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INTERNATIONAL AS
ECONOMICS
UNIT 2: THE NATIONAL ECONOMY IN A GLOBAL ENVIRONMENT

Specimen 1 2019 Morning Time allowed: 1 hour 45 minutes

Materials
For this paper you must have:
• the source booklet, provided as an insert (enclosed)
• a calculator, which you are expected to use where appropriate.

Instructions
• Use black ink or black ball-point pen.
• Fill in the boxes at the top of the page.
• Answer all questions.
• You must answer the questions in the spaces provided.
• Do not write outside the box around each page or on blank pages.
• Do not write in the source booklet.
• If you need extra space for your answer(s), use the lined pages at the end of
this book. Write the question number against your answer(s).
• All working must be shown.
• Do all rough work in this book. Cross through any work you do not
want to be marked.

Information
• The marks for questions are shown in brackets.
• The maximum mark for this paper is 80.
• You may use a bilingual dictionary for this exam.
• You may not use an English dictionary
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Section A

Answer all questions in the spaces provided

Only one answer per question is allowed.

For each question completely fill in the circle alongside the appropriate answer.

CORRECT METHOD WRONG METHODS

If you want to change your answer you must cross out your original answer as shown.

If you wish to return to an answer previously crossed out, ring the answer you now wish to
select as shown.

0 1 In the circular flow of income model, which one of the following is an injection?

[1 mark]

A Consumer spending

B Government spending

C Imports

D Wages

0 2 Which one of the following is an example of expansionary monetary policy?

An increase in
[1 mark]

A government expenditure

B interest rates

C the exchange rate

D the money supply

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0 3 The diagrams below show aggregate demand (AD) and short-run aggregate supply
(SRAS) curves for the UK. All other things being equal, which one of the diagrams,
A, B, C or D, shows the most likely effects of an increase in government spending
financed by an increase in indirect tax?

[1 mark]
Turn over ►
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0 4 The diagram below shows the actual level of real GDP and the trend level of real
GDP over time for an economy.

Between the points P and Q, which one of the following is most likely to be
correct?
[1 mark]

The actual rate of economic growth is negative while the rate

A
of inflation is falling.

The actual rate of economic growth is rising while the level of

B
unemployment is falling.

The trend rate of economic growth and the output

C
gap are both positive.

The trend rate of economic growth is rising while the balance

D
of payments on current account is deteriorating.

0 5 Changes are regularly made to the weights used in a country’s consumer price
index. This means that the index takes account of changes in
[1 mark]

A month on month increases in the general price level.

B spending patterns throughout the economy.

C the growth of real output in the economy.

D total spending on all domestic goods and services.

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0 6 The diagram below shows the initial short run aggregate supply curve (SRAS1) and
long run aggregate supply curve (LRAS1) for an economy. SRAS2 and LRAS2 are
the new positions of the two aggregate supply curves.

The most likely combination of causes of the shifts in the short run and long run
aggregate supply curves is

[1 mark]

A a fall in productivity and a rise in emigration.

B a fall in subsidies and a fall in skill levels.

C a rise in immigration and a fall in money wages.

an increase in oil prices and more investment in renewable
D
energy.

0 7 Structural unemployment is most likely to be caused by

[1 mark]

A a change in the pattern of demand.

B a fall in the exchange rate.

C a fall in unemployment benefits.

D an increase in interest rates.

Turn over ►
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0 8 In an economy, the government reduced its spending by $4bn at the same time as
exports rose by $20bn. As a result of these changes, national income rose by $20bn.
The size of the multiplier is
[1 mark]

A 0.8

B 1

C 1.2

D 1.25

0 9 All other things being equal, a rise in a country’s exchange rate is most likely to

[1 mark]

A increase inflation and increase the budget deficit.

B increase the negative output gap and increase inflation.

C reduce the positive output gap and reduce inflation.

D reduce unemployment and increase economic growth.

1 0 The annual rate of change in the consumer prices index for an economy falls from 6%
to 3%. All other things being equal, this economy is best described as
[1 mark]

A entering a positive output gap.

B entering a recovery period.

C experiencing deflation.

D experiencing disinflation.
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1 1 The table below shows annual income before tax for three different households and
the total annual amount of income tax that each household pays.

Household income
Income tax
before tax

$18 000 $7 000

$40 000 $12 000

$80 000 $22 400

This income tax is

[1 mark]

A flat rate.

B progressive.

C proportional.

D regressive.

1 2 All other things being equal, which one of the following is most likely to increase the
current account deficit on the balance of payments?
[1 mark]

A A decrease in the level of consumption

B A decrease in the rate of inflation

C An increase in productivity

D An increase in the exchange rate

Turn over ►
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1 3 The diagram below shows two production possibility frontiers (PPF) for an economy.

Which one of the following movements represents an economy that has experienced
short-run but not long-run economic growth?
[1 mark]

A Q to R

B Q to S

C R to S

D S to T

1 4 The accelerator process illustrates the relationship between investment and the rate
of change of
[1 mark]

A government spending.

B national income.

C prices.

D unemployment.
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1 5 The table below shows values ($billion) for components of aggregate demand (AD) in
an economy:

Components of AD ($billion)
Consumption 500
Investment 50
Government spending 250
Exports ?
Imports 50
Aggregate demand 825

What is the value of exports in $ billion?

[1 mark]

A 25

B 75

C 100

D 125

Turn over for Section B

Turn over ►
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Section B

Look at the source booklet and answer all questions in the spaces provided
Do not write in the source booklet

1 6 . 1 Define ‘economic growth’ Extract B (line 2).

[3 marks]

1 6 . 2 Define ‘productivity’ Extract B (line 18).

[3 marks]
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1 7 Extract A shows selected economic indicators for three economies.

You are advised to show your working for the calculations below.

1 7 . 1 Calculate, to one decimal place, the mean world GDP growth rate for the five
years listed in Extract A, 2009 to 2017.
[3 marks]

1 7 . 2 If the index of world GDP was 100 at the start of 2009, using Extract A,
calculate, to one decimal place, the index of world GDP at the start of 2010.

[3 marks]

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1 8 Extract C (lines 11-12) states: ‘there is also the possibility of trade-offs

arising, at least in the short run, when attempting to achieve different
macroeconomic objectives’.

1 8 . 1 Explain why there may be a trade-off between inflation and unemployment.

[6 marks]
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1 8 . 2 To what extent do the data suggest that there is a trade-off between inflation
and unemployment? Use the data in Extract A to help support your answer.

[6 marks]

Turn over for the next question

Turn over ►
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1 9 Extract B (lines 18-19) states: ‘It has also been a time of rapid changes in
technology, increasing productivity and reducing costs. This has helped many
countries keep inflation low’.

With the help of a diagram, explain how changes in technology can help to
keep inflation low.
[9 marks]
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Turn over for the next question

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2 0 Extract C (lines 16-17) states: ‘The global recession caused widespread

cyclical unemployment, which resulted in many developed countries running
much larger budget deficits’.

Analyse reasons why a country may have a budget deficit.

[12 marks]
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Turn over for the next question

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2 1 Extract C (lines 23-26) states: ‘If the unemployment is due to supply-side

factors, appropriate policies to reduce unemployment may help to achieve the
other macroeconomic objectives as well’.

Use the extracts and your knowledge of economics to discuss the contribution
of supply-side policies to reducing unemployment.
[20 marks]
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END OF QUESTIONS
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Question Additional page, if required.

number Write the question numbers in the left-hand margin.

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Question Additional page, if required.

number Write the question numbers in the left-hand margin.

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