PRACTICE EXAM PAPER

OCR AS
Economics (Macro)
Paper A
 Section A
ANSWER ALL QUESTIONS IN THIS SECTION

1. Which of the following scenarios is most likely to cause an increase in international

competitiveness?
A. An appreciation in the exchange rate
B. A fall in the quality of the product being produced
C. Greater use of labour saving technology in manufacturing
D. An increase in unit labour costs

2. Which of the following is not a component of the current account?

A. Balance of trade in goods
B. Balance of trade in services
C. Investment income
D. Hot money

3. A government runs a fixed exchange rate system, and wishes to keep the value of its currency
below the free market equilibrium. Which of the following policies is it most likely to use?
A. Using its foreign currency reserves to buy up its own currency
B. Raising the rate of interest
C. Imposing import quotas
D. Using its own currency to increase its foreign exchange reserves

4. The following chart shows the UKs overall employment rate and the UKs youth unemployment
rate, from 2005 to 2015.

UK Unemployment rate UK Youth unemployment rate

9 24
UK Youth Unemployment Rate (%)

22
UK Unemployment Rate (%)

20
7
18
6
16

5
14

4 12
2006 2008 2010 2012 2014

Page 2 Practice exam paper - OCR

DebtAS Economics
interest (Macro) Paper A
- 36 billion
Other (including EU transactions) - 48 billion
 Which of the following statements can be correctly inferred from the chart above?
A. The youth unemployment rate has been lower than the overall unemployment rate throughout the
period shown.
UK Unemployment rate UK Youth unemployment rate
B. The overall unemployment rate peaked in late 2011.
C. 9 Unemployed youths make up the majority of the UKs unemployed population. 24

D. The youth unemployment rate was lowest in 2005 when it was just above 4%.

UK Youth Unemployment Rate (%)

22
UK Unemployment Rate (%)

20
5. 7
Study the charts below, which summarise the UK governments fiscal position in 2015/2016.
18

6
Which of the following statements is correct?
16
A. The UK government ran a budget deficit of 72bn in 2015/2016
5
B. The UK government had a balanced budget in 2015/2016 14
C. The UK government ran a budget surplus of 72bn in 2015/2016
4 12
D. The2006
size of the budget
2008 deficit increased
2010 in 2015/2016
2012 2014

Figure 1: Public sector spending 2015-16

Debt interest - 36 billion

Other (including EU transactions) - 48 billion
Social protection - 231 billion
Pulblic order and safety - 34 billion

Housing and environment - 28 billion

Industry, agriculture and
employment - 24 billion

Defence - 45 billion

Personal social services - 30 billion

Education - 99 billion

Transport - 28 billion
Health - 141 billion

Figure 2: Public sector receipts 2015-16

Other (non-taxes) - 44 billion

Other (taxes) - 65 billion Income tax - 170 billion

Council tax - 28 billion

Business rates - 28 billion

VAT- 133 billion National insurance

contributions - 115 billion

Corporation tax- 42 billion Excise duties- 47 billion

Practice exam paper - OCR AS Economics (Macro) Paper A Page 3

 6. Which of the following policy combinations is most likely to cause economic growth?

A A fall in the rate of VAT An increase in the base rate of interest

B An appreciation of the exchange rate A cut in corporation tax
C Increased spending on transport infrastructure A depreciation of the exchange rate
D Further quantitative easing An increase in the rate of income tax

7. The table below shows the UKs real GDP for recent years.

Year 2008 2009 2010 2011 2012 2013 2014

GDP (m) 1 659 039 1 589 493 1 613 974 1 645 808 1 665 213 1 701 180 1 751 198
Index num- - 98.48 100.00 101.97 103.17 105.40 -
ber (2010 =
100)

The index numbers missing from the table for 2008 and 2014 are:

A. 2008 = 104.38 and 2014 = 102.94

B. 2008 = 102.72 and 2014 = 107.84
C. 2008 = 102.79 and 2014 = 108.50
D. 2008 = 104.19 and 2014 = 102.86

8. Which of the following is regarded as an injection into the circular flow of income?
A. Savings
B. Investment
C. Taxation
D. Imports

9. Which of the following identities is correct?

A. Marginal propensity to withdraw = marginal propensity to save + marginal propensity to tax +
marginal propensity to import
B. Multiplier = marginal propensity to withdraw marginal propensity to consume
C. Marginal propensity to consume = marginal propensity to withdraw 1
D. Marginal propensity to save = 1 marginal propensity to withdraw

10. Which of the following classifications of tax in the UK is true?

Regressive Progressive Indirect Direct

A Income Tax Yes No No Yes
B Corporation Tax No Yes No Yes
C Petrol excise duty Yes No No Yes
D - VAT No Yes Yes No

Page 4 Practice exam paper - OCR AS Economics (Macro) Paper A

11. A decrease in the rate of interest in an economy is most likely to result in:
A. An increase in the level of GDP and a rise in employment
B. A decrease in the level of GDP and a rise in unemployment
C. An increase in the average price level and a decrease in employment
D. A decrease in the average price level and a decrease in the level of GDP

12. The table below shows the Consumer Price Index (CPI) for the UK from Q3 2012 to
Q3 2015 (2005 = 100)
2012 Q3 123
2012 Q4 124.5
2013 Q1 125.1
2013 Q2 126
2013 Q3 126.4
2013 Q4 127.1
2014 Q1 127.2
2014 Q2 128.1
2014 Q3 128.2
2014 Q4 128.3
2015 Q1 127.4
2015 Q2 128.1
2015 Q3 128.2

Which of the following can be correctly inferred from the table above?
A. Prices in Q3 2015 were 5.2% higher than in Q3 2012
B. There was deflation in Q1 2015
C. Inflation was most rapid in Q3 2015
D. There was disinflation between Q1 2014 and Q2 2014

13. Which of the following supply-side policies is most likely to cause aggregate supply to increase?
A. An increase in the progressivity of income tax
B. A reduction in the immigration quota
C. Raising the National Minimum Wage
D. Tax reductions to firms carrying out research and development

14. A devaluation of the currency is most likely to cause a reduction in the size of the trade deficit if:
A. The combined price elasticity of demand for exports and imports is greater than 1
B. The income elasticity of demand for exports is high and positive
C. The combined price elasticity of demand for exports and imports is elastic
D. The cross elasticity of demand between exports and imports is negative

Practice exam paper - OCR AS Economics (Macro) Paper A Page 5

 15. An increase in the rate of VAT combined with an increase in house prices is likely to result in a move
to which of the following macroeconomic equilibrium points, from the initial equilibrium PY?

AS1
AS2
AS
Price level

D
B
C
P
A
AD1
AD
AD2

Y Real GDP

6
Percent

-1
Sept 2005 Sept 2007 Sept 2009 Sept 2011 Sept 2013 Sept 2015
Page 6 Practice exam paper - OCR AS Economics (Macro) Paper A
 AS1
AS2
AS

Price level
Section B D
ANSWER ALL QUESTIONS IN THIS SECTION
B
C
P
A
Inflation, unemployment and living standards
AD
AD1 in the UK
AD2

In October 2015 the Office for National Statistics (ONS) reported

Y that the prices households pay for the goods and
Real GDP
services they buy were very slightly lower than a year before. The Consumer Prices Index (CPI) fell by 0.1% in the
year to September 2015. A smaller than usual rise in clothing prices following the summer sales period, plus falls in
the prices of petrol and diesel were the main contributors to the drop in inflation.

Throughout 2015, the rate of inflation had been low, varying between a positive 0.3% and negative 0.1%. Inflation
had also been comparatively stable; the rate of inflation ranged between 0.5% and 1.9% in 2014. During the
financial crisis in 2008, the rate of inflation ranged between 2.2% and 5.8%.

6
Percent

0
Costs and benefits

-1
Sept 2005 Sept 2007 Sept 2009 Sept 2011 Sept 2013 Sept 2015

Of course, the rate of inflation faced by individual households will vary depending on what they spend their money
on. For example, rental prices (including social and council rents) increased by 3.0% in the year to September 2015.
Conversely, food prices fell by 2.5% in the wake of continued supermarket price wars. This means that prices in the
sector fell for the 15th month in a row. Meanwhile, prices of motor fuels fell by 14.9% and diesel prices at 110.2p
per litre were at their lowest in close to six years.

Practice exam paper - OCR AS Economics (Macro) Paper A Page 7

 On the same day, the ONS reported on the Labour Force Survey data for June to August 2015. There were
31.12 million people in work, 140,000 more than for March to May 2015 and 359,000 more than for a year earlier.
22.77 million people were working full-time and 8.35 million people working part-time. There were 1.77 million
unemployed people, 79,000 fewer than for March to May 2015 and 198,000 fewer than for a year earlier. The
unemployment rate fell to 5.4%, lower than for March to May 2015 (5.6%) and for a year earlier (6.0%), and the
lowest rate since March to May 2008. Comparing June to August 2015 with a year earlier, pay for employees in
Great Britain increased by 2.8%.

One implication of the negative CPI rate is that most benefits would be frozen from April 2016. The annual uprating
of some benefits, public sector pensions, and the state second pension, is linked to the September CPI rate,
meaning that millions of people were unlikely to see any rise in these benefits. In addition, the government had
already announced a freeze for most working age benefits, such as Job Seekers Allowance, Employment and
Support Allowance, some types of Housing Benefit, and Child Benefit. The state pension, however, is protected
and is guaranteed to rise by at least 2.5%.

On the other hand, the government had also announced that the National Minimum Wage was to be increased for
workers over the age of 25 to 7.20 an hour from April 2016, with the intention of raising it by stages to 60 per cent
of median earnings in 2020 assumed by the Office for Budget Responsibility to be a figure of 9.35. Businesses
employing staff on the minimum wage, such as hotels, coffee bars and care homes, expressed concern about the
impact this would have the number of staff that they could afford to employ.

16 (a) Throughout 2015, the rate of inflation had been low (line 6). What is the meaning of inflation? [1 mark]

(b) Assuming that pay for employees remains at the same rate in September 2015 as a month earlier,
calculate the real rate of inflation in September 2015. [2 marks]

(c) (i) Using information from the case study, explain why weighting would be used to calculate the
Consumer Price Index. [2 marks]
(c) (ii) Using fig. 1, state why the Governor of the Bank of England would be required to write an open letter to
the Chancellor of the Exchequer in September 2011 and in September 2015. [2 marks]

(d) (i) Using information from the case study, distinguish between the Labour Force Survey and the
Claimant Count measures of unemployment. [2 marks]
(d) (ii) Calculate the percentage change in the number of people employed in the period June to August 2015
compared with a year earlier. [2 marks]

(e) Show using a diagram, how the freezing of benefits paid by the government might be expected to impact
Aggregate Demand in the UK. [4 marks]

(f)* Evaluate the extent to which the introduction of the new higher National Minimum Wage of 7.20 an hour
for employees over the age of 25 might affect employment in hotels, coffee bars and care homes.
[10 marks]

Page 8 Practice exam paper - OCR AS Economics (Macro) Paper A

Section C
ANSWER EITHER QUESTION 17 OR QUESTION 18

17* Comparing June to August 2015 with a year earlier, pay for employees in Great Britain increased
by 2.8%.

Evaluate, with the aid of an appropriate diagram(s), whether such rise in average pay is likely to lead the
Monetary Policy Committee of the Bank of England to raise the Base Rate. [20 marks]

OR

18* Following the General Election in May 2015, the Chancellor of the Exchequer George Osborne
set an objective of binding future governments to maintaining a budget surplus when the
economy is growing.

Evaluate, with the aid of an appropriate diagram(s), the extent to which such a policy would ensure that
macroeconomic objectives could be achieved. [20 marks])

Practice exam paper - OCR AS Economics (Macro) Paper A Page 9

Mark scheme

Answers
1. C 6. C 11. A
2. D 7. C 12. B
3. D 8. B 13. D
4. B 9. A 14. C
5. A 10. B 15. D

Page 10 Practice exam paper - OCR AS Economics (Macro) Paper A

16.

Answer Marks Guidance
(a) Inflation means a sustained increase in the cost of living 1 Accept only a first answer
or the general price level leading to a fall in the purchasing (AO1 x 1)
power of money
(b) Average regular weekly pay in August 2015 = 463 2 Up to two marks:
Annual increase to August 2015 = 2.8% (AO1 x 1 Two marks for correct answer 450.39
Average regular weekly pay in August 2014 = (463 ) x 100 AO2 x 1) One mark if symbol is omitted.
100/102.8 Where candidates have used the
= 450.39 correct formula OFR applies one
mark for formula.

(c) i Weighting reflects shifts in the spending patterns of 2 Up to two marks:

households in the British economy as measured by the (AO1 x 1 One mark for understanding of the
Family Expenditure Survey (1 mark). For example the AO2 x1) role of weighting in calculating CPI
importance of spending on food and motor fuel, for which (AO1)
prices fell by 2.5% and 14.9%, would be given a high One mark for valid reference to price
weighting due to their importance in family budgets, and so rises or falls given in the text (AO2)
would have a more significant effect on CPI than prices of cut
flowers which are of less importance.
(c) ii The Governor of the Bank of England is required to write 2 Up to two marks:
an open letter to the Chancellor of the Exchequer if the CPI (AO1 x One mark for knowledge of the
inflation rate is outside the target of 2% with a tolerance of 1 AO2 inflation target and circumstances in
between 1 to 3%. (1mark). CPI was outside this target in x 1) which the letter is to be written (AO1)
September 2011 (5.1%) and in September 2015 (-0.1%) One mark for correct interpretation of
therefore the letter would be required (1 mark). data in Fig. 1 (AO2)

(d) i The Labour Force Survey counts those who are without 2 Up to two marks:
any kind of job including part time work but who have (AO1 One mark for understanding of each
looked for work in the past month and are able to start work x 2) term
immediately. The Claimant Count measure includes people
who claim the Job Seekers Allowance (JSA).
(d) ii Employment June-August 2015 = 31.12mn 2 Up to two marks:
Increase compared with June-August 2014 = 359,000 (AO2 Two marks for correct answer 1.17%
Number employed in June-August 2014 = (31.12mn x 2) (allow 1.167%)
0.359mn) = 30.761mn One mark if % symbol is omitted
Percentage increase Where candidates have used the
= (0.359) x 100 correct formula OFR applies one
30.761 mark for formula.
= 1.17%

Practice exam paper - OCR AS Economics (Macro) Paper A Page 11

 (e) Accept Real National Output instead of Real GDP 4 Up to four marks:
Candidate should indicate that Aggregate Demand will shift (AO1 x One mark for the correct labelling of
leftwards due to lower Consumption (not lower Government 2 AO2 the axes plus AD/AS.
Spending, as spending on benefits is a transfer payment). x 2) One mark for labelling the initial
Accept a rightward shift of Aggregate Demand if candidate equilibrium points.
indicates that this is due to more money being available One mark for a rightward shift in the
for other forms of government spending on state provided AD curve.
goods and services (ie not on benefits) One mark for the new equilibrium
points.

(f) Level 3 (7- 10 marks) 10 Evaluation of the extent to which the

Good knowledge and understanding of ways in which the (AO2 x higher NMW might affect employment

Price level
higher NMW might affect employment. 1 AO3 x might include:

Price level
4 AO4 The effect will dependAggregate
on thesupply
age profile
Strong analysis of ways in which the higher NMW might x 5) of employees in the industry
affect employment. A relevant and accurately labelled The
P* effect will depend on the price
P*

diagram(s) is provided and is linked to the analysis. elasticity

P 1
of demand for the goods or
services Aggregate demand
Good to Strong evaluation of ways in which the higher The possibility that employers will
Aggregate demand 1 cease

NMW might affect employment. Good evaluation would to employ

0 staff
Y over
Y* the age
1
of
Real GDP 25
be awarded in the lower portion of the band and strong

Price level
evaluation in the upper portion of the band. Analysis may include a diagram:
W

There is a well-developed line of reasoning which is clear and S = AC

P1

logically structured. The information presented is relevant and P*

substantiated. W2

W1

Level 2 (6-10 marks)

Good knowledge and understanding of ways in which the
higher NMW might affect employment. D

Q2 Q1 Q3 QL

Real GDP
Good analysis of ways in which the higher NMW might affect
employment. A relevant and accurately labelled diagram(s) is Analysis of the reasons the higher
provided and is linked to the analysis. NMW might affect employment might
Price level

include: Aggregate supply

Reasonable evaluation of ways in which the higher NMW Whether the employer can pass
might affect employment. on the
P
increased costs to the
1

consumer
P*

There is a line of reasoning presented with some structure. Why those industries in particular
Aggregate demand 1
The information presented is in the most-part relevant and might be affected Aggregate demand
supported by some evidence. Y* Y1 Real GDP P
Knowledge of how a higher wage P

rate might cause an excess supply

of labour, particularly in those
occupations such as the leisure
industry and care homes.

Page 12 Practice exam paper - OCR AS Economics (Macro) Paper A

 Level 1 (1-3 marks)
Reasonable knowledge and understanding of ways in which
the higher NMW might affect employment.
Limited or no analysis of ways in which the higher NMW
might affect employment.
Limited or no evaluation
The information is basic and communicated in an
unstructured way. The information is supported by limited
evidence and the relationship to the evidence may not be
clear.

0 marks no response or no response worthy of credit

17.

Answer Marks Guidance
(a) Level 4 (16-20 marks) 20 This question requires a discussion
Good knowledge and understanding of the likely impact of (AO1 x 3 of the different factors which may be
rising average pay and other factors on the level of inflation. AO2 x 4 considered by the Monetary Policy
AO3 x 6 Committee in deciding whether to
Strong analysis of the likely impact of rising average pay AO4 x 7 raise the Base Rate.
and other factors on the level of inflation. A relevant and Answers are likely to set out the
accurately labelled diagram is provided and is linked to the likely impact of rising average pay
analysis. on the level of inflation, and then
consider other factors which may be
Strong evaluation of the likely impact of rising average pay inflationary or deflationary. This should
and other factors on the level of inflation, and the monetary culminate in a reasoned judgement as
policy decisions which might result. to the likelihood of a decision to raise
Base Rate:
There is a well-developed line of reasoning which is clear and The decision may depend
logically structured. The information presented is relevant and upon estimates of the marginal
substantiated. propensity to consume and the
multiplier effect
The decision may depend upon the
level of inflation at the time
The decision may depend upon
the strength of other inflationary/
deflationary factors
The decision may depend upon
expectations for those factors for
the next 12-18 months
The decision may depend upon an
assessment of spare capacity in the
economy

Practice exam paper - OCR AS Economics (Macro) Paper A Page 13

 Aggregate supply

Pric
P*
P*
P1

Aggregate demand

Aggregate demand 1

0 Y1 Y* Real GDP

Price level
Answer Marks Guidance
The decision may depend upon

W
P1
trends in business confidence
S = AC and P*
prospects for counter-inflationary
investment
W2

The decision depends upon

W1

whether the MPC considers the rise

in average pay to be a short-run or
D
a long-run factor
Q2 Q1 Q3 QL
The relative significance of the

Real GDP
Level 3 (11-15 mark) various factors under consideration Pe

Good knowledge and understanding of the likely impact of

Price level
rising average pay and other factors on the level of inflation.
Aggregate supply

Good analysis of the likely impact of rising average pay and

other factors on the level of inflation. A relevant diagram is P1

Price level
provided and is linked to the analysis. P*

Aggregate demand 1

Good evaluation of the likely impact of rising average pay and Aggregate demand

other factors on the level of inflation, and the monetary policy Y* Y1 Real GDP P1

decisions which might result. P*

There is a line of reasoning presented with some structure. Analysis which examines other
The information presented is in the most-part relevant and factors which may affect aggregate
supported by some evidence. supply in the short run (such as
wage costs and import prices) and/
or long run aggregate supply (such
Level 2 (6-10 marks) as rising confidence resulting in more
Reasonable knowledge and understanding of the likely investment in capacity) would require
impact of rising average pay and other factors on the level of use of diagrams showing a rightward
inflation. shift of aggregate supply, with or
without an accompanying shift of
Reasonable analysis of the likely impact of rising average pay aggregate demand:
and other factors on the level of inflation. A relevant diagram
is provided, which is less than perfect.
Price level

LRAS LRAS1
Price level

Aggregate supply
Reasonable evaluation of the likely impact of rising average
pay and other factors on the level of inflation, but without a
judgement being made. P*
P* AD AD1
P1

The information has some relevance and is presented with

limited structure. The information is supported by limited
Aggregate demand

Aggregate demand 1 Y* Y1
evidence. Real GDP

0 Y1 Y* Real GDP
Price level

AS
AS1
W

P1
S = AC
P*

W2 AD
Page 14 Practice exam paper - OCR AS Economics (Macro) Paper A
W1
Y* Y1 Real GDP
 Answer Marks Guidance
Level 1 (1-5 marks)
Limited knowledge and understanding of the likely impact of

Price level

Price level
LRAS
rising average pay and other factors on the level of inflation.
LRAS1
LRAS1 LRAS
Aggregate supply

Limited or no analysis of the likely impact of rising average

P
pay and other factors on the level of inflation.
1

P* Mark p
P* AD diagra
AD1 LRAS a
AD
are rev
Limited or no evaluation. Aggregate demand 1
The do
Aggregate demand tion of
to whe
Y* Y1 Real GDP Y1 Y*
In the
Y* The
Y1 information is basic and communicated in an
Real GDP
Real GDP AS and
leave P
unstructured way. The information is supported byLRAS
limited
Price level

In the

Price level
evidence and the relationship to the evidence may not be AS1
box an
PPC
AS
clear.
AS1
AS

P*
P1
0 marks no response or no response worthy of credit.
AD AD1 P*

Y* Y1 Real GDP

AD
AD

Y1 Y* Real GDP
Y* Y1 Real GDP
Current
account
surplus Capital goods

MarkX1in the second diagram of these

two, please reverse P* and P1
Recovery Boom
Time X2

For an application of knowledge and

Trend
Peak

Current understanding of the likely impact

account
deficit of rising average pay on the level of
Trough

inflation
Contraction Expansion Y2 Y1
Consumer goods
Time
Price
Candidates will demonstrate
Level
knowledge and understanding of
Price level

AS1 AS2

P1
how rising average pay might cause
Aggregate supply

P2
demand pull inflation, and raise
the level of Real GDP. They may
P1
AD also demonstrate knowledge and
P*
understanding of other factors which
Aggregate demand 1 Y1 Y2 Real GDP the MPC would take into account,
Aggregate demand
such as spare capacity, employment
Y* Y1 Real GDP
levels, consumer and business
Quantity of cars
confidence, retail sales, export
competitiveness, import prices,
exchange rates, macroeconomic
performance in major trading partners

Practice exam paper - OCR AS Economics (Macro) Paper A Page 15

 18.

Answer Marks Guidance
Level 4 (16-20 marks) 20 This question requires a discussion
Good knowledge and understanding of the effect of (AO1 x 3 of government budgets and
maintaining a government budget surplus when the economy AO2 x 4 macroeconomic objectives, in the
is growing, and of macroeconomic objectives. AO3 x 6 context of the economic cycle.
AO4 x 7 Answers are likely to set out the
Strong analysis of the effect of maintaining a government reasons for the objective of a running
budget surplus when the economy is growing, and of a budget surplus when the economy
macroeconomic objectives. A relevant and accurately labelled is growing, demonstrating awareness
diagram is provided and is linked to the analysis. of the extent of UK government
debt and the debate over austerity
Strong evaluation of the effect of maintaining a government measures or government spending
budget surplus when the economy is growing, and the ability as a solution, and then consider the
to achieve macroeconomic objectives. impact of lower government spending
on various macroeonomic objectives
There is a well-developed line of reasoning which is clear and
logically structured. The information presented is relevant and Answers should evaluate the effect
substantiated. on macroeconomic objectives of
a budget surplus during periods
Level 3 (11-15 mark) of economic growth . This should
Good knowledge and understanding of the effect of culminate in a reasoned judgement as
maintaining a government budget surplus when the economy to effectiveness of such a policy:
is growing, and of macroeconomic objectives. The consequences of conflicts
between policy objectives
Good analysis of the effect of maintaining a government Comparison of the moderating
budget surplus when the economy is growing, and of effects during periods of economic
macroeconomic objectives. A relevant diagram is provided growth, and the potential to
and is linked to the analysis. increase government spending
during a downturn
Good evaluation of the effect of maintaining a government The effectiveness of fiscal rules,
budget surplus when the economy is growing, and of the with possible reference to Gordon
ability to achieve macroeconomic objectives. Browns Golden Rules
The consequences of government
There is a line of reasoning presented with some structure. debt
The information presented is in the most-part relevant and The relative importance of ability to
supported by some evidence. absorb future economic shocks
Comparison of short run and long
run effects

Page 16 Practice exam paper - OCR AS Economics (Macro) Paper A

Answer Marks Guidance
Level 2 (6-10 marks) Analysis of the effect of maintaining a government
budget surplus when the economy is growing,
Reasonable knowledge and understanding of and of the ability to achieve macroeconomic
the effect of maintaining a government budget objectives may include:
surplus when the economy is growing, and of Explanation of the circular flow of income,
macroeconomic objectives. of government spending as an injection and
taxation as a withdrawal, and the impact of
Reasonable analysis of the effect of maintaining a running a budget surplus
government budget surplus when the economy Economic objectives:

Price level
LRAS LRAS1
is growing, and of macroeconomic objectives. A Balanced government budget as the purpose
Price level

relevant diagram is provided, which is less than

Aggregate supply
of the policy
perfect. Economic growth the role of lower
P*
government spending in moderating growth
Reasonable evaluation of the effect of maintaining in an upturn, but available
P* AD funds may raise
AD1
P 1

a government budget surplus when the economy growth in a downturn (may include reference to
is growing, and of macroeconomic objectives, but
Aggregate demand automatic stabilisers)
without a judgement being made. Aggregate demand 1 Unemployment Y*how lower Y Real growth
GDP may result 1

0 Y1 Y* Real GDP
in fewer jobs in an upturn but funds be used to
The information has some relevance and is protect jobs in a downturn
Price level

presented with limited structure. The information is Inflation how lowerAS growth in an upturn may
AS1
supported by limited evidence. moderate demand pull inflation
Balance of Payments how lower aggregate
W

P 1

S = AC demand may moderate demand for imports

P*
in an upturn; the effect of lower inflation on
W2 competitiveness of UK AD
exports
Living standards the effect of reduced ability
W1
Y* Y Real GDP
for government spending to be used to create
1
Curr
jobs and to support supply side growth in an acco
surp

upturn
D

Q2 Q1 Q3 QL Recovery Boom
Real GDP

Trend
Peak

Curr
acco
Price level

defic
Trough

Aggregate supply
Contraction Expansion

Time
P1
Mark on the above diagram please remove the
Price level

P*
dotted lines, and label the wavy line as Actual
Aggregate supply
Aggregate demand 1 GDP growth
Aggregate demand

Y* Y1 Real GDP P1

P*

Aggregate demand 1
Aggregate demand

Y* Y1 Real GDP

Quantity of cars

Practice exam paper - OCR AS Economics (Macro) Paper A Page 17

 D

Q2 Q1 Q3 QL Recovery Boom

Real GDP
Trend
Peak

Price level
Trough

Answer Aggregate supply

Marks Guidance
Level 1 (1-5 marks) The analysis may also require
Contraction use of diagrams
Expansion

Limited knowledge and understanding of the effect showing a rightward shift in aggregate demand:
Time

of maintaining
P1 a government budget surplus when

Price level
the economy
P* is growing, and of macroeconomic
objectives.
Aggregate supply
Aggregate demand 1
Aggregate demand
Limited or no analysis of the effect of maintaining a
government budgetY* surplus
Y1 when the economy
Real GDP is P1
growing, and of macroeconomic objectives. P*

Limited or no evaluation. Aggregate demand 1

Aggregate demand
The information is basic and communicated in an
Y* Y1 Real GDP
unstructured way. The information is supported
Quantity of cars
by limited evidence and the relationship to the
evidence may not be clear. For an application of knowledge and
understanding of the effect of maintaining a
0 marks no response or no response worthy of government budget surplus when the economy
credit. is growing, and of the ability to achieve
macroeconomic objectives
Candidates will demonstrate knowledge
and understanding of:
The circular flow of income
The economic cycle
Government budgets, government spending
and revenue, government borrowing in the UK
Macroeconomic objectives

Page 18 Practice exam paper - OCR AS Economics (Macro) Paper A