Questions

Question 6 (c) In this question it was important that candidates understood the key relationship between the exchange rate and aggregate demand, via imports and exports. Many candidates explained this nice and clearly and, as long as they knew the economics correctly, this was a fairly straightforward question. (c) With reference to Extract A, explain the likely effect of a rise in the value of the pound on aggregate demandQuestion 6 (b) This question demonstrates very clearly the importance of candidates carefully reading the question and making sure they understand precisely what is being asked of them. Far too many candidates gave a very generic answer talking about issues like falling aggregate demand but failed to link their writing specifically to UK consumers. Also key with this question was understanding the concept of real income, bearing in mind this is with inflation already taken into account. Finally, this is also the first question on the exam paper that tests candidates' evaluation skills, and it is important that they are aware of what key words like 'assess' mean. (b) Assess the likely impact of falling real incomes on UK consumers.\fQuestion 6 (a) In this question the emphasis is on knowledge and application. Candidates should bear this in mind and focus specifically on what the question is asking them to do. Some candidates are losing precious time by suggesting reasons why real income has changed, which is not what this question is asking of them. 6 (a) With reference to Figure 1, explain the term 'real income'.5 In 2014 the Bank of England estimated the marginal propensity to consume of UK consumers to be 0.5. In 2014 the Chancellor of the Exchequer announced a $15 billion investment programme into UK road infrastructure. (Sources: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/ 2014/qb14q405.pdf and https://www.gov.uk/governmentews/ autumn-statement-2014-16-things-you-should-know) (a) Using the information above, calculate the total increase in national income, resulting from the $15 billion investment