Mark Scheme (Results)

Summer 2016

Pearson Edexcel GCE

in Economics (6EC02)
Paper 01 Managing the Economy
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Summer 2016
Publications Code 6EC02_01_1606_MS
All the material in this publication is copyright
© Pearson Education Ltd 2016
General Marking Guidance

 All candidates must receive the same treatment.

Examiners must mark the first candidate in exactly the
same way as they mark the last.
 Mark schemes should be applied positively.
Candidates must be rewarded for what they have shown
they can do rather than penalised for omissions.
 Examiners should mark according to the mark
scheme not according to their perception of where the
grade boundaries may lie.
 There is no ceiling on achievement. All marks on
the mark scheme should be used appropriately.
 All the marks on the mark scheme are designed
to be awarded. Examiners should always award full marks
if deserved, i.e. if the answer matches the mark scheme.
Examiners should also be prepared to award zero marks if
the candidate’s response is not worthy of credit according
to the mark scheme.
 Where some judgement is required, mark schemes
will provide the principles by which marks will be awarded
and exemplification may be limited.
 When examiners are in doubt regarding the
application of the mark scheme to a candidate’s response,
the team leader must be consulted.
 Crossed out work should be marked UNLESS the
candidate has replaced it with an alternative response.
Question Indicative Content Mark
Number
1 (a) (i) KAA 4 marks:
 Increase/rise in wages/income (1)
 adjusted for inflation (1)

2 marks for data reference - Only 1 mark if

no/inaccurate figures used from Figure 1
(4)

Question Indicative Content Mark

Number
1 (a) (ii) KAA 8 marks:

2 marks for data reference - Only 1 mark if

no/inaccurate figures used from Figure 1
Award 2 measures only. Max. 6 marks;
1 mark for solely identifying a relevant point
1 mark for limited development of this point
Up to 1 further mark for clear analysis of this point

For example:
 higher rates of inflation experienced
during this period
 high unemployment depressing the
wage growth
 a lack of demand in the economy:
could be due to recession, welfare
cuts, etc.
 lack of business confidence
 falling labour productivity
 high levels of immigration (can use
Figure 3/Extract 1) depressing wages
 increases in non-wage costs, such as
pensions and employers’ national
insurance contributions
 shift in labour market from well-paid
manufacturing jobs to the lower paid
service sector jobs that are flexible,
with temporary/zero hour contracts
 trade union bargaining power has
been hit by economic problems at
home and forces of globalisation (8)
Question Indicative Content Mark
Number
1 (b) KAA 8

1 mark for only an identification of a point, 1 mark for

identification and very brief explanation, further 1
marks for analysis/development of the point.

2 marks for reference to data – Only 1 mark if

no/inaccurate figures used.
Maximum 6/8 if no data reference.
Maximum 5/8 if no reference to employment and
unemployment

Effects for employment: up to 3 marks for 1 point

 Increased size of population means that
there is an increase in supply of labour,
thus reducing wage rate and increasing
demand for labour, so employment rises
 41% of people have immigrated for work
and this is likely to lead to an increase in
employment – these 228,000 immigrants
may fill those vacancies that cannot be filled
by indigenous workers
 Increased consumer spending from an
increased population means more jobs are
created
 Increased demand for public services
creating increased demand for public sector
workers

Effects for unemployment: up to 3 marks for 1 point

 Increased immigration means more people
looking for work so likely to increase
unemployment – 41% of immigrants
looking for work, hence could displace
current employees
 Surplus labour in the market, e.g. family
(15%), might attempt to join the labour
market but with inappropriate skills

Evaluation 4 marks (2+2 or 4):

 Magnitude: only 41% coming for work
 Magnitude of net immigration– 244,000 in
the year ending March 2014
 31% are for formal study so may only be
short-term migrants; also not sure they will
remain in the UK after study
 Different sectors of the economy may be
affected differently
 Growing UK economy can take on more
labour without increasing unemployment
 Evidence might not be accurate/reliable,
 Depends on the skills of the immigrants (12)
Level Mark Descriptor
Level 3 9-12 2 convincing reasons with at least one evaluative point
Level 2 5-8 2 convincing reasons with no connections, or 1 convincing
impact with some good analysis but no evaluative point; 1
or 2 less-convincing impacts with some evaluation
Level 1 1-4 Identification of relevant reasons with or without brief
evaluative keywords
Question Indicative Content Mark
Number
*1 (c) KAA 8
QWC i-iii
Up to 4 marks for the diagram: Diagram
demonstrating a leftward shift of AD:

correct shift of AD (1),

lines labelled (1),
axes labelled (1),
equilibria labelled (1)


Up to 2 marks for the analysis:

 AD=C + I + G + (X-M); widening deficit
means (X-M) is a negative value and so
AD will fall (1)
 Impact on price level and real output (1)
 Reference to the circular flow of income:
leakages are greater than injections (1)
 Reference to the multiplier effect causing
impact across economy (1)

2 marks for reference to data - Only 1 mark if

no/inaccurate figures used.
Maximum 6/8 if no data reference present

Evaluation 4 marks (2+2 or 4):

 depends on other factors (e.g. could be
offset by a change in consumption)
 other factors may be more significant
parts of aggregate demand
 exports have increased
 may be due to short-term shifts in
exchange rates
 consideration of magnitude
 consideration of time lags
 elasticity of the AS curve
 depends on the size of the multiplier

Quality of written communications will be

assessed in this question based on the
candidate’s ability:
 To present an argument and conclude on
the basis of that argument
 To organise information clearly and
coherently
 To use economic vocabulary appropriately
 To use grammar, spelling and punctuation
appropriately (12)
Level Mark Descriptor
Level 3 9-12 1 convincing impact with AD/AS diagram, with at least one
evaluative point
Level 2 5-8 1 convincing effect with evaluation but no/incorrect
diagram, or 1 convincing impact with diagram but no
evaluative point; less-convincing impact or diagram with
some evaluation
Level 1 1-4 Identification of relevant impacts with or without brief
evaluative keywords

Question Answer Mark

Number
1 (d) (i) Definition / explanation of balance of trade: e.g.
difference between value (1) of country’s imports
and exports (1) OR value of exports minus value
of imports of a country (2) OR imports – exports
(1)

Lack of demand in the Eurozone economy leads

onto lack of demand for UK exports (2) as large
percentage - 50% - of UK exports go to these
countries (2) so negative impact on UK balance
of trade/deficit increases (2) (6)

Question Indicative Content Mark

Number
1 (d) (ii) KAA 8 marks:
1 mark for solely identifying a relevant point
1 mark for limited development of this
up to 2 further marks for clear analysis of this
point

Award 2 reasons only. Do not double award.

For example:
 Increased demand for UK exports as
they are now relatively less expensive
for foreigners / exports become more
competitive
 Reduced demand for UK imports as they
are now relatively more expensive for
UK citizens / imports less competitive
 Increase in UK aggregate demand due to
increase in net exports
 Increase in imported / cost push inflation
pushing up UK inflation rate
 Increased employment in the UK due
to an increased demand for domestic
production and exports (8)
Question Indicative content Mark
Number
*1 (e) KAA 18 marks
QWC i-iii
Up to 6 marks:
 Identification of government policies as fiscal
or supply-side policy (2)
 Definition of employment rate OR data
reference to employment rate (2)
 Diagram showing AD shift and/or AS shift
consistent with analysis (4); axes labelled
(1), equilibria labelled (1), AD/AS lines
labelled (1), correct shift (1). No marks for
diagram if shift inconsistent with analysis.

Explanation of how the policies might help increase

employment: 12 marks (3 x 4 marks or 2 x 6
marks);
1 mark for only identification of a point, 2 marks
for identification and very brief explanation, up to
further 4 marks for analysis/development of the
point

 Investment in education and training to

provide a more skilled workforce through
increases in the level of human capital
 Reduction in minimum wage to encourage
more firms to increase employment levels
 Reduction in unemployment and associated
benefits to increase incentive to find work
 Grants/tax breaks to firms encourage
increases in employment
 Reduction in taxation to encourage firms to
expand or set up in UK, therefore increasing
employment
 Reduction in income tax creating a larger
incentive to work, increasing consumption
and therefore, employment
 Decreasing the power of trade unions will
help reduce real wage unemployment
 Improving geographical mobility of labour -
government providing tax breaks to firms
who set up in depressed areas/giving some
financial assistance to unemployed workers
who move to areas with high employment
 Government improving the labour market
flexibility by making it easier to hire and fire
workers may encourage more job creation
 Increase provision of free childcare
 Evaluation 12 marks (2 x 6 marks or 3 x 4 marks
or 6 + 4 + 2 marks)
 Time lag (e.g. education takes a long time to
have significant impact on productivity) and
implementation lags
 Government budget deficit and national debt
make it difficult to pay for large investments
or offer significant grants/tax breaks
 External factors beyond UK government’s
control, e.g. recession in Eurozone
 Magnitude of the policy change
 Conflicts with other UK economic objectives
 Conflicts between the policies
 Depends if there is spare capacity
 Creditworthiness of the UK government
 Discussion of effectiveness of individual
policies - this could be 3 separate points

Quality of written communications will be

assessed in this question based on the
candidate’s ability:
 To present an argument and conclude on the
basis of that argument
 To organise information clearly and
coherently
 To use economic vocabulary appropriately
 To use grammar, spelling and punctuation (30)
appropriately

Level Mark Descriptor

Level 4 25-30 2 or 3 convincing points with at least two evaluative points (an
evaluation points is worth up to a maximum of 6 marks
Level 3 19-24 2 or 3 convincing points with at least one evaluative point (mark cap
to 18 if no evaluation)
Level 2 7-18 2 or 3 convincing points with no evaluative point; 1 or 2 less-
convincing effects with some evaluation
Level 1 1-6 Identification of relevant points with or without brief evaluative
keywords
Question Answer Mark
Number
2 (a) (i) KAA: 4 marks

 An increase (1) in the total value of goods

and services produced in an economy/GDP
 adjusted for inflation (1)

2 marks for data reference - Only 1 mark if

no/inaccurate figures used from Figure 1
(4)

Question Indicative Content

Number Mark
2 (a) (ii) KAA 8

Award 2 advantages only

1 mark for solely identifying a relevant point
1 mark for limited development of this point
Up to 2 further marks for clear analysis of this
point

For example:
 HDI is a composite measure: broader
perspective on a country’s standard of
living, not solely a monetary basis for
comparison
 Easy to compare countries by rank: can
quickly see which countries performing
well and which are not
 Could be used to focus aid on countries
most in need
 Use of education and health could be
used as a measure of the success of
different government’s policies
 GDP rank minus HDI rank as a useful
measure of health and education
 Shift of AS curve outwards as a sign of
increased potential without increase in
costs: HDI rank sign of future welfare

Evaluation 4 marks (2+2 or 4):

 Reliability of the data: e.g. possibility of
some countries deliberately producing
misleading data; some countries lacking
an organised and independent statistics
authority
 Access to data for some countries: due
to lack of availability of data, especially
in less developed countries
 Less up-to-date data: more data to
collect and then collate, so this is much
more time-consuming than one single
piece of data such as GDP
 PPP values change quickly and are likely
to be inaccurate or misleading
 Still little sense of income distribution
and quality of life in this measure
 Difficult to measure human development
 Other measures, such as access to the
internet/mobile phones, might be better
 An indication of deprivation or poverty (12)
would increase the usefulness of HDI
Level Mark Descriptor
Level 3 9-12 2 convincing advantages with at least one evaluative point
Level 2 5-8 2 convincing advantages with no connections, or 1
convincing advantage with some good analysis but no
evaluative point; 1 or 2 less-convincing advantages with
some evaluation
Level 1 1-4 Identification of relevant advantages with or without brief
evaluative keywords

Question Indicative Content

Number Mark
2 (a) (iii) KAA 8 marks:

2 marks for data reference - Only 1 mark if

no/inaccurate figures used from Figure 2
Award 2 measures only. Max. 6 marks;
1 mark for solely identifying a relevant point
1 mark for limited development of this
Up to 1 further mark for clear analysis of this point

For example:
 Measures to increase GDP e.g.
reflationary fiscal policy
 Higher government spending on
benefits / social protection
 Higher government spending on
education e.g. building infrastructure,
such as schools
 Higher government spending on
healthcare e.g. building infrastructure,
such as hospitals
 Better access to education / healthcare,
e.g. providing incentives to children from
poor families in countries where there is
no state provision of education
 Improved information / more support for
jobseekers
 Reduction in regulation to promote
business investment
 Raising of the compulsory school leaving
age / increasing University enrolment
and entry levels (8)
Question Answer Mark
Number
2 (b) (i) 2 marks:
• Weights are attached to reflect relative
importance of items (1) in terms of
consumer spending/income (1)
OR weights defined as a proportion of
consumer spending/income spent on
particular goods and services (2)

KAA 4 - 1 mark per point

• Price survey
• Expenditure and Food Survey
• Basket of goods / 650 goods and services
• Contents of the basket revised annually
• Use of an index
• Base year (6)
• Price changes multiplied by weightings

Question Indicative Content Mark

Number
2 (b) (ii) KAA 8 marks:

1 mark for solely identifying a relevant point

1 mark for limited development of this
up to 2 further marks for clear analysis of this
point
Award 2 reasons only.

For example:
 Inflation above target
 Rapid wage growth
 Other cost-push factors
 Other demand-pull factors e.g. house
prices
 Consumer / business expectations of
future price rises
 Lack of spare capacity in the economy
 Economy growing at ‘unsustainable’ level
 Make imports cheaper by strengthening
the value of the sterling pound (attract
hot money flows) (8)

Question Indicative content Mark

Number
2 (b) (iii) KAA 8 marks

Up to 4 marks for identification and explanation of

each point. Award 2 points only.
1 mark for only identification of a point, 2 marks
for identification and brief explanation, further 2
marks for analysis/development of the point.
For example, it is desirable:
 Exports may increase and imports
may decrease, improving UK trade
balance and competitiveness
 May lead to higher real wages or less
erosion of fixed incomes, hence more
spending
 Could lower nominal interest rates
which may encourage borrowing
 Benefits of falling oil and commodity
prices for the economy

Evaluation 4 marks (2+2 or 4)

For example, it is not desirable:
 Expectation of falling prices in the
future discourages purchases today;
consumption and therefore AD falls
 This is a cycle that it can be very hard
for a country to get out of
 May lead to increased unemployment
 Increases real debt burden (could
relate to consumers, business, or
the government)

NB: Candidates may take reasons why a low

rate of inflation is desirable as KAA, and why
it’s not as evaluation or vice versa.
Other evaluation points include:
 Magnitude: Only 0.1% deflation
 Deflation mainly caused by cost-push
factors
Quality of written communications will be
assessed in this question based on the
candidate’s ability:
 To present an argument and conclude
on the basis of that argument
 To organise information clearly and
coherently
 To use economic vocabulary
appropriately
 To use grammar, spelling and
punctuation appropriately (12)
Level Mark Descriptor
Level 3 9-12 2 convincing reasons with at least one evaluative point
Level 2 5-8 2 convincing reasons with no connections, or 1 convincing
impact with some good analysis but no evaluative point; 1
or 2 less-convincing impacts with some evaluation
Level 1 1-4 Identification of relevant reasons with or without brief
evaluative keywords

Question Indicative content Mark

Number
*2 (c) KAA 18 marks
QWC i-iii
Up to 6 marks:
 Definition of Monetary Policy (2)
 Definition of the rate of inflation or data
reference to the rate of inflation (2)
 Diagram showing AD shift and/or AS shift
consistent with analysis (4); axes labelled
(1), equilibria labelled (1), AD/AS lines
labelled (1), correct shift (1). No marks for
diagram if shift inconsistent with analysis.

Explanation of how the monetary policy has been

responsible for controlling inflation:
12 marks (3 x 4 marks or 2 x 6 marks);
1 mark for only identification of a point, 2 marks
for identification and very brief explanation, up to
further 4 marks for analysis/development of the
point

 Explanation of transmission mechanism-

impact of changing interest rate on AD
and therefore inflation (could count as 3
separate points, e.g. on consumption,
investment, exchange rates and house
prices)
 Quantitative easing / changing money
supply to further impact the inflation rate
 Forward guidance?
 Successfully kept inflation reasonably
close to the target and within control
(Figure 3)
 Open, transparent and is operationally
independent from political interference
allowing it to focus on meeting inflation
target

Evaluation 12 marks (2 x 6 marks or 3 x 4 marks

or 6 + 4 + 2 marks)
 Cost-push factors are out of the Bank of
 England’s control, e.g. oil prices
 Times where inflation is out of tolerance/not
within target range (Figure 3)
 Reluctance of banks to pass on changes in
the base rate to their customers
 Banks seeking to improve their capital ratios
 Lack of confidence among consumers and/or
businesses
 MPC can only use interest rate and money
supply as instruments which may restrict it
from meeting the UK inflation target
 Conflicts with other UK economic objectives
 Time lags
 Depends if there is spare capacity

Quality of written communications will be

assessed in this question based on the
candidate’s ability:
 To present an argument and conclude on the
basis of that argument
 To organise information clearly and
coherently
 To use economic vocabulary appropriately
 To use grammar, spelling and punctuation (30)
appropriately

Level Mark Descriptor

Level 4 25-30 2 or 3 convincing points with at least two evaluative
points (an evaluation points is worth up to a maximum of
6 marks
Level 3 19-24 2 or 3 convincing points with at least one evaluative point
(mark cap to 18 if no evaluation)
Level 2 7-18 2 or 3 convincing points with no evaluative point; 1 or 2
less-convincing effects with some evaluation
Level 1 1-6 Identification of relevant points with or without brief
evaluative keywords
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