Oxford Cambridge and RSA

Monday 22 November 2021 – Afternoon

GCSE (9–1) Economics
J205/02 National and International Economics
Time allowed: 1 hour 30 minutes

You can use:

* 8 9 9 0 8 9 3 4 3 0 *

• a scientific or graphical calculator

• an HB pencil

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Centre number Candidate number

First name(s)

Last name

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.

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 20 pages.

ADVICE
• Read each question carefully before you start your answer.

© OCR 2021 [603/0143/0] OCR is an exempt Charity

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SECTION A

Answer all the questions in this section.

Write your answer for each question in the box provided.

1 The best way for a government to quickly increase economic growth is to

A boost private investment

B increase state spending on education
C raise corporation taxes
D sign a free trade agreement

Your answer [1]

2 Unemployment as a result of a long-term change in technology is called

A cyclical unemployment
B frictional unemployment
C seasonal unemployment
D structural unemployment

Your answer [1]

3 Plumrith has a population of 1000 of whom 800 people are in the labour force and 200 people are
unemployed. The unemployment rate is:

A 20%
B 25%
C 60%
D 80%

Your answer [1]

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4 The benefits of international trade are only fully achieved if there is

A a constant exchange rate

B free trade
C globalisation
D no opportunity cost

Your answer [1]

5 An increase in the level of unemployment benefit is most likely to

A increase labour market flexibility

B increase the quantity of labour supplied
C reduce the quantity of labour supplied
D stabilise the level of demand for goods and services

Your answer [1]

6 Which of the following is the most likely cost to central government of a high level of unemployment?

A Encouraging the unemployed to move

B Higher taxes for those in work
C Increased spending on unemployment-related benefits
D Lower living standards for the workforce

Your answer [1]

7 Government spending and taxation policy is known as

A financial policy
B fiscal policy
C monetary policy
D supply-side policy

Your answer [1]

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8 Under which of the following circumstances would it be best to be a lender?

A The nominal rate of interest is 0 percent and the inflation rate is 0 percent
B The nominal rate of interest is 2 percent and the inflation rate is 5 percent
C The nominal rate of interest is 5 percent and the inflation rate is 1 percent
D The nominal rate of interest is 7 percent and the inflation rate is 4 percent

Your answer [1]

9 Which of the following is an example of supply-side policy?

A Lowering the rate of price rises

B National defence expenditure
C Raising interest rates
D Reducing direct taxes on workers

Your answer [1]

10 Which of the following will cause a country’s exchange rate to fall? Increased

A balance of payments surplus

B demand for its exports
C demand for its imports
D rate of interest

Your answer [1]

11 Which of the following is normally part of a country’s GDP?

A Domestic services performed within a family

B Household savings
C Interest rates
D Investment spending by firms

Your answer [1]

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12 Data is often presented in terms of nominal or real figures. The difference between them takes
into account

A direct taxes
B the rate of inflation
C the rate of interest
D wider supply-side policy

Your answer [1]

13 How does the consumer price index measure the rate of inflation?

A By using changes in the rate of growth of the money supply

B By using the increase in the annual GDP per capita figures
C Through a process of weighing a range of goods and services
D Through a survey of prices in a typical basket of goods and services

Your answer [1]

14 James and Jane are returning from a holiday in Slovenia and want to convert their euros (€) into
UK pounds (£). If the value of the UK pound in terms of the euro is £1 = €1.15, how many pounds
will they get if they exchange €300?

A £260.87
B £298.65
C £302.94
D £345.00

Your answer [1]

15 The Balance of Payments on the current account shows the balance of receipts and payments of

A a country’s international banks

B a typical household
C foreign exchange by a country
D the government

Your answer [1]

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16 Which of the following is likely to be the greatest benefit of globalisation to consumers in less
developed countries?

A A better infrastructure
B A wider range of resources
C Increased migration opportunities
D Increased use of technology

Your answer [1]

17 Monetary policy is most likely to affect

A real output and indirect taxes

B the price level and indirect taxes
C the price level and real output
D the price level but not real output

Your answer [1]

18 The central bank decides to increase quantitative easing. The most likely effect on investment is
that it would

A decrease
B fall at first and then increase
C increase
D remain constant

Your answer [1]

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19 The table shows the rate of inflation for Country A for 2016–2020.

Year Inflation
rate %
2016 3.0

2017 2.0

2018 2.0

2019 1.5

2020 2.5

Which of the statements is correct? Prices

A fell from 2016 to 2019 and then increased

B rose only in 2020
C rose throughout the period shown
D were constant in 2017–2018

Your answer [1]

20 Which pair of events is most likely to happen as a result of a rise in the rate of interest?

A Asset prices fall and savings by households rise

B Borrowing by firms rises and savings by households fall
C Consumer prices rise and asset prices fall
D External value of the currency falls and borrowing rises

Your answer [1]

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SECTION B

Answer all the questions in this section.

21

Net trade (exports – imports)

Year
10.0
0.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
–10.0
–20.0
–30.0
–40.0
–50.0
Net trade –60.0
(£ billion) –70.0

–80.0
–90.0
–100.0
–110.0
–120.0
–130.0
–140.0

Goods and services Goods only

Trade is the largest item in the balance of payments on the current account. The chart shows the
UK’s trade deficits since 2009 as measured by exports minus imports for goods and services, and
for goods only. The UK’s exports of services are becoming an increasingly important part of its
overseas trade.

Globalisation has led to UK residents being able to enjoy a higher standard of living because they
can access a wide range of low-priced imported goods from rapidly growing economically less
developed countries. Workers in those countries are being employed in manufacturing goods for the
UK market. Equally, the UK provides a wide range of services to people in other countries.

Extract 1: UK Trade in the Current Account 2009–2018

(a) Give two examples of services that the UK exports.

Example 1 .................................................................................................................................

Example 2 .................................................................................................................................
[2]
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(b) Using the chart in Extract 1 on page 8, state in which year the deficit in net trade of goods
and services was at its:

1 Largest ..................................................................................................................................

2 Smallest ................................................................................................................................
[2]

(c) Using the information in Extract 1 on page 8, analyse why the deficit on trade in goods and
services is not as large as the deficit on trade in goods only.

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(d) (i) Explain one driving factor of globalisation.

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(ii) Explain one cost of globalisation on environmental sustainability in less developed

countries.

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(iii)* Evaluate whether globalisation is beneficial to workers in less developed countries that
are exporting to the UK market.

Use the information given in Extract 1 on page 8 and your own knowledge.

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22

2016 2017 2018

GDP per capita (US$) 7797 7859 8031

Botswana
carbon emissions (metric tons per capita) 2.86 3.35 3.19

GDP per capita (US$) 52 534 53 356 54 542

USA
carbon emissions (metric tons per capita) 15.56 15.81 16.14

GDP per capita (US$) 56 196 56 611 57 232

Sweden
carbon emissions (metric tons per capita) 4.54 4.55 4.47

GDP per capita is used to compare living standards or development levels between countries.
Economic growth over time can be measured by rising GDP per capita. Higher living standards that
result from economic growth often lead to increases in carbon emissions, because people travel
more by car and use more electricity.

Climate change has been identified as a negative externality that arises from the carbon emitted
as a result of energy production and consumption. Despite the associated opportunity costs, most
countries have pledged to reduce emissions. Governments and firms, therefore, are investing in
alternative renewable energy sources in order to reduce the burning of fossil fuels. Also, governments
are imposing taxes on petrol and on electricity production; the taxes provide an economic incentive
for firms and consumers to reduce their energy consumption.

Extract 2: Economic Growth and Carbon Emissions

(a) Explain what is meant by GDP per capita.

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(b) Using the table in Extract 2 calculate the difference in 2018 in GDP per capita in Sweden and
Botswana. Show your working.

Answer: .......................................................... [2]

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(c) Using Extract 2 on page 12, analyse the argument that as countries become more developed
with higher living standards their carbon emissions increase.

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(d) (i) Give two examples of additional costs households may have to pay as a result of policies
to reduce carbon emissions.

Example 1 .........................................................................................................................

Example 2 ..........................................................................................................................
[2]

(ii) Explain an opportunity cost of a government’s increased investment in renewable energy

sources.

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(iii)* Evaluate whether government policies to correct negative externalities would benefit
consumers.

Use the information given in Extract 2 on page 12 and your own knowledge.

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23

Government
Income share held by Income share held by spending on
richest 10% poorest 10% education per
(%) (%) secondary student
(% of GDP per capita)
Argentina 30.3 1.8 21.8

Finland 22.4 3.9 25.8

UK 25.4 2.9 23.1

USA 30.6 1.7 22.1

Income share is the percentage of income that goes to subgroups, ranked from the richest 10% of
the population to the poorest 10%. If income were distributed perfectly equally then all the figures in
the first two columns of the table would be 10 (%).

Income shares do not take account of differences in wealth, which includes savings and property
ownership. However, income that is generated by wealth does appear in the income share data.

Government spending on education is a supply-side policy which aims to increase GDP per capita
and improve equality of opportunities.

Extract 3: Data on Household Income Shares and Spending on Education in 2015

(a) Using the table in Extract 3, explain which of the four countries has the most equal income
distribution.

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(b) Apart from wages, state two other sources of income.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

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(c) Analyse the causes of differences in the distribution of income.

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(d) (i) Using the table in Extract 3 on page 15, explain the impact of government spending on
education in Argentina and Finland on their related income shares.

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(ii) Explain one way in which spending on education could improve a country’s GDP per
capita.

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(iii)* Evaluate the benefits of supply-side policies for the income distribution of an economy.

Use the information given in Extract 3 on page 15 and your own knowledge.

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END OF QUESTION PAPER

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ADDITIONAL ANSWER SPACE

If additional space is required, you should use the following lined page(s). The question number(s)
must be clearly shown in the margin(s).

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