: Pearson Edexcel past-paper questions pack

Demand-side policies: fiscal and monetary policy

Past-paper questions pack

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Questions are numbered; the mark schemes (the answer key) follow on separate pages so the question pages can be handed out alone. www.economicsaleveltutor.com

Pearson Edexcel AS and A-level Economics past-paper questions since 2016 · 50 parts · mark schemes follow the questions · www.economicsaleveltutor.com · Questions and mark schemes © Pearson Edexcel

1. June 2025 · AS Paper 2 · Q1(b) · 3 marks · AO1=1,AO2=1,AO3=1

(b) With reference to the information above, explain one possible effect of the increase in the rate of unemployment on the UK government budget. (3)

2. June 2025 · AS Paper 2 · Q4(a) · 1 marks · AO1=1

3. June 2025 · AS Paper 2 · Q4(c) · 1 marks ·

(c) Which one of the following is an example of an indirect tax? (1) A Corporation tax B Income tax C Inheritance tax D Value added tax

4. June 2025 · Paper 2 · Q6(a) · 5 marks · AO1=2,AO2=2,AO3=1

(a) With reference to Figure 1, explain the distinction between direct and indirect taxation. (5)

5. June 2025 · Paper 2 · Q6(c) · 10 marks · AO1=2,AO2=2,AO3=2,AO4=4

(c) With reference to the information provided and your own knowledge, assess the likely macroeconomic effects of the German government’s budget deficit. (10)

6. June 2025 · AS Paper 2 · Q6(d) · 6 marks · AO1=2,AO2=2,AO3=2

(d) With reference to the information provided, explain two factors that the Bank of England’s Monetary Policy Committee may have considered when changing the base interest rate. (6)

7. June 2024 · AS Paper 2 · Q5(a) · 1 marks · AO1=1

(a) Define the term ‘budget deficit’. (1)

8. June 2024 · AS Paper 2 · Q5(b) · 2 marks · AO2=2

(b) Using the above table, calculate the percentage decrease in budget deficit between March 2016 and March 2019. You are advised to show your working. (2)

9. June 2024 · AS Paper 2 · Q5(c) · 1 marks ·

(c) Which one of the following will most likely lead to a reduction in the budget deficit? (1) A An increase in government spending and a decrease in taxation B An increase in taxation and a decrease in government spending C An increase in the value of exports and a decrease in the value of imports D An increase in the value of imports and a decrease in the value of exports

10. June 2024 · Paper 2 · Q6(d) · 12 marks · AO1=2,AO2=2,AO3=4,AO4=4

(d) With reference to Extract B, discuss the use of quantitative easing in preventing deflation. (12)

11. June 2024 · AS Paper 2 · Q6(e) · 15 marks · AO1=3,AO2=3,AO3=3,AO4=6

(e) Discuss factors, apart from changes in real wages, which the MPC may have considered when changing the base interest rate. (15)

12. June 2024 · AS Paper 2 · Q6(f) · 20 marks · AO1=4,AO2=4,AO3=6,AO4=6

(f) Evaluate whether expansionary demand-side policies lead to conflicts between macroeconomic objectives. (20)

13. June 2024 · AS Paper 2 · Q6(g) · 20 marks · AO1=4,AO2=4,AO3=6,AO4=6

(g) Evaluate whether the MPC has been successful in meeting the UK’s macroeconomic objectives between 2008 and 2019. (20)

14. June 2024 · Paper 3 · Q2(d) · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

(d) Evaluate the microeconomic and macroeconomic effects of high interest rates in Ghana, or another developing country of your choice. (25)

15. June 2023 · Paper 2 · Q1(a) · 4 marks · AO1=2,AO2=2

(a) Draw an aggregate demand and aggregate supply diagram to illustrate the likely impact of an increase in the UK base interest rate on the average price level and real output. (4)

16. June 2023 · Paper 2 · Q1(b) · 1 marks ·

(b) Which one of the following is the most likely impact of an increase in the base interest rate? (1) A decrease in the: A level of demand pull inflation B marginal propensity to save C rate of cyclical unemployment D value of the pound against the dollar

17. June 2023 · AS Paper 2 · Q3(a) · 1 marks ·

(a) Which one of the following can be deduced from the above chart? (1) A Corporation tax revenue is higher than excise duties B Income tax raises less revenue than Value Added Tax (VAT) C Tax revenue from business rates contributes to approximately 3% of the overall government tax revenue D Tax revenue from National Insurance contributions is five times greater than the tax revenue from council tax

18. June 2023 · AS Paper 2 · Q3(b) · 3 marks · AO1=1,AO2=1,AO3=1

(b) Total UK Government tax revenue for 2021–22: £820 billion. Total UK Government expenditure for 2021–22: £1 053 billion. Using these figures, explain the likely impact of the above data on the UK Government’s budget balance. (3)

19. June 2023 · AS Paper 2 · Q6(g) · 20 marks · AO1=4,AO2=4,AO3=6,AO4=6

(g) Evaluate how interest rates are used to control UK inflation. (20)

20. June 2023 · Paper 2 · Q8 · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

8 UK inflation, as measured by the CPI, rose to 10.1% in the 12 months to July 2022, compared to 2.0% in the 12 months to July 2021. (Source: adapted from https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/ consumerpriceinflation/july2022) Evaluate macroeconomic policies, apart from monetary policy, the UK government could use to reduce inflation.

21. June 2022 · AS Paper 2 · Q1(a) · 1 marks ·

(a) Which one of the following is the most likely effect of this quantitative easing? (1) A A fall in economic growth B A fall in the rate of inflation C An increase in the money supply D An increase in unemployment

22. June 2022 · AS Paper 2 · Q1(b) · 3 marks · AO1=1,AO2=1,AO3=1

The MPC of the Bank of England also cut the UK’s base interest rate from 0.75% to 0.1% in March 2020. (b) Explain one likely impact of a decrease in the base interest rate on inflation. (3)

23. June 2022 · AS Paper 2 · Q6(f) · 20 marks · AO1=4,AO2=4,AO3=6,AO4=6

(f) Evaluate the fiscal policies the UK Government could use if it believes that ‘the UK economy is likely to experience another recession’ (Extract A, lines 27–28). (20)

24. June 2022 · Paper 3 · Q2(d) · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

(d) Evaluate the microeconomic and macroeconomic effects of decreasing interest rates in Kenya, or another developing country of your choice. (25)

25. November 2021 · Paper 2 · Q7 · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

7 The European Central Bank introduced a new round of quantitative easing (QE) in March 2020, purchasing up to €750 billion of assets. The objective of this QE was to reduce the serious risks to the effectiveness of monetary policy resulting from a significant recession. The European Central Bank’s target for inflation remains at ‘below but close to 2%’. (Source adapted from: https://www.ecb.europa.eu/press/pr/date/2020/html/ecb. pr200318_1~3949d6f266.en.html) Evaluate the effectiveness of quantitative easing during ‘a significant recession’.

26. November 2021 · Paper 3 · Q2(e) · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

(e) Evaluate the microeconomic and macroeconomic impacts of ‘a much more expansionary fiscal policy’ (Extract C line 23) on the German economy. (25)

27. October 2020 · AS Paper 2 · Q4(a) · 1 marks · AO1=1

(a) Define the term ‘interest rate’. (1)

28. October 2020 · AS Paper 2 · Q4(b) · 2 marks · AO2=2

(b) Annotate the aggregate demand (AD) and short-run aggregate supply (SRAS) diagram below to show the possible impact of a rise in the base interest rate on the equilibrium level of real output and the price level. (2) Price level SRAS P1 AD Y Real output 1

29. October 2020 · AS Paper 2 · Q4(c) · 1 marks ·

(c) Which one of the following demand-side policies best explains a rise in the base interest rate? (1) A Contractionary fiscal policy B Contractionary monetary policy C Expansionary fiscal policy D Expansionary monetary policy

30. October 2020 · AS Paper 2 · Q6(a) · 4 marks · AO1=2,AO2=2

(a) With reference to Figure 1, explain the term ‘balanced government budget’. (4)

31. October 2020 · AS Paper 2 · Q6(g) · 20 marks · AO1=4,AO2=4,AO3=6,AO4=6

(g) Evaluate the likely macroeconomic effects of the UK government pursuing a policy of reducing its budget deficit. (20)

32. October 2020 · Paper 2 · Q7 · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

7 In 2018, the United States Government cut the corporation tax rate (tax on company profits) from 35% to 21%. Income tax rates for US citizens were also reduced: for example, the top rate of income tax was cut from 39.6% to 37%. (Source adapted from: https://www.nytimes.com/) Evaluate the likely impact of cutting tax rates as a policy to increase economic growth.

33. October 2020 · Paper 3 · Q1(d) · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

(d) Evaluate the likely microeconomic and macroeconomic effects of a rise in interest rates in Turkey. (25)

34. June 2019 · Paper 2 · Q6(d) · 12 marks · AO1=4,AO2=2,AO3=2,AO4=4

(d) With reference to Extract C, discuss the potential conflicts between macroeconomic objectives when the central bank attempts to control inflation. (12)

35. June 2019 · AS Paper 2 · Q6(f) · 20 marks · AO1=4,AO2=4,AO3=6,AO4=6

(f) Evaluate the use of interest rate changes as a means of controlling UK inflation. (20)

36. June 2019 · Paper 3 · Q1(d) · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

(d) Evaluate the microeconomic and macroeconomic effects of increased government spending on education to promote healthy eating in the UK. (25)

37. June 2018 · Paper 2 · Q2(b) · 4 marks · AO1=2,AO2=2

(b) Draw an aggregate demand and aggregate supply diagram illustrating the likely impact of a rise in interest rates on the price level and real output. (4)

38. June 2018 · AS Paper 2 · Q3(a) · 3 marks · AO1=1,AO2=1,AO3=1

(a) With reference to the chart above, explain one factor that the Monetary Policy Committee (MPC) of the Bank of England may have considered when reducing the base interest rate. (3)

39. June 2018 · AS Paper 2 · Q3(b) · 1 marks ·

In August 2016 the Bank of England extended its existing asset purchases (quantitative easing) programme, from a total of £375 billion to £435 billion. (b) Which one of the following is the most likely effect of the Bank of England’s quantitative easing? (1) A A fall in economic growth B A fall in the money supply C An increase in the rate of inflation D An increase in unemployment

40. June 2018 · Paper 2 · Q4(c) · 1 marks ·

(c) If a government takes decisions to target a budget surplus, this is an example of: (1) A contractionary monetary policy B discretionary fiscal policy C expansionary fiscal policy D expansionary monetary policy

41. June 2018 · AS Paper 2 · Q5(c) · 1 marks · AO1=1

(c) Define the term ‘budget deficit’. (1)

42. June 2018 · AS Paper 2 · Q6(f) · 20 marks · AO1=4,AO2=4,AO3=6,AO4=6

(f) Evaluate government policies, apart from migration policies, that could be used to increase the employment rate in the UK. (20)

43. June 2017 · AS Paper 2 · Q4(a) · 2 marks · AO2=2

(a) Annotate the aggregate demand and aggregate supply diagram below to show the likely impact of the increase in the personal allowance on the UK’s price level and real output. (2)

44. June 2017 · AS Paper 2 · Q4(b) · 1 marks · AO1=1

Price AS level P1 AD Y1 Real output (b) Define the term ‘direct tax’. (1)

45. June 2017 · AS Paper 2 · Q4(c) · 1 marks ·

(c) Which one of the following is an example of a direct tax? (1) A Value Added Tax B Vehicle Excise Duty C Corporation tax D Alcohol duty

46. June 2017 · Paper 2 · Q6(d) · 12 marks · AO1=2,AO2=2,AO3=4,AO4=4

(d) Discuss the likely success of the ECB’s quantitative easing programme in moving Eurozone inflation closer to ‘the central bank’s ceiling of 2%’ (Extract A, line 17). (12)

47. June 2017 · Paper 2 · Q6(e) · 15 marks · AO1=3,AO2=3,AO3=3,AO4=6

(e) Discuss ‘looser fiscal policy’ and ‘supply-side reforms’ (Extract A, lines 20 and 21) that may be used by governments of Eurozone countries to increase economic growth. (15)

48. June 2016 · AS Paper 2 · Q6(e) · 15 marks · AO1=3,AO2=3,AO3=3,AO4=6

(e) With reference to Extracts A and B and your own knowledge, discuss whether the MPC should be concerned about the risk of deflation in the UK economy. (15)

49. June 2016 · AS Paper 2 · Q6(f) · 20 marks · AO1=4,AO2=4,AO3=6,AO4=6

(f) Evaluate whether the MPC has been successful in controlling the UK’s inflation rate since 2011. (20)

50. June 2016 · AS Paper 2 · Q6(g) · 20 marks · AO1=4,AO2=4,AO3=6,AO4=6

(g) Evaluate demand-side policy responses to the Global Financial Crisis of 2008. (20)

Mark schemes

1. June 2025 · AS Paper 2 · Q1(b)

2. June 2025 · AS Paper 2 · Q4(a)

3. June 2025 · AS Paper 2 · Q4(c)

4. June 2025 · Paper 2 · Q6(a)

5. June 2025 · Paper 2 · Q6(c)

6. June 2025 · AS Paper 2 · Q6(d)

7. June 2024 · AS Paper 2 · Q5(a)

8. June 2024 · AS Paper 2 · Q5(b)

9. June 2024 · AS Paper 2 · Q5(c)

10. June 2024 · Paper 2 · Q6(d)

11. June 2024 · AS Paper 2 · Q6(e)

12. June 2024 · AS Paper 2 · Q6(f)

13. June 2024 · AS Paper 2 · Q6(g)

14. June 2024 · Paper 3 · Q2(d)

15. June 2023 · Paper 2 · Q1(a)

16. June 2023 · Paper 2 · Q1(b)

17. June 2023 · AS Paper 2 · Q3(a)

18. June 2023 · AS Paper 2 · Q3(b)

19. June 2023 · AS Paper 2 · Q6(g)

20. June 2023 · Paper 2 · Q8

21. June 2022 · AS Paper 2 · Q1(a)

22. June 2022 · AS Paper 2 · Q1(b)

23. June 2022 · AS Paper 2 · Q6(f)

24. June 2022 · Paper 3 · Q2(d)

25. November 2021 · Paper 2 · Q7

26. November 2021 · Paper 3 · Q2(e)

27. October 2020 · AS Paper 2 · Q4(a)

28. October 2020 · AS Paper 2 · Q4(b)

29. October 2020 · AS Paper 2 · Q4(c)

30. October 2020 · AS Paper 2 · Q6(a)

31. October 2020 · AS Paper 2 · Q6(g)

32. October 2020 · Paper 2 · Q7

33. October 2020 · Paper 3 · Q1(d)

34. June 2019 · Paper 2 · Q6(d)

35. June 2019 · AS Paper 2 · Q6(f)

36. June 2019 · Paper 3 · Q1(d)

37. June 2018 · Paper 2 · Q2(b)

38. June 2018 · AS Paper 2 · Q3(a)

39. June 2018 · AS Paper 2 · Q3(b)

40. June 2018 · Paper 2 · Q4(c)

41. June 2018 · AS Paper 2 · Q5(c)

42. June 2018 · AS Paper 2 · Q6(f)

43. June 2017 · AS Paper 2 · Q4(a)

44. June 2017 · AS Paper 2 · Q4(b)

45. June 2017 · AS Paper 2 · Q4(c)

46. June 2017 · Paper 2 · Q6(d)

47. June 2017 · Paper 2 · Q6(e)

48. June 2016 · AS Paper 2 · Q6(e)

49. June 2016 · AS Paper 2 · Q6(f)

50. June 2016 · AS Paper 2 · Q6(g)