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1A) Which one of the following would be most likely to cause an increase in credit card lending? (1 Mark)
A) A fall in interest rates
B) A fall in investment
C) An increase in the deficit on the current account of the balance of payments
D) An increase in savings
An increase in the deficit on the current account of the balance of payments (B) would be most likely to cause an increase in credit card lending?
1B) 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. (2 Marks)
(15,000 ÷ 13,000) X 100 = 115
1C) Explain one possible link between an increase in credit card lending and the rate of inflation. (2 Marks)
(15,000 ÷ 13,000) X 100 = 115
2) The International Monetary Fund has called on the G20 group of large industrialised countries to boost government spending on infrastructure.
A) Draw an aggregate demand and aggregate supply diagram to show the likely impact of n increase in government spending on infrastructure on a country's price level and real output. (2 Marks)
B) Which one of the following would be an example of government spending on infrastructure. (1 Mark)
A) Construction work on new railway lines
B) Interest payments on the national debt
C) Salaries for teachers
D) Unemployment benefit payments
An example of government spending on infrastructure would be (A) construction work on new railway lines
3) Unit labour costs for selected European countries
A) Explain one likely reason for Estonia's unit labour costs rising faster than in other European countries. (2 Marks)
(15,000 ÷ 13,000) X 100 = 115
B) Explain the impact of rising unit labour costs on Estonia's economy. (2 Marks)
(15,000 ÷ 13,000) X 100 = 115
C) The increase in Austria's unit labour costs between 2010 and 2017 is: (1 Mark)
A) 3%
B) 11.3%
C) 13%
D) 113%
The increase in Austria's unit labour costs between 2010 and 2017 is (C) 13%.
4) The UK Government is planning to cut the rate of corporation tax on all pre-tax profits of companies to 17% by 2020.
A) This would be an example of: (1 Mark)
A) A contractionary monetary policy
B) An exchange rate policy
C) An expansionary monetary policy
D) A supply-side policy
The increase in Austria's unit labour costs between 2010 and 2017 is () a policy.
B) If a company makes £500,000 pre-tax profit in 2020, calculate how much corporation tax it will pay. Assume that the government cuts the rate of corporation tax as planned (2 Marks)
(£500,000 ÷ 100) X 17 = £85,000
C) Explain one possible reason why the revenue from corporation tax could increase if the government cuts the rate of tax. (2 Marks)
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5) According to the charity Oxfam, the combined wealth of the 62 richest people in the world is the same as the wealth of the poorest half of the world's population. The value of the combined wealth of the poorest half of the world's population has fallen by 38% between 2010 and 2016.
A) Explain the distinction between income and wealth. (2 Marks)
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B) Explain one likely reason why global wealth inequality has increased. (2 Marks)
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C) Which one of the following would be most likely to reduce the level of inequality in the country? (1 Mark)
An increase in:
A) Import tariffs
B) Progressive taxes
C) Regressive taxes
D) Value added tax
The most likely to reduce the level of inequality in the country is () a policy.
6) The International Monetary Fund has called on the G20 group of large industrialised countries to boost government spending on infrastructure.
A) With reference to Extract A, explain the role of forward markets in currencies. (5 Marks)
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B) With reference to Extract A and Figure 1, examine the likely impact of the change in the sterling exchange rate on the UK economy. (8 Marks)
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C) With reference to the last paragraph in Extract C, assess the impact of a fall in real incomes on subjective happiness. (10 Marks)
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D) With reference to Extract C, discuss the potential conflicts between macroeconomic objectives when the central bank attempts to control inflation. (12 Marks)
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E) Discuss whether providing substantial government financial support to banks is the best policy response during a financial crisis. (12 Marks)
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