Multiple-choice questions

Answer

A

Mark scheme

Notes from the mark scheme and report

• a computer is a capital good used to produce other goods (A)
• savings and shares are financial assets, not capital goods
• underground oil reserves are natural resources (land)

Answer

C

Mark scheme

Notes from the mark scheme and report

• -0.2 lies between 0 and -1, so demand is relatively inelastic (C)
• perfectly inelastic is 0, relatively elastic above 1, unitary 1

Quantitative skills: QS 8 (make calculations of elasticity and interpret the result)

Answer

C

Mark scheme

Notes from the mark scheme and report

• underconsumption of goods with external benefits means output is below the social optimum (C)
• free provision of public goods helps achieve the optimum
• overproduction of external-benefit goods and underproduction of external-cost goods would move towards it

Answer

B

Mark scheme

Notes from the mark scheme and report

• a subsidy to coffee bean producers lowers costs and shifts supply right (B)
• a fall in demand shifts demand, a tax and rising costs shift supply left

Answer

A

Mark scheme

Notes from the mark scheme and report

• advertising shifts the demand curve (A)
• cost of production, indirect taxes and producer subsidies shift supply

Answer

A

Mark scheme

Notes from the mark scheme and report

• unemployment rising in a recession = cyclical (demand-deficient) (A)
• not caused by changing jobs (frictional), seasons, or changes in technology/sectors (structural)

Answer

D

Mark scheme

Notes from the mark scheme and report

• 284 152 : 281 555 = 1 : 0.99 (D)
• the £2 597 fall was Feb-Mar not Jan-Feb
• March was 1.665% lower, not 16.65% higher
• no base year is given for an index

Quantitative skills: QS 1 (calculate, use and understand ratios and fractions); 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)

Answer

C

Mark scheme

Notes from the mark scheme and report

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

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

Answer

D

Mark scheme

Notes from the mark scheme and report

• VAT is a tax on spending, i.e. indirect (D)
• corporation, income and inheritance taxes are direct

Answer

C

Mark scheme

Notes from the mark scheme and report

• the trade balance is negative every month so imports exceed exports (C)
• A and B are about the government budget, not trade

Quantitative skills: 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

• a fall in demand shifts the firm's AR (its demand curve) left, so MR falls too (A)
• B ignores that AR is the demand curve
• C and D have AR and MR moving in opposite directions

Answer

C

Mark scheme

Notes from the mark scheme and report

• %change in Qd of petrol cars = XED x %change in price of diesel cars = +0.64 x -10% = -6.4% (C)
• A and B change the price of petrol cars, not quantity
• D would need a 100% price change

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 8 (make calculations of elasticity and interpret the result)

Answer

A

Mark scheme

Notes from the mark scheme and report

• at E AR is tangent to AC so the practice makes normal profit in long-run equilibrium (A)
• B is wrong as AR = AC, not AR > AC
• C supernormal profit needs AR > AC
• D it is not at the minimum of AC so not productively efficient

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• cancelling when the price rises is rational utility maximisation (B)
• A firms maximise profit, not consumers
• C and D are irrational behaviour

Answer

D

Mark scheme

Notes from the mark scheme and report

• higher wages in retail raise the opportunity cost of farm work so supply of agricultural workers falls (D)
• A and C raise demand for labour, B raises supply

Answer

B

Mark scheme

Notes from the mark scheme and report

• Morocco's HDI 0.683 is above Pakistan's 0.544, so development as measured by HDI is higher in Morocco (B)
• A is wrong as Morocco's incomes are higher
• C: life expectancy is only one part of HDI, 0.683 is not 68.3 years
• D: the data are per capita, not total output

Quantitative skills: QS 11 (understand composite indicators); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

B

Mark scheme

Notes from the mark scheme and report

• the deficit was smallest (-1.5% of GDP) in 2021 (B)
• the current account was in deficit throughout, so A and D are wrong
• C confuses the current account with the fiscal deficit

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

• growth was positive in Q2 and Q4 2022, so real GDP in Q4 2022 was larger than in Q1 2022 (C)
• fastest growth was Q1 2022, one negative quarter is not a recession, and equal growth rates do not mean equal GDP levels

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); 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

• (92 - 80) / 80 x 100 = 15% (C)
• A is the 12-point change, B divides 12 by the 2020 value 92, D is the 2020 index

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 5 (calculate and interpret index numbers); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

B

Mark scheme

Notes from the mark scheme and report

• more employment raises incomes and living standards (B)
• it is more likely to cause inflation not deflation, reduce absolute poverty and raise growth rather than cause recession

Answer

C

Mark scheme

Notes from the mark scheme and report

• scarcity = insufficient resources to satisfy unlimited wants (C)
• not a movement along demand (A), not excess supply (B), not misallocation (D)

Answer

D

Mark scheme

Notes from the mark scheme and report

• a cyclone destroys productive capacity, so the PPF shifts inward and X moves to Y on the new curve (D)
• A is an unobtainable point, B a movement along the PPF, C an outward shift

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• in a free market the price mechanism allocates all resources (B)
• Marx criticised free markets, externalities exist in all systems, and the state owning all resources is a command economy

Answer

C

Mark scheme

Notes from the mark scheme and report

• statement 1 can be tested, so positive
• statement 2 contains 'ought' and a value judgement, so normative (C)

Answer

A

Mark scheme

Notes from the mark scheme and report

• availability of substitutes determines PED (A)
• population size shifts demand, steel costs shift supply, unsold stock relates to PES

Answer

A

Mark scheme

Notes from the mark scheme and report

• a rise in real GDP is actual economic growth (A)
• B and C are output gaps (actual below or above potential)
• D potential growth is a rise in productive capacity

Answer

D

Mark scheme

Notes from the mark scheme and report

• multiplier = 1 / (1 - MPC) = 1 / 0.2 = 5 (D)
• A is 1 - 0.8, B is the MPC, C is 1 / 0.8

Quantitative skills: QS 1 (calculate, use and understand ratios and fractions)

Answer

C

Mark scheme

Notes from the mark scheme and report

• net migration fell from about 300 000 to about 220 000 after the referendum (C)
• A more people entered than left
• B migration affects LRAS, not a fall in SRAS
• D emigration was fairly stable

Quantitative skills: 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

• weaker business expectations (animal spirits) cut investment (A)
• less regulation, more export demand and faster growth would all raise investment

Answer

B

Mark scheme

Notes from the mark scheme and report

• higher taxes and lower spending narrow the budget deficit (B)
• A widens it
• C and D are about the current account, not the budget

Answer

B

Mark scheme

Notes from the mark scheme and report

• %change in Qd = PED x %change in P = -0.4 x 4.8 = -1.92 (B)
• C uses the student PED
• A and D divide instead of multiply

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 8 (make calculations of elasticity and interpret the result)

Answer

C

Mark scheme

Notes from the mark scheme and report

• %change in P = %change in Qs / PES = 12 / 1.8 = 6.67 (C)
• 1.8/12, 1.8/1.2 and 1.8 x 12 are the distractors

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 8 (make calculations of elasticity and interpret the result)

Answer

A

Mark scheme

Notes from the mark scheme and report

• sales maximisation without a loss is where AC = AR (A)
• B is productive efficiency, C revenue maximisation (PED = -1), D allocative efficiency

Answer

B

Mark scheme

Notes from the mark scheme and report

• distortion of price signals (B) is a cause of government failure
• a maximum price gives excess demand, not excess supply

Answer

C

Mark scheme

Notes from the mark scheme and report

• 19.5% x £1 601 billion = £312 billion (C)
• A divides by 19.5, B uses 12.7%, D divides by 0.195

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes)

Answer

D

Mark scheme

Notes from the mark scheme and report

• read the savings ratio chart carefully (D)
• A wrong as savings rose during 2015, B wrong as savings fluctuated, C wrong as the lowest point was in 2017

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

• percentage point fall = 23.5 - 21.4 = 2.1 (C)
• D is the percentage change between the values, A a part-calculated percentage change, B the July to October 2020 fall

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes)

Answer

C

Mark scheme

Notes from the mark scheme and report

• financial markets provide forward markets in currencies and commodities (C)
• A, B and D are not roles
• report: the negative words "discourage" and "restrict" caused processing errors

Answer

C

Mark scheme

Notes from the mark scheme and report

• a boom is where actual GDP is furthest above trend (C)
• A and D lie on the trend line
• B is a recession below trend

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

Answer

C

Mark scheme

Notes from the mark scheme and report

• higher productivity of US steel workers lowers the opportunity cost of steel (C)
• A higher corporation tax and D higher wages raise costs
• B growth may raise inflation

Answer

C

Mark scheme

Notes from the mark scheme and report

• (1 971 - 1 277)/1 277 x 100 = 54% (C)
• A divides the change by the new price
• D is the change in pounds (694), not a percentage

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes)

Answer

C

Mark scheme

Notes from the mark scheme and report

• both coefficients are below 1 in absolute value, so demand and supply are price inelastic (C)
• a 10% price rise raises supply only 1.4%
• no YED is given
• supply (0.14) is more responsive than demand (0.10)

Quantitative skills: QS 8 (make calculations of elasticity and interpret the result)

Answer

A

Mark scheme

Notes from the mark scheme and report

• a positive statement can be tested: 'disruption to global supply chains will reduce the level of trade' (A)
• B, C and D contain value judgements ('most important', 'best', 'ought to')

Answer

D

Mark scheme

Notes from the mark scheme and report

• close substitutes (petrol at Esso, Tesco and Sainsbury's) have a high positive XED: +2.1 (D)
• negative values mean complements
• +0.1 is a weak substitute

Quantitative skills: QS 8 (make calculations of elasticity and interpret the result)

Answer

A

Mark scheme

Notes from the mark scheme and report

• low unemployment (A) is a likely advantage of a command economy
• price signals and the profit motive are free-market advantages
• shortages from price controls are a command-economy disadvantage

Answer

C

Mark scheme

Notes from the mark scheme and report

• more training programmes is an interventionist supply-side policy (C)
• A and B are market-based
• D higher corporation tax reduces incentives

Answer

A

Mark scheme

Notes from the mark scheme and report

• real GDP per capita fell from $47 369 to $42 536, so A (options not in the crop)
• B wrong as unemployment rises
• C wrong as confidence and consumption fall
• D wrong as lower spending lowers the price level

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

• answer C (options not in the crop)
• A wrong as corporation tax (£40bn) is below excise duties (£48bn)
• B wrong as income tax raises more than VAT
• D wrong as NICs are about 3.7 times council tax

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

B

Mark scheme

Notes from the mark scheme and report

• 204 / 226 x 100 = 90.3 (B)
• A is the percentage change
• C is the base year value 100
• D uses 2020 as the base

Quantitative skills: QS 5 (calculate and interpret index numbers)

Answer

D

Mark scheme

Notes from the mark scheme and report

• answer D (options not in the crop)
• A wrong as Q4 2020 growth was positive but slower
• B confuses GDP growth with inflation
• C wrong as there was a decline between Q3 2019 and Q1 2020

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

D

Mark scheme

Notes from the mark scheme and report

• Karl Marx supported a command economy (D)
• Smith and Hayek supported free markets
• Keynes favoured government borrowing to boost demand, not a command economy

Answer

B

Mark scheme

Notes from the mark scheme and report

• new farming technology shifts the PPF outward to reach Z (B)
• milk machinery is not on this PPF
• demand and price are not shown on a PPF

Answer

D

Mark scheme

Notes from the mark scheme and report

• a luxury good has a positive income elasticity greater than 1, e.g. +3.40 (D)
• negative values are inferior goods, +0.74 is a normal necessity

Quantitative skills: QS 8 (make calculations of elasticity and interpret the result)

Answer

C

Mark scheme

Notes from the mark scheme and report

• read the change in producer surplus off the minimum-price diagram: GEPeP1 (C)
• A is the change in consumer surplus, B the new consumer surplus, D the new producer surplus

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• public 114 : private 118 = 1 : 1.04 (B)
• A is private relative to public
• C is the 4-point gap in the index
• D is the 14% rise in public pay since 2018

Quantitative skills: QS 1 (calculate, use and understand ratios and fractions); QS 5 (calculate and interpret index numbers); 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 rates reduce AD so demand-pull inflation falls (A)
• mps would rise, cyclical unemployment would rise, the pound would appreciate on hot money inflows

Answer

B

Mark scheme

Notes from the mark scheme and report

• 5.0% (Feb 21) to 4.0% (Dec 21) is a fall of one percentage point (B)
• A confuses 1.4 percentage points with 1.4%
• C reverses the highest and lowest months
• D is a forecast the chart cannot show

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); 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)

Answer

D

Mark scheme

Notes from the mark scheme and report

• technological advances shift LRAS right = potential growth (D)
• consumption raises actual growth via AD
• higher raw material costs shift SRAS left
• higher income tax reduces growth

Answer

D

Mark scheme

Notes from the mark scheme and report

• buying new clothes is household consumption (D)
• a cycle lane and school buildings are government spending
• Heathrow expansion is investment

Answer

A

Mark scheme

Notes from the mark scheme and report

• more government borrowing raises interest rates and reduces private investment = crowding out (A)
• higher government spending would more likely reduce inequality, poverty and unemployment

Answer

C

Mark scheme

Notes from the mark scheme and report

• a private good is rivalrous and excludable (C)
• non-rival and non-excludable is a public good (B)
• A and D are quasi-public goods

Answer

B

Mark scheme

Notes from the mark scheme and report

• intervention buying spend = guaranteed price P2 x the surplus bought (Q2 to Q3), area JHQ2Q3 (B)
• HKL is lost consumer surplus, LKJH the producer surplus gain, Q1Q2LK spending by consumers

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• money unlimited in supply loses its value and acceptability (B)
• being hard to counterfeit, divisible and durable are desirable attributes of money

Answer

C

Mark scheme

Notes from the mark scheme and report

• underprovision of goods with positive externalities is market failure (C)
• A is government failure, B the incentive function, D the rationing function of the price mechanism

Answer

D

Mark scheme

Notes from the mark scheme and report

• %change in Qs = PES x %change in P = 1.5 x 10 = 15% (D)
• A and B misplace the decimal
• C divides 10 by 1.5

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 8 (make calculations of elasticity and interpret the result)

Answer

C

Mark scheme

Notes from the mark scheme and report

• QE (asset purchases) increases the money supply (C)
• it raises AD so growth and inflation rise and unemployment falls

Answer

B

Mark scheme

Notes from the mark scheme and report

• 1 995 478 / 2 033 234 x 100 = 98.1 (B)
• A uses 2018 as base, C is 2017 on a 2016 base, D is 2018 on a 2016 base

Quantitative skills: QS 5 (calculate and interpret index numbers); 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

• nominal earnings rose from about £375 to £495 a week while real earnings stayed about £450-460, so the increase not adjusted for inflation was greater (C)
• A says interest rates, not inflation
• B confuses £125 with percentage points
• D real earnings were flat

Quantitative skills: QS 7 (make calculations to convert from money to real terms); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

B

Mark scheme

Notes from the mark scheme and report

• (1.22 - 1.53)/1.53 x 100 = -20.26%, a 20.26% fall (B)
• A is the $0.31 difference, C divides by the new value 1.22, D is the index with 2015 = 100

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes)

Answer

A

Mark scheme

Notes from the mark scheme and report

• inflation stayed positive throughout, so the price level was lower in January 2018 than January 2019 (A)
• positive but falling inflation is disinflation, not unchanged prices or deflation
• inflation rose in 2016-17

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

D

Mark scheme

Notes from the mark scheme and report

• subscribers rose from 10 to 50 million, so ceteris paribus revenue rises (D)
• A fixed costs do not vary with output in the short run
• B and C need income or price data that is not given

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

Answer

D

Mark scheme

Notes from the mark scheme and report

• PED -1.37 is price elastic so a price cut raises total revenue, and XED +0.63 means substitutes (D)
• A and C wrongly treat the goods as complements
• B wrongly says revenue falls

Quantitative skills: QS 8 (make calculations of elasticity and interpret the result)

Answer

C

Mark scheme

Notes from the mark scheme and report

• the fine raises the polluter's costs so it cuts illegal discharges, reducing external costs (C)
• A market failure falls
• B profits fall
• D it does not cause a net welfare loss

Answer

D

Mark scheme

Notes from the mark scheme and report

• tacit collusion is an unspoken agreement such as price leadership (D)
• A overt sharing is the opposite
• B predatory pricing and C price wars are competitive, not collusive

Answer

C

Mark scheme

Notes from the mark scheme and report

• two car makers at the same stage of production is horizontal integration (C)
• A backward vertical (supplier)
• B forward vertical (customer)
• D organic growth is internal, not a merger

Answer

B

Mark scheme

Notes from the mark scheme and report

• investment is an injection (B)
• imports, savings and taxation are all withdrawals from the circular flow

Answer

C

Mark scheme

Notes from the mark scheme and report

• the chart shows the annual % change, so house prices rose fastest where the line is highest, May 2021 (C)
• a falling line still means prices rising (A, B wrong) and prices rose throughout 2018 (not D)

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

B

Mark scheme

Notes from the mark scheme and report

• lower interest rates reduce hot money inflows, so the external value of the pound falls (B)
• house prices, employment and growth would all be likely to rise

Answer

D

Mark scheme

Notes from the mark scheme and report

• Z is a peak with a positive output gap, so demand-pull inflation rises (D)
• absolute poverty, the budget deficit and cyclical unemployment would fall

Quantitative skills: 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

• minimal checks mean lenders know less than borrowers about the risk of default, so asymmetric information (A)
• no crowding out, market rigging or speculation is suggested

Answer

D

Mark scheme

Notes from the mark scheme and report

• both statements can be tested against evidence and contain no value judgement, so both are positive (D)
• "higher paid" is a fact, not a value judgement

Answer

C

Mark scheme

Notes from the mark scheme and report

• price fell from $40 to $15: (15 - 40) / 40 x 100 = -62.5% (C)
• A is the $25 change written as a %, B is 15/40, D divides the change by the new price

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)

Answer

A

Mark scheme

Notes from the mark scheme and report

• the firm needs some market power (price-maker) to price discriminate (A)
• storage is irrelevant
• third-degree discrimination sells the same product
• price differences are not due to cost differences

Answer

D

Mark scheme

Notes from the mark scheme and report

• revenue maximisation where MR = 0 (D)
• AR = AC is sales maximisation, AR = MC is allocative efficiency, MR = AR is the perfectly competitive firm

Answer

B

Mark scheme

Notes from the mark scheme and report

• in the short run with a loss the firm still sets P = MC so is allocatively efficient, but AC is above its minimum so it is productively inefficient (B)
• report: a significant number of random wrong answers

Answer

D

Mark scheme

Notes from the mark scheme and report

• taxation is a withdrawal (D)
• exports, government spending and investment are injections

Answer

A

Mark scheme

Notes from the mark scheme and report

• higher net exports shift AD right along a Keynesian LRAS, raising real output (and the price level near full capacity) (A)
• B and D draw a classical vertical LRAS, C shows AD falling

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• the pound fell from about $1.35 to about $1.25 under a floating system = depreciation (B)
• devaluation and revaluation apply to fixed rates

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• spending on new rail infrastructure is capital expenditure (B)
• automatic stabilisers are not a discretionary choice, current spending is day-to-day, transfers are payments with no output in return

Answer

C

Mark scheme

Notes from the mark scheme and report

• every year France's GDP fell (2012, 2015) Germany's fell too (C)
• no inflation data, Germany is larger every year, both grew 2015-16

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

Answer

D

Mark scheme

Notes from the mark scheme and report

• rationing: when there is a shortage the price rises and discourages some consumers from buying (D)
• A is the incentive function, B the signalling function
• C is wrong because a rise in price reduces the shortage

Answer

D

Mark scheme

Notes from the mark scheme and report

• a negative YED means demand falls as income rises, so bus travel is an inferior good (D)
• A describes PED
• B is wrong as falling unemployment raises incomes and reduces bus use
• C is about XED

Quantitative skills: QS 8 (make calculations of elasticity and interpret the result)

Answer

C

Mark scheme

Notes from the mark scheme and report

• subsidy per unit (vertical distance J to L) x quantity Q2 = area P3P1JL (C)
• OP3LQ2 is consumer spending
• the other areas ignore the supply shift or the subsidised quantity

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

Answer

C

Mark scheme

Notes from the mark scheme and report

• tax revenue = tax per unit (H to K) x Q1 = area P3P1HK (C)
• P2P1HJ is the consumers' share and P3P2JK the producers' share of the tax
• OP1HQ1 is total consumer spending

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

Answer

A

Mark scheme

Notes from the mark scheme and report

• a tax on workplace parking raises the cost of driving to work, so demand for rail (a substitute) shifts right (A)
• subsidies and more track shift supply, not demand
• cheaper petrol would reduce rail demand

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

Answer

D

Mark scheme

Notes from the mark scheme and report

• RPI 2.1% minus CPI 1.5% = 0.6 percentage points (D)
• A ignores the difference
• B and C are not the percentage point gap

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes)

Answer

A

Mark scheme

Notes from the mark scheme and report

• cutting unemployment benefits increases incentives to work through the market (A)
• transport links, funded apprenticeships and health spending are interventionist

Answer

C

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 reason, the application for explaining the data, and analysis for development building on the knowledge. Most candidates were able to access application marks, correctly identifying a current account deficit.

Notes from the mark scheme and report

• the balance is negative throughout, so imports exceeded exports by value (C)
• A describes a budget deficit
• B the balance was never zero
• D inflows were smaller than outflows

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• raising Bank Rate is contractionary monetary policy (B)
• fiscal policy uses tax and spending
• expansionary monetary policy cuts rates or uses QE

Answer

C

Mark scheme

Notes from the mark scheme and report

• 2 008 593 / 1 852 845 = 1.08, so 1 : 1.08 (C)
• A is 2014 to 2015, B 2016 to 2017, D 2014 to 2017

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

• a higher indirect tax raises price and cuts quantity so both consumer and producer surplus fall (A), whatever the PED of -0.1
• B, C and D each have one surplus rising

Answer

C

Mark scheme

Notes from the mark scheme and report

• the £10 000 higher earnings go to the graduate, a private benefit (C)
• A external benefit needs a third party
• B and D are costs

Answer

B

Mark scheme

Notes from the mark scheme and report

• regulation can create unintended consequences, a cause of government failure (B)
• A, C and D reverse the other causes (distorted price signals, information gaps, excessive administrative costs)

Answer

B

Mark scheme

Notes from the mark scheme and report

• beyond Z average variable cost rises (B)
• AFC keeps falling as fixed costs are spread, so the AFC distractors (C, D) are wrong
• A wrong as AVC does not fall

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• merging with a tea supplier is backward vertical integration giving control over input prices (B)
• A external economies arise outside the firm
• C diversification describes a conglomerate merger
• D monopoly power would rise

Answer

C

Mark scheme

Notes from the mark scheme and report

• the tallest bar is 2014 (2.9%), so growth was fastest then (C)
• no population data for per capita (A)
• no inflation data (B)
• growth was positive in 2015, so no recession (D)

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

C

Mark scheme

Examiner's comment

Question 2 was focused on the multiplier effect and whilst the majority of students could correctly answer the multiple-choice question, they found it harder to put the multiplier effect into words using the case study provided. Having said that, most students were able to demonstrate some understanding of what the multiplier process is and how it works. In question 3 students were asked to explain the role of the IMF in providing financial assistance. Similar to question 2, most students had some understanding of how the IMF could assist countries such as Argentina but some struggled to fully articulate it in order to achieve full marks. Having said that, there were some good answers that did this very effectively. Whilst the majority of students did correctly answer this multiple-choice question about capital flight and exchange rate systems, this multiple-choice question was the one students found hardest out of the 5. The first part of question 4 asks students to calculate the percentage change, and they scored significantly higher on this question compared to the calculation in question 1. In part b, most students could identify a relevant reason, and the majority were also able to earn the second mark for explaining their reason.

Notes from the mark scheme and report

• final increase = multiplier x injection = 1.8 x £115m = £207m (C)
• A divides by 1.8, B is just the initial £115m, D doubles it

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• capital flight increases supply of the peso on the forex market, so under a floating system it depreciates (B)
• devaluation and revaluation refer to fixed systems
• appreciation is a rise
• report: the hardest of the five MCQs

Answer

D

Mark scheme

Notes from the mark scheme and report

• technological change makes skills obsolete in an industry, causing structural unemployment (D)
• cyclical and seasonal unemployment are not caused by technology
• real wage unemployment is from real wage inflexibility

Answer

C

Mark scheme

Examiner's comment

Question 5 consists mainly of a draw question, and the vast majority of students demonstrated a very good understanding of what an AD/AS diagram should look like, and what should be happening on it in this case study- i.e. an increase in either aggregate supply and/or aggregate demand. Section B, the data response section, is based on information provided in the exam paper about trade and development issues in Africa. This includes 2 figures and 2 extracts on different issues.

Notes from the mark scheme and report

• spending on public transport is a domestic injection that raises AD and closes a negative output gap (C)
• World Bank funding and foreign aid leave the domestic circular flow
• a higher income tax reduces AD

Answer

A

Mark scheme

Notes from the mark scheme and report

• Adam Smith (A) is linked to specialisation and the division of labour (the pin factory)
• Hayek is free-market thinking, Keynes animal spirits and the multiplier, Marx the case for a command economy

Answer

C

Mark scheme

Notes from the mark scheme and report

• diesel vehicles and diesel fuel are complements (C), so less demand for the cars means less demand for fuel
• irrational behaviour or an expected price rise would not reduce demand
• they are not substitutes

Answer

D

Mark scheme

Notes from the mark scheme and report

• close substitutes have a high positive XED: +2.1 (D)
• negative values mean complements
• +0.1 is only a weak substitute

Quantitative skills: QS 8 (make calculations of elasticity and interpret the result)

Answer

A

Mark scheme

Notes from the mark scheme and report

• VAT = 5% x £1 070 = £53.50 (A)
• B divides by 0.5, C multiplies by 1.005, D gives the bill including VAT (x 1.05)

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes)

Answer

C

Mark scheme

Notes from the mark scheme and report

• %change in income = (8.75 - 7)/7 = 25%
• %change in Qd = -0.1 x 25 = -2.5% (C)
• A multiplies 8.75 by -0.1, B uses 2017 as the base year, D forgets to multiply by -0.1

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 8 (make calculations of elasticity and interpret the result)

Answer

D

Mark scheme

Notes from the mark scheme and report

• a higher MPM raises the leakages (MPW) so the multiplier 1/MPW falls (D)
• A, B and C each raise the multiplier

Answer

D

Mark scheme

Notes from the mark scheme and report

• a change in AD causes a movement along the AS curve (D)
• A and B shift LRAS
• C shifts SRAS

Answer

A

Mark scheme

Notes from the mark scheme and report

• lower corporation tax raises the incentive to invest and hire, cutting unemployment (A)
• B less QE and D a higher base rate reduce AD
• C higher benefits reduce the incentive to work

Answer

A

Mark scheme

Notes from the mark scheme and report

• improving infrastructure is an interventionist supply-side policy (A)
• B and C are contractionary demand-side policies
• D more regulation is not market-based deregulation

Answer

A

Mark scheme

Notes from the mark scheme and report

• higher house prices give homeowners a positive wealth effect (A)
• B house prices raise wealth, not income
• C and D wrongly predict lower confidence or spending

Answer

C

Mark scheme

Notes from the mark scheme and report

• PES = 10 / 2.5 = 4, greater than 1 so relatively price elastic (C)
• perfectly elastic is infinity, perfectly inelastic is zero, relatively inelastic is below 1

Quantitative skills: QS 8 (make calculations of elasticity and interpret the result)

Answer

A

Mark scheme

Notes from the mark scheme and report

• a natural disaster destroys capacity, so the PPF shifts inward and output falls from X to Y (A)
• B is growth in potential output, C a reallocation along the PPF, D a move from inefficiency to the frontier

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

Answer

D

Mark scheme

Notes from the mark scheme and report

• low barriers to entry and exit (D)
• firms do differentiate and advertise, so A is wrong
• domination by a few large firms is oligopoly
• homogeneous products describe perfect competition

Answer

C

Mark scheme

Notes from the mark scheme and report

• the demerged firm can focus on its core business (C)
• external economies of scale are irrelevant, internal economies come from growing not demerging, a demerger usually reduces market share

Answer

D

Mark scheme

Notes from the mark scheme and report

• Marx criticised private ownership of the factors of production (D)
• Hayek favoured free markets, not subsidies for inefficient firms or command economies
• Marx did not advocate the free market

Answer

A

Mark scheme

Notes from the mark scheme and report

• lower interest rates make borrowing cheaper so credit card lending rises (A)
• investment is by firms, the current account is unrelated, more saving means less consumption

Answer

A

Mark scheme

Notes from the mark scheme and report

• construction of new railway lines is infrastructure (capital spending) (A)
• debt interest and unemployment benefit are transfers, teachers' salaries are current spending

Answer

C

Mark scheme

Notes from the mark scheme and report

• index 113 with base 100 means a 13% rise (C)
• 113% confuses the index with the change, 11.3% and 3% are misreadings

Quantitative skills: QS 5 (calculate and interpret index numbers)

Answer

D

Mark scheme

Notes from the mark scheme and report

• a cut in corporation tax to improve incentives is a supply-side policy (D)
• monetary policy uses interest rates/QE, exchange rate policy changes the pound

Answer

B

Mark scheme

Notes from the mark scheme and report

• progressive taxes take a larger share from high incomes, reducing the Gini coefficient (B)
• regressive taxes and VAT increase it
• tariffs affect trade, not income distribution

Answer

C

Mark scheme

Notes from the mark scheme and report

• Statement 1 is testable data so positive
• "ought" in Statement 2 is a value judgement so normative (C)

Answer

A

Mark scheme

Notes from the mark scheme and report

• availability of rival newspapers (substitutes) determines PED (A)
• population size and expected price rises shift demand, a fall in production cost shifts supply

Answer

A

Mark scheme

Notes from the mark scheme and report

• the high private price (£95 to £700) signals to dentists to provide private treatment (A)
• a shortage is removed by a price rise not a fall
• government targets are not the price mechanism
• a lower NHS price would be a disincentive

Answer

B

Mark scheme

Notes from the mark scheme and report

• median = the middle income when all household incomes are placed in order (B)
• A is the range, C the mode, D the mean

Quantitative skills: QS 3 (understand and use the terms mean, median and relevant quantiles)

Answer

C

Mark scheme

Notes from the mark scheme and report

• public goods are non-rival (and non-excludable), so C
• public finance, popularity and external benefits do not make a good public

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

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)

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

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)

Answer

D

Mark scheme

Notes from the mark scheme and report

• outward shift of the PPF on the consumer-goods axis only is a rise in potential output of consumer goods (D)
• A describes a movement from inside the PPF (W to V)
• B and C wrongly link the PPF to costs or demand

Answer

C

Mark scheme

Notes from the mark scheme and report

• the flood defence scheme is non-excludable and non-rival, a public good (C)
• B wrong as non-payers cannot be excluded
• A and D misuse excludability and rivalry

Answer

C

Mark scheme

Notes from the mark scheme and report

• London price divided by North East price (C)
• A inverts the ratio (North East to London)
• B and D are computational errors

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

B

Mark scheme

Notes from the mark scheme and report

• sales maximisation (AC = AR) is at a higher output than revenue maximisation, so price falls (B)
• A wrong as output rises
• C AC is higher there
• D only normal profit is made

Answer

A

Mark scheme

Notes from the mark scheme and report

• (276.7 - 352.4) / 352.4 x 100 = -21.5% (A)
• B divides by the 2015 figure
• C uses 2014 to 2015 only
• D gives the absolute fall, not a percentage

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)

Answer

D

Mark scheme

Notes from the mark scheme and report

• CETA eliminates or reduces trade barriers, so tariffs on European exports to Canada fall (D)
• EU growth, EU exports to Canada and imports from Canada are all likely to increase

Answer

D

Mark scheme

Notes from the mark scheme and report

• a fall in the MPS means a higher MPC, so consumption and AD rise (D)
• falls in G, net trade or the MPC all reduce AD

Answer

C

Mark scheme

Notes from the mark scheme and report

• the line is below zero throughout 1993 to 2015, so a deficit for the whole period (C)
• the deficit increased 2001 to 2006 (not A)
• there was never a surplus (not B or D)

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• choosing to target a surplus is a deliberate decision on spending and taxes, so discretionary fiscal policy (B)
• A and D are monetary policy
• C would mean a deficit

Answer

B

Mark scheme

Notes from the mark scheme and report

• more lending to individuals finances consumer spending, so consumption rises (B)
• it would worsen net trade (not A), reduce unemployment (not C) and add to inflation, not deflation (not D)

Answer

B

Mark scheme

Notes from the mark scheme and report

• more capital goods raise productive capacity, shifting the PPF outward (B)
• not linked to less specialisation, marginal utility or demand for consumer goods

Answer

B

Mark scheme

Notes from the mark scheme and report

• (16 129 - 16 606) / 16 606 x 100 = -2.87% (B)
• C divides by the 2015 figure, D is the absolute change in thousand tonnes

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)

Answer

C

Mark scheme

Notes from the mark scheme and report

• removing the subsidy shifts supply left, raising price and cutting quantity, so consumer surplus falls (C)
• producer surplus falls and government spending falls
• solar panels are not a public good

Answer

D

Mark scheme

Notes from the mark scheme and report

• lower indirect taxes cut the price of steel products, raising consumption and output and so carbon emissions (D)
• permits, closing steel plants and subsidies for clean technology all reduce emissions

Answer

A

Mark scheme

Notes from the mark scheme and report

• university education has external benefits, so MSB exceeds MPB (A)
• it is a normal good, not a public good, and the social optimum quantity is greater than the market quantity (not D)

Answer

A

Mark scheme

Notes from the mark scheme and report

• falling oil prices cut firms' costs (SRAS shifts right) causing cost-push deflation (A)
• lower unemployment, income tax or interest rates all raise AD and push prices up

Answer

D

Mark scheme

Notes from the mark scheme and report

• higher consumer spending raises AD and the derived demand for labour (D)
• higher benefits, falling real GDP and less apprenticeship funding would raise unemployment

Answer

B

Mark scheme

Notes from the mark scheme and report

• France's index rose to about 102 while Italy's fell to about 92, so France grew faster (B)
• the UK index is above 100 in 2014 (A wrong)
• real GDP says nothing about inflation (C)
• France did not fall in 2014 (D)

Quantitative skills: QS 5 (calculate and interpret index numbers); 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

• corporation tax is a tax on profits (C)
• VAT, vehicle excise duty and alcohol duty are indirect taxes on spending

Answer

D

Mark scheme

Notes from the mark scheme and report

• more confident consumers save a smaller share of extra income, so MPS falls (D)
• MPC would rise, MPT and MPM are not driven by confidence

Answer

C

Mark scheme

Notes from the mark scheme and report

• %change in Qd = XED x %change in P = 0.16 x 5 = 0.8 (C)
• positive because e-cigarettes and tobacco are substitutes
• A and D divide 5 by 0.16
• B just restates the XED with a minus sign

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 8 (make calculations of elasticity and interpret the result)

Answer

B

Mark scheme

Notes from the mark scheme and report

• an inferior good has a negative income elasticity of demand (B)
• negative XED means complements, negative PED is normal for any good, PES is a supply concept

Answer

A

Mark scheme

Notes from the mark scheme and report

• a subsidy lowers the price and raises the quantity, so consumer surplus increases (A)
• the subsidy costs the government rather than raising tax revenue
• cooking gas is a private good, not a public good

Answer

B

Mark scheme

Notes from the mark scheme and report

• a 50% market share and strong brand image are barriers to entry, so contestability is low (B)
• concentration would be high not low
• private ownership and specialisation are irrelevant

Answer

D

Mark scheme

Notes from the mark scheme and report

• rent does not vary with output, so it is a fixed cost (D)
• coffee, milk and packaging rise with each cup sold so are variable costs

Answer

A

Mark scheme

Notes from the mark scheme and report

• unemployment rose sharply from about 5% to 8% during the 2008-09 recession = cyclical (A)
• frictional and voluntary do not explain a sharp rise
• seasonal is ruled out as the data are seasonally adjusted

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

Answer

D

Mark scheme

Notes from the mark scheme and report

• multiplier = 1/MPW = 1/(0.1+0.2+0.1) = 1/0.4 = 2.5 (D)
• A is MPW itself, B is 1 - MPW, C is 1/0.6
• use the mps/mpt/mpm given in the part, not the table

Quantitative skills: QS 1 (calculate, use and understand ratios and fractions)

Answer

B

Mark scheme

Notes from the mark scheme and report

• CPI inflation fell from about 5.2% to about 2.7% but stayed positive = disinflation (B)
• deflation and falling average prices need a negative rate
• the money supply is not shown

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); 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

• Gini 0 = perfect equality (A)
• 1 = perfect inequality
• 0.5 is a midpoint
• 50:50 is not a Gini value

Answer

A

Mark scheme

Notes from the mark scheme and report

• GNI per capita (PPP) is higher in India (5 497) than Vietnam (5 092) so A
• poverty and life expectancy cannot be read from the table
• D is the reverse, as Vietnam has the higher HDI on a lower income

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

• division of labour raises productivity so cost per unit falls (C)
• it tends to increase boredom, increase use of specialised equipment and reduce training cost per worker

Answer

B

Mark scheme

Notes from the mark scheme and report

• a subsidy of RS per unit (the vertical gap between MSB and MPB at the optimum) shifts MPC down to reach Q1 (B)
• a tax of VT would reduce consumption
• maximum and minimum prices at 0P1 do not reach the optimum

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

Answer

C

Mark scheme

Notes from the mark scheme and report

• damage to fish stocks is a cost to third parties (fishing workers) so it is an external cost (C)
• not a private cost of the flower farms

Answer

A

Mark scheme

Notes from the mark scheme and report

• a fall in the good's own price causes a movement along the demand curve: an extension in demand (A)
• a shift is caused by non-price factors
• a contraction follows a price rise

Answer

D

Mark scheme

Notes from the mark scheme and report

• %change in Qd = PED x %change in P = -0.2 x -20 = +4% (D)
• A and B misplace the decimal, C has the wrong sign

Quantitative skills: QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 8 (make calculations of elasticity and interpret the result)

Answer

C

Mark scheme

Notes from the mark scheme and report

• injections are investment, government spending and exports (C)
• savings, taxation and imports are withdrawals

Answer

A

Mark scheme

Notes from the mark scheme and report

• total GDP = GDP per capita x population = US$38 500 x 64 million = about US$2.46 trillion (A)
• options not shown in the crop and the mark scheme gives only the letter

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

Answer

B

Mark scheme

Notes from the mark scheme and report

• a compulsory weekly interview raises the cost of claiming and pushes claimants into work or off benefit (B)
• A raises the incentive to claim
• C and D are likely to raise the count

Answer

D

Mark scheme

Notes from the mark scheme and report

• answer D (options not shown in the crop and the mark scheme gives only the letter)
• read the seasonally adjusted goods deficit, services surplus and total balance in Figure 1

Quantitative skills: QS 12 (understand the meaning of seasonally adjusted figures); QS 4 (construct and interpret a range of standard graphical forms); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

D

Mark scheme

Notes from the mark scheme and report

• higher productivity raises productive capacity, shifting AS right (D)
• A is an outcome
• B and C are price level changes, which are movements along AS