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AQA MERGED QUESTION PAPER AND MARK SCHEME ECONOMICS PAPER 2-7136/2 NATIONAL AND INTERNATIONAL ECONOMY FOR MAY 2024
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Section A
Answer EITHER Context 1 OR Context 2.
Context 1 Total for this context: 40 marks
Productivity and living standards
Study Extracts A , B and C and then answer all parts of Context 1 which follow.
Extract A: Indicators of economic performance and living standards, selected nations, 2021
Productivity (GDP per hour worked, US $)
Productivity change 2010– (%)
Life expectancy at birth (years)
Gini coefficient
Expected years of schooling (years)
emissions per capita (tonnes)
Estonia 42.9 +28.8 77.1 0.308 15.9 7.
Hungary 39.9 +16.7 74.5 0.300 15.0 5.
Source: OECD & WHO, 2022
Extract B: The UK’s productivity puzzle
The economist Paul Krugman once wrote that “Productivity isn’t everything, but, in the long-run, it is almost everything”. Productivity is a key determinant of living standards because it affects the amount of goods and services that can be produced, and therefore consumed, from the resources that are available. Historically, productivity has increased over time, which has contributed to real wage rises and improved living standards. Although productivity can be measured in several different ways, one common way is GDP per hour worked.
When economies move through their economic cycles, it is not unusual for productivity to fall during downturns, as happened in 2008–2009. However, the persistently low rate of growth of productivity that the UK has experienced since 2010 is unusual. Productivity growth in other nations, including Estonia and Hungary, has been much higher. The UK’s low rate of productivity growth is often referred to as ‘The UK’s productivity puzzle’. If the pre-2007 trend in productivity growth had continued, UK productivity would now be over 30% higher than it is today.
Many economists have tried to provide reasons for the productivity puzzle. Among the suggestions are low levels of investment and the impact of the financial crisis on banks’ willingness to lend to new businesses. More people working beyond normal retirement age has led to an older workforce and may have affected productivity. These factors may be relevant but they do not provide a complete explanation for the weakness in UK productivity growth.
So, what can be done to raise productivity? Investing in human capital to improve people’s skills and supporting improvements in technology should help. Creating a stable economy and effective use of the tax and benefits system are also key factors in driving productivity growth.
Source: News reports, 2022
Do not answer Context 2 if you have answered Context 1.
Context 2 Total for this context: 40 marks
Globalisation and deglobalisation
Study Extracts D , E and F and then answer all parts of Context 2 which follow.
Extract D: Macroeconomic performance indicators, selected Southeast Asian economies, 2010 to 2021
GDP per capita (constant prices, PPP)
Average annual growth rate 2010–2021 (%)
Average unemployment rate 2010– (%)
Exports (% of GDP)
Malaysia 9 041 11 371 4.3 3.4 86.9 68.
Thailand 5 076 7 233 2.6 0.7 66.5 58.
Vietnam 1 673 3 694 5.9 1.6 54.2 93.
Note: PPP = Purchasing power parity Source: World Bank, 2022
Extract E: Made in Vietnam
Trade and foreign investment have helped Vietnam emerge from extreme poverty. Integration with global manufacturing has kept Vietnam’s economy growing even during the pandemic. In 2020, GDP rose by 2.9%, while many other countries experienced recession. The latest forecasts indicate an economic growth rate of over 8% in 2022.
Vietnam’s openness to trade and investment has made the country an important link in the global economy and it has been one of the five fastest growing countries in the world over the past 30 years. Its record has been characterised by steady growth compared to boom-busts in similar nations. According to the World Bank, Vietnam is a lower-middle income economy but the government wants it to become a high-income economy by 2045.
Vietnam’s development is often compared to that of China in the 1990s or early 2000s. Both are former command economies that now focus on export-led growth. However, Vietnam is very different in terms of the amount of foreign investment and its connection to global supply chains. Since 1990, Vietnam’s inflows of foreign direct investment have averaged 6% of GDP each year, more than twice the global average and a much higher percentage of GDP than China has ever recorded over a sustained period.
As many countries in Southeast Asia developed and wages rose, multinational corporations (MNCs) were attracted by Vietnam’s low labour costs and stable exchange rate. A low rate of corporation tax has also contributed to both short-run and long-run economic growth. Vietnam is also a member of the ASEAN free trade area and has bilateral trade deals with the European Union and the USA. In the past decade, exports have risen by over 140%. However, Vietnam has become increasingly dependent on foreign companies for growth and employment, while foreign competition has meant that many domestic firms have struggled.
Source: News reports, 2022
IB/H/Jun24/7136/2 Turn over^ ►
Extract F: A period of deglobalisation?
After decades of growing integration and interdependence between nations, trade and investment flows between countries have been growing more slowly and, in some cases, falling. This process has been labelled ‘deglobalisation’ and is characterised by rising protectionism, reduced dependence on foreign imports and increased self-reliance by nations. However, could the rise in protectionism have boosted the Vietnamese economy in the short term?
The trade war between the USA and China, which started in 2018, has probably helped Vietnam. It is estimated that, in 2019, US tariffs on imports from China resulted in the US buying $31bn more imports from other low-cost Asian countries rather than China. Vietnam supplied almost half of these imports.
China’s rising labour costs, and the growing tensions between the world’s superpowers, make it easy to see why many big firms are relocating to Vietnam. Apple’s biggest suppliers, Foxconn and Pegatron, are building big factories in Vietnam, creating many jobs. Other big firms moving production from China to Vietnam include Dell, Hewlett Packard, Google and Microsoft.
Some see deglobalisation as a threat. Many nations such as Vietnam rely on international trade and investment for employment and economic growth. If other countries start to protect their economies from Vietnamese imports, this could damage the economic development of Vietnam. The slowing, or reversal, of globalisation could mean that the benefits of specialisation and foreign direct investment are lost.
Source: News reports, 2022
(^0 5) Using the data in Extract D , calculate the percentage change in Vietnam’s GDP per capita between the years 2010 and 2021. Give your answer to one decimal place. [2 marks]
(^0 6) Explain how the data in Extract D show that Vietnam may have outperformed the other selected Southeast Asian economies between 2010 and 2021. [4 marks]
(^0 7) Extract E (lines 17–18) states: ‘A low rate of corporation tax has also contributed to both short-run and long-run economic growth.’ With the help of a diagram, explain how a low rate of corporation tax may cause short-run and long-run economic growth. [9 marks]
(^0 8) Extract F (lines 19–20) states: ‘The slowing, or reversal, of globalisation could mean that the benefits of specialisation and foreign direct investment are lost.’ Using the data in the extracts and your knowledge of economics, discuss the view that a slowing, or reversal, of globalisation would be harmful to developing economies such as Vietnam. [25 marks]
IB/H/Jun24/7136/
Essay 3
In November 2022, the UK government announced large public spending cuts and tax rises in order to reduce the budget deficit. Some economists worry that this may cause a negative multiplier effect and damage economic activity.
(^1 3) Explain how the multiplier and accelerator affect the overall level of economic activity. [15 marks]
(^1 4) Evaluate the view that increasing taxation is the best way to reduce a budget deficit. [25 marks]
There are no questions printed on this page
Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation events which all associates participate in and is the scheme which was used by them in this examination. The standardisation process ensures that the mark scheme covers the students’ responses to questions and that every associate understands and applies it in the same correct way. As preparation for standardisation each associate analyses a number of students’ scripts. Alternative answers not already covered by the mark scheme are discussed and legislated for. If, after the standardisation process, associates encounter unusual answers which have not been raised they are required to refer these to the Lead Examiner.
It must be stressed that a mark scheme is a working document, in many cases further developed and expanded on the basis of students’ reactions to a particular paper. Assumptions about future mark schemes on the basis of one year’s document should be avoided; whilst the guiding principles of assessment remain constant, details will change, depending on the content of a particular examination paper.
No student should be disadvantaged on the basis of their gender identity and/or how they refer to the gender identity of others in their exam responses.
A consistent use of ‘they/them’ as a singular and pronouns beyond ‘she/her’ or ‘he/him’ will be credited in exam responses in line with existing mark scheme criteria.
2
Annotation Description ? Unsure/unclear/somewhat confusing KU Knowledge and understanding APP Application tick Analysis for questions 3,4,7,8,9,10,11,12,13, EVAL Evaluation NR Not relevant NAQ Not answering question REP Repetition BD Benefit of the doubt X Incorrect tick Correct for questions 1,2,5, Place marker Seen
Level of response marking instructions
Level of response mark schemes are broken down into levels, each of which has a descriptor. The descriptor for the level shows the average performance for the level. There are marks in each level.
Before you apply the mark scheme to a student’s answer read through the answer and annotate it (as instructed) to show the qualities that are being looked for. You can then apply the mark scheme.
Start at the lowest level of the mark scheme and use it as a ladder to see whether the answer meets the descriptor for that level. The descriptor for the level indicates the different qualities that might be seen in the student’s answer for that level. If it meets the lowest level then go to the next one and decide if it meets this level, and so on, until you have a match between the level descriptor and the answer. With practice and familiarity you will find that for better answers you will be able to quickly skip through the lower levels of the mark scheme.
When assigning a level you should look at the overall quality of the answer and not look to pick holes in small and specific parts of the answer where the student has not performed quite as well as the rest. If the answer covers different aspects of different levels of the mark scheme you should use a best fit approach for defining the level and then use the variability of the response to help decide the mark within the level, ie if the response is predominantly level 3 with a small amount of level 4 material it would be placed in level 3 but be awarded a mark near the top of the level because of the level 4 content.
Once you have assigned a level you need to decide on the mark. The descriptors on how to allocate marks can help with this. The exemplar materials used during standardisation will help. There will be an answer in the standardising materials which will correspond with each level of the mark scheme. This answer will have been awarded a mark by the Lead Examiner. You can compare the student’s answer with the example to determine if it is the same standard, better or worse than the example. You can then use this to allocate a mark for the answer based on the Lead Examiner’s mark on the example.
You may well need to read back through the answer as you apply the mark scheme to clarify points and assure yourself that the level and the mark are appropriate.
Indicative content in the mark scheme is provided as a guide for examiners. It is not intended to be exhaustive and you must credit other valid points. Students do not have to cover all of the points mentioned in the Indicative content to reach the highest level of the mark scheme.
An answer which contains nothing of relevance to the question must be awarded no marks.
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Section A
Context 1 Total for this context: 40 marks
Using the data in Extract A , calculate the ratio of the UK’s GDP per hour worked to $1 of GDP per hour worked in Hungary.
Give your answer to two decimal places. [2 marks]
5
Response Max 2 marks
For the correct answer (1.48:1) to two decimal places. Also allow $1.48:$ Also allow Hungary $1 : UK $1.48 (allow the symbols : or = or the word “to”)
2 marks
For a correct answer but not to two decimal places. OR For the correct answer (1.48 or $1.48) but not displayed as a ratio.
OR For an answer with the ratio displayed the wrong way round (1:1.48 or $1:$1.48) OR For the correct method but the wrong answer, to two decimal places, displayed as a ratio.
1 mark
Explain how the data in Extract A show that higher productivity may result in higher living standards. [4 marks]
Relevant issues include:
6
Response: Max 4 marks
4 marks
3 marks
2 marks
1 mark
Expected diagrams are:
Relevant issues include:
MAXIMUM FOR QUESTION 03: 9 MARKS
8
Extract B (lines 4 – 5) states: ‘Historically, productivity has increased over time, which has contributed to real wage rises and improved living standards.’
Using the data in the extracts and your knowledge of economics, assess the view that the government should make raising productivity a priority in order to improve living standards in the UK. [25 marks]
Areas for discussion include:
definitions/explanations: productivity, real wages, living standards linking rising productivity to supply-side policies explaining how the government could help raise productivity by using methods such as: o using the tax system to create incentives in labour markets o improving labour mobility o providing education to develop skills and human capital o improving healthcare o providing grants or subsidies for R&D or improving technology o using the tax system to encourage investment o deregulating markets o privatising markets o creating more competition explaining why raising productivity is likely to lead to an improvement in living standards assessing other benefits of raising productivity such as: o efficiency o the effects on real wages or GDP per capita o the effects on the macroeconomic objectives o the effects on living standards o international competitiveness o firms’ average costs and profits assessing alternative measures to improve living standards such as: o focusing on reducing unemployment o tackling inflation/reducing the cost of living o reducing inequality and poverty o focusing on the environment o improving the wages of public sector workers o improving public services and welfare the pros and cons of each method of raising living standards possible trade-offs in trying to improve living standards considering the term ‘priority’ and the current situation in the UK the possibility that multiple methods could be used the view that living standards may be subjective and desirable outcomes may change over time the difficulties of raising productivity, and the effectiveness of policies time lags and the costs of implementing policies productivity may be improved through the private sector, regardless of government intervention an overall assessment of whether the government should prioritise raising productivity to try to improve living standards in the UK.
The use of relevant diagrams to support the analysis should be taken into account when assessing the quality of the student’s response to the question.
Use the level mark scheme on page 4 to award students marks for this question.
9
Explain how the data in Extract D show that Vietnam may have outperformed the other selected Southeast Asian economies between 2010 and 2021. [4 marks]
Relevant issues include:
the meaning of ‘outperformed’ in terms of macroeconomic objectives Vietnam has had the largest percentage increase in GDP per capita (120.8% from 2010 to 2021) compared to Malaysia (25.8%) and Thailand (42.5%) indicating the largest rise in living standards per person Vietnam has achieved the highest annual growth rate from 2010 – 2021 (5.9%) compared to Malaysia (4.3%) and Thailand (2.6%) Vietnam has a lower average rate of unemployment from 2010 – 2021 (1.6%) than Malaysia (3.4%) although not lower than Thailand Vietnam has had a rise in exports as a % of GDP (54.2% to 93.3%) whereas Malaysia and Thailand have both fallen. Malaysia (86.9% to 68.8%) and Thailand (66.5% to 58.2%) Vietnam now has the highest share of exports as a % of GDP in 2021 (93.3%) whereas in 2011, it was lowest (54.2%) indicating improved export performance.
11
Response: Max 4 marks
4 marks
3 marks
2 marks
1 mark
Extract E (lines 17 – 18) states: ‘A low rate of corporation tax has also contributed to both short- run and long-run economic growth.’
With the help of a diagram, explain how a low rate of corporation tax may cause short-run and long-run economic growth. [9 marks]
An AD/AS diagram showing a rise in AD and LRAS is expected. However, some candidates may just shift the LRAS curve. This is acceptable, provided it also includes an AD curve, because it shows an increase in actual and potential output. Also, candidates may use a PPF to show long-run growth by shifting out the boundary and illustrate short-run growth by including a point that moves closer to, or onto, the new boundary.
It is also acceptable for candidates to display the information on 2 separate diagrams, with short-run economic growth on one, and long-run economic growth on another.
12
Level of response Response:^ Max^9 marks
7 – 9 marks
4 – 6 marks
1 – 3 marks
