2023 Edexcel A-Level Economics Paper 2 Official Unofficial Mark Scheme

Question Question Answer Marks Debate

number

1a Illustrate on 4 inward AD shift and AS shift left due to

a diagram increased costs of production why AS as
the effect of well? I only shifted AD
an increase
in the base Just AD inwards right?
rate
Not LRAS actually, it's SRAS right? I think
it can be both

Would you have to show AD shifting left

for full marks? -surelyI don't think so
What else were you meant to do?
I think the main thing is shifting in AD… less
so AS
Or Ad left init aka fall in AD

Sras increase because:

Interest up, hot money up, exchange rate up,
imports cheaper, costs down, sras up
Not required
 What is the Decrease in demand pull inflation 1
1b most likely
effect of an
increase in
the base
rate?

2a Multiple B 1 It was B, unlucky

choice on 1%
employment
it says a decrease of 1.4% that means 1.4% of the
value.

Percentage POINT decrease of 1.4 is different to a

percentage decrease of 1.4%.
 So its B a percentage point decrease of 1 as 1.4%
decrease of 5.2 it isn't 3.8

2b Explain the The changes in unemployment are due to the trade 4 Definition
reasons for cycle. During a recession, there is more State reason
changes in unemployment. During times of growth there is less. Application aka unemployment figure from
unemployme The fall in unemployment shown in the figure can be above
nt with attributed to the relaxation of covid policies, causing Sum up
reference to an increase in economic growth. = 4 marks
the figure Can you talk about lockdown causing high
unemployment as firms laid off workers then after there's several reasons for unemployment
lockdown the unemployment decreased from after
the recession?
Can you not say incomes grow abroad ?
Is increased immigration a point?

3a Calculate £2129419.55 million 2 £2121456.555 or smth

the Think it was for the forecast in GDP
forecasted I remember a 419 in the number
GDP

3b What is the Multiplier formula: 1/1-MPC 4 I thought the value of the multiplier went
likely effect Lower consumption means lower multiplier up?
of a fall in GDP falls
MPC on Erm i put negative multiplier effect uh oh
GDP? GDP would increase but not by much because it is a
multiplier effect?
3c What is a Higher unemployment do to a fall in AD and lower 2
likely cost of demand for labour
falling GDP?

4a Calculate
USA debt:
GDP ratio
123.5%
or
123%
2
😭
How were you meant to work this one out

(debt/gdp) x 100

4b What is the Technological advances 1 Multiple choice with technical advances and
most likely consumption: what did people put in
potential consumption? I think it was about an
economic increase in economic growth???
growth? consumption???

Was POTENTIAL
so technology
Oh well

4c Most likely Buying more clothes (D) 1

example of
increase in
consumption

5a Explain the Budget deficit is where govt spending is greater than 2

link between tax revenues, meaning borrowing is likely to have
fiscal deficit occurred in order to finance the excess spending
over taxes.
 and national
debt

5b What is the Crowding out (A) 1 Was this question not about a reduction in
most likely government spending? If so I'm pretty sure
effect of Inequality the answer is inequality?! Yep I remember
increased that too
government
borrowing? I think the question was on the most likely
effect of increased national debt.
swear the
question was
about
government
spending
rather than
borrowing?

SECTION B

5 marker Free trade amongst regional countries e.g. the 5

What is meant African one.
by regional trade This increases regional trade
agreement? - Define RTA i.e., reduce protectionist barriers such
as tariffs
- Allows countries to specialise in goods they have
comparative advantage, increased exports and
economic growth
8marker Causes of Red tape and bureaucracy due to huge handling costs 8 Large land mass??? Costs a lot to travel
Transport costs high round a large geographical area?
transport Poor roads, increases chance of lorries breaking
costs down etc increasing costs

High handling costs in ports

Lack of roads, this means journeys are longer so

higher fuel costs and more time spent on journeys

Lack of information on available land. +1

Corruption??

Queuing means high wages for drivers as they spend

more time?

Quantity and quality of infrastructure

12 marker FDI, Improve geographical mobility of labour 12

Improving - More FDI- leads to greater employment etc
transport links leading to economic growth EVAL OF FDI: MNCS
on economic may take advantage of lack of environmental and
growth labour laws.
Increased intra-regional trade.
Comparative advantage-across the whole of Africa
growth
10 marker assess two KAA1 - more finance available for investment. 10
Debt relief? benefits of EV1 - some spending may take a long time to see
debt relief effects, like education.
for the
Angolan KAA2 - appreciation of the Kwanza due to less
economy. outflows (I think) from servicing debt. Might boost oil
revenue if neighbouring countries don’t have the
ability to divert. I think it causes appreciation?
EV2 - but that also causes FDI to be more relatively
expensive, reducing the amount that Chevron/Total
are able to import and disincentivising new oil firms
from cropping up.

Point 1: Increase in economics growth

Point 2: Increase in economic development as well

Could also talk about reduced absolute poverty +1

Ev - moral hazard and dependance
Eval corruption, gov spend on self interest instead

Government borrowing reduced to 8.6% (something

like that) of GDP - this could crowd in private
investment through reducing the interest rate on
loans due to there being less of a demand for money.
Could encourage investment etc. However, animal
spirits may be low in the economy due to instability of
the government needing to be relieved of their debt
to prevent severe financial issues - investment may
 be hindered and firms will likely hold onto excess
profits.
Eval- MORAL HAZARD could create
overdependence and encourage risk taking
behaviours. More relief may make lending countries
reluctant in the future as the debt is relieved rather
than paid back. Uneven distribution of debt relief on
government and higher-income classes rather than
the lower-incomes as over 17 million still in absolute
poverty.

Improve SOLs

15 marker Encourage - Free floating exchange rate, attracting FDI 15

Market based FDI - due to less likelihood of poor management of
policies to reduce exchange rates.- Increased
improve corporation employment-income- better living standards
development tax. Pretty as depreciation improves export
sure these competitiveness
can be two APPLICATION: Angola’s currency depreciated at
separate first which may reduce FDI inflows as imports are
points if you more expensive but cheaper exports so export price
justify it competitiveness.
differently. - -Trade liberalisation- lower price for
Oh I think I consumer, export-led growth
said smth - Privatisation-leads to shares being owned
like by public, allowing income to be generated for
decreasing them etc- however primary product
 corp tax will dependency on oil exports could be bad, link
encourage to dutch disease as eval
fdi as - Ii said deregulation leads to lower costs of
investors production which may shift sras out and as a
will see result economic growth occurs- you had to
higher rate link it to development not economic growth
of return - Microfinance schemes
from - Promotion of tourism industry to attract
investment, MNC Hotel chains + FDI
which will
grow firms in Could you use lower income tax + abolish nmw?
angola,
creating jobs, Fiscal policy-reduce corp tax (market based)
leading to Invest more on capital, increase in level of edu of
development. workers and potentially have higher income higher
Definitely GNI so the HDI increase, development improve
valid as one! EVAL: Laffer curve, decrease tax revenue, less gov
But could spending on socially desirable things e.g. edu and
surely be healthcare, less hdi, less development
split. Reduce income….. similar COR
EVAL: I forgot, maybe Time
lag/corruption/confidence level/crowding
out/depends on the

7 KAA1: You could have said expansionary monetary/fiscal 25

INCREASING devalue policy right??? As expansionary monetary by
COMPETITIV through reducing interest rates will devalues the exchange
ENESS OF manipulation, rate… → more competitive exports ? Yes
BRITISH exports Valid.
EXPORTS cheaper Hot money flows go out
abroad.
EV1: may A reduction in the interest rate (expansionary
rely on monetary policy) would mean that there is a flow out
imports, of hot money from domestic banks. Means that there
which means is a higher supply of the currency on foreign
this just exchange markets, diagram showing shift outwards
causes of supply. Will cause a depreciation of the currency
inflation, meaning exports become cheaper. This results in
offsetting more exports due to their lower price and makes
the gains - them more internationally competitive.
we likely
don’t meet Decreasing interest rate evaluation: depends on
the M-L J-curve and if Marshall-Lerner condition is met. In
condition. short run it is inelastic: no increase in demand for
Could talk cheaper exports meaning no change in international
about J competitiveness. Long run: more elastic as people
curve effect are more able to switch to the cheaper exports.
as well. Means that internationally competitive only in the
long run.
KAA2:
training Subsidies make exports more competitive due to the
schemes to decreased costs for firms, lower prices and results in
increase higher exports making it more internationally
labour competitive to other countries. Diagram: outwards
productivity. shift of SRAS- lower price level.
Other
supply side Subsidy evaluation: high opportunity cost involved
policies such means that other things like education are funded
as less meaning productivity decreases (lower human
infrastructur capital) and the subsidies will actually cause a
e. decrease in international competitiveness. Diagram:
EV2: more shift inwards of LRAS- higher price level.
government
spending Increase in spending on apprenticeships to improve
leading to output / quality/quantity of exported services/
lower bond goods which lowers the price of exports making it
prices, more competitive. (dk if this is right lol)…higher
higher yields skilled workers so greater human capital so lower
and interest unit labour costs so lower prices passed on to
rates - this consumers (so lower export prices)
may cause
appreciation I did 1) currency devaluation through lower interest
from hot rates, with a j curve, evaluated with marshall lerner,
money, time lags and how imports becoming more expensive
exports. could widen inequality in the uk (mentioned gini
Less coefficient)
competitive.
2) second point was very dubious talked about trade
Use of agreements and used nz/australia as
protectionis
m- infant
industry
argument -
 economies of
scale

8 - policies to 1. Incre 1. Contractionary fiscal policy to reduce AD

reduce Inflation asing and lower general price level.
other than inco Ev - Could lead to cost push inflation if firms
monetary policy me have higher costs and pass onto consumers
tax
Eval - 2. Subsidise industries in the economy to
transfer cause a fall in price (used example of farmers
pricing, less to reduce prices of food)
government Ev - High opportunity cost
revenue 2. Spending on education/tech - supply side
2. Rem policy.
oval Ev: time lags. Is this ok ??????
of
tariff
s
Contraction
of domestic
supply
Expansion of
domestic
demand
Increases
number of
imports
Increases
withdrawals
Decreasing
AD
Eval: laffer
curve

Supply side
policies-
increase
government
spending on
transport
infrastructur
e e.g. HS2,
to increase
labour supply
Increase
government
spending on
education to
make
workers
more
productive
and lower
costs
Eval:
crowding
out, time lag

AUSTERIT
Y CUTS?

Could you
possibly say
subsidising
the cost of
energy for
firms /
producers
and also food
since they
are two key
drivers in
the current
inflation rate
- food
inflation is at
like 19% and
energy crisis
is obviously a
supply side
issue that
fiscal policy
may not help.
Counter it
by saying
that UK
already has a
high national
debt of
100% of
GDP and
this year
alone will
spent
£116bn on
servicing
this debt so
the
government
may not
want to
further
worsen the
budget
deficit so
that they can
prevent the
accumulation
of even large
 national
debts????

Question number Question Answer

SECTION B
5 marker Free trade amongst regional countries eg the
what is meant by regional trade african one.
agreement? This increases regional trade
- Define RTA i.e., reduce protectionist barriers
such as tariffs
- Allows countries to specialise in goods they have
comparative advantage, increased exports and
economic growth

8marker Causes of high transport costs Red tape and bureaucracy due to huge handling
Transport costs costs

Poor roads, increases chance of lorries breaking

down etc increasing costs

High handling costs in ports

Lack of information on available land. +1

Corruption??

Quantity and quality of infrastructure

12 marker FDI, Improve geographical mobility of labour

Improving transport links - More FDI- leads to greater employment etc
leading to economic growth
10 marker assess two benefits of debt KAA1 - more finance available for investment.
Debt relief? relief for the Angolan economy. EV1 - some spending may take a long time to see
effects, like education.

KAA2 - appreciation of the Kwanza due to less

outflows (I think) from servicing debt. Might boost
oil revenue if neighbouring countries don’t have the
ability to divert. I think it causes appreciation?
EV2 - but that also causes FDI to be more
relatively expensive, reducing the amount that
Chevron/Total are able to import and
disincentivising new oil firms from cropping up.

Could also talk about reduced absolute poverty

Government borrowing reduced to 8.6%

(something like that) of GDP - this could crowd in
private investment through reducing the interest
rate on loans due to there being less of a demand
for money. Could encourage investment etc.
However, animal spirits may be low in the economy
due to instability of the government needing to be
relieved of their debt to prevent severe financial
issues - investment may be hindered and firms will
likely hold onto excess profits.
 Eval- MORAL HAZARD could create
overdependence and encourage risk taking
behaviours

15 marker Encourage FDI - reduce - Free floating exchange rate, attracting

Market based policies corporation tax. Pretty sure FDI’s due to less likelihood of poor
these can be two seperate management of exchange rates.- Increased
points if you justify it employment-income- better living
differently. standards as depreciation improves export
Oh i think i said smth like competitiveness
decrreasing corp tax will - -Trade liberalisation- lower price for
encourage fdi as investors will consumer, export-led growth
see higher rate of return from - Privatisation-leads to shares being
investment, which will grow owned by public, allowing income to be
firms in angola, creating jobs, generated for them etc- however primary
leading to development. product dependency on oil exports could be
Definitely valid as one! But bad, link to dutch disease as eval
could surely be split. - Ii said deregulation leads to lower costs of
production which may shift sras out and as
a result economic growth occurs

7 INCREASING KAA1: devalue through You could have said expansionary monetary/fiscal
COMPETITIVENESS OF manipulation, exports cheaper policy right??? As expansionary monetary by
BRITISH EXPORTS abroad. reducing interest rates will devalue the exchange
EV1: may rely on imports, which rate… → more competitive imports?? Yes
means this just causes inflation, Valid.
offsetting the gains - we likely Hot money flows go out
don’t meet the M-L condition.
 Could talk about J curve effect Yes ofc
as well.

KAA2: training schemes to

increase labour productivity.
Other supply side policies such
as infrastructure.
EV2: more government
spending leading to lower bond
prices, higher yields and
interest rates - this may cause
appreciation from hot money,
exports. Less competitive.

8 DECREASING 3. Increasing income tax 3. Contractionary fiscal policy to reduce AD

INFLATION Eval - transfer pricing, less and lower general price level.
(Non Monetary policy) government revenue Ev - Could lead to cost push inflation if
4. Removal of tariffs firms have higher costs and pass onto
Contraction of domestic supply consumers
Expansion of domestic demand
Increases number of imports 2. Subsidise industries in the economy to
Increases withdrawals cause a fall in price (used example of
Decreasing AD farmers to reduce prices of food)
Eval: laffer curve Ev - High opportunity cost

Supply side policies- increase

government spending on
transport infrastructure e.g.
HS2, to increase labour supply
Increase government spending
on education to make workers
more productive and lower
costs
Eval: crowding out, time lag

AUSTERITY CUTS?

Could you possibly say

subsidising the cost of energy
for firms / producers and also
food since they are two key
drivers in the current inflation
rate - food inflation is at like
19% and energy crisis is
obviously a supply side issue
that fiscal policy may not help.
Counter it by saying that UK
already has a high national debt
of 100% of GDP and this year
alone will spent £116bn on
servicing this debt so the
government may not want to
further worsen the budget
deficit so that they can prevent
the accumulation of even large
national debts????