Monday 6 June 2022 – Afternoon
A Level Economics
H460/02 Macroeconomics
Time allowed: 2 hours
* H 4 6 0 0 2 *
INSTRUCTIONS
• Use black ink. You can use an HB pencil, but only for graphs and diagrams.
• Write your answer to each question in the space ...
Monday 6 June 2022 – Afternoon
A Level Economics
H460/02 Macroeconomics
Time allowed: 2 hours
1
*
4
9
3
0
*
6
4
1
5
6
* H 4 6 0 0 2 *
INSTRUCTIONS
• Use black ink. You can use an HB pencil, but only for graphs and diagrams.
• Write your answer to each question in the space provided. If you need extra space use
the lined pages at the end of this booklet. The question numbers must be clearly
shown.
• Answer all the questions in Section A, one question in Section B and one question
in Section C.
INFORMATION
• The total mark for this paper is 80.
• The marks for each question are shown in brackets [ ].
• Quality of extended response will be assessed in questions marked with an asterisk (*).
• This document has 16 pages.
ADVICE
• Read each question carefully before you start your answer.
Read the following stimulus material and answer all parts of Question 1 which follow in this section.
Does rising national debt matter?
At the start of 2020, there were reasons to think there was both a greater need for government
borrowing and a reduced concern about rising national debt. There had been a slowdown on
the growth of aggregate demand. Although interest rates were low, private sector investment
was not making full use of available savings. Fig. 1 shows a virtuous circle between savings and
5 economic growth.
Fig. 1
A virtuous circle
savings
economic
growth investment
productivity
However, more savings, if not used for investment, can slow down economic growth. One
cause of an increase in savings can be greater income inequality. Fig. 2 shows the Gini
coefficient and economic growth rates for selected countries.
The Gini coefficient and economic growth rate for selected countries 2018
8
Mongolia
7
6
Indonesia
5
Economic
growth 4
rate (%)
3 Turkey
2
UK Brazil
1
0
0 0.1 0.2 0.3 0.4 0.5 0.6
Gini coefficient
The slowdown in aggregate demand in the UK kept the country’s inflation rate low. Between
10 January 2019 and January 2020, the Consumer Prices Index increased from 106.3 to 108.2. If a
central bank can convince households, workers and firms that inflation will be at a low and stable
rate, it can affect expectations and investment in a beneficial way. One way of doing this is by
setting an inflation rate target. Of course, trying to achieve an inflation rate target can be affected
by adverse demand-side and supply-side shocks. If the target is not met, it can also cause
15 households, workers, and firms to question the central bank’s ability to control inflation.
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