Measures of Economic Performance (Edexcel A Level Economics A)

Exam Questions

1 hour20 questions
1
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2 marks

UK real Gross Domestic Product (GDP), annual percentage change 2014–2017

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Total real UK GDP in 2016 was £200 000 million. With reference to the chart above, calculate the total real UK GDP for 2017. You are advised to show your working.

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2
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2 marks

UK real Gross Domestic Product (GDP), annual percentage change 2014–2017

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Explain the term ‘real gross domestic product’.

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3
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1 mark

UK real Gross Domestic Product (GDP), annual percentage change 2014–2017

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With reference to the chart below, which one of the following is correct over the period shown?

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  • GDP per capita was highest in 2014

  • Inflation rose in 2015

  • The UK economy grew at the fastest rate in 2014

  • The UK economy was in recession in 2015

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4
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2 marks

Number of unemployed persons, UK, as measured by the claimant count, thousands

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Calculate the percentage change in the number of UK unemployed persons between April and July 2018. You are advised to show your working.

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5
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2 marks

Explain one likely reason for the increase in the number of people unemployed in the UK over the time period shown. 

Number of unemployed persons, UK, as measured by the claimant count, thousands

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6
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1 mark

Number of unemployed persons, UK, as measured by the claimant count, thousands

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Which one of the following types of unemployment is most likely to be caused by a technological change in an industry?

  • Cyclical

  • Real wage

  • Seasonal

  • Structural

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7
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2 marks

Monthly additions to UK credit card lending, £ billions, 2015 – 2017

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Using the chart, calculate an index number for additions to credit card lending in March 2017, using January 2016 as the base. You are advised to show your working.

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8
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2 marks

Monthly additions to UK credit card lending, £ billions, 2015 – 2017

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Explain one possible link between an increase in credit card lending and the rate of inflation.

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9
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2 marks

United States current account of the balance of payments, 1993–2015

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Calculate the percentage change in the United States current account deficit on the balance of payments between 1998 and 2006.

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10
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2 marks

United States current account of the balance of payments, 1993–2015

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Explain the term ‘current account of the balance of payments’.

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11
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1 mark

United States current account of the balance of payments, 1993–2015

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Using the chart on page 6, which one of the following may be inferred about the United States balance of payments?

  • The current account deficit decreased between 2001 and 2006

  • The current account surplus increased between 2001 and 2006

  • There was a current account deficit for the entire period shown

  • There was a current account surplus for the entire period shown

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12
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1 mark

The chart below shows the UK unemployment rate, seasonally adjusted, from 2008 to 2015

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Which one of the following types of unemployment best explains the change in the data between 2008 and 2010?

  • Cyclical

  • Frictional

  • Seasonal

  • Voluntary

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13
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1 mark

The chart below shows UK inflation as measured by the Consumer Prices Index (CPI), 2011 to 2015.

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Which one of the following statements is correct about the UK’s inflation record between September 2011 and January 2013?

Based on the data shown, the UK experienced:

  • deflation

  • disinflation

  • falling average prices

  • falling money supply

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14
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1 mark

The table shows the selected economic data in 2014 for Vietnam and India.

 

Gross National Income per capita

(2011 PPPs)

Human Development Index (HDI) value

Vietnam

5 092

0.666

India

5 497

0.609

Which one of the following statements can be deduced from the data in the table?

  • Average incomes are higher in India than in Vietnam.

  • Levels of absolute poverty are higher in Vietnam.

  • Life expectancy is higher in India than in Vietnam.

  • Provision of healthcare and education is less effective in Vietnam than in India.

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1
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10 marks

With reference to the last paragraph in Extract C, assess the impact of a fall in real incomes on subjective happiness (10)  

Extract C

Bank of England tells lenders to increase capital reserves

The Bank of England has told lenders they will need to build a special reserve worth £11.4 billion by the end of 2018 as it tries to make banks more resilient to the risk posed by mounting consumer debt. This reserve of assets that can be readily turned into cash is a way of forcing banks to set aside capital reserves in good times in order to keep lending to the wider economy at a steady level, even during an economic downturn. In 2017 the Bank of England told UK banks it would raise the reserve ratio, relative to all assets, from zero to 0.5% and also forecast a further increase to 1% by the end of 2017.

The move is not intended to directly reduce consumer demand for credit, which in 2017 grew by 10.3% on an annual basis, but it may well lead to banks becoming less willing to lend to consumers. Since the Bank of England has recently become increasingly concerned about consumer borrowing, including rising car loans and credit card debt, this may be no bad thing as far as the Bank of England is concerned, even if it does have a negative impact on the wider economy.

Analysts are concerned about the impact on consumer confidence of rising inflation, partly caused by a falling pound. With falling real incomes consumers could become more vulnerable to falling behind with their credit card and personal loan repayments. Despite these concerns the UK economy recently recorded the lowest rate of unemployment since 1975.

(Source: adapted from ‘Bank of England tells lenders to increase capital buffers by £11.4bn’ by Caroline Binham, Gemma Tetlow and Martin Arnold © Financial Times 2017 https://www.ft.com/content/9bc99294-5b1b-11e7-9bc8-8055f264aa8b)

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2
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5 marks

The UK economy

Figure 3: GDP per hour worked, nominal values at PPPs, percentage above or below UK level, 2018

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With specific reference to Figure 3, explain why productivity is measured by ‘GDP per hour worked, nominal values at PPPs’.

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3
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4 marks

The chart below shows UK inflation as measured by the Consumer Prices Index (CPI), 2011 to 2015.

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With reference to the data provided, explain the process of calculating the rate of inflation in the UK using the Consumer Prices Index. Refer to the concept of weights in your answer.

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4
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8 marks

With reference to the information provided and your own knowledge, examine two factors which might explain the change in the rate of Eurozone inflation as shown in Figure 2  

Figure 2: Eurozone inflation rate as measured by the Consumer Prices Index (CPI)

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Extract A

European Central Bank disappoints markets with weaker than expected stimulus

Mario Draghi, president of the European Central Bank (ECB), surprised financial markets in November 2015 with a less ambitious package of monetary stimulus than many had anticipated.

The ECB cut its base interest rate by 0.1% to minus 0.3% in order to encourage private banks to lend funds to companies and households rather than deposit them at the central bank. The central bank agreed to extend its €60 billion (£45 billion) monthly bond-buying quantitative easing (QE) programme for a further six months. The ECB’s €1.1 trillion QE scheme had originally been due to end in September 2016.

“We are doing more because it works,” Mr Draghi said. Yet the ECB did not increase the size of its monthly asset purchases and also disappointed those expecting that it would cut interest rates more aggressively.

The euro rose almost 3% against the dollar to $1.08 after the announcement. Italian and Spanish bond yields both jumped by 0.27% to 1.62% and 1.72% respectively.

The ECB’s economists reduced their inflation forecasts for the next two years. They now predict consumer prices in the Eurozone rising by just 1% in 2016 and 1.6% in 2017 – still below the central bank’s ceiling of 2%. In November 2015, the inflation rate was just 0.1% and core inflation, excluding volatile items such as fuel and food, dropped to 0.9%.

Mr Draghi stressed again that monetary policy alone could not restore the Eurozone to economic health. He called for looser fiscal policy among member states to support aggregate demand and more rapid implementation of supply-side reforms. “In order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively,” he said.

(Source: http://www.independent.co.uk/news/business/news/ecb-disappoints-traders

-with-weaker-than-expected-stimulus-a6759786.html, 4th December 2015)

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1
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25 marks

Evaluate the likely microeconomic and macroeconomic effects of relatively high inflation rates in many African countries (25)

Extract D

Rising debt levels in Africa

Increases in national debt have brought several African governments towards a debt-servicing crisis when the repayment of debt and interest become unsustainable. Between 2010 and 2015, many sub-Saharan countries raised debt totalling more than £20 billion. Back then, with commodity prices soaring and foreign loans available at very low interest rates, everyone agreed that borrowing was the way to grow an economy with expansionary fiscal policy. Since 2015, some African governments – beneficiaries of big debt write-offs at the start of the century – have taken to private debt markets too eagerly, leaving them with heavy repayment schedules at a time of lower commodity prices. 

Until recently, the International Monetary Fund (IMF) has played down African debt concerns, pointing to better management of public resources and greater transparency. But it was shaken by Mozambique’s default on more than £2 billion of secret loans used to purchase a non-existent tuna-fishing fleet, raising fears of hidden debt in other African countries with similar levels of corruption. The median level of debt in sub-Saharan Africa 15 had risen sharply from 34% of gross domestic product in 2013 to 48% in 2017. Although that is low by international standards, analysts said debt burdens were heavier than they appeared because of most African countries’ low tax base. “The real thing to look for is debt to revenue, or debt-service as a percentage of government spending,” said John Ashbourne, Africa Economist at Capital Economics. In several countries, he said, debt payments were above 20% of government revenue, with an opportunity cost in terms of government spending.

(Source: adapted from African debt worries intensify as levels near tipping point by David Pilling © Financial Times 2017 https://www.ft.com/ content/939808dc-b4d8-11e7-a398-73d59db9e399)

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2
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15 marks

 

Nigeria

Venezuela 

Annual GDP (US $bn)

477

112

Annual GDP growth rate (%)

2.5

8.0

Interest rate (%)

18.75

55.3

Inflation rate (%)

26.7

317.6

Unemployment rate (%)

4.1

5.3

Budget balance (% of GDP)

-5

-4.5

Current account (% of GDP)

-0.3

3.5

With reference to the information provided, discuss whether the macroeconomic performance of Nigeria is stronger than the macroeconomic performance of Venezuela (15)

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