AQA A Level Economics 4th Edition Ray Powell, James Powell - Solutions

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An economy has a £1,700 billion national debt and the government plans to run a budget deficit of £40 billion, but the economy is expected to grow by 3%.All other things being equal, which of the following statements is correct?A The national debt as a proportion of GDP is rising.B The national
The table below shows the UK’s income tax rates for the financial year 2018/19.Taxable income Tax band Tax rate (%)Up to £11,850 Personal allowance 0£11,851 to £46,350 Basic rate 20£46,351 to £150,000 Higher rate 40 Over £150,000 Additional rate 45 An individual worker earns £63,525. What
In 2018/19 the British economy is expected to grow below trend and government plans to spend £812.8 billion, of which £731.5 billion will be current spending and £81.3 billion will capital spending. The government expects to raise £787.3 billion in taxation receipts.Which one of the flowing
The table below shows the human development index rankings of four countries in the years 1990, 2005 and 2018 Which country experienced the highest rate of development over the period shown?A Country W B Country X C Country Y D Country Z
The table below shows Bank Rate set by the central bank and the Paper 3: Economic principles and issues inflation rate over the period 2015–20 Which one of the following can be concluded from the data?A The economy experienced an extended period of disinflation.B The economy had negative real
The diagram below shows the market for steel after the introduction of a tariff.What is the percentage increase in domestic firms’ total revenue following the introduction of the tariff?A 62.5%B 166.7%C 125.5%D 162.5%
The diagram below shows two aggregate demand (AD) curves and two short-run aggregate supply (SRAS) curves for an economy.All other things being equal, which event is most likely to have resulted in the changes in real national output and the price level?A a sustained depreciation in the external
Following a series of unsatisfactory annual stress tests on the UK’s commercial banking system, the Bank of England’s Financial Policy Committee decides that it needs to take action to maintain financial stability.What is the Bank of England’s most likely course of action?A increase Bank Rate
The table below shows a price index in a country in the years from 2013 to 2018. What was the annual rate of inflation in the year 2018?
The annual coupon payment on a 30-year bond issued in 2018 is £6.When the bond was first issued, the long-run interest rate was 4%. The bond’s maturity value is £100. Within the last year, long-run interest rates have fallen to 3%.Other things being equal, what will be the current market price
A government makes the reduction of the natural rate of unemployment a major macroeconomic policy objective. Which of the following would be the most effective policy for the government to adopt to achieve its objective?A a new bout of quantitative easing B the introduction of tariffs on imported
During the course of 2016 the value of the pound against the euro Paper 3: Economic principles and issues depreciated from £1 = €1.36 to £1 = €1.17. All other things being equal, this is most likely to result in:A an increase in the size of the UK’s budget deficit B an increase in UK
What is most likely to result from a sustained decrease in the world price of oil for a petroleum-exporting developing country?A a deterioration in the government’s finances B an increase in the balance of trade in services C an increase in the level of investment from MNCs D an appreciation in
Which represents a withdrawal from an economy’s circular flow of income?A an increase in the budget deficit B an increase in the trade surplus C an increase in income tax D an increase in the level of investment
The table below shows the production possibilities of two countries, Oceana and Eurasia, if they divide their resources equally between the production of two goods, guns and butter.Guns Tonnes of butter Oceana 12,000 6,000 Eurasia 4,000 2,000 If Oceana decides to produce an extra tonne of butter,
When ownership resides with shareholders and control rests with manages, which of the following is most likely?A price rigging and cartel activity B profit-satisficing behaviour C price discrimination D profit-maximising behaviour
The diagram below shows a firm operating in an imperfectly competitive market.A an oligopoly firm pursuing a policy of limit pricing B a monopoly firm experiencing X-inefficiency C an oligopoly firm engaging in anti-competitive behaviour D a firm in monopolistic competition making normal profits
A town which relies on tourism as its major industry has experienced problems with littering. If the local council wants to adopt a behavioural economic policy to address the problem, it should:A place signs which state that the majority of people do not drop litter B install CCTV and fine people
The diagram below shows the marginal private cost (MPC) and marginal social cost (MSC) and the marginal private benefit (MPB) and marginal social benefit (MSB) resulting from the production of a product.If the government intervenes in the market to achieve the optimal social output, where should
A local authority is deciding on how to allocate its budget to improve public transport in the area. It can afford to build only one of four capital infrastructure projects. The table below show the estimated private and external costs and benefits of each project.Which one of the projects should
The diagram below shows the impact of a subsidy imposed on a good by the government, which shifts the market supply curve from S1 to S2.After the subsidy has been received, the revenue that firms receive from the sale of products is:A $5,225 B $7,125 C $2,100 D $1,900
The table below shows a firm’s output and total costs.What is the average variable cost of producing 4,000 units of output?A £32.50 B £12.50 C £20.00 D £25.00
The table below shows the price and quantity demanded of two goods, H and K.When the price of H falls from $40 to $36, the cross elasticity of demand for K with respect to the price of H is:A −4 B −2 C +2 D +4
The diagram below shows the consequences of introducing an indirect Paper 3: Economic principles and issues sugar tax on fizzy drinks, with the market supply curve of fizzy drinks shifting from S1 to S2.Once the tax has been paid to the government, what is the firm’s total revenue?A £30,000 B
Sales of new cars increase from 9,600 to 10,800 cars. The income elasticity of demand for new cars is +2.5. Workers’ original income per annum is $21,000. What is the new average income per annum?A $22,050 B $21,525 C $22,680 D $21,932
The diagram below shows four Lorenz curves, W, X, Y and Z, and a line of complete equality.Which Lorenz curve would have the largest Gini coefficient?A W B X C Y D Z
The diagram shows a firm’s average and marginal revenue curves.What is the price elasticity of demand at P1?A −1 B −2.5 C −0.25 D −0.75
The diagram below shows the marginal revenue product of labour(MRPL), the average cost of labour (ACL), and the marginal cost of labour (MCL) in a labour market with low barriers to entry for workers but a firm which can exercise monopsony power when employing labour.Where will a profit-maximising
The diagram below shows the production possibility frontiers for two countries, Oceana and Eurasia.The opportunity cost of butter in terms of guns:A increases as more guns are produced B increases as more butter is produced C is greater for Oceana than for Eurasia D is greater for Eurasia than for
The table below shows an individual’s total utility from the consumption of glasses of lemonade. Glasses of lemonade 0 1 Total utility (units of utility) 0 8 2 14 3 18 4 20 5 20 6 18
Do you agree that national income figures provide an inadequate measure of economic development? Justify your answer.
Explain three factors that might affect the growth and development of a country in sub-Saharan Africa.
Distinguish between economic growth and economic development.
Explain the advantages and disadvantages of a floating exchange rate.
Using a demand and supply diagram, explain how a trade deficit is eliminated in a freely floating exchange rate system.
Would you agree that there has been an exchange rate crisis in the UK in the period before and after Brexit? Justify your answer.
Is the UK pound’s current exchange rate floating or fixed?
Distinguish between a floating and a fixed exchange rate.
Taking into account what you have learnt earlier in your studies about negative externalities and demerit goods, to what extent does this extract support the view that national income is of little use in measuring economic development?
Why was the United Nations’ Human Development Index (HDI) created?
What are the thee methods of measuring national income?
Distinguish between GNP and GDP.
Describe what happened to the pound’s exchange rate during the year before you are reading this case study.
Suggest why a fall in the pound’s exchange rate has not in recent years led to a significant increase in demand for UK exports.
Explain how a depreciation in the value of a currency affects the rate of domestic inflation.
Explain how a central bank will implement monetary policy to try to maintain a high exchange rate.
Using a demand and supply diagram, explain how a trade deficit is eliminated in a freely floating exchange rate system.
Do you agree that supply-side reforms are needed if the UK’s current account is to improve in the long run? Justify your answer.
Explain the policies that may be used to reduce a deficit on the current account of the balance of payments.
Assess the view that the progress made towards free trade has brought significant economic benefits both to the global economy and to the UK.
Explain the difference between absolute advantage and comparative advantage.
Do you agree that, for a developed economy such as the UK, the advantages of globalisation exceed any disadvantages? Justify your answer.
If the UK has left the European Union by the time you have read the case study, describe how Britain’s exit has affected the UK’s financial services industry.
Whereas many service industries are sheltered from international trade, this is generally not true for financial services. Explain why this is so.
‘The growth of the financial services industry has led to an unbalanced economy.’ What does this mean and how might the UK economy be ‘rebalanced’?
Explain two reasons for the temporary decline of the UK financial services industry after 2007.
Which trading bloc has the highest level of economic integration?A North American Free Trade Agreement B European Union C Eurasian Customs Union D Eurozone Explain why the correct answer is D.
What is first-world economic imperialism?
Do you agree that increasing returns to scale and imperfect competition weaken the case for unlimited free trade based on the principle of comparative advantage? Justify your answer.
Briefly define each of the terms underlined in the extract.
What is comparative advantage?
How may the movement of factories from Mexico to the USA increase the costs of production of multinational corporations?
Explain how the US government can use the threat of tariffs to encourage firms to relocate factories in the USA.
How may the growth in ‘cross-border trade’ promote globalisation?
What is meant by de-globalisation?
Evaluate the effectiveness of President Trump’s economic nationalist policies which aim to increase employment in the USA.
Explain how building a global production platform enables a multinational corporation to reduce costs and increase profits.
Explain two ways in which a government can seek to protect domestic firms from competition.
Define the term ‘supply chain’.
Do you agree that supply-side policies on their own are sufficient to help the economy achieve a stable, sustainable and satisfactory rate of economic growth? Justify your answer.
Evaluate the impact of measures undertaken by governments to reduce the budget deficit.
Explain how automatic stabilisers operate.
Explain the difference between the cyclical and the structural components of a budget deficit.
To what extent do you agree that supply-side improvements are needed if UK macroeconomic performance is to improve? Justify your answer.
Explain the role of fiscal policy in supply-side economic policy.
Explain the relationship between a budget deficit and the national debt.
Explain how the growth of the national debt has affected fiscal policy.
Which groups in society will be negatively affected by large cuts to public spending? Explain your answer.
Describe the difference between ‘extreme’ and ‘moderate’ supply-side views on the role of tax cuts.
Explain, using the Laffer curve, how a government may aim to increase tax revenues by cutting taxes.
To what extent, if any, does an independent fiscal watchdog improve fiscal policy? Justify your reasoning.
The OBR has claimed that it is a ‘fiscal watchdog’ rather than a ‘fiscal lapdog’. What do these terms mean?
Explain why it is desirable to take politics out of tax and public spending policy.
Define the terms ‘deficit bias’ and ‘pro-cyclicality’.
Budget day is usually the most important day in the year for UK fiscal policy. What is fiscal policy?
On budget day, the government publishes an executive summary of the budget statement. Go to the Treasury website and download and read the executive summary of the most recent budget.
What is a ‘stealth tax’? Why are stealth taxes unpopular?
What is the purpose of budget day?
Distinguish between capital markets and money markets. Explain how UK capital markets help both public limited companies (PLCs) and the government to undertake their functions.
Do you agree that monetary policy has been highly effective in the UK in recent years? Justify your answer.
How has quantitative easing operated in the UK? Evaluate the case for and against the Bank of England extending quantitative easing.
Explain how changes in Bank Rate may affect bank lending and the economy.
What is money? Explain how both the Bank of England and privately owned banks create money.
What is a systemic risk? Give an example of a ‘systemic risk to the resilience of the financial system’.
‘The Bank has a statutory objective to protect and enhance the stability of the financial system of the United Kingdom.’ Describe one event which might reduce the financial stability of the United Kingdom.
Explain the differences between the Bank of England’s Monetary Policy Committee (MPC) and the Bank’s Financial Policy Committee (FPC).
What is the difference between macroprudential and microprudential regulation?
In the years after 2007, young house buyers who had got onto the property ladder in the years just before the financial crisis were the main victims of the negative equity problem. Explain why this was so.
What is the negative equity trap?
Distinguish between positive and negative equity.

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AQA A Level Economics 4th Edition Ray Powell, James Powell - Solutions

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