AQA A-Level Economics: Macroeconomic Performance
6 exam-style questions with full mark schemes and model answers. Write your own answer and the AI examiner marks it against the mark scheme.
Read the following extract and answer the question that follows.
The following extract was written for this exercise.
Veland is a medium-sized economy that has recorded strong headline growth over the last four years, led by a booming financial and technology sector concentrated in its capital. Government ministers point to the figures below as evidence of an economic success story and argue that rapid growth is the surest route to higher living standards for all Veland's citizens.
| Year | Real GDP growth (%) | CPI inflation (%) | Unemployment (%) | Gini coefficient |
|---|---|---|---|---|
| Year 1 | 2.4 | 2.1 | 5.6 | 0.34 |
| Year 2 | 3.6 | 2.8 | 4.9 | 0.37 |
| Year 3 | 4.1 | 3.9 | 4.2 | 0.40 |
| Year 4 | 4.5 | 4.6 | 3.8 | 0.43 |
Opposition economists are less convinced. They note that the growth has been geographically and socially narrow, that median household incomes outside the capital have barely risen, and that food and energy prices have climbed faster than the headline CPI figure. They call for the government to prioritise redistribution and regional rebalancing rather than simply chasing a higher growth rate.
Question: Evaluate the view that rapid economic growth is the surest route to higher living standards for all of Veland's citizens. [25 marks]
The economy of Marenia has experienced several years of low unemployment alongside steadily rising inflation, and policymakers are debating whether reducing unemployment further would push inflation higher still.
Explain why a government that tries to reduce unemployment may find that inflation rises as a result, with the help of a diagram. [15 marks]
In the economy of Tarsis, a sharp fall in business and consumer confidence has caused investment and spending to drop, and unemployment is rising as factories run well below their capacity.
Analyse the effects of a fall in aggregate demand on the level of national output and the price level when an economy has substantial spare capacity, with the help of a diagram. [9 marks]
The statistical office of Calderon constructs its Consumer Prices Index (CPI) from a representative basket of goods and services. The table below shows the weight attached to each category in the basket (the weights are out of 100) and the percentage change in the prices of each category over the last year.
| Category | Weight | Price change over the year (%) |
|---|---|---|
| Food and drink | 30 | +5 |
| Housing and energy | 25 | +4 |
| Transport | 20 | +6 |
| Recreation | 15 | +2 |
| Other goods and services | 10 | +1 |
Calculate the weighted CPI inflation rate for Calderon over the year. (6 marks)
In the economy of Doran, unemployment has fallen to its lowest level in twenty years after a sustained rise in consumer spending, and the central bank is concerned about inflation.
Explain why a fall in unemployment in Doran might cause demand-pull inflation. (5 marks)
In the economy of Sennar, nominal GDP in the current year is £840 billion. Prices have risen since the base year, and the GDP deflator for the current year is 105 (the base year is set to 100).
Calculate Sennar's real GDP in the current year, expressed in base-year prices. (4 marks)