: Pearson Edexcel past-paper questions pack

The circular flow, national income and the multiplier

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 · 51 parts · mark schemes follow the questions · www.economicsaleveltutor.com · Questions and mark schemes © Pearson Edexcel

1. June 2025 · 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 likely impact of a reduction in indirect tax on the equilibrium level of real output and the price level. (2) Price level SRAS P1 AD Y1 Real output

2. June 2025 · Paper 2 · Q6(d) · 12 marks · AO1=2,AO2=2,AO3=4,AO4=4

(d) With reference to Extract B, discuss the impact of the planned investment by Intel in a new semiconductor factory on Germany’s aggregate demand. Use an aggregate demand and aggregate supply diagram in your answer. (12)

3. June 2025 · AS Paper 2 · Q6(e) · 15 marks ·

(e) Discuss the likely macroeconomic effects of a decrease in government expenditure on the UK economy. Use an aggregate demand and aggregate supply diagram to support your answer. (15)

4. June 2024 · AS Paper 2 · Q2(a) · 1 marks · AO1=1

(a) Define the term ‘marginal propensity to consume’. (1)

5. June 2024 · AS Paper 2 · Q2(c) · 1 marks ·

(c) Using the above data, which one of the following represents the value of the multiplier? (1) A 0.2 B 0.8 C 1.3 D 5.0

6. June 2024 · 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 likely impact of a fall in business investment on the equilibrium level of real output and the price level. (2)

7. June 2024 · Paper 2 · Q4(b) · 4 marks · AO1=2,AO2=2

(b) In July 2020 a survey estimated that the marginal propensity to consume in the UK was 0.1. (Source: adapted from https://ifs.org.uk/uploads/WP202035-MPCs-through- COVID-spending-saving-and-private-transfers.pdf) Calculate the total increase in aggregate demand from an increase in government spending of £60 million. (4)

8. June 2024 · AS Paper 2 · Q6(b) · 10 marks · AO1=2,AO2=2,AO3=2,AO4=4

(b) Assess the likely impact of an increase in real wages on the UK economy. Use an aggregate demand and aggregate supply diagram in your answer. (10)

9. June 2024 · Paper 3 · Q2(c) · 12 marks · AO1=2,AO2=2,AO3=4,AO4=4

(c) Discuss factors influencing the level of aggregate demand in Ghana. Use an aggregate demand and aggregate supply diagram in your answer. (12)

10. 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)

11. June 2023 · Paper 2 · Q4(b) · 4 marks · AO2=3,AO3=1

(b) With reference to the chart on the previous page, explain the likely effect of a fall in the marginal propensity to consume on the level of real GDP. Refer to the multiplier in your answer. (4)

12. June 2023 · AS Paper 2 · Q4(c) · 2 marks · AO2=2

(c) Annotate the aggregate demand (AD) and aggregate supply (AS) diagram below to show the likely impact of a fall in business investment on the equilibrium level of real output and the price level. (2) Price AS level P1 AD Y1 Real output

13. June 2023 · AS Paper 2 · Q6(c) · 10 marks · AO1=2,AO2=2,AO3=2,AO4=4

(c) With reference to Extract A, assess the likely impact of a rise in the value of exports on the UK economy. (10)

14. June 2022 · Paper 2 · Q1(a) · 4 marks · AO2=3,AO3=1

(a) Using the information above, calculate the total reduction in the UK’s GDP from a fall in government spending of £20 million. (4)

15. June 2022 · Paper 2 · Q1(b) · 1 marks ·

(b) Which one of the following is an injection into the circular flow of income? (1) A Imports B Investment C Savings D Taxation

16. June 2022 · AS Paper 2 · Q4(c) · 2 marks · AO2=2

(c) Annotate the aggregate demand (AD) and aggregate supply (AS) diagram below to show the likely impact of an improvement in net trade on the equilibrium level of real output and the price level. (2) Price level AS P1 AD Y1 Real output

17. June 2022 · Paper 2 · Q6(e) · 15 marks · AO1=3,AO2=3,AO3=3,AO4=6

(e) With reference to Extract B, discuss the benefits of an increase in infrastructure spending on the UK economy. Use an aggregate demand and aggregate supply diagram to support your answer. (15)

18. June 2022 · Paper 3 · Q1(e) · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

(e) Evaluate the microeconomic and macroeconomic effects of significant increases in the minimum wage. Refer to restaurants or other food delivery services in your answer. (25)

19. November 2021 · Paper 2 · Q1(a) · 1 marks ·

(a) Which one of the following is a withdrawal from the circular flow of income? (1) A Exports B Government spending C Investment D Taxation

20. November 2021 · Paper 2 · Q1(b) · 2 marks · AO2=2

(b) Calculate the total final increase in US aggregate demand as a result of the President’s ‘expansionary fiscal policies’, assuming no other changes. (2)

21. November 2021 · Paper 2 · Q2(a) · 1 marks ·

(a) Which one of the following diagrams illustrates the impact of an increase in net exports along a Keynesian long-run aggregate supply curve? (1) B A AS AS Price Price level level P1 P1 P AD1 P AD1 AD AD Y Y Y1 Real output Real output D C AS AS Price Price level level P P P1 AD P1 AD AD1 AD1 Y Y1 Y Real output Real output A B C D

22. October 2020 · Paper 2 · Q2(a) · 1 marks ·

(a) If the value of the multiplier is 1.8, which one of the following will be the total increase in GDP from the redevelopment, assuming other things are equal? (1) A £64 million B £115 million C £207 million D £230 million

23. October 2020 · Paper 2 · Q2(b) · 4 marks · AO1=2,AO2=1,AO3=1

(b) Using the example above, explain how the multiplier process leads to an increase in aggregate demand. (4)

24. 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

25. October 2020 · Paper 2 · Q5(a) · 4 marks · AO1=2,AO2=2

(a) Draw an aggregate demand and aggregate supply diagram to show the likely impact of this new bridge on the price level and real output in the region. (4)

26. October 2020 · AS Paper 2 · Q6(d) · 10 marks · AO1=2,AO2=2,AO3=2,AO4=4

(d) Assess the likely impact on the UK economy of an ‘increase in consumption’ (Extract A, lines 5–6). Use an aggregate demand and aggregate supply diagram in your answer. (10)

27. June 2019 · AS Paper 2 · Q1(a) · 1 marks · AO1=1

(a) Define the term ‘injection’ in this context. (1)

28. June 2019 · AS Paper 2 · Q1(b) · 2 marks · AO2=2

(b) Calculate the value of the multiplier based on the data given. You are advised to show your working. (2)

29. June 2019 · AS Paper 2 · Q1(c) · 1 marks ·

(c) Which one of the following is a likely cause of a decrease in the value of the UK’s multiplier? (1) A A decrease in the marginal propensity to save B A decrease in the marginal propensity to tax C An increase in the marginal propensity to consume D An increase in the marginal propensity to import

30. June 2019 · Paper 2 · Q2(a) · 4 marks · AO1=2,AO2=2

(a) Draw an aggregate demand and aggregate supply diagram to show the likely impact of an increase in government spending on infrastructure on a country’s price level and real output. (4)

31. June 2019 · AS Paper 2 · Q4(b) · 2 marks · AO2=2

(b) Annotate the diagram above to show the likely impact of government policy to promote business competition on the equilibrium level of real output and price level. (2)

32. June 2019 · Paper 2 · Q5(a) · 2 marks · AO1=2

(a) Explain the distinction between income and wealth. (2)

33. June 2019 · AS Paper 2 · Q6(d) · 10 marks · AO1=2,AO2=2,AO3=2,AO4=4

(d) With reference to Figure 3, assess the likely impact of the change in the value of exports, since mid-2016, on the economic growth of the UK. Use an aggregate demand and aggregate supply diagram in your answer. (10)

34. 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)

35. June 2018 · AS Paper 2 · Q4(b) · 2 marks · AO2=2

(b) Annotate the diagram above to show the likely impact of a rise in the cost of raw materials on the UK’s equilibrium level of real output and price level. (2)

36. June 2018 · AS Paper 2 · Q6(b) · 10 marks · AO1=2,AO2=2,AO3=2,AO4=4

(b) With reference to Extract A, assess the likely macroeconomic effects of an increase in house prices. Use an aggregate demand and aggregate supply diagram in your answer. (10)

37. June 2018 · AS Paper 2 · Q6(d) · 6 marks · AO1=2,AO2=2,AO3=2

(d) Explain two factors that might cause a rise in the value of the multiplier. (6)

38. June 2018 · Paper 2 · Q7 · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

7 In 2016 the UK Chancellor of the Exchequer announced that the government would spend an extra £23 billion on innovation and infrastructure over the following five years. Evaluate the likely economic effects of this planned increase in government expenditure.

39. June 2018 · Paper 3 · Q1(e) · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

(e) With reference to the information provided and your own knowledge, evaluate the microeconomic and macroeconomic effects of increased UK demand for coffee at branded coffee shops. (25)

40. June 2017 · Paper 2 · Q1(b) · 4 marks · AO1=2,AO2=1,AO3=1

(b) Explain the likely effects on the circular flow of income of the change in unemployment between 2013 and 2015. (4)

41. June 2017 · Paper 2 · Q2(b) · 2 marks · AO1=2

(b) Explain the likely effect of a fall in the marginal propensity to save on the value of the multiplier if other things remain equal. (2)

42. June 2017 · Paper 2 · Q2(c) · 1 marks ·

An economy has marginal propensity to save of 0.1, marginal propensity to tax of 0.2 and marginal propensity to import of 0.1. (c) Which one of the following is the correct size of the multiplier? (1) A 0.4 B 0.6 C 1.7 D 2.5

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 · Q5(b) · 1 marks ·

(b) Which one of the following is most likely to result from an improvement in UK consumer confidence? A decrease in the marginal propensity to: (1) A consume B tax C import D save

45. June 2017 · Paper 2 · Q8 · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

8 Global oil prices fell from a 2008 peak of $147 a barrel to $27 in 2016. Evaluate the likely macroeconomic consequences of a significant fall in global oil prices.

46. June 2017 · Paper 3 · Q1(e) · 25 marks · AO1=4,AO2=4,AO3=8,AO4=9

(e) With reference to the information provided and your own knowledge, evaluate the microeconomic and macroeconomic impact on Chile’s economy of changes in the level of investment. (25)

47. June 2016 · AS Paper 2 · Q1(a) · 1 marks · AO1=1

(a) Define the term ‘national income’. (1)

48. June 2016 · AS Paper 2 · Q1(b) · 1 marks ·

(b) Which one of the following is an injection into the circular flow of income? (1) A Taxation B Imports C Investment D Saving

49. June 2016 · AS Paper 2 · Q1(c) · 2 marks · AO1=2

(c) Define the term ‘circular flow of income’. (2)

50. June 2016 · AS Paper 2 · Q2(c) · 1 marks · AO1=1

(c) Diagram A shows the aggregate demand and aggregate supply for a country. Illustrate actual economic growth on Diagram A. (1) Diagram A Price Aggregate supply level P1 Aggregate demand Y1 Real output

51. June 2016 · AS Paper 2 · Q5(a) · 3 marks · AO1=1,AO2=2

(a) Using the information above, calculate the total increase in national income, resulting from the £15 billion investment. (3)

Mark schemes

1. June 2025 · AS Paper 2 · Q4(b)

2. June 2025 · Paper 2 · Q6(d)

3. June 2025 · AS Paper 2 · Q6(e)

4. June 2024 · AS Paper 2 · Q2(a)

5. June 2024 · AS Paper 2 · Q2(c)

6. June 2024 · AS Paper 2 · Q4(b)

7. June 2024 · Paper 2 · Q4(b)

8. June 2024 · AS Paper 2 · Q6(b)

9. June 2024 · Paper 3 · Q2(c)

10. June 2023 · Paper 2 · Q1(a)

11. June 2023 · Paper 2 · Q4(b)

12. June 2023 · AS Paper 2 · Q4(c)

13. June 2023 · AS Paper 2 · Q6(c)

14. June 2022 · Paper 2 · Q1(a)

15. June 2022 · Paper 2 · Q1(b)

16. June 2022 · AS Paper 2 · Q4(c)

17. June 2022 · Paper 2 · Q6(e)

18. June 2022 · Paper 3 · Q1(e)

19. November 2021 · Paper 2 · Q1(a)

20. November 2021 · Paper 2 · Q1(b)

21. November 2021 · Paper 2 · Q2(a)

22. October 2020 · Paper 2 · Q2(a)

23. October 2020 · Paper 2 · Q2(b)

24. October 2020 · AS Paper 2 · Q4(b)

25. October 2020 · Paper 2 · Q5(a)

26. October 2020 · AS Paper 2 · Q6(d)

27. June 2019 · AS Paper 2 · Q1(a)

28. June 2019 · AS Paper 2 · Q1(b)

29. June 2019 · AS Paper 2 · Q1(c)

30. June 2019 · Paper 2 · Q2(a)

31. June 2019 · AS Paper 2 · Q4(b)

32. June 2019 · Paper 2 · Q5(a)

33. June 2019 · AS Paper 2 · Q6(d)

34. June 2018 · Paper 2 · Q2(b)

35. June 2018 · AS Paper 2 · Q4(b)

36. June 2018 · AS Paper 2 · Q6(b)

37. June 2018 · AS Paper 2 · Q6(d)

38. June 2018 · Paper 2 · Q7

39. June 2018 · Paper 3 · Q1(e)

40. June 2017 · Paper 2 · Q1(b)

41. June 2017 · Paper 2 · Q2(b)

42. June 2017 · Paper 2 · Q2(c)

43. June 2017 · AS Paper 2 · Q4(a)

44. June 2017 · AS Paper 2 · Q5(b)

45. June 2017 · Paper 2 · Q8

46. June 2017 · Paper 3 · Q1(e)

47. June 2016 · AS Paper 2 · Q1(a)

48. June 2016 · AS Paper 2 · Q1(b)

49. June 2016 · AS Paper 2 · Q1(c)

50. June 2016 · AS Paper 2 · Q2(c)

51. June 2016 · AS Paper 2 · Q5(a)