11. Economic Performance (AQA A Level Economics)

Essay 2

During 2018, the UK experienced an annual growth rate of 1.4%, an unemployment rate of around 4.1%, inflation close to target at 2.5% and a reduced current account deficit on the balance of payments. However, in November 2018, the Bank of England warned that economic shocks could damage the UK’s prosperity.

Evaluate the view that the main objectives of UK government macroeconomic policy can be achieved without conflicting with each other.

Table 1 contains data for the rates of growth of nominal and real GDP and the rate of inflation for an economy in a given year. Which one of the following combinations,

A, B, C or D, shows the correct relationship between the three variables? 

The long-run Phillips curve shows that

An economy is estimated to be experiencing a 2% rate of frictional unemployment plus a 3% rate of structural and real wage unemployment. If it is also experiencing cyclical unemployment of 4%, its natural rate of unemployment is most likely to be

Source: News reports, 2017

Extract B (lines 13–15) states ‘If real GDP goes up, the economy is doing well; this is associated with higher incomes, more jobs and higher spending.’ 

Using the data in the extracts and your knowledge of economics, assess the view that to improve the living standards of their citizens, governments across the world should prioritise achieving economic growth.

Essay 3

In the past few years, CPI inflation has often differed by more than 1% from its 2% target. In the winter of 2015 the UK experienced a brief period of deflation but, more recently, inflation has been over 3%.

Explain the main causes of a rise in inflation. 

Essay 3     

In the past few years, CPI inflation has often differed by more than 1% from its 2% target. In the winter of 2015 the UK experienced a brief period of deflation but, more recently, inflation has been over 3%.

Evaluate the view that inflation is always preferable to deflation.

The table below contains selected data on a country’s macroeconomic performance over a 20 year period. 

All other things being equal, which one of the following, A, B, C or D, can be inferred from the above data?

All other things being equal, if the velocity of circulation is constant, the quantity theory of money based on Fisher’s equation of exchange, MV=PQ, predicts that an x% increase in the money supply will always cause an x%

The diagram below shows the actual level of real GDP and the trend level of real GDP over time for an economy. The economy starts its recovery from recession at point M. After several years of growth the economy reaches point N.

All other things being equal, which one of the following is the most likely consequence of the economy’s growth path between points M and N? 

Source: News reports, 2016

Extract E (lines 16–17) states ‘However, some argue that trying to maintain stable prices and low unemployment could create trade-offs.’ 

With the help of a diagram, explain why a trade-off between price stability and low unemployment might occur.

Essay 3 

In July 2017, more people were employed in the UK than ever before. At the same time, the UK unemployment rate fell to 4.3%, the lowest rate for 40 years. Whilst this suggests that the government’s policies for employment are working, some claim that zero-hours contracts, low real wages and temporary jobs have made many people worse off.

Explain the causes of cyclical and structural unemployment.

Essay 3 

In July 2017, more people were employed in the UK than ever before. At the same time, the UK unemployment rate fell to 4.3%, the lowest rate for 40 years. Whilst this suggests that the government’s policies for employment are working, some claim that zero-hours contracts, low real wages and temporary jobs have made many people worse off.

Assess the view that falling unemployment will inevitably lead to an improvement in the standard of living for people in the UK.

The short-run Phillips curve below illustrates the relationship between unemployment and inflation in an economy.

The Phillips curve shows that in this economy.

The table below shows indices for real GDP and consumer prices in an economy over six quarters.

During these six quarters the economy experienced 

Extract D

Figure 3: CPI inflation rates (%) for Japan and the UK, 2010 to 2015

Using the data in Extract D (Figure 3), calculate, to two decimal places, the mean inflation rate for Japan from 2010 to 2015.

Extract D

Figure 3: CPI inflation rates (%) for Japan and the UK, 2010 to 2015

Explain how the data in Extract D (Figure 4) show that Japan has been less successful than the UK in achieving a stable rate of economic growth.

Essay 1

Between 2011 and 2016, UK unemployment fell from a high of 8.5% to 4.8%. Some argue that government attempts to reduce unemployment inevitably lead to trade-offs with other macroeconomic policy objectives.

Discuss the view that falling unemployment will inevitably lead to trade-offs with other macroeconomic policy objectives.

The primary measure of unemployment in the UK is based on the

The table below shows the Consumer Prices Index for a country over a number of years.

Which one of the following can be concluded from the table?

Extract B:       Trends in UK manufacturing 

Figure 1: Index of manufacturing output 2003 to 2015, 1997 = 100

 Figure 2: Manufacturing employment Jan–Mar 2003 to Oct–Dec 2015, thousands

Figure 3: Value of UK trade in goods 2003 to 2015, £ billion at current prices 

 Figure 4: Annual average rate of growth in UK manufacturing output and real GDP, 1949 to 2015 

Source: Official statistics for all data in Extract B

To what extent, if at all, do you consider that the UK manufacturing sector has been in decline since 2003? You must use the data in Extract B to support your assessment.