MODEL ANSWER For a long time, supermarkets and other commercial firms have understood the benefits of behavioural economic concepts such as choice architecture and framing. The public sector has been slow off the mark, but at last governments are now taking advantage of the opportunities provided by nudging. Explain how rules of thumb and irrationality can affect consumers’ demand for goods and services (15 marks)

MODEL ANSWER Extract B (lines 12-13) states ‘The Government last night released research suggesting a US-EU agreement sweeping away trade barriers would particularly benefit the automotive, financial and chemical sectors’. With the help of a diagram, explain the extent to which the removal of a tariff might affect the volume of imports into the UK. (9 marks)

MODEL ANSWER Extract E (lines 4-6) states ‘the UK may soon be growing at an annual rate of between 3 and 4% and the Bank could not be certain when it might need to tighten policy.’ With the help of a diagram, explain why interest rates may need to rise if growth rates increase (9 marks)

MODEL ANSWER Extract B (lines 7-8) states that increased openness of the UK economy has ‘weakened the usual link between the amount of spare capacity in an economy and inflationary pressure’. With the help of a diagram, explain why the level of spare capacity is usually inversely correlated with the amount of inflationary pressure in an economy. (9 marks)

MODEL ANSWER Extract E (lines 8 - 9) states that ‘the collapse in the oil price has had significant effects on the economy of Saudi Arabia‘. Using a diagram, explain the likely effect on growth, employment and inflation in Saudi Arabia of the recent collapse in the price of oil. (9 marks)

MODEL ANSWER 7. Extract E (lines 22–23) states that ‘The tendency for women to participate in low-productivity sectors is now a bigger factor in their low pay than discrimination’. With the help of a diagram, explain how the difference between the marginal revenue product of male and female workers might account for the lower average earnings of women. (9 marks)

MODEL ANSWER The economist Greg Mankiw has written that ‘society faces a trade-off between efficiency and equity. Efficiency means that society is getting the maximum benefits from its scarce resources. Equity means that those benefits are distributed fairly among society’s members. Often, when government policies are designed, these two goals conflict.’ Explain how a production possibility diagram can be used to illustrate some features of the fundamental economic problem (15 marks)

MODEL ANSWER Explain why a lack of competition is likely to lead to allocative and productive inefficiency in markets such as the market for energy (15 marks)

MODEL ANSWER Explain how the absence of property rights can worsen the environmental market failures of both pollution and the rapid depletion of natural resources (9)

MODEL ANSWER Explain how a monopsonistic public sector can lead to low pay for social care work (9 marks)

MODEL ANSWERS Questions: Using Extract A, calculate the total number of non-EU migrant workers employed in the UK in 2016. (2 marks) Explain how the data in Extract A shows that the number of EU migrant workers in the UK has increased faster than the number of non-EU migrant workers in the UK. (4 marks) Using the data in Extract D, calculate the percentage change in the price of oil from the lowest point in 2016 to the point at the end of the period. (2 marks) Using the data in Extract A, calculate to one decimal place, the percentage change in the total net trade balance in goods with the UK’s top five trade partners from February-April 2012 to February-April 2013. (2 marks) Explain how the data in Extract A shows that the UK is having more success in trading goods with the rest of the world than with Europe. (4 marks) If UK GDP in 2012 was $2375 billion, use the data in Extract D to calculate, to the nearest $billion, the difference in forecast UK GDP between IMF’s initial and revised growth forecasts (2 marks) Explain how the data in Extract D shows that the IMF has become less confident about growth rates (4 marks)

MODEL ANSWERS Questions: Using the data in Extract D (Figure 3), calculate the mean female labour force participation rate for the five countries listed. Give your answer to one decimal place. (2 marks) Explain how the data in Extract D (Figure 4) show that the degree of inequality between the pay of male and female workers is falling. (4 marks) Using the data in Extract D, calculate, to two decimal places, the percentage of world CO2 emissions generated by the UK. (2 marks) Explain how the data in Extract D show that the USA needs to reduce pollution more than other countries. (4 marks) Using the data in Extract D (Figure 3), calculate how much the median care worker earns for every pound earned by the median worker in the whole economy. Give your answer to the nearest penny. (2 marks) Explain how the data in Extract D (Figure 4) show that there is likely to be substantial upward pressure on the wages of care workers by 2041. (4 marks)

MODEL ANSWER Extract F (lines 14-17) states ‘Investment forecasts are being revised downward and on top of speculation of interest rate rises and criticism of the UK’s quantitative easing programme, the outlook is not looking as good as forecasts first indicated.’ Using the data in the extracts and your economic knowledge, evaluate the effectiveness of monetary policy in achieving macroeconomic stability in the UK. (25 marks)

MODEL ANSWER Extract C (lines 10-11) suggests that ‘Increased protectionism could be damaging as the UK is placing much of its hopes for export success on the growing Chinese market’. Using the data in the extracts and your economic knowledge, evaluate the view that the use of protectionism is inevitably damaging to economies. (25 marks)

MODEL ANSWER Evaluate the view that if markets can be made more contestable there is no need for further government intervention (25 marks)

MODEL ANSWER Extract C (line 15) states that due to globalisation, ‘for many workers in the West economic stagnation is actually now the new norm’. Using the data in the extracts and your economic knowledge, assess the view that globalisation has been entirely advantageous to the UK economy. (25 marks)

MODEL ANSWER Extract F (lines 19–20) notes that ‘The UK Government recognises the need to raise aspirations and attainment for girls’. Use the extracts and your knowledge of economics to evaluate the policies that the government might use to reduce the gender pay gap. (25 marks)

MODEL ANSWER Taking into account Extract D and the original evidence, do you support the view that more economic stimulus is necessary in the UK economy? Justify your argument (25 marks)

MODEL ANSWER Extract F (line 1) states that “The fall in oil prices has been a “net good” for the UK economy”. Using the data in the extracts and your economic knowledge, assess the view a sustained fall in the price of oil can only have positive outcomes for the UK economy. (25 marks)

MODEL ANSWER Assess policies that might be used to improve the provision of social care in the UK (25 marks)