100 marks · 21 question parts · Paper, mark scheme and report on Pearson's site
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A
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This question required a simple calculation of the index number. There seemed to be an improvement in candidates' understanding of index numbers compared to previous exam papers. The main problem candidates found was in selecting the wrong initial data from the figure - something that is worth practising. This answer scores full marks having correctly calculated the index number to be 115.4 This answer scores 1/2 marks as the two correct pieces of data have been identified from the figure but the calculation is not correct. Ensure you know key formulas such as how to calculate an index number from data.
Quantitative skills: QS 5 (calculate and interpret index numbers); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)
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In this question there is 1 mark for knowledge and 1 for application. The knowledge mark comes from identifying that inflation is likely to increase and the second mark for illustrating where this comes from, e.g. from an increase in consumption/AD. This answer achieves the full 2 marks. 1 mark for 'rate of inflation will increase'. 1 mark for making the link from consumption increasing. This answer scores zero as it doesn't clearly explain any plausible link between an increase in credit card lending and inflation.
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This question was generally answered well, with many candidates able to accurately draw a diagram showing either AD or AS increasing, or both. The main reason for candidates scoring 3/4 marks as opposed to 4/4 marks was labelling the vertical axis as price rather than price level. This answer scores the full 4 marks - it clearly shows AS shifting out to the right and the resultant effect on price level and real output. Everything is also correctly labelled - all axes and lines. There is no need to write anything for these questions - just draw the diagram. This answer also scores 4/4 marks. This time the candidate has shifted out AD, showing an increase in price level and real GDP. Again everything is correctly labelled.
Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)
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A
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In this question there is 1 mark for knowledge and 1 for analysis. The knowledge mark comes from identification of a relevant reason for Estonia's rising labour costs. The analysis mark is awarded for 'linked development', explaining/justifying how the candidate's reason could lead to higher unit labour costs. This answer achieves full marks. The candidate has identified one reason as wage-price spiral/high inflation. They then go on to analyse it by explaining how workers will ask for higher wages. Get straight on and answer the question, just like this candidate has done. This answer achieves only the knowledge mark. The candidate has mentioned a reason in the form of an increase in emigration but they have failed to explain how this could cause Estonia's unit labour costs to rise. The first two lines of this answer don't do anything to answer the question - candidates need to focus their time specifically on answering the question, that is what will earn them marks.
Quantitative skills: QS 5 (calculate and interpret index numbers)
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In this question there is one knowledge mark available for an understanding that competitiveness will fall/decrease (or words to that effect). The second mark, for analysis, is for explaining how rising unit labour costs will lead to reduced competitiveness. This answer achieves 1/2 marks. The knowledge mark is awarded for saying that Estonia will be less internationally competitive. The rest of the answer which focuses on FDI doesn't answer the question. This answer achieves full marks. The candidate straight away gets the knowledge mark for saying that competitiveness will decrease. The analysis mark is awarded for the explanation of how this means higher costs of production. Be accurate and concise in these answers - this answer isn't very long but the candidate has done what is required and so gets full marks.
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C
Quantitative skills: QS 5 (calculate and interpret index numbers)
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D
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The majority of candidates were able to accurately calculate the answer here. Those who didn't get full marks generally hadn't read the question properly and so didn't calculate what they had been asked to. This answer achieves 1/2 marks for correctly constructing the formula 500,000 X 0.17 but unfortunately the candidate didn't get the right answer from their calculation.
Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes)
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In this question there is 1 mark for knowledge and 1 for analysis. The knowledge mark was awarded for any relevant reason, e.g. an increase in the number of firms basing themselves in the UK. The second mark, for analysis, was gained by providing the linked development to explain how/why this would cause an increase in total corporation tax receipts. In this question it was important for candidates to remember that they are writing about corporation tax, so answers discussing consumption weren't relevant to the question. This answer gains the knowledge mark for referring to 'an incentive for foreign companies to set up in the UK'. However they haven't quite explained clearly enough how this would lead to an increase in tax revenue, they have just said that it will. This answer scores the full 2 marks. The candidate gets the knowledge mark straight away by referring to an increase in inward foreign direct investment. The answer then goes on to explain how this would lead to an increase in corporation tax revenue for the government. This is a good example of an answer that gets straight to the point, immediately answering the question - this will save candidates time in the exam.
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This question was answered well, with most candidates able to distinguish between the two - for example referring to income as a flow whereas wealth is a stock. Many candidates also described income as earnings/salary or similar and wealth as assets or similar. This is a clear and straightforward full marks answer, with a clear explanation of both income and wealth. This answer also scores 2/2 marks for accurate explanations of income and wealth. You will notice that this answer is longer than the previous one - however it will still only get the maximum 2 marks. Candidates need to avoid wasting time doing things like providing application (as in this example) when they haven't been asked to. The last sentence here isn't answering the question and so it doesn't gain the candidate any marks.
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Candidates found this question more challenging particularly in making sure their points were clearly related to increasing wealth inequality rather than income. There is one mark available for knowledge, for identifying a relevant reason. The second mark, for analysis, comes from linked development - explaining how their reason may be a cause of the increase in wealth inequality. This is a short but accurate answer that identifies a relevant reason and makes a reasonable attempt to justify it. The knowledge mark comes from 'wars in developing countries' as a reason. The rest of the answer, explaining how assets of the poorest people are getting destroyed, gains the analysis mark. Notice how brief this answer is - yet it accurately answers the question, and so achieves full marks. This answer scores 1/2 marks. The candidate has identified a relevant reason in the sense of 'top companies in the world' dominating but they have not explained how this causes wealth inequality to increase, and so they cannot get the analysis mark.
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B
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In this question most candidates were able to access some of the marks. There was, in most cases, some level of understanding of what a forward market was. The better answers sought to make good use of the extract to illustrate the point they were making. However, many candidates struggled to reach full marks as their explanations of forward markets in currencies often showed a lack of clarity about how forward markets work. This answer achieves 4/5 marks. There is accurate application to the extract - both the direct quote in quotation marks as well as the reference to the Brexit referendum. There is also analysis talking about decreasing currency fluctuations. However, only 1 of the 2 knowledge marks is awarded as there isn't really a fully accurate explanation of how forward markets in currencies work. Remember there are two marks for knowledge in this question. This answer scores only 1 mark out of 5. There is an understanding of the benefits of a forward market, referring to combatting price fluctuations, but nothing else here is relevant to the question or the case study. In a question that says 'with reference to...' make sure you do as asked.
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In these 8-mark questions the marks are split equally across all four assessment objectives. So 2 marks for knowledge, 2 for application, 2 for analysis, and 2 for evaluation. This is the last of the questions in the paper to be marked on a points-based system - questions 10 marks and above are marked using levels. As such candidates need to ensure they clearly demonstrate enough things to tick off all of these marks. Many candidates on this question were able to accurately explain the impact on demand for imports and exports and then follow this through by considering the impact on factors such as economic growth, unemployment, and inflation. Good evaluation points often referred to the J-curve or Marshall-Lerner condition. Some candidates also remembered the previous question, and suggested that forward markets could limit the impact for firms, at least in the short run. This answer achieves full marks. The candidate immediately gains 2 application marks for the reference to the data. Next the impact on exports and imports is discussed. There is a knowledge mark for the reference to an improvement in the current account. The excellent explanation of the Marshall-Lerner condition and the rest of the bottom of the first page gains 2 marks for evaluation. On the second page there is another knowledge mark awarded for 'increase in inflation'. This answer scores 4/8 marks. There are 2 marks for application on the second page. There are also 2 marks for analysis, as the candidate correctly discusses the cost of imports increasing on the first page and the price of exports decreasing on the second page. However, there is no knowledge or evaluation, so the maximum they can get is 4/8 marks.
Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)
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This question focuses fairly specifically on happiness. Candidates are asked to discuss the impact of the fall in real incomes on subjective happiness. The best answers did exactly that, considering how it might mean consumers are not able to purchase as many goods and services that would make them happy and so therefore their happiness falls. Many candidates also made reference to consumers falling behind on credit card and loan repayments, making good use of the extract. Where some candidates fell down on this question was in not focusing specifically on happiness but discussing wider implications for the economy of falling real incomes. This is a high quality answer that scores 8/10 marks. The first paragraph doesn't add much to the answer but the second paragraph is good KAA and the last paragraph is very good evaluation. In terms of KAA is it good to see a holiday as an example of something that consumers may no longer be able to afford. In terms of evaluation the candidate has made a good job of using context to back up their argument. Note that this is a fairly brief answer, yet the candidate has done a good job of accurately answering the question and so it still scores highly. This answer scores 5/10 marks. It is Level 3 in terms of KAA, but unfortunately the candidate has not offered any counter-arguments and so they cannot gain any of the 4 evaluation marks. In the 10 and 12 mark questions there will be 4 marks for evaluation.
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In this question the key to success was in ensuring you fully grasped both aspects of the question. Good answers began from a starting point of the central bank attempting to control inflation and then went on to explain the conflicts that can occur as the central bank attempts to keep inflation on target. For example the Bank of England's 2% target. Answers that just discussed conflicts between macroeconomic objectives without making that link to controlling inflation still received credit but they obviously haven't fully addressed what the question has asked of them. This answer scores 6/12 marks. It just achieves Level 3 for KAA but unfortunately there is no evaluation so they have immediately missed out on those 4 marks. The candidate has answered the question and discussed different conflicts between the macroeconomic objectives, but to reach a higher mark they have to explain in a little more depth and to offer some context to evidence the points being made. Don't forget to relate your answer to the real world - either making use of the information provided in the figures and extracts or your own knowledge. This is a high quality answer with top levels for both KAA and evaluation. The answer starts off straight away with good application to the context and then goes on to explain how this creates a conflict, with an AD/AS diagram to illustrate the point clearly. On the second page the conflict between inflation is explained clearly and has a Phillips curve to illustrate the point. This answer is also evaluated well, looking at the current situation in the UK economy.
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This question focuses on financial markets and whether the government was right to bail out the banks or not. The best answers provided clear and in-depth arguments of both the reasons why this was a good idea and why it wasn't. They also related this specifically to the context, using evidence from the case study and/or their own knowledge. Some answers also included a judgement, but candidates should note that this is not required in this question. This answer scores 5/15 marks. It has some points which are not relevant, such as the point about inflation on the second page, but does have some understanding of the situation and offers some good application - particularly to start with. This is a high quality answer that achieves top level for both KAA and evaluation. The candidate clearly articulates the arguments on both sides of the debate with lots of context - for example talking about the run on Northern Rock. The wider implications for the UK economy had the banks not been rescued have been clearly discussed, and then for evaluation the opportunity cost for the government has been clearly explained. Depth of explanation in both KAA and evaluation was the key to success here. To get top marks make sure you use evidence, either from the case study or your own knowledge, to back up your arguments.
This question asks candidates to consider the impact of the growth of trading blocs on trading patterns. The question focus is specific in that candidates are expected to consider how trading patterns may change. The TFTA is given as an example of a trading bloc, and whilst many candidates made good use of this context, others chose to discuss other trading blocs such as the European Union to good effect. Unfortunately what held many candidates back from achieving more highly in this question was that they didn't focus their answers specifically on trading patterns, and instead considered the benefits and downsides for a country's economy of joining a trading bloc. Such answers generally gained some marks but obviously couldn't access the higher marks. This is a high quality answer that fulfils the requirements of the criteria for KAA Level 4 and evaluation Level 3. It clearly answers the question - with a focus on the impact on trading patterns specifically. The EU has been used as a case study to good effect and key economic theories such as trade diversion have been discussed. Where relevant, candidates should use diagrams to aid their explanation. This answer achieves 9/25 marks. Right from the start the candidate makes it clear that they are discussing the benefits and downsides of the growth of trading blocs rather than the impact on trading patterns, with a discussion of the impact on GDP and living standards in a country. There are some references to trading patterns throughout the answer, both on positive and negative sides, but with the broad thrust of the answer not being focused on trading patterns it can only score fairly low for both KAA and evaluation. Make sure you answer the question that has been set, not the question you want to answer.
This question was generally answered more accurately than question 7 - in the sense that answers were on the whole more focused on the actual question set. Success in this question came from ensuring that clear, in-depth explanation of both KAA and evaluation points were made, with good context to back up answers. Japan was given as a context for the question, and many candidates made good use of this, often adding in their own knowledge of the Japanese economy. Other candidates talked about other countries they were familiar with, the most common being the UK. This is a high-quality, top-level answer that clearly fulfils all the criteria for both KAA Level 4 and evaluation Level 3. The focus is on the Japanese economy, and the candidate makes good use of the context provided to back up points. A diagram is also used to good effect to illustrate the point about crowding out leading to less aggregate demand. The candidate has also ensured that they have discussed issues to do with both the fiscal deficit and the national debt. Ensure you answer both parts of a question like this to reach the top level - e.g. in this case make sure both fiscal deficit and national debt are discussed. This answer scores 11/25 marks. It starts off ok although does take a while to get onto analysis rather than simply knowledge. However, after a while, the candidate appears to have forgotten what the question is asking and they begin to write about imports and exports. As such there is a limit to what mark this answer can achieve. Do not get the fiscal deficit confused with the current account deficit. Remember anything can be 'in deficit' - this word simply means that it's a negative number.
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