieves 2/2 marks. The shift in SRAS is correct and they have illustrated the new equilibrium and the change in price level and real output with the dotted lines. This candidate achieves 1/2 marks – the shift in SRAS is correct but they have not illustrated the new equilibrium and the change in price level and real output.

Notes from the mark scheme and report

• shift SRAS left and mark the new equilibrium with a higher price level and lower real output
• missing the new equilibrium loses a mark

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Answer

B

Mark scheme

Notes from the mark scheme and report

• higher relative productivity shifts LRAS right (B)
• lower investment, higher benefits (weaker work incentives) and less credit reduce LRAS

Answer

D

Mark scheme

Notes from the mark scheme and report

• health spending rose from 141 to 145: 4/141 = 2.84% (D)
• the biggest change is social protection (+8), all areas rose, defence (46) is less than twice housing (34)

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme

Examiner's comment

This question asked candidates to calculate the forecast UK government spending on social protection as a percentage of total forecast UK government spending in 2016/17. Many candidates were able to answer this question relatively easily. However, some candidates lost marks because they selected the wrong two pieces of data. This candidate achieves 2/2 marks. They have correctly calculated an answer of 31%. This candidate achieves 0/2 marks. They have not shown the correct workings and their answer is incorrect.

Notes from the mark scheme and report

• 240 / 772 x 100 = 31.1%
• the £716bn tax receipts figure is a distractor
• some used the wrong data

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme

Examiner's comment

This question requires a definition of budget deficit. A few candidates were not able to provide an accurate definition, as they confused budget deficit with current account deficit; hence did not get the mark for this question. This candidate gives an accurate definition of budget deficit and as such achieves the 1 mark available. This candidate does not define budget deficit accurately and hence does not attain the 1 mark available.

Notes from the mark scheme and report

• government spending exceeds tax revenue in a year
• some confused it with a current account deficit

Mark scheme

Examiner's comment

The marks for this question are split in half between knowledge and application. Candidates achieved 2 marks for an explanation of one reason and 2 marks for some relevant application from Figure 1. Candidates lost marks where they were only defining the two measures and not explaining why they differ. This candidate achieves 4/4 marks. They have both of the application marks – mentioning both ILO and Claimant Count figures. They also attained 2 knowledge marks for explaining why these measures differ. This candidate achieves 2/4 marks. They have gained 2 knowledge marks for explaining why these measures differ but do not get any application marks. Always read the question carefully. Candidates must ensure they refer to the appropriate data provided to get 2 application marks.

Notes from the mark scheme and report

• different methods: claimant count only counts those claiming benefits, ILO Labour Force Survey counts all seeking and available for work
• quote both measures from Figure 1 (e.g. 2.5m ILO vs 1.5m claimant count in 2010)
• defining the measures is not explaining why they differ

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

This question required candidates to assess the likely macroeconomic effects of increase in house prices using an AD/AS diagram. In these longer questions the focus for a candidate needs to be on the quality of their answer, bearing in mind the levels mark scheme. They should ensure they are clearly giving step-by-step explanations for their reasons. This would cover the exam skills of knowledge, application, and analysis (KAA). There are also 4 marks available here for evaluation. Popular comments revolved around the wealth effect for existing home owners and the effect on inflation, coupled with the impact on first time buyers as evaluation. This is a more able response, scoring the full 10 marks. It clearly and logically explains different effects of an increase in house prices and also offers two relevant evaluations of these points. The candidate uses the data from the extract to support their arguments. This answer scores 3 marks in total. There is no evaluation and so the highest mark possible is 6/10 marks. In terms of KAA, only one relevant point has been explained - government spending on helping people to buy homes. This however could have been further developed and hence only fits with the criteria for Level 2. Keep the levels in mind – in this case you are aiming for KAA Level 3 and Evaluation Level 2.

Notes from the mark scheme and report

• wealth effect and confidence raise consumption, AD shifts right, higher real output and price level
• Level 3 needs an accurate AD/AS diagram
• evaluate with first-time buyers, regional differences, size of the effect, falling real incomes

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Mark scheme

Examiner's comment

This question asked candidates for one specific factor, so it is important for candidates to make the most of their time in the exam and not explain two factors. Several possibilities could be explained here, such as real income and unemployment. Popular application amongst candidates included the use of Figure 2. Candidates should remember that in these shorter questions examiners are looking for specific pieces of application. This answer provides exactly what the examiner is looking for and gets 5/5 marks. A relevant point in the form of unemployment rates which is clearly analysed in the first paragraph along with application from the extract in the second paragraph. This answer achieves a score of 4/5 marks. The candidate has identified a relevant factor and has analysed their point. However, they only get 1 application mark. Be concise and stick to the point in these shorter questions. Only answer with one factor and avoid spending time writing more.

Notes from the mark scheme and report

• one factor only (income, interest rates, unemployment, confidence) with two data references, e.g. savings ratio fell from about 11% (2010) to under 6% (2015), real incomes fell 10.4%

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme

Examiner's comment

This question asks candidates for two factors. It is important that candidates focus specifically on their factors and answer the question in terms of the multiplier. Too much time was wasted on explaining and drawing the circular flow of income diagram without any link to a rise in the value of the multiplier. Each reason needed to be identified and analysed. There are two marks for application, which most candidates attained through the use of an accurately written multiplier formula. This candidate gets 6/6 marks for this answer. They identify two factors - a fall in the marginal propensity to save and a fall in the marginal propensity to import. They get 2 application marks for the use of multiplier formula and their explanation is well made, which gives the other 2 marks for analysis. This candidate gets 3/6 marks for this answer. They get 2 knowledge marks, one for defining the multiplier effect and one for identifying a factor of a decrease in the marginal propensity to save. They get 1 additional mark for its analysis. No marks have been awarded for the second paragraph and they get 0 application marks. Make sure you know the difference between injections and leakages/withdrawals.

Notes from the mark scheme and report

• two factors (fall in mps, mpt or mpm, i.e. fewer withdrawals) each analysed
• multiplier formula or Figure 2 savings data for application
• drawing the circular flow without linking to the multiplier wasted time

Quantitative skills: QS 1 (calculate, use and understand ratios and fractions); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

This question required the candidates to discuss the likely impact of migration on employment and unemployment in the UK. Candidates needed to ensure they answered the question being asked, as there were a few candidates who explained the impact on employment as analysis and the impact on unemployment as evaluation. This was credited as analysis and consequently, they were not able to receive any evaluation marks. There was good use of data in this question. This candidate gets 15/15 marks and is a high quality answer. With highly developed points that are clearly focused on employment and unemployment, as well as evaluation that clearly critiques these analysis points this answer is worthy of the top Level 3 for both KAA and Evaluation. They also use relevant data from the extract to extend their arguments. The analysis is not as well developed as the previous answer, and in parts, lacks fully coherent chains of reasoning. The point on employment on the first page is not as detailed as the point on unemployment on the second page. There is no evaluation. Overall this is a low Level 3 for KAA. There is no need for a conclusion in this question, remember to focus your time only on what is going to get you marks.

Notes from the mark scheme and report

• discuss both employment and unemployment with Extract B data (312 000 for work, 182 000 with a definite job, 130 000 looking)
• employment as KAA and unemployment as 'evaluation' counts only as KAA
• evaluate with skills, vacancies and wages

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

This question required candidates to evaluate government policies to increase the employment rate in the UK. Many candidates were able to effectively answer this question and provided arguments on spending on education and training, healthcare and infrastructure. They linked this to increasing employment rate using an AD/AS diagram in context of their explanations. One of the key issues was that a few candidates discussed migration policies which the question asks them not to refer to. As such they did not obtain any marks for this policy. This is a more able response which clearly fits the criteria for the top levels of both KAA and Evaluation. There is a thorough explanation of government policies that could be used to increase the employment rate. There is a clear explanation of improving access to apprenticeship schemes, reducing national minimum wage and reducing benefits. This is supported by well-developed evaluative arguments about information gaps and inequality. This response only fits the criteria for Level 2 of both KAA and Evaluation. There is limited explanation of government policies that could be used to increase the employment rate. There is only a two-stage chain of reasoning of the explanation of providing cheaper specialist education, improving infrastructure and reducing corporation tax. This is supported by four brief evaluative comments with a partially developed chain of reasoning. Where relevant, always try to include diagrams to aid the argument you are making. Make sure you refer to these as part of your written answer.

Notes from the mark scheme and report

• migration policies earn nothing
• education and training, apprenticeships, benefit reforms, infrastructure, fiscal stimulus with AD/AS diagrams
• evaluate with cost, time lags, information gaps, inequality

Mark scheme, including the levels grid and indicative content

Examiner's comment

This question required candidates to evaluate the likely impact of high inflation on UK government’s macroeconomic objectives. Although candidates were able to understand the impact of high inflation, they were not able to link it back to the macroeconomic objectives. Some candidates were not able to recall what these government objectives were and hence did not access higher levels. Those who were able to effectively answer this question explained the impact on current account deficit and economic growth in depth, and in context of recent UK inflation trends. This response achieves Level 3 for both KAA and Evaluation. The candidate starts off with an explanation of the impact on economic growth followed by a brief evaluation on the magnitude of inflation. They discuss the impact on fixed income groups/standard of living and evaluates their argument with consideration of time period. The final analysis point discusses the impact on the current account deficit, but there are some errors. The response ends with two well-developed evaluative comments, which take the candidates marks to Level 3. This response starts with a weak opening paragraph. The candidate then moves on to explain the impact on the current account, and this is well developed. It is supported by only one developed evaluative comment on relative inflation rates. There is no balance to the analysis and the evaluation does not consider the broad elements of the question. The answer therefore gets top of Level 2 for KAA and Evaluation. Do not contradict yourself between different points without a clear justification of the point you are making. Include logical and coherent chains of reasoning within your point rather than briefly explaining them.

Notes from the mark scheme and report

• link high inflation to each objective (growth, unemployment, current account, budget, equality)
• report: candidates "were not able to link it back to the macroeconomic objectives" and some could not recall them