June 2022 QP-merged

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A-level
ECONOMICS
Paper 3 Economic Principles and Issues
Time allowed: 2 hours

Materials
For Examiner’s Use
For this paper you must have:
• the Insert Section Mark
• a calculator.
A
Instructions B
• Answer all questions. TOTAL
• Use black ink or black ball-point pen. Pencil should only be used for
drawing.
• Fill in the boxes at the top of this page.
• You will need to refer to the Insert provided to answer Section B.
• You must answer the questions in the spaces provided. Do not write
outside the box around each page or on blank pages.
• If you need extra space for your answer(s), use the lined pages at the end of
this book. Write the question number against your answer(s).
• Do all rough work in this answer book. Cross through any work that you
do not want to be marked.
Information
• The maximum mark for this paper is 80.
• The marks for questions are shown in brackets.
• No deductions will be made for wrong answers.
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Section A box
Answer all questions in this section.
Only one answer per question is allowed.
For each question completely fill in the circle alongside the appropriate answer.
CORRECT METHOD WRONG METHODS
If you want to change your answer you must cross out your original answer as shown.
If you wish to return to an answer previously crossed out, ring the answer you now wish to select
as shown.
0 1 A positive statement
[1 mark]
A does not take into account irrational behaviour.
B enables accurate forecasts to be made.
C includes a value judgement.
D may be true or false.
0 2 Which one of the following is a nudge technique that could be used to encourage healthy
eating?
[1 mark]
A Banning supermarkets from selling high-calorie energy drinks
B Increasing taxes on high-fat products to raise their price
C Moving products with a high sugar content away from

supermarket checkouts
D Subsidising fruit and vegetables to reduce their prices
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0 3 Figure 1 shows the production possibility diagram for an economy producing capital goods box
and consumer goods.
Figure 1
The opportunity cost of producing an additional unit of capital goods is

[1 mark]
A greater at X than Y.
B greater at Z than Y.
C the same at X, Y and Z.
D zero when 300 units of consumer goods are produced.
Turn over for the next question
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0 4 Table 1 shows the individual price indices and the weightings of the three goods that make box
up a price index.
Table 1
Price Index in April 2022

Good Weighting
(April 2021=100)
X 0.1 102
Y 0.4 104
Z 0.5 103
What was the percentage increase in the overall price index between April 2021 to April
2022?
[1 mark]
A 1.1%
B 3%
C 3.3%
D 9%
0 5 When using data to make international comparisons of the standard of living, purchasing
power parity (PPP) exchange rates are more useful than market exchange rates.
This is because PPP exchange rates take into account differences in countries’
[1 mark]
A distribution of income.
B levels of taxation.
C price levels.
D rates of population growth.
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0 6 Figure 2 shows two aggregate demand (AD1 and AD2) curves and the short-run aggregate box
supply (SRAS) curve for an economy.
Figure 2
Which one of the following is the government most likely to increase if it wishes to use
fiscal policy to reduce national output from Y1 to Y2?
[1 mark]
A Infrastructure expenditure
B Interest rates
C Rates of income tax
D The budget deficit
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0 7 Which one of the following is a reason why the extension of property rights is likely to box
reduce market failure?

[1 mark]
A Merit goods will no longer be underconsumed in a free market.
B Producers will be more likely to have to pay compensation for

pollution.
C Public goods will no longer be subject to the free-rider problem.
D The inequality in the distribution of income and wealth will be

reduced.
0 8 Figure 3 shows the demand curve for a firm’s scarves.
Figure 3
Which one of the following statements is true when the price of scarves is reduced from
£30 to £25?
[1 mark]
A Demand for scarves is price elastic.
B Price elasticity of demand is –0.5.
C The firm’s total revenue falls.
D The firm’s total revenue increases.
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0 9 A firm charging different customers different prices for the same product is practising box
[1 mark]
A limit pricing.
B marginal cost pricing.
C price discrimination.
D price leadership.
1 0 In an economy, an index showing the change in the money supply multiplied by the
velocity of circulation increases from 100 to 115.5. At the same time, the final output
produced by the economy increases from 100 to 110.
According to Fisher’s equation of exchange, the price level will increase by

[1 mark]
A 5%
B 5.5%
C 10%
D 15.5%
1 1 Systemic risk is most likely to occur in financial systems when

[1 mark]
A investment banks have low capital-output ratios.
B most banks carry out both commercial and

investment banking activities.
C the central bank acts as lender of last resort

to financial institutions.
D the commercial banks have high liquidity ratios.
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1 2 Figure 4 shows the aggregate demand (AD) curve, the short-run aggregate supply box
(SRAS1 and SRAS2) curves and the long-run aggregate supply (LRAS1 and LRAS2)
curves for an economy.
Figure 4
All other things being equal, which one of the following is most likely to move the economy
from point M to point N?
[1 mark]
A A decrease in the natural rate of unemployment
B A loss of consumer and producer confidence
C A natural disaster, damaging productive capacity
D A rise in factor prices, resulting in cost-push inflation
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1 3 Which one of the following is a role of the World Trade Organisation? box
[1 mark]
A Helping countries settle disputes over tariffs and quotas
B Lending money to countries with balance of payments problems
C Monitoring the stability of the international monetary system
D Providing loans at low rates of interest to low-income countries
1 4 Which one of the following is a reason why the supply of cars is likely to be price elastic in
the short run when the price of cars increases?
[1 mark]
A Car manufacturers’ stocks of unsold cars are low
B The demand for cars is also price elastic
C The marginal cost of producing cars increases significantly with output
D There is considerable spare capacity in the car industry
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1 5 Which one of the following diagrams, A, B, C or D, shows the most likely short-run impact box
on an economy of an improvement in technology in the production process?

[1 mark]
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1 6 Which one of the following best explains the existence of relative poverty? box
[1 mark]
A Some households have to pay more in income tax than other households.
B The Gini coefficient in some countries is low.
C The income of some households is significantly less than the median

household income.
D The prices of items that are essential for life differ between countries.
1 7 Table 2 shows the amount paid in tax by individuals at different levels of income.
Table 2
Income (£) Tax paid (£)
20 000 4 000
30 000 5 400
40 000 6 400
50 000 7 000
This tax is an example of a

[1 mark]
A lump sum tax.
B progressive tax.
C proportional tax.
D regressive tax.
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1 8 Which one of the following is a supply-side policy aimed at reducing the natural rate of box
unemployment?
[1 mark]
A Government retraining schemes for structurally unemployed workers
B Increasing legal protection against unfair dismissal for employees
C Increasing the real value of the national minimum wage
D New government subsidies for developers of artificial intelligence
1 9 Figure 5 shows the average revenue (AR), marginal revenue (MR) and marginal cost
(MC) curves for an industry which was perfectly competitive but is now a monopoly. The
cost and revenue curves remain unchanged.
Figure 5
Which of the following areas shows the total deadweight loss of consumer and producer
surplus resulting from the structure of the industry changing from perfect competition to
monopoly?
[1 mark]
A 1+2
B 3+4
C 5+6
D 7+8
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2 0 There is a reduction in the market demand for the product supplied by firms operating in a box
perfectly competitive industry.
All other things being equal, which one of the following will happen to firms’ average and
marginal revenue as a result of this change?
[1 mark]
A Average revenue and marginal revenue will both fall.
B Average revenue and marginal revenue will not change.
C Average revenue will fall and marginal revenue will increase.
D Average revenue will increase and marginal revenue will fall.
2 1 Figure 6 shows the marginal utility that a consumer gains from eating apples.
Figure 6
When 7 apples per day are consumed

[1 mark]
A average utility is maximised.
B marginal utility is maximised.
C opportunity cost is minimised.
D total utility is maximised.
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2 2 Table 3 shows different combinations of performance for three macroeconomic indicators. box
Which one of the combinations, A, B, C or D, is most likely to indicate an economy

experiencing an economic boom?
[1 mark]
Table 3
Imports Price level Job vacancies
A Decreasing Increasing Decreasing
B Decreasing Decreasing Increasing
C Increasing Increasing Increasing
D Increasing Decreasing Decreasing
2 3 Table 4 shows the values of nominal GDP and a price index in two different years.
Table 4
Year 2015 2019
Nominal GDP (£ billions) 250 290
Price index 100 110
What was the value of real GDP in 2019, to the nearest £ billion, expressed in 2015 prices?
[1 mark]
A £227 billion
B £261 billion
C £264 billion
D £319 billion
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2 4 Figure 7 shows the average revenue and marginal revenue (AR and MR) curves and the box
average cost and marginal cost (AC and MC) curves for a firm in monopolistic competition
in the short run.
Figure 7
At the profit maximising price and output the firm will

[1 mark]
A make supernormal profits.
B produce the allocatively efficient output.
C produce where average revenue = average cost.
D set price equal to minimum average costs.
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2 5 The price of a government bond was £10 000 when it was issued. The bond does not box
have a maturity date and the government is not intending to buy back the bond. The bond
pays £200 per year to the bond holder and has a market price of £8 000.
Which one of the following fractions represents the yield on the bond?
[1 mark]
1
A
50
1
B
40
1
C
5
4
D
5
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2 6 Table 5 contains figures from the balance sheet of a commercial bank. box
Table 5
Item Value (£ bn)
Cash 45
Share capital 100
Loans advanced 135
Fixed assets 115
Long-term liabilities 85
Investments 50
Reserves (retained profit) 30
Balances at the central bank 25
Deposits and other liabilities 185
Other liquid assets 30
What is the value of this bank’s total liquid assets?

[1 mark]
A £70 bn
B £100 bn
C £130 bn
D £175 bn
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2 7 Changing patterns of consumption have meant that summer holidays at UK seaside towns box
have become less popular. As a result, UK seaside holiday towns are affected by
seasonal unemployment and increasing structural unemployment.
Which one of the following is the most likely consequence of this change in the pattern of
consumption?
[1 mark]
A Occupational immobility of labour will help to reduce structural unemployment.
B The cost of living for people who live in UK seaside towns will fall.
C Unemployment is likely to be higher in the summer than the winter.
D Wages in UK seaside towns will rise because firms want to retain workers.
2 8 Figure 8 shows the marginal cost (MCL), average cost (ACL) and marginal revenue
product (MRPL) curves for labour in a specialised computer programming industry.
Figure 8
Following a series of mergers between firms in this industry, a single large firm remains as
a monopsony employer.
Which one of the following is the most likely to result from a competitive labour market
being replaced by a monopsony employer?
[1 mark]
A The total amount paid in wages will fall from (W2 × Q2) to (W3 × Q1).
B The total amount paid in wages will increase from (W3 × Q1) to (W1 × Q1).
C The wage rate will fall from W1 to W2.
D The wage rate will increase from W3 to W2.
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2 9 Table 6 shows the value of the UK’s Human Development Index (HDI) over the period box
2015 to 2019.
Table 6
Year 2015 2016 2017 2018 2019
UK HDI Value 0.916 0.918 0.919 0.920 0.932
All other things being equal, which one of the following is most likely to explain the trend
shown in Table 6?
[1 mark]
A A fall in the sterling exchange rate
B Falling emissions of greenhouse gases
C Increasing life expectancy at birth
D Reductions in income inequality
3 0 Unemployed workers in the south of a country are unable to take up jobs in the north of the
country due to higher housing costs. This is an example of
[1 mark]
A cyclical unemployment.
B frictional unemployment.
C geographical immobility of labour.
D occupational immobility of labour. 30
Turn over for Section B
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Section B box
Refer to the Insert for Extracts A, B, C and D.
Total for this Investigation: 50 marks
The commercial aircraft manufacturing industry
INVESTIGATION
Scenario
You are an economist working for an organisation that is investigating the commercial aircraft
manufacturing industry.
You have been asked to review the changes to the industry that have taken place since 2014.
As part of this investigation, you are to provide answers to three questions.
Referring to the Insert, study Extracts A, B and C, and then use these and your knowledge of
economics to help you answer Questions 31 and 32. There is also a news report, Extract D, which
is to be used with the other extracts to help you answer Question 33.
3 1 To what extent do the data support the view that Boeing has been more successful
than Airbus since 2014? You must use the data in Extract B to support your assessment.
[10 marks]
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3 2 Explain the factors that a commercial aircraft manufacturer, such as Boeing or Airbus, box
should consider when forecasting the future sales of its aircraft.

[15 marks]
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3 3 After considering Extract D, and the original evidence in Extracts A, B and C, would box
you recommend that the UK government provides financial and other support to
companies involved in the production of commercial aircraft? Justify your
recommendation.
[25 marks]
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50
END OF QUESTIONS
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ANSWER IN THE SPACES PROVIDED
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Question Additional page, if required.
number Write the question numbers in the left-hand margin.
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is published after each live examination series and is available for free download from www.aqa.org.uk
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A-level
ECONOMICS
Time allowed: 2 hours

Materials
• the insert Section Mark
• a calculator.
A
Instructions B
drawing.
• You will need to refer to the insert provided to answer Section B.
Information
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Section A box
as shown.
0 1 The average university graduate can expect to earn more over their working life than the
average school leaver.
This is most likely to be explained by
A discrimination in the labour markets for non-graduates.
B the higher marginal revenue productivity of graduates.
C the higher price elasticity of demand for graduates.
D the relatively low elasticity of supply of non-graduates.

[1 mark]
0 2 Which one of the following statements regarding supply-side policies is correct?
Supply-side policies
A can have microeconomic as well as macroeconomic effects

on the economy.
B can increase the potential output of an economy but not its

trend rate of growth.
C cannot be used to correct market failures and improve the

operation of markets.
D do not affect competitiveness or the current account of the

balance of payments.
[1 mark]
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0 3 Figure 1 shows the marginal private benefit and marginal social benefit (MPB and MSB) box
curves and the marginal private cost and marginal social cost (MPC and MSC) curves in
the market for a good.
Figure 1
The diagram represents a good with
A negative externalities in production and consumption.
B negative externalities in production and positive externalities in

consumption.
C positive externalities in production and consumption.
D positive externalities in production and negative externalities in

consumption.
[1 mark]
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0 4 Which one of the following changes in macroeconomic performance is most likely to box
involve a trade-off, at least in the short-run, between the objectives of government

macroeconomic policy?
A Economic growth increases and the deficit on the balance of

payments on current account is eliminated
B Inflation declines to match its target rate and the government’s

budget position moves into balance
C The distribution of income becomes more equal as economic

growth increases
D The government’s budget deficit increases as the rate of

unemployment is reduced
[1 mark]
0 5 Table 1 contains data for GDP per capita and the Human Development Index (HDI) for four
countries in a given year.
Table 1
GDP per capita

HDI
($)
Country 1 32 860 0.45
Country 2 29 440 0.77
Country 3 23 230 0.51
Country 4 22 650 0.92
Which one of the following statements is most consistent with the data?
A Country 1 has the highest living standards of the four countries
B Country 2 has a higher rate of growth than countries 3 and 4
C Country 3 is the least developed of the four countries
D Country 4 has the highest life expectancy and literacy rates

[1 mark]
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0 6 Figure 2 shows the production possibility curve for an economy producing capital and box
consumer goods.
Figure 2
The opportunity cost of increasing the output of capital goods from G1 to G2 is shown by
A H - H2
B H2KLH1
C G2 - G1
D H1 - H2
[1 mark]
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0 7 Table 2 contains a simple balance sheet for a bank. box
Table 2
Assets (£ billion) Liabilities (£ billion)

Customer
Cash 20
Deposits 700
Cash held at Money owed to
Central Bank 70 Central Bank 30
Money owed to
Securities held 130
other banks 170
Shareholders
Loans 730
Equity 100
Other assets 50
Total assets 1000 Total liabilities 1000
From the balance sheet it can be concluded that this bank is
A a threat to financial stability because it holds no capital.
B an investment bank because it holds non-interest bearing cash.
C earning large profits because most of its assets are loans.
D most likely to be a commercial bank because its main liabilities

are customer deposits.
[1 mark]
0 8 The free-rider problem in economics means that government intervention is necessary to

prevent market failure in the supply of
A inferior goods.
B merit goods.
C private goods.
D public goods.
[1 mark]
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0 9 Figure 3 shows the demand curve (Demand) and the supply curve (Supply) for bus travel box
within a city. The initial market equilibrium price is P.
Figure 3
To reduce pollution, the city council pays bus companies to provide bus travel free of
charge. As a result of this policy, consumer surplus will increase by the area
A OFHJ
B FGH
C OPHJ
D QHJ
[1 mark]
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1 0 At the end of the previous financial year, a country had a national debt of £20 000 billion. box
The government’s planned expenditure for the current year exceeds its projected income
by £100 billion.
All other things being equal, which one of the following is most likely to enable the
government to complete its planned expenditure and reduce the national debt?
Increasing its
A planned borrowing by more than £100 billion.
B projected income and borrowing by £100 billion.
C projected income by £100 billion and reducing new borrowing

by £100 billion.
D projected tax revenue by more than £100 billion.

[1 mark]
1 1 A person is considering buying a used motorbike from a dealer on the internet. The
motorbike is described as being in perfect condition and is being offered at a
correspondingly high price.
In this situation, asymmetric information is most likely to lead the person to
A buy the motorbike because they believe the price is justified

by its condition.
B know more about the motorbike’s market value than

the dealer.
C maximise their utility by buying a cheaper used motorbike

from a different dealer.
D not buy the motorbike because they do not know as much

about the motorbike as the dealer.
[1 mark]
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1 2 Figure 4 shows two aggregate demand (AD1 and AD2) curves and two long-run aggregate box
supply (LRAS1 and LRAS2) curves for an economy.
Figure 4
All other things being equal, which one of the following is the most likely explanation
for the movement of the economy from E1 to E2?
A A decline in the capital stock resulting from a significant decline in

bank funding for business investment
B An increase in net foreign investment by firms following a reduction

in the rate of inflation
C An unexpected reduction in the rate of interest following a fall in the

rate of inflation
D The growth of government borrowing to fund increased expenditure

on infrastructure
[1 mark]
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1 3 A feature of the UK government’s workplace pension scheme is that employers are box
required to enrol their employees in the scheme unless the employees make a conscious
decision to opt out and join another scheme.
An individual choosing to remain in their workplace pension scheme is an example of a

person
A accepting the default choice.
B acting irrationally by ignoring an economic incentive.
C being anchored by a previous financial decision.
D using a rule of thumb to make the choice.

[1 mark]
1 4 The Bank of England’s Monetary Policy Committee increases Bank Rate to reduce the risk
of an increase in inflationary pressure in the economy. All other things being equal, which
one of the following is most likely to result from the policy change?
A Consumption will increase since house prices will rise and

increase wealth.
B Investment will increase as the return on investment projects rises.
C Savings will increase as interest rates rise in real terms.
D The exchange rate will fall as a result of increased capital inflows.

[1 mark]
1 5 An increase in the national minimum wage may be used to make the distribution of income
more equal. Such a policy is most likely to be effective when the elasticity of demand for
labour in low-paid work is
A elastic.
B inelastic.
C perfectly elastic.
D unitary elastic.
[1 mark]
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1 6 Figure 5 shows the demand (D) curve and the average and marginal cost (AC and MC) box
curves for a firm operating in a perfectly competitive market for eggs.
Figure 5
The firm is in equilibrium at the initial market price of £1.25 for a box of 6 eggs. If the
market price increases to £1.50 for a box of eggs the firm will
A have a marginal revenue of £0.25.
B increase its average revenue by 20%.
C make supernormal profits in the long run.
D sell 180 boxes per day in the short run.

[1 mark]
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1 7 Table 3 contains labour market data, in millions, for the UK in 2019. box
Table 3
Population aged 16 years and over 53.3
Economically active labour force 34.3
Total employment 33.0
Total unemployment 1.3
Source: ONS
Which one of the following, calculated in accordance with international guidelines,

represents the UK’s unemployment rate in 2019?
A 2.4%
B 3.7%
C 3.8%
D 4.0%
[1 mark]
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1 8 Figure 6 represents the market for sugar in a country. It shows the demand (D) curve and box
two supply (S1 and S2) curves in the market for sugar before and after the imposition of an
indirect tax on sugar.
Figure 6
According to Figure 6, which one of the following combinations: A, B, C, or D, is correct?
Change in price Government tax revenue

% generated (£)
A 20 200
B 20 400
C 50 200
D 50 400
[1 mark]
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1 9 According to the accelerator process, a slowdown in the rate of growth of national income box
will lead to a fall in the
A level of investment.
B marginal propensity to save.
C rate of interest.
D value of the multiplier.

[1 mark]
2 0 A monopolistically competitive firm’s demand curve for good X has a price elasticity of
demand of minus 1.0 throughout its entire range. All other things being equal, which one
of the following is most likely to result in an increase in the firm’s profits?
A A decrease in the cost of producing the good
B A decrease in the price of the good
C An increase in the price of the good
D An increase in the scale of its operation

[1 mark]
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2 1 Figure 7 shows the average and marginal revenue (AR and MR) curves and the average box
and marginal cost (AC and MC) curves for a firm. The firm is in equilibrium producing an
output of Qe.
Figure 7
From the diagram it can be inferred that the
A firm is a price taker and will reduce its supply if the market price falls
below Pe.
B firm is making abnormal profits but this will not attract new firms into
the market because the firm has a monopoly.
C firm is maximising its abnormal profit and has no incentive to expand

its production.
D firm’s abnormal profit will lead it to expand its production and shift its
market supply curve to the right.
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2 2 Which one of the following combinations of possible shocks: A, B, C, or D, is most likely to box
move an economy from a negative output gap to a positive output gap?
An unexpected increase in
A productivity growth combined with a larger than expected decrease

in inflation.
B the exchange rate combined with an unexpected fall in business

confidence.
C the government’s budget surplus combined with a downturn in

world trade.
D the marginal propensity to consume combined with a fall in the

exchange rate.
[1 mark]
2 3 All other things being equal, which one of the following is the most likely consequence of
technological innovation in the production process by the firms within an industry?
A A decrease in the number of firms in the industry
B A reduction in firms’ unit costs of production
C The elimination of entry barriers into the industry
D The invention of a product that did not previously exist

[1 mark]
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2 4 Figure 8 shows two demand (D1 and D2) curves and two supply (S1 and S2) curves in the box
market for tea.
Figure 8
Tea and coffee are substitutes. All other things being equal, which one of the following is
the most likely explanation of the move from E1 to E2 in the market for tea?
A A fall in the price of tea and a rise in productivity in coffee production
B A rise in the price of coffee and an increase in the cost of producing

tea
C An increase in competition in the market for tea and a fall in the price
of coffee
D The removal of a subsidy to tea producers and a fall in the price of

coffee
[1 mark]
2 5 In 2019, an economy operating at full capacity on its long-run aggregate supply curve grew
at its trend growth rate of 5% per annum. It had a national income of £200 billion. In 2020,
the economy experienced 2% actual growth.
It follows that in 2020 there was
A a negative output gap equal to £4 billion.
B a negative output gap equal to £6 billion.
C a positive output gap equal to £4 billion.
D a positive output gap equal to £6 billion.

[1 mark]
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2 6 The money market is the financial market in which box
A companies issue new shares to the public and financial institutions.
B dealers are able to trade foreign currencies.
C long-term company securities and government bonds are traded.
D short-term finance is provided for companies and governments.

[1 mark]
2 7 Figure 9 shows two labour supply (S1 and S2) curves for workers qualified to the level
necessary to be employed in a particular industry.
Figure 9
All other things being equal, the shift of the supply of labour curve from S1 to S2 is most
likely to be explained by a reduction in
A job security for qualified workers in the industry.
B the average wage rate in the industry.
C the productivity of workers in the industry.
D the qualifications required by the industry.

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2 8 The index of real GDP for an economy was 100 in 2017, its base year, and 105 in 2020. box
In 2017, real GDP was £500 billion. The monetary value of real GDP for this economy in
2020 must therefore have been
A £395 billion.
B £475 billion.
C £525 billion.
D £605 billion.
[1 mark]
2 9 Which one of the following is an expenditure switching policy that would help to reduce a
deficit on the balance of payments on current account?
An increase in
A government expenditure on public goods.
B income tax to reduce consumer expenditure.
C quotas on exports of demerit goods.
D tariffs to raise the price of imports.

[1 mark]
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3 0 Figure 10 shows two aggregate demand (AD1 and AD2) curves and two short-run box
aggregate supply (SRAS1 and SRAS2) curves for an economy.
Figure 10
All other things being equal, which one of the following is the most likely explanation for the
movement of the economy from E1 to E2?
A A depreciation of the currency and an increase in interest rates
B A fall in the prices of raw materials and an increase in investment
C An increase in exports and the rate of Value Added Tax
D An increase in the supply of money and the level of money wages 30
[1 mark]
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Section B box
Refer to the insert for Extracts A, B, C, D and E.
Climate change – it is not too late
INVESTIGATION
Scenario
You are an economist working for an organisation which investigates the impact of climate change
policies on the economy.
You have been asked to review the contribution of the UK to reducing greenhouse gas
(GHG) emissions and the potential impact of climate change policies on the UK economy.
Referring to the insert, study Extracts A, B, C and D, then use these and your knowledge of
economics to help you answer Questions 31 and 32. There is also a news report, Extract E, which
is to be used with the other extracts to help answer Question 33.
3 1 The UK government has set a target to reduce net greenhouse gas (GHG) emissions to
zero by 2050.
To what extent, if at all, do the data suggest that to achieve its net-zero emissions target,
the government should focus on reducing GHG emissions from the transport sector?
You must use the data in Extract C to support your assessment.
[10 marks]
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3 2 Explain why, without government intervention, markets are likely to allocate too few box
resources to dealing with the problem of climate change.

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3 3 After considering Extract E, and the original evidence in Extracts A, B, C and D, which box
policies, if any, would you recommend that the UK government should introduce to ensure
that it achieves its zero-emissions target by 2050. Justify your recommendation.
[25 marks]
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END OF QUESTIONS
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is published after each live examination series and is available for free download from www.aqa.org.uk.
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been unsuccessful and AQA will be happy to rectify any omissions of acknowledgements. If you have any queries please contact the
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*216A7136/3*
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Surname
Forename(s)
Candidate signature
A-level
ECONOMICS
Monday 8 June 2020 Morning Time allowed: 2 hours

Materials
• a calculator.
A
Instructions B
drawing.
Information
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Section A box
as shown.
0 1 Economics is a social science because
A all economic hypotheses are based on value judgements.
B economic policies can only be based on positive analysis.
C it involves the study of human behaviour and economic decision

making
D quantitative data cannot be used to test economic theories.

[1 mark]
0 2 All other things being equal, the demand for labour is more likely to be wage elastic if
A it is difficult to substitute capital for labour.
B the cost of labour is a low percentage of total costs.
C the final product has a high price elasticity of demand.
D the supply curve for labour is wage elastic.

[1 mark]
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0 3 Table 1 contains data for the rates of growth of nominal and real GDP and the rate of box
inflation for an economy in a given year. Which one of the following combinations,
A, B, C or D, shows the correct relationship between the three variables?
Table 1
Nominal GDP Real GDP

Inflation
growth growth
A –2% 0% +2%
B +4% +3% –1%
C +5% +5% +1%
D –5% –2% –3%

[1 mark]
0 4 Figure 1 shows three aggregate demand (AD) curves, a short-run aggregate supply
(SRAS) curve and a long-run aggregate supply (LRAS) curve.
Figure 1
In Figure 1, when
A aggregate demand shifts from AD1 to AD2, cyclical unemployment is

likely to be eliminated.
B aggregate demand shifts from AD1 to AD3, the rate of economic

growth is equal to (Y3 – Y1).
C the economy is producing at Y1, there is a positive output gap.
D the economy is producing at Y2, there is no unemployment.

[1 mark]
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0 5 In an economy, over the last decade, each of the top five decile groups has experienced a box
fall in their share of total income. In contrast, the bottom five decile groups have
experienced a substantial increase in their share of total income.
It can be concluded that, over this period, the distribution of income is most likely to have
become
A more equal.
B more equal but less equitable.
C more equitable.
D more equitable but less equal.

[1 mark]
0 6 In an economy, the marginal propensity to consume is 0.6. All other things being equal,
which one of the following statements is correct?
A A £5 billion reduction in the economy’s national income will

result in a £3 billion fall in consumption
B If injections into the circular flow of income equal £20 billion,

national income will equal £32 billion
C If injections into the circular flow of income rise by £10 billion,

national income will rise by £6 billion
D When the economy’s national income equals £100 billion,

consumption will equal £60 billion
[1 mark]
0 7 Which one of the following combinations, A, B, C or D, shows the essential characteristics

of a customs union?
Internal trade Common external

Common currency
barriers tariffs
A Yes No Yes
B No Yes No
C Yes Yes No
D No No Yes
[1 mark]
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0 8 Figure 2 shows the equilibrium position, point E, of a profit-maximising firm in a box
monopolistically competitive industry.
Figure 2
All other things being equal, which one of the following applies to the firm’s equilibrium
at point E? The firm is
A in short-run equilibrium, but not in long-run equilibrium.
B making normal profit because AC = AR.
C making supernormal profit because MC = MR.
D productively efficient but not allocatively efficient.

[1 mark]
0 9 A long-dated £100 government bond with a coupon rate of 5% has a current market value
of £125. This implies that the
A current yield on the bond is 4%.
B current yield on the bond is 5%.
C market rate of interest is 2.5%.
D market rate of interest is 5%.

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1 0 All other things being equal, in which one of the following circumstances is the box
Bank of England most likely to raise Bank Rate to maintain financial stability?
A A fall in bank liquidity and capital ratios following several years of

rapid growth in bank lending and a boom in house prices
B An increase in the government’s target for the rate of inflation

following a significant increase in the rate of productivity growth
C An increase in the savings ratio as the economy recovers from a

recession
D A rise in share prices on global stock markets due to the growth in

world trade
[1 mark]
1 1 Figure 3 shows a firm’s total revenue (TR) curve.
Figure 3
Which one of the following combinations, A, B, C or D, describes how the firm’s average
revenue and marginal revenue will change as the firm expands its output?
Average revenue Marginal revenue
A Increases Increases
B Constant Constant
C Decreases Decreases
D Increases Constant
[1 mark]
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1 2 According to the hypothesis of diminishing marginal utility, when marginal utility is zero box
A average utility is negative.
B the good is a demerit good.
C total utility from consuming the good is maximised.
D total utility will increase by consuming more of the good.

[1 mark]
1 3 Table 2 shows the inflation rate and the rate of growth of the money supply for an economy
between 2016 and 2019.
Table 2
Rate of growth
Year Inflation
of money supply
2016 3.1% 3.5%
2017 3.5% 3.3%
2018 2.9% 3.2%
2019 2.5% 2.0%
From the data in Table 2 it may be concluded that, all other things being
equal, there was
A a fall in the value of money throughout the entire period.
B a policy of quantitative easing in operation throughout the entire

period.
C an inverse relationship between inflation and the rate of growth of

the money supply.
D continuous disinflation throughout the entire period.

[1 mark]
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1 4 Increased output results from specialisation and the division of labour because box
they enable
A countries to produce outside their production possibility boundary.
B more efficient use of the available resources.
C people to exchange goods and services with each other.
D the use of money as a medium of exchange and store of value.

[1 mark]
1 5 Figure 4 shows a firm’s demand (D) curve and its marginal revenue (MR) curve for
good X. The firm initially sells OQ1 units of X per day at a price of OP1.
Figure 4
If the firm increases its price by 10%
A price elasticity of demand will decrease.
B price elasticity of demand will not change.
C total revenue will decrease.
D total revenue will increase.

[1 mark]
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1 6 Which one of the following distinguishes a private good from a pure public good? box
A A private good can only be provided by private firms and not the
government
B Consumption of a private good creates negative externalities for

other consumers
C Consumers of a private good have full knowledge of any

externalities in its production
D One person’s consumption of a private good reduces the amount

available for other consumers
[1 mark]
1 7 Table 3 shows the demand for and supply of oranges at a range of prices between 10
pence and 30 pence.
Table 3
Quantity Quantity
Price (pence) supplied demanded
(000s) (000s)
10 100 125
15 120 120
20 122 108
25 125 100
30 128 88
As a result of an increase in consumers’ incomes, the demand for oranges increases by

25% at each of the prices shown in Table 3.
After the rise in incomes:
A at a price of 10 pence, excess demand increases by 50%.
B at a price of 30 pence, excess supply falls by 75%.
C the equilibrium market price increases by two-thirds.
D the price elasticity of demand increases by 25% at each price.

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1 8 Which one of the following government policies is most likely to reduce market failure and box
to improve the allocation of resources?
A A higher rate of tax on all firms earning profit
B A minimum price for demerit goods above their free market price
C Free market pricing for the provision of public goods
D Subsidies paid to all loss-making firms to maintain full employment

[1 mark]
1 9 The long-run Phillips curve shows that
A the expected rate of inflation is zero.
B there is an inverse relationship between unemployment and inflation

in the long run.
C there is no trade-off between reducing inflation and lower

unemployment in the long run.
D unemployment can only be reduced in the long run by an increase in

aggregate demand.
[1 mark]
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2 0 Figure 5 shows the market demand for labour (DL = MRPL), the market supply box
of labour (SL=ACL), and the marginal cost of labour (MCL), in a particular industry.
The employer in this industry is a monopsonist.
Figure 5
From Figure 5, it can be concluded that, in the absence of a trade union or a minimum
wage, the firm will employ
A OQ1 workers at a wage of OW1.
B OQ2 workers at a wage of OW1.
C OQ2 workers at a wage of OW2.
D OQ2 workers at a wage of OW3.

[1 mark]
2 1 All other things being equal, which one of the following is most likely to increase the
national debt?
A Foreign companies increasing their direct investment into the

economy
B The central bank using its reserves of foreign currency to fund

a trade deficit
C The government reducing its budget surplus by increasing its

expenditure on infrastructure
D The government running a budget deficit, financed by selling

bonds to foreign investors
[1 mark]
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2 2 Table 4 shows the weights used in the Consumer Prices Index (CPI) for a selection of box
items in 2008 and 2018.

Table 4
Category 2008 weight 2018 weight
Food and non-alcoholic beverages 109 101
Alcoholic beverages and tobacco 42 42
Clothing and footwear 63 70
Transport 152 156
All goods 547 519
All services 453 481
The data in Table 4 indicate that between 2008 and 2018 the
A average price of goods fell, whereas the average price of services

increased.
B percentage increase in the price of ‘Clothing and footwear’ was

greater than the percentage increase in the price of ‘Transport’.
C proportion of total expenditure, by a typical household, on

‘Alcoholic beverages and tobacco’ did not change.
D total expenditure of a typical household on ‘Food and non-alcoholic

beverages’ fell.
[1 mark]
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2 3 Figure 6 shows the marginal private and social benefit (MPB and MSB) curves and the box
marginal private and social cost (MPC and MSC) curves in the market for domestically
produced solar panels. The initial market equilibrium is at E1.
Figure 6
To correct the market failure, the government introduces a subsidy to domestic

manufacturers of solar panels of £200 per unit produced. Which one of the following
represents the total amount of subsidy payments made by the government in the first
year of the scheme?
A £20 million.
B £25 million.
C £75 million.
D £100 million.
[1 mark]
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2 4 Moral hazard results when individuals and organisations make investment decisions box
A based on asymmetric information.
B because they expect to make a large profit.
C based on the returns made on previous investments.
D knowing that others will bear the loss if things go wrong.

[1 mark]
2 5 An economy is estimated to be experiencing a 2% rate of frictional unemployment plus a

3% rate of structural and real wage unemployment. If it is also experiencing cyclical
unemployment of 4%, its natural rate of unemployment is most likely to be
A 3%
B 5%
C 6%
D 9%
[1 mark]
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2 6 Figure 7 shows two aggregate demand (AD1 and AD2) curves and two long-run aggregate box
supply (LRAS1 and LRAS2) curves for an economy.
Figure 7
All other things being equal, which one of the following combinations, A, B, C or D, is
most likely to explain the movement of the economy from E1 to E2?
An increase in the
A budget surplus and size of the multiplier.
B exchange rate and supply of money.
C rate of inflation and positive output gap.
D volume of exports and potential output.

[1 mark]
2 7 Which one of the following is correct for a proportional tax on income?
A The amount of tax paid increases as income increases
B The marginal rate of tax is lower than the average rate
C The average rate of tax falls as income increases
D The average rate of tax is lower than the marginal rate

[1 mark]
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2 8 Table 5 contains data for a firm’s marginal cost of producing different outputs of shirts per box
day. The firm operates in a perfectly competitive market.
Table 5
Output of shirts per day Marginal cost (£s)
800 8
900 9
1000 10
1100 11
If the market price is £10 per shirt, at which one of the following outputs per day,
A, B, C or D, will the firm maximise its profit?
A 800
B 900
C 1000
D 1100
[1 mark]
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2 9 Figure 8 shows two supply (S1 and S2) curves and the demand (D) curve for euros on the box
foreign exchange market and the price of euros in terms of pounds sterling.
Figure 8
Which one of the following is the most likely explanation for the change in the exchange
rate shown in Figure 8?
An increase in eurozone
A companies buying factories in the UK.
B exports of manufactured goods to the UK.
C interest rates relative to those in the UK.
D productivity growth relative to that in the UK.

[1 mark]
3 0 The behaviour of a consumer buying a 75-inch large screen TV is biased due to bounded
rationality and the anchoring effect. This implies that the choice of which TV to buy is
based on the price of
A all available 75-inch TVs, given sufficient time to obtain the

information.
B the cheapest available 75-inch TV, in order to maximise utility.
C the first 75-inch TV seen and imperfect information about available

alternatives.
D the most expensive 75-inch TV, believing that this indicates the 30
best quality available.
[1 mark]
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Section B box
Refer to the insert for Extracts A, B, C and D.
Changing living standards and inequality in the UK
INVESTIGATION
Scenario
You are an economist working for an organisation which investigates ways to improve the standard
of living of UK citizens.
You have been asked to review changes in living standards and inequality since the 2007–2008
financial crisis.
Referring to the insert, study Extracts A, B and C and then use these and your knowledge of
economics to help you answer Questions 31 and 32. There is also a news report, Extract D, which
is to be used with the other extracts to help you answer Question 33.
3 1 To what extent, if at all, do the data suggest that living standards in the UK improved
between 2007 and 2017? You must use the data in Extract B to support your
assessment.
[10 marks]
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3 2 Explain how a sustained slowdown in the world economy is likely to affect living standards box
in the UK.
[15 marks]
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3 3 After considering Extract D, and the original evidence in Extracts A, B and C, would you box
recommend that the government implement a further substantial increase in the National
Living Wage? Justify your recommendation.
[25 marks]
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END OF QUESTIONS
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40
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For confidentiality purposes, all acknowledgements of third-party copyright material are published in a separate booklet. This booklet is published after
each live examination series and is available for free download from www.aqa.org.uk.
Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright-holders may have been unsuccessful
and AQA will be happy to rectify any omissions of acknowledgements. If you have any queries please contact the Copyright Team.
*206A7136/3*
*40*
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A-level
ECONOMICS
Paper 3 Economic principles and issues
Tuesday 4 June 2019 Morning Time allowed: 2 hours

Materials
For this paper you must have: For Examiner’s Use
• the insert
Section Mark
• a calculator.
A
Instructions B
• Answer all questions.
• Use black ink or black ball-point pen. Pencil should only be used for TOTAL
drawing.
Information
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Section A box
For each answer completely fill in the circle alongside the appropriate answer.
If you wish to return to an answer previously crossed out, ring the answer you now wish to
select as shown.
0 1 A monopolistically competitive firm’s demand curve is
A also the market demand curve.
B inelastic throughout its length.
C the firm’s average revenue curve.
D the same as its marginal revenue curve.

[1 mark]
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0 2 The table below contains selected data on a country’s macroeconomic performance over a box
20 year period.
Balance of trade
Unemployment Rate of inflation on current
Year
(%) (%) account
($ bn)
1998 6.0 3.5 –20
2003 5.8 3.0 –19
2008 5.5 2.5 –12
2013 5.2 2.0 –2
2018 5.0 1.5 +3
All other things being equal, which one of the following, A, B, C or D, can be inferred from
the above data?
A The natural rate of unemployment is falling
B The price level is increasing more slowly
C The volume of exports is increasing
D There is an inverse relationship between unemployment and

inflation
[1 mark]
0 3 Which one of the following is most likely to result in complete market failure?
A Negative externalities in production and consumption
B Non-excludability and no enforceable property rights
C The existence of demerit goods in some markets
D The government setting maximum prices for excludable and rival

goods
[1 mark]
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0 4 The diagram below shows the aggregate demand (AD) curve, the long-run aggregate box
supply (LRAS) curve, and two short-run aggregate supply (SRAS1 and SRAS2) curves for
an economy. The economy’s initial equilibrium is at E1.
The most likely explanation for the move of the economy from its initial equilibrium at E1 to
a new short-run equilibrium at E2 is a decrease in the
A level of tariffs on imports.
B productivity of capital.
C rate of wage inflation.
D value of government subsidies to farmers.

[1 mark]
0 5 Which one of the following policies is most likely to improve the supply side of the
economy? A policy which
A increases the budget surplus.
B reduces the natural rate of unemployment.
C shifts resources from capital to labour intensive industries.
D shifts the burden of tax from indirect to direct taxation.
[1 mark]
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0 6 The diagram below shows the market demand (D) curve and two supply (S1 and S2) box
curves for a brand of soft drink. The drink is a demerit good because of its high sugar
content. The government imposes an indirect tax on each can sold that cuts consumption
by 100 000 cans per week.
If the price elasticity of demand for the drink is –2.0, the price must have increased by
A 5p
B 10p
C 15p
D 20p
[1 mark]
0 7 The hypothesis of diminishing marginal utility
A assumes that at least one factor of production is fixed in the

short run.
B can be used to help explain why a demand curve is downward

sloping.
C explains why firms try to maximise profit.
D states that total utility must fall as consumption increases.

[1 mark]
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0 8 A rational, utility maximising consumer is considering the purchase of a used car. Her final box
choice is between two cars which are identical in all respects except for the differences
shown below.
Period of
Price guarantee
against faults
Car 1 £8 000 3 months
Car 2 £10 000 12 months
Based on the above information, which one of the following is the most likely explanation
for the customer’s purchase of Car 2? She
A has £10 000 of savings available to buy herself a used car.
B has a positive income elasticity of demand for used cars.
C has a price inelastic demand curve for used cars.
D wants to reduce the risks from asymmetric information.

[1 mark]
0 9 All other things being equal, if the velocity of circulation is constant, the quantity theory of
money based on Fisher’s equation of exchange, MV=PQ, predicts that an x% increase in
the money supply will always cause an x%
A decrease in the rate of interest.
B increase in nominal national income.
C increase in real national income.
D increase in the rate of economic growth.

[1 mark]
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1 0 The diagram below shows the aggregate demand (AD) curve, the short-run aggregate box
supply (SRAS) curve and the long-run aggregate supply (LRAS) curve for an economy.
The economy’s initial equilibrium is at E1.
The government wants to achieve economic growth without conflicting with its long-run
objective of price stability. All other things being equal, which one of the following policy
combinations is most likely to enable the economy to achieve a new long-run equilibrium
at E2?
A A reduction in interest rates and increased government borrowing.
B A reduction in the budget deficit and the rate of growth of the

money supply.
C Increased government expenditure on apprenticeships and

transport infrastructure funded through borrowing.
D Increased government expenditure on welfare funded through

higher indirect taxes.
[1 mark]
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1 1 The table below shows how a firm’s total cost of producing handbags changes as output box
increases.
Output Total cost per month

(handbags per month) (£)
0 45 000
1 000 165 000
2 000 250 000
3 000 360 000
What is the average fixed cost of producing 3 000 handbags per month?
A £15
B £105
C £110
D £120
[1 mark]
1 2 The existence of negative externalities in consumption results in a misallocation of

resources. This is because at the free market level of output the
A marginal private benefit is greater than the marginal private cost.
B marginal private cost is greater than the marginal social cost.
C marginal social benefit is less than the marginal social cost.
D marginal social cost is less than the marginal private benefit.

[1 mark]
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1 3 The diagram below shows the actual level of real GDP and the trend level of real GDP box
over time for an economy. The economy starts its recovery from recession at point M.
After several years of growth the economy reaches point N.
All other things being equal, which one of the following is the most likely consequence of
the economy’s growth path between points M and N?
A A decrease in the level of interest rates due to deflation.
B A decrease in the rate of inflation due to increased output.
C An increase in investment due to the accelerator process.
D An increase in the value of the multiplier due to a rise in the

savings ratio.
[1 mark]
1 4 All other things being equal, which one of the following would be most likely to result in a
reduction in inequality in the distribution of income in the UK? An increase in the
A amount of government tax revenue.
B average standard of living.
C level of median income.
D share of income of the lowest quintile.

[1 mark]
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1 5 The table below shows different combinations of changes in the rate of interest and the box
government’s budget position. The economy has a negative output gap. All other things
being equal, which one of the combinations of policies, A, B, C or D, is most likely to
reduce the economy’s negative output gap?
Rate of interest Government’s budget position
A Increase Decrease in surplus
B Decrease Increase in surplus
C Increase Decrease in deficit
D Decrease Increase in deficit

[1 mark]
1 6 The table below shows the value of the Gini coefficient for a country between 2012 and
2016. Over the five year period, the government has used progressive taxation to change
the distribution of income.
Year Gini coefficient

2012 0.60
2013 0.55
2014 0.50
2015 0.45
2016 0.40
Based on the above data, which one of the following is a positive statement?
A A progressive tax system is the fairest way of correcting income

inequality.
B Between 2012 and 2016 the distribution of income in the country

became more equal.
C The Gini coefficient is the best way of measuring changes in the

distribution of income.
D The government should continue to tax the rich to improve the

distribution of income.
[1 mark]
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1 7 The UK’s labour productivity increases by only 10% over a five year period. Over the box
same period its main trading partners increase their productivity by 25%. All other things
being equal, the most likely consequence for the UK is
A a decline in UK imports from its main trading partners.
B a 15% deterioration in its balance of trade on the current account.
C a loss of competitiveness against its main trading partners.
D the imposition of a 15% tariff on imports to maintain international

competitiveness.
[1 mark]
1 8 The diagram below shows the kinked demand curve (D) for a firm operating in a
competitive oligopolistic market.
The kinked demand curve model provides an explanation of why the
A firm colludes with competitors to set the price of 0P1.
B firm’s demand curve becomes more elastic as it lowers its price.
C firm’s price changes depend on competitors’ pricing behaviour.
D firm won’t change its price from 0P1 even if competitors change
their prices.
[1 mark]
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1 9 A large Asian steel-producing country dumps its surplus steel on the world market. All box
other things being equal, if the demand for steel is price elastic, the most likely
consequence for the EU market for steel will be to
A reduce excess capacity in the EU steel-making industry.
B reduce the value of steel imports into the EU.
C shift the demand curve for EU steel workers to the left.
D shift the supply curve of EU steel workers to the left.

[1 mark]
2 0 A company has an issued share capital of £1 million and an outstanding corporate bond
issue of £200 000. To fund its expansion, the company issues additional corporate bonds
for £300 000. All other things being equal, after the issue of the additional corporate
bonds the ratio of the company’s total debt to its equity will be
A 0.2:1
B 0.3:1
C 0.5:1
D 2.0:1
[1 mark]
2 1 Despite its central bank operating a policy of quantitative easing for several years, an
economy has rising unemployment and a rate of inflation significantly below the target rate
set by the government. All other things being equal, which one of the following actions is
the central bank most likely to take in order to meet the target for inflation?
A A policy leading to an appreciation of the exchange rate.
B An increase in its base rate of interest and the reversal of its

quantitative easing policy.
C Providing forward guidance indicating that the bank will continue

with its programme of quantitative easing.
D Selling some of its stock of government bonds to other financial

institutions.
[1 mark]
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2 2 Beef and leather are in joint supply. Changes in farming methods have resulted in a box
significant fall in the price of chicken, a substitute for beef. All other things being equal,
which one of the following diagrams, A, B, C, or D, best illustrates the effects of the fall in
the price of chicken on the market for leather?
[1 mark]
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box
2 3 The table below shows different combinations of changes in a commercial bank’s liquidity
and capital ratios. All other things being equal, which one of the following combinations,
A, B, C or D, is most likely to improve the bank’s financial stability?
Liquidity ratio Capital ratio
A Increase Decrease
B Increase Increase
C Decrease Increase
D Decrease Decrease
[1 mark]
2 4 An economy had a 3% increase in its real GDP over a one year period. In the same
period its population grew by 5% and its rate of inflation was 2.5%. From these data it can
be inferred that
A its Human Development Index decreased by 2%.
B nominal GDP per capita increased.
C real wages fell due to inflation.
D the number of unemployed people increased.

[1 mark]
2 5 The marginal propensity to consume (MPC) in an economy is 0.5. If the MPC increases
by 20% the new value of its multiplier will be
A 2.0
B 2.5
C 5.0
D 10.0
[1 mark]
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2 6 All other things being equal, which one of the following is most likely to cause the marginal box
revenue product of labour curve in the shoe manufacturing industry to shift to the right?
A A decrease in money wage rates in the shoe industry.
B A decrease in the number of workers employed in the shoe

industry.
C An increase in the market demand for shoes.
D An increase in the number of firms competing in the shoe industry.

[1 mark]
2 7 The diagram below shows the average revenue and marginal revenue (AR and MR)
curves, and the average cost and marginal cost (AC and MC) curves, for the only firm in
an industry.
If the market is highly contestable, in the long run, the firm is most likely to set its price at
A 0P1
B 0P2
C 0P3
D 0P4
[1 mark]
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2 8 A country experiences a large net capital outflow. All other things being equal, the most box
likely consequence of this in the short run will be a decrease in
A its exchange rate.
B its net income from overseas investments.
C its rate of interest.
D the value of exports and imports.
[1 mark]
2 9 The diagram below shows two market demand curves (D1 and D2) and the market supply
curve (S), for Good X.
The price elasticity of supply of Good X when the demand curve shifts from D1 to D2 is
A +0.25
B +2.0
C +4.0
D +7.5
[1 mark]
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3 0 An economy’s GDP increased from £400 billion in 2016 to £428 billion in 2018. Using box
2016 as the base year, what is the value of the index for GDP in 2018?
A 103.5
B 106.5
C 107.0
D 128.0
[1 mark]
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Section B box
Total for this investigation: 50 marks
The UK’s broken housing market
INVESTIGATION
Scenario
You are an economist working for the Ministry of Housing, Communities and Local Government
(MHCLG).
You have been asked to investigate the state of the UK housing market.
Referring to the insert, study Extracts A, B, C and D, then use these extracts and your knowledge
of economics to help you answer Questions 31 and 32. There is also a news report, Extract E,
which is to be used with the other extracts to help you answer Question 33.
3 1 To what extent, if at all, do the data suggest that houses in the UK were more affordable in
2017 than they were in 2007? You must use the data in Extract C to support your
assessment.
[10 marks]
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3 2 Explain the likely causes of the main changes in house prices that have taken place box
between 2007 and 2017.

[15 marks]
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3 3 After considering Extract E, and the original evidence in Extracts A, B, C and D, would box
you recommend that the Government should increase its spending on housing? Justify
your recommendation.
[25 marks]
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50
END OF QUESTIONS
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For confidentiality purposes, from the November 2015 examination series, acknowledgements of third-party copyright material are published in a
separate booklet rather than including them on the examination paper or support materials. This booklet is published after each examination series and
is available for free download from www.aqa.org.uk after the live examination series.
Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright-holders may have been unsuccessful
and AQA will be happy to rectify any omissions of acknowledgements. If you have any queries please contact the Copyright Team, AQA, Stag Hill
House, Guildford, GU2 7XJ.
*196A7136/3*
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Surname
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Candidate signature
A-level
ECONOMICS
Friday 15 June 2018 Morning Time allowed: 2 hours

Materials
For this paper you must have: For Examiner’s Use
• a calculator.
A
Instructions
• Answer all questions. B
drawing. TOTAL
Information
*JUN187136301* IB/G/Jun18/E12 7136/3

2
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Section A outside the
box
select as shown.
0 1 Which one of the following applies to merit goods?
A Their marginal private benefit is greater than their marginal social

benefit.
B They are likely to be provided by the market.
C They can only be supplied by the government.
D They have the characteristics of non-excludability and non-rivalry.
[1 mark]
0 2 At the start of the financial year, an economy’s national debt stands at £1000 billion.
Over the course of the year, the government plans to spend an extra £100 billion and
borrow an extra £40 billion.
If the government achieves its spending and borrowing targets, by the end of the financial
year the national debt will have increased by
A 4%
B 10%
C 14%
D 40%
[1 mark]
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0 3 The diagram below shows the production possibility frontier for an economy that outside the
produces consumer goods and capital goods. The economy is initially operating at point box
X within its frontier.
If the economy now moves from point X to point Y on its frontier it will
A achieve both productive and allocative efficiency.
B benefit from improved economies of scale in the production of

both goods.
C increase its underlying trend rate of growth.
D obtain more consumer goods and capital goods at zero opportunity

cost.
[1 mark]
0 4 All other things being equal, an increase in the ratio of capital to labour resulting from an
increase in investment is most likely to lead to a
A decline in labour productivity.
B fall in the size of the labour force.
C negative demand-side shock to the economy.
D supply-side improvement.
[1 mark]
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0 5 The diagram below shows the demand curve (D) and two supply curves (S1 and S2) in outside the
box
the market for renewable energy.
The renewable energy market is initially in equilibrium at a price of OH. The government
then introduces a subsidy for renewable energy.
After the introduction of the subsidy, the total amount of money received by the producers
from both consumers and the government is
A OGME2
B OHLE2
C OHNME2
D OJKE2
[1 mark]
0 6 Which one of the following provides a reason for government intervention in a market?
A Firms in an oligopolistic market may limit price competition.
B Market failures can only be corrected by using regulations.
C Monopolistically competitive firms earn abnormal profits in

the long run.
D Public goods are excludable and rival.
[1 mark]
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0 7 In recent years, several central banks around the world have implemented a policy of outside the
quantitative easing (QE). All other things being equal, which one of the following box
combinations A, B, C or D, is most likely to be the result of this policy?
Long-term interest
Bank liquidity Bond prices
rates
A Decrease Fall Rise
B Increase Fall Rise
C Decrease Rise Fall
D Increase Rise Fall
[1 mark]
0 8 The price of good Y, a substitute for good X, rises from 75p to £1. As a result, the
quantity of demand for good X rises from 3 million units to 5 million units per month.
What is the value of the cross elasticity of demand for good X with respect to good Y?
A +0.5
B –0.5
C +2.0
D –2.0
[1 mark]
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0 9 The short-run Phillips curve below illustrates the relationship between unemployment and outside the
box
inflation in an economy.
The Phillips curve shows that in this economy
A high inflation leads to high unemployment.
B there is an inversely proportional relationship between

unemployment and inflation.
C the trade-off for reducing inflation from 7% to 3% is a 4% increase

in unemployment.
D the trade-off for reducing unemployment from 7% to 4% is 3%

inflation.
[1 mark]
1 0 Which one of the following is most likely to be associated with behavioural economic
theory?
A All consumer behaviour is based on rational utility-maximising

decisions.
B An individual’s economic decisions may be biased.
C Price changes cannot explain how competitive markets achieve

equilibrium.
D The behaviour of firms is based on their desire to maximise profit.
[1 mark]
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1 1 At the initial market equilibrium, the income elasticity of demand for fresh chickens is outside the
+1.5, and the price elasticity of supply is +1.0. Then there is a 5% increase in box
consumers’ income.
Which one of the following combinations, A, B, C or D, is most likely to show the changes
in the market equilibrium price and quantity?
Price Quantity
A Higher Unchanged
B Higher Higher
C Unchanged Unchanged
D Lower Higher
[1 mark]
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1 2 The diagram below shows two aggregate demand (AD) curves and the short-run outside the
box
aggregate supply (SRAS) curve for an economy.
All other things being equal, the change in real national output from Y1 to Y2 is most likely
to have been caused by an increase in the
A government’s budget deficit.
B level of interest rates.
C size of the labour force.
D volume of exports.
[1 mark]
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1 3 An economy is in a state of macroeconomic equilibrium. The levels of investment, outside the
savings, exports and imports are shown below. box
Injections into and withdrawals from the circular flow of income

Investment £200 bn
Savings £200 bn
Exports £300 bn
Imports £400 bn
It can be inferred from the data in the table above that
A government expenditure equals taxation.
B the budget surplus equals the balance of payments deficit.
C the government has a budget deficit.
D the government has a budget surplus.
[1 mark]
1 4 The table below shows how a firm’s total and average product change, in the short run,
with different inputs of labour.
Number of workers Total product Average product

4 128 32
5 260 52
6 420 70
7 497 71
8 528 66
Diminishing marginal returns to labour set in when the firm employs
A 5 workers
B 6 workers
C 7 workers
D 8 workers
[1 mark]
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1 5 The diagram below shows the market demand curve (D), the market supply curve (S) for outside the
box
solar panels produced in a country, and the world market supply curve (SW) for solar
panels.
To protect domestic producers of solar panels the country introduces a tariff on imports.
The imposition of the tariff increases the price of solar panels from the world market price
(PW) to the higher price (PT).
Following the imposition of the tariff, the amount of tariff revenue collected by the
government is shown by the area
A EFGH
B JFGK
C PWPTGK
D Q2FGQ3
[1 mark]
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1 6 A person eats six biscuits a day to maximise their total utility from the consumption of outside the
biscuits. box
The price of biscuits increases by 50%, leading to a change in the individual’s daily
consumption of biscuits.
Which one of the following combinations, A, B, C or D, shows the most likely changes in
the individual’s total utility and marginal utility?
Marginal utility
Total utility derived from their
derived from the last biscuit
daily consumption of biscuits
consumed each day
A Decrease Decrease
B Increase Decrease
C Decrease Increase
D Increase Increase
[1 mark]
1 7 A large, unexpected decline in house prices could lead to a systemic crisis in the financial
system.
This is most likely to happen if, following the fall in house prices, commercial banks and
building societies
A have a low ratio of capital to their total assets.
B have followed Prudential Regulation Authority (PRA) guidance to

reduce the amount they lend to high-risk borrowers.
C have the option to use the Bank of England as the lender of last
resort.
D hold a high proportion of liquid assets on their balance sheets.
[1 mark]
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1 8 The diagram below shows two long-run aggregate supply (LRAS) and two short-run outside the
box
aggregate supply (SRAS) curves for an economy.
All other things being equal, which one of the following is most likely to explain the
movement to the right of both the short-run and long-run aggregate supply curves?
A A large increase in the availability of renewable energy within

the economy
B An increase in employment and a depreciation of the exchange

rate
C An increase in the natural rate of unemployment and the level

of money wage rates
D A supply-side shock to the economy which increases the rate

of inflation
[1 mark]
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1 9 The table below shows the average exchange rate and currency valuation estimates for outside the
four nations in comparison to the US Dollar in January 2016. box
Average exchange Currency valuation

rate to US $1 estimate
Australian Dollar 1.46 Undervalued by 24%
Brazilian Real 4.05 Undervalued by 32%
Chinese Yuan 6.57 Undervalued by 46%
Danish Krone 6.84 Undervalued by 12%
Which one of the following can be concluded from the data?

A The Australian Dollar has appreciated by 24% against the US
Dollar.
B The Brazilian Real has been devalued by 32% against the US

Dollar.
C The Chinese Yuan has depreciated the most against the US Dollar.
D The Danish Krone has the closest purchasing power parity to the
US Dollar.
[1 mark]
2 0 A firm benefits from significant and persistent economies of scale as it increases output.
Which one of the following is the most likely consequence as it grows in size?
The firm’s
A ability to set its own prices will increase.
B long-run average cost curve will become ‘U’ shaped.
C increasing profitability will attract many new entrants.
D total cost of production will decrease.
[1 mark]
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2 1 The diagram below shows a firm operating in perfect competition in the short run. outside the
box
Which quantity, OE, OF, OG or OH, indicates the output where profits are maximised?
A OE
B OF
C OG
D OH
[1 mark]
2 2 Which one of the following policies is most likely to have an immediate effect in helping to
reduce the amount of poverty in the UK?
A An increase in government subsidies for buyers of electric cars
B A shift in the burden of taxation from direct to indirect taxes
C Setting a price floor for basic foods
D The introduction of a price ceiling for household energy
[1 mark]
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2 3 The table below shows selected components of the UK balance of payments on current outside the
account as a percentage of GDP between 2011 and 2014. box
Balance of
Primary Secondary Current
trade in
Year income income account
goods and
balance balance balance
services
2011 –1.6 1.3 –1.3 –1.6
2012 –2.0 0.1 –1.3 –3.2
2013 –2.0 –1.0 –1.5 –4.5
2014 –1.9 –1.8 –1.4 –5.1
It can be concluded from the data that between 2011 and 2014 the main reason for the
rise in the current account deficit as a percentage of GDP was
A GDP growing faster than the deficit on the current account.
B the deficit on trade in goods increasing by more than the surplus

on trade in services.
C the deterioration in the primary income balance.
D the growth in the deficit on the secondary income balance.
[1 mark]
2 4 Globalisation can make some product markets more contestable.
Which one of the following characteristics of globalisation is the most likely explanation
for such an increase in contestability?
A A reduction in protectionism
B Greater synchronisation of economic cycles between countries
C Higher levels of labour migration
D The growth of employment in emerging market economies
[1 mark]
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2 5 The diagram below shows two aggregate demand (AD) curves, two short-run aggregate outside the
box
supply (SRAS) curves, and the long-run aggregate supply (LRAS) curve for an economy.
The increase in the price level from P1 to P2 raises the rate of inflation above the target
rate set by the government. In an attempt to bring inflation back to its target rate, the
central bank announces a change in interest rates. Other things being equal, this is most
likely to
A create upward pressure on the exchange rate.
B increase bond prices.
C make business loans more affordable.
D reduce the cost of servicing the national debt.
[1 mark]
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2 6 Which one of the following is most likely to measure the degree of competition in an outside the
oligopolistic industry? box
A The price elasticity of supply in the industry
B The profitability of the 10 largest firms in the industry
C The three firm concentration ratio
D The value of the Gini coefficient
[1 mark]
2 7 The diagram below shows the demand and supply curves for skilled labour (Ds and Ss)
and unskilled labour (Du and Su) and the wage differential (W s–W u) between the two
types of labour.
All other things being equal, which one of the following is most likely to cause a decrease
in the wage differential?
A A fall in the demand for unskilled workers
B A fall in the size of the labour force
C An increase in the demand for skilled workers
D An increase in the proportion of the labour force with a degree
[1 mark]
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2 8 In a labour market dominated by a monopsonist, wages and employment are usually outside the
box
lower than in a competitive labour market. This is because a monopsonist
A employs workers up to the point where the marginal revenue

product of labour is equal to the wage rate.
B is a monopoly supplier of labour.
C equates the marginal revenue product of labour with its marginal

cost not the wage rate.
D restricts output to raise the price of the product sold.
[1 mark]
2 9 Which one of the following is most likely to cause an increase in the structural budget
deficit?
A A fall in income tax receipts in the downturn of the economic cycle
B A rise in government spending on unemployment-related benefits

during a recession
C A rise in healthcare expenditure and state pension provision

due to an ageing population
D A rise in spending on imports during an economic recovery
[1 mark]
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3 0 The table below shows indices for real GDP and consumer prices in an economy over six outside the
quarters. box
Index of consumer
Quarter Index of real GDP
prices
1 106 100
2 105 105
3 104 111
4 105 116
5 107 120
6 110 123
During these six quarters the economy experienced
A deflation and a recession.
B disinflation when in recession.
C disinflation when recovering from recession.
D rising inflation when recovering from recession.

30
[1 mark]
Turn over Section B
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Section B outside the
box
The world energy market

INVESTIGATION
Scenario
You are an economist working for OPEC (The Organisation of Petroleum Exporting Countries).
You have been asked to produce a review of the world energy market.
Referring to the insert, study Extracts A, B, C and D, then use these extracts and your
economic knowledge to help you answer questions 31 and 32. There is also a news report,
Extract E, which is to be used with the other extracts to help answer question 33.
3 1 To what extent, if at all, do the data suggest that the reliance on fossil fuels to produce
energy is falling? You must use the data in Extract C to support your assessment.
[10 marks]
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3 2 Explain how a sustained low world market price for oil would be likely to affect the outside the
box
economic development of a less economically developed oil-producing country such as
Nigeria or Venezuela.
[15 marks]
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3 3 After considering Extract E, and the original evidence in Extracts A, B, C and D, would outside the
you recommend to the members of OPEC that they continue to restrict the supply of oil box
to try to raise the world market price of oil? Justify your recommendation.
[25 marks]
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END OF QUESTIONS
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Surname
Forename(s)
Candidate signature
A-level
ECONOMICS
Monday 19 June 2017 Afternoon Time allowed: 2 hours

Materials
• the insert
• a calculator.
Section Mark
Instructions A
• Answer all questions. B
• Use black ink or a black ball-point pen. Pencil should only be used for drawing.
• Fill in the boxes at the top of this page. TOTAL
• You must answer the questions in the spaces provided. Do not write outside the box around each
page or on blank pages.
• Do all rough work in this answer book. Cross through any work you do not want to be marked.
Information
• There are 80 marks available on this paper.
*JUN177136301*
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Do not write
2 outside the
box
Section A
select as shown.
0 1 Economic decision making and policies are influenced by value judgements

because
A all people are motivated by the desire to maximise their

incomes.
B economic analysis and decision making is assumed to be

based on complete information.
C they are based on the same methodology as the natural

sciences.
D they involve moral and political considerations as well as

positive analysis.
[1 mark]
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3 outside the
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0 2 The diagram below shows the original market demand and supply curves
(D1 and S) for loft insulation. Loft insulation reduces energy consumption.
The government wishes to meet its energy efficiency target by shifting the market
demand curve for loft insulation from D1 to D2. Which one of the following policies
is most likely to enable the government to achieve its objective?
A A decrease in the rate of VAT on domestic gas and electricity

used for home heating
B A ‘nudge’ to households to install loft insulation by offering to
clear lofts of unwanted items if insulation is installed
C The introduction of a maximum price for loft insulation
D The introduction of a subsidy paid to the firms installing loft

insulation
[1 mark]
0 3 The law of diminishing marginal utility states that
A as more of a product is consumed, the extra satisfaction will

decline.
B as more of all factors are employed, the additional output

produced will fall.
C as more variable factors are added to a fixed factor, the

additional output produced will decline.
D the total satisfaction from consuming a product will be

maximised when marginal utility starts to fall.
[1 mark]
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0 4 The diagram below shows the market for bricklayers.
The original equilibrium wage is W 1 and the number of bricklayers employed is N1.
Which one of the following events is most likely to increase the wage paid to
bricklayers to W 2 and increase employment to N2?
A A cut in bank rate leading to a fall in mortgage interest rates
B A fall in the number of young people training as apprentice

bricklayers
C An improvement in working conditions in the construction

industry
D An increase in the wages paid to electricians in the

construction industry
[1 mark]
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0 5 A firm employs three factors of production: capital, land and labour. The table below
shows how the firm’s output is affected by changing the amount employed of these
factor inputs.
Labour (Number
Units of output Units of capital Units of land
of workers)
500 20 40 60
1000 80 160 240
2000 140 280 420
3000 210 420 630
4000 300 580 860
The firm experiences constant returns to scale when it increases its output from
A 500 to 1000 units.
B 1000 to 2000 units.
C 2000 to 3000 units.
D 3000 to 4000 units.

[1 mark]
0 6 The table below shows possible differences between the meanings of the terms
invention and innovation. Which combination, A, B, C or D, correctly identifies the
difference between the meanings of these terms?
Invention Innovation
Applies to changes in Applies to changes in
A
goods only services only
Applies to changes in Applies to changes in
B
services only goods only
Discovering something Turns the results of
C
entirely new invention into a product
Turns the results of Discovering something
D
innovation into a product entirely new
[1 mark]
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0 7 The table below shows the output, average total cost and average revenue for a
firm.
Units of output Average total cost (£) Average revenue (£)
10 15 26
11 14 24
12 13 23
13 12 21
At which one of the following levels of output will the firm maximise its profits?
A 10 units
B 11 units
C 12 units
D 13 units
[1 mark]
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0 8 The diagram below shows the cost and revenue curves for a monopoly.
At which one of the following levels of output would the firm be productively
efficient?
A OW
B OX
C OY
D OZ
[1 mark]
0 9 The marginal revenue product of labour is the
A addition to total revenue when the firm produces and sells an

extra unit of output.
B amount produced per worker per time period.
C change in total output that is produced when one extra worker

is employed.
D revenue gained by selling the extra output produced by

employing one more worker.
[1 mark]
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1 0 The diagram below shows the demand curves (D1 and D2) and the supply curve (S)
in the market for good X. The initial market equilibrium is at E1.
The increase in market demand from D1 to D2 results in a new market equilibrium at

E2. The market mechanism that leads to the establishment of the new equilibrium is
based on
A excess demand for good X at the initial price of P1.
B excess demand for good X at the new price P2.
C excess supply of good X at the initial price of P1.
D excess supply for good X at the new price P2.

[1 mark]
1 1 Which one of the following values for the Gini coefficient shows the greatest
inequality?
A -0.5
B 0
C 0.5
D 1
[1 mark]
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1 2 The tragedy of the commons can be applied to the fishing industry. What is the
nature of this market failure?
A Over-fishing resulting in declining fish populations
B The imposition of fishing quotas by the European Union
C The positive externalities associated with fish consumption
D The third-party effects on dolphins as a result of tuna fishing

[1 mark]
1 3 Immobility of labour may lead to a misallocation of resources and market failure

because
A a change in the pattern of demand results in structural

unemployment.
B the education and training needed to reduce labour immobility

is a public good.
C the government’s target for the rate of inflation is too high.
D the immobility of factors of production is a negative externality

in production.
[1 mark]
1 4 The following table shows the real GDP of an economy from 2012 to 2016.
Year 2012 2013 2014 2015 2016

Real GDP
213 215 245 256 271
(£bn)
If the figures were converted to index form with 2013 as the base year, what would
be the value of the index (to the nearest whole number) in 2016?
A 124
B 125
C 126
D 127
[1 mark]
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1 5 The information below shows the changes in key economic indicators for a country
over a period of one year.
Rate of Population
Money GDP Gini coefficient
inflation increase
+6% +4% +1% –8%
Which one of the following can be concluded from the data?
A External costs generated from economic activity have

reduced the quality of life
B Real GDP per capita has fallen
C The distribution of income has become more unequal
D The standard of living of typical residents in the country has

probably improved
[1 mark]
1 6 Assuming that the value of the marginal propensity to consume is 0.6, which of the
following changes in national income would result from an increase in exports of
£19bn?
A £31.7bn
B £47.5bn
C £76bn
D £114bn
[1 mark]
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1 7 The primary measure of unemployment in the UK is based on the
A number of people joining the labour force minus the number

of people leaving the labour force.
B number of people not working who are of working age.
C the number of people actively seeking work and available to

start work.
D proportion of the population of working age without a job.

[1 mark]
1 8 The diagram below depicts an aggregate demand (AD) curve and two long-run
aggregate supply (LRAS) curves for an economy. The economy’s initial equilibrium
is at E1.
All other things being equal, the movement of the economy from its initial
equilibrium at E1 to E2 is most likely to be caused by an increase in
A government borrowing.
B labour productivity.
C the rate of deflation.
D money wage rates.

[1 mark]
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1 9 The diagram below represents the market for unskilled agricultural labourers where
the demand for agricultural labourers is DL and the supply is SL. The trade union
representing agricultural labourers has negotiated a minimum wage of OWmin for its
members.
The effect of implementing a minimum wage of OWmin is that
A cyclical unemployment increases by (ON3 – ON1).
B frictional unemployment increases by (ON2 – ON1).
C real wage unemployment increases by (ON3 – ON1).
D the natural rate of unemployment increases by (ON2 – ON1).
[1 mark]
2 0 A bank makes a new loan to a customer. All other things being equal, which
combination of events, A, B, C or D, shows what will happen?
Bank’s
Bank’s assets Money supply
liabilities
A Increase Increase Increases
B Increase Fall Increases
C Fall Increase Falls
D Fall Fall Falls
[1 mark]
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2 1 A government issued bond has a nominal value of £100 and the annual coupon is
£6. The bond has 35 years until maturity. Its current yield is 5%. The current
market price of the bond is
A £100
B £105
C £106
D £120
[1 mark]
2 2 Which one of the following combinations, A, B, C or D, best distinguishes between

the functions of the money market and the capital market?
Money market Capital market
The market where foreign

The market for issuing new
A currency is exchanged at
shares
some point in the future
The market where The market where

commercial banks provide businesses obtain funds
B
short-term loans to each to finance long-term
other growth
The main market in which

The market where foreign
C commercial banks lend to
currencies are traded
each other
The market where the The market where

government finances its short-term debt is
D
budget deficit by issuing converted into equity
bonds finance
[1 mark]
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2 3 The table below shows the marginal income tax rates in an economy for 2016.
Table: Marginal income tax rates for every $1 of income
Taxable Income Income tax rates 2016
From $0 to $10 000 0%

From $10 001 to $30 000 10%
From $30 001 to $50 000 30%
$50 001 and above 45%
How much income tax would be payable by someone earning $40 000 in 2016?
A $5 000
B $5 500
C $10 000
D $12 000
[1 mark]
2 4 The national debt is the
A annual budget deficit plus the external trade deficit.
B amount by which the budget deficit increases each year.
C annual difference between government spending and tax

receipts.
D the cumulative stock of outstanding central government

borrowing.
[1 mark]
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2 5 The table below shows how much of each of two products can be produced by
two countries with the same amount of resources.
Motorbikes Cars
Brazil 10 or 5
United States 6 or 2
Which one of the following statements is correct?
A Brazil has a comparative advantage in the production of both

motorbikes and cars.
B Brazil has a comparative advantage in the production of cars.
C The opportunity cost of producing motorbikes is higher in the

United States than Brazil.
D Trade will not take place because Brazil is better at producing

both goods.
[1 mark]
2 6 A country has a Human Development Index of 0.91. This country is most likely to
have
A a high dependence on its primary sector.
B a low level of life expectancy.
C rapid population growth.
D relatively low levels of illiteracy.

[1 mark]
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2 7 The table below shows the Consumer Prices Index for a country over a number of
years.
End of year prices

Year
index
1 100
2 98
3 103
4 105
5 106
6 104
7 107
Which one of the following can be concluded from the table?
A The country suffered disinflation in Year 5
B The inflation rate was highest in Year 7
C The only time the country suffered deflation was in Year 2
D Real incomes fell between Year 1 and Year 7

[1 mark]
*16* IB/G/Jun17/7136/3
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2 8 The diagram below shows the aggregate demand (AD) and two short-run
aggregate supply (SRAS) curves for an economy.
All other things being equal, which one of the following is most likely to cause the
short-run aggregate supply curve to shift from SRAS1 to SRAS2?
A A fall in the size of the labour force
B An increase in imports
C An increase in the value of the multiplier
D Lower world commodity prices

[1 mark]
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2 9 The diagram below shows the marginal private and social benefit (MPB and MSB)
curves and the marginal private and social cost (MPC and MSC) curves in a market
where there are positive externalities in production.
At the free market equilibrium, market failure occurs. Which one of the following is
correct?
A As a result of this market failure, consumer surplus is reduced

by ZXY
B As a result of this market failure, there is a deadweight loss to

society of P3P1XZ
C P1 minus P3 is the subsidy per unit that is required to correct

the market failure and achieve the social optimum
D The diagonal distance XY shows the amount by which

marginal private cost exceeds marginal social cost at OQ2
[1 mark]
3 0 The price elasticity of demand for games consoles is -1.2. It can be concluded that
a 10% reduction in their price would lead to a percentage change in demand of
A −8.3%
B −12.0%
C +8.3%
D +12.0%
[1 mark] 30
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Section B
Answer all questions in this section
Refer to the insert for Extracts A, B, C and D.
The march of the makers – does manufacturing matter?
INVESTIGATION
Scenario
You are an economist, employed by a firm of economic consultants working for the government.
You have been asked to produce a report on the importance of manufacturing for the UK economy.
Referring to the insert, study Extracts A, B, C and D, and then use these and your own economic
knowledge to help you answer questions 31, 32 and 33.
3 1 To what extent, if at all, do you consider that the UK manufacturing sector has been
in decline since 2003? You must use the data in Extract B to support your
assessment.
[10 marks]
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3 2 Explain why, in advanced economies, economic growth is usually accompanied by

a fall in employment in manufacturing but an increase in employment in the service
sector.
[15 marks]
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3 3 Taking into account Extract D, and the original evidence presented in Extracts A,
B and C, would you recommend that the government should intervene to support
the UK steel industry? Justify your recommendation.
[25 marks]
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50
END OF QUESTIONS
For confidentiality purposes, from the November 2015 examination series, acknowledgements of third party copyright material will be published in a
separate booklet rather than including them on the examination paper or support materials. This booklet is published after each examination series
and is available for free download from www.aqa.org.uk after the live examination series.
Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright-holders may have been
unsuccessful and AQA will be happy to rectify any omissions of acknowledgements. If you have any queries please contact the Copyright Team,
AQA, Stag Hill House, Guildford, GU2 7XJ.
*28* IB/G/Jun17/7136/3
SPECIMEN MATERIAL
A-level
ECONOMICS
7136/3
Specimen 2014 Morning Time allowed: 2 hours

Materials
• a calculator.
Instructions
• Answer all questions.
• Use a black ball-point pen. Do not use pencil.
• You will need to refer to the source booklet provided to answer Section B.
• Do all rough work in this answer book. Cross through any work you do not want to be marked.
• You must answer the question in the spaces provided. Do not write outside the box around each
page or on blank pages.
Information
7136/3
2
Section A
For each answer completely fill in the lozenge alongside the appropriate answer.
as shown.
0 1 Which one of the following is a true statement about average fixed costs?
Average fixed costs
A do not change as output changes.
B fall as output increases.
C include rent and raw materials.
D equal total costs minus total variable costs.

[1 mark]
0 2 Which one of the following is an example of a supply-side policy rather than a

demand-side policy?
A An increase in the supply of money.
B Increased government expenditure on welfare benefits.
C An increase in export subsidies.
D Increased government expenditure on education and training.

[1 mark]
3
0 3 The table below shows the total utility of an individual’s consumption of chocolate bars.
Quantity Total utility

1 100
2 180
3 250
4 300
5 330
What is the marginal utility gained by the consumption of the fourth chocolate bar?
A 30
B 50
C 70
D 300
[1 mark]
0 4 The diagram below shows the Marginal Revenue Product of Labour (MRPL), Marginal
Cost of Labour (MCL) and Average Cost of Labour (ACL) curves in a market where
there is a single employer but labour is supplied competitively.
The employer’s profit-maximising wage rate and level of employment is a
A wage of W 1 and employment of L 1
B wage of W 2 and employment of L 2
C wage of W 3 and employment of L 1
D wage of W 4 and employment of L 2

[1 mark]
Turn over 
4
0 5 Over a period of time, the value of the pound against the US dollar changes from £1 =
$2.00 to £1 = $1.50. All other things being equal, this is most likely to result in
A UK products becoming more expensive in the US.
B a downturn in the UK’s economic cycle.
C a higher inflation rate in the UK.
D an increase in the UK’s budget deficit.

[1 mark]
0 6 The diagram below shows the market demand and supply curves for electric light
bulbs.
Assuming that electric light bulbs are a normal good, the shift in the demand curve
from D 1 to D 2 and the rise in the equilibrium price from P 1 and P 2 can be explained by
A an increase in household incomes.
B an increase in the price of electricity.
C a decrease in the rate of value added tax (VAT) on light bulbs.
D the introduction of a government subsidy to the producers of

light bulbs.
[1 mark]
0 7 Which one of the following is used to measure inequality in the distribution of income?
A The size of the employed labour force.
B The value of the Gini coefficient.
C The size of the income multiplier.
D The marginal rate of income tax.

[1 mark]
5
0 8 The four diagrams below show aggregate demand (AD) and short-run aggregate
supply (SRAS) curves for the UK economy. All other things being equal, which one of
the diagrams A, B, C or D shows the most likely effects of an increase in raw material
prices and an increase in income taxes on consumers?
[1 mark]
Turn over 
6
0 9 All other things being equal, a rise in which one of the following would shift an
economy’s short-run aggregate supply curve to the left?
A Wage rates
B Imports of consumer goods
C The money supply
D Labour productivity
[1 mark]
1 0 The table below shows the marginal private and external benefits and the marginal
private and external costs of two products at their free market equilibrium level of
output.
Product X (£) Product Y (£)

Marginal private benefit 200 70
Marginal external benefit 50 40
Marginal private cost 200 70
Marginal external cost 90 30
To improve the allocation of resources, what should the government do?
A Tax product X and subsidise product Y
B Tax product X and tax product Y
C Subsidise product X and tax product Y
D Subsidise product X and subsidise product Y

[1 mark]
7
1 1 Three aims of commercial banks are liquidity, profitability and security. To achieve
these aims, the banks hold a range of assets. Which one of the following shows a list
of banks’ assets ranging from the most liquid to the least liquid?
Most liquid Least liquid

Balances at
Government
A the Bank of Treasury bills Advances
bonds
England
Balances at
Government
B Treasury bills the Bank of Advances
bonds
England
Balances at
Government
C Advances the Bank of Treasury bills
bonds
England
Balances at
Government
D Advances Treasury bills the Bank of
bonds
England
[1 mark]
1 2 According to the principle of comparative advantage, on what does a country’s gains

from international trade depend?
A Its level of money wage rates compared to its trading partners.
B It imposing a higher level of tariffs compared to those of its

trading partners.
C Its greater productive capacity in some goods compared

to its trading partners.
D Its lower opportunity cost in the production of some goods

compared to its trading partners.
[1 mark]
Turn over 
8
1 3 The table below shows the effective exchange rate index for Country X in 2010 and
2012 (2012 = 100).
Year Effective exchange rate index

2010 125
2012 100
All other things being equal, which one of the following options provides both the
correct percentage change in the index from 2010 to 2012 and a valid reason why this
change may have occurred?
Change in
Reason
exchange rate
An increase in interest rates in
A 20%
Country X
B 20%
other countries
An increase in interest rate in
C 25%
Country X
D 25%
other countries
[1 mark]
1 4 The lack of clearly defined property rights in a country is most likely to lead to
A overproduction of merit goods.
B equality of private costs with social costs.
C overuse of scarce natural resources.
D an efficient allocation of resources.
[1 mark]
9
1 5 The diagram below shows aggregate demand (AD), short-run aggregate supply
(SRAS) and long-run aggregate supply (LRAS) curves for the UK economy. Initial
aggregate demand is AD 1 . The shift of the aggregate demand curve to AD 2 is the
result of a decrease in bank lending following the 2008–2009 financial crisis.
The shift in the AD curve indicates that the effect of the financial crisis on the UK
economy was to create a
A negative output gap and structural unemployment.
B positive output gap and cyclical unemployment.
C positive output gap and structural unemployment.
D negative output gap and cyclical unemployment.

[1 mark]
1 6 If the price elasticity of supply of a good is +4.0 and its price increases by 10%, the
increase in quantity supplied is
A 0.4%
B 2.5%
C 25%
D 40%
[1 mark]
Turn over 
10
1 7 In the diagram below, SRPC is a short-run Phillips curve.
The vertical axis measures the
A rate of interest.
B price level.
C percentage change in aggregate demand.
D rate of inflation.
[1 mark]
1 8 Assuming a perfectly competitive labour market, a firm’s demand curve for labour
would be derived from its marginal
A cost curve.
B revenue product curve.
C utility curve.
D revenue curve.
[1 mark]
1 9 An injection into an economy, with a marginal propensity to consume of 0.8, leads to a

total increase in national income of £350 million. What was the value of the initial
injection?
A £35 million
B £70 million
C £120 million
D £280 million
[1 mark]
11
2 0 An essential difference between behavioural and traditional economic theory is that

behavioural economic models assume that
A people act rationally.
B consumers attempt to maximise utility.
C people consider all the available options when making choices.
D emotional factors influence economic decision-making.

[1 mark]
2 1 Which one of the following macroeconomic policies is a Keynesian economist most

likely to recommend as a means of stimulating recovery for an economy that has been
in recession for several years?
A Increasing taxes to finance increased government expenditure.
B Increasing the money supply to maintain very low interest rates.
C Increasing government expenditure financed by increased

government borrowing.
D Cutting government expenditure to balance its budget.

[1 mark]
2 2 Government intervention will result in a more efficient allocation of resources if
A it leads to a reduction in the consumption of demerit goods.
B it leads to a reduction in the subsidies received by firms.
C it reduces the number of competing firms in an industry.
D consumers are charged for the provision of public

goods.
[1 mark]
Turn over 
12
2 3 According to the Quantity Theory of Money, as illustrated by the equation of exchange

MV = PQ, a rise in the money supply will have most effect on inflation when which one
of the following combination of events occurs?
Velocity of
Final output (Q)
circulation (V)
A Decrease Decrease
B Decrease Increase
C Increase Increase
D Increase Decrease
[1 mark]
2 4 The diagram below illustrates the short-run effect on output of increasing the amount
of labour employed in combination with a fixed factor of production.
At which level of employment will the total output of the firm be at its maximum?
A OW
B OX
C OY
D OZ
[1 mark]
13
2 5 In 2012, the UK Government issued a £100 bond with a coupon of £3 per annum and
40 years until maturity. Two years later, the interest that could be earned on a similar
asset had risen to 6%. What is likely to have happened to the price of the bond and its
yield?
A The price of the bond will have risen but the yield will be
unchanged.
B The price of the bond will have fallen but the yield will have
increased.
C The price of the bond will have risen but the yield will have
increased.
D The price of the bond will be unchanged but the yield will have
fallen.
[1 mark]
2 6 The diagram below shows the cost and revenue curves for a firm in a perfectly
competitive market.
All other things being equal, the firm
A is making a loss in the short run but will remain in the market
in the long run.
B is making a profit and will remain in the market in the long run.
C will exit the market immediately to minimise its loss.
D is minimising its loss by staying in the market in the short run.

[1 mark]
Turn over 
14
2 7 The table below contains index number data for an economy’s GDP, population size
and its price level for the years 2005 and 2014. All three indices have 2005 for their
base year.
GDP Population Price level

2005 100 100 100
2014 200 120 150
Using the data, the increase in real GDP per capita between 2005 and 2014 is
approximately
A 10%.
B 20%.
C 50%.
D 100%.
[1 mark]
2 8 The data below shows economic growth rates, unemployment rates and inflation rates
for an economy.
Real output growth Unemployment Inflation rate

Year
rate (%) rate (%) (%)
2010 2 4 6
2011 3 3 5
2012 4 3 4
2013 5 2 3
All other things being equal, which one of the following is the most likely explanation
for the relationship between the rates of growth of real output, rates of unemployment
and inflation between 2010 and 2013?
A A decrease in the money supply.
B An increase in innovation and productivity.
C A decrease in the savings ratio.
D An increase in the current account deficit.

[1 mark]
15
2 9 A farmer can produce two types of grain on his farm, wheat and barley. The
production possibility boundary below shows the different quantities of the two grains
that can be produced on the farm in a single year.
It can be deduced from the diagram that
A a movement from X to Y results in an improvement in

productive efficiency because the total output of grain
increases from 100 to 115 tonnes.
B at point X, the opportunity cost of producing 20 more tonnes

of wheat is 40 tonnes of barley.
C a movement from point Y to point Z does not involve an

opportunity cost because all resources are fully employed.
D the maximum amount of grain that the farm can produce in one
year is 80 tonnes of wheat and 100 tonnes of barley.
[1 mark]
Turn over 
16
3 0 The diagrams below show the peak and off-peak travel markets for a
price-discriminating train operating company. The firm is a monopolist and the costs in
both markets are the same.
To maximise profits, how much should be supplied in each market?
Peak travel Off-peak travel

A OV OX
B OV OY
C OW OX
D OW OY
[1 mark]
QUESTION 30 IS THE LAST

QUESTION IN SECTION A
Turn to page 18 for Section B

17
Turn over for the next section

Turn over 
18
Section B
Refer to source booklet for Extracts A, B, C and D.
Brazil: The Hot ‘BRIC’
INVESTIGATION
Scenario
You are an economist reporting to a UK car manufacturer who is considering investing in Brazil. The
company has requested that you provide answers to three key questions.
Referring to the source booklet, study Extracts A, B, and C and then use these and your own
economic knowledge to help you answer questions 31 and 32. There is also an additional news
report, Extract D, which is to be used with the other extracts to help answer question 33.
3 1 How does Brazil compare with the UK in relation to human capital and macroeconomic
stability? You must use the data in Extract C to support your assessment.
[10 marks]
19
Extra space
Turn over 
20
If your client decides that they want to invest in Brazil, they will have to persuade the government that
it will benefit the Brazilian economy and its people.
3 2 Explain how Brazil is likely to benefit from inward investment by a UK car

manufacturer.
[15 marks]
21
Extra space
Turn over 
22
3 3 Taking into account the news report, Extract D and the original evidence, do you
recommend that the company should invest in Brazil? Justify your recommendation.
[25 marks]
23
Turn over 
24
Extra space
END OF QUESTIONS
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will be happy to rectify any omissions of acknowledgements in future papers if notified.

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Centre number Candidate number

Time allowed: 2 hours

Answer all questions in this section.

Only one answer per question is allowed.

CORRECT METHOD WRONG METHODS

A does not take into account irrational behaviour.

B enables accurate forecasts to be made.

C includes a value judgement.

D may be true or false.

A Banning supermarkets from selling high-calorie energy drinks

B Increasing taxes on high-fat products to raise their price

C Moving products with a high sugar content away from

D Subsidising fruit and vegetables to reduce their prices

and consumer goods.

The opportunity cost of producing an additional unit of capital goods is

C the same at X, Y and Z.

D zero when 300 units of consumer goods are produced.

Turn over for the next question

Price Index in April 2022

D rates of population growth.

supply (SRAS) curve for an economy.

C Rates of income tax

D The budget deficit

Turn over for the next question

reduce market failure?

A Merit goods will no longer be underconsumed in a free market.

B Producers will be more likely to have to pay compensation for

C Public goods will no longer be subject to the free-rider problem.

D The inequality in the distribution of income and wealth will be

0 8 Figure 3 shows the demand curve for a firm’s scarves.

A Demand for scarves is price elastic.

B Price elasticity of demand is –0.5.

C The firm’s total revenue falls.

D The firm’s total revenue increases.

B marginal cost pricing.

According to Fisher’s equation of exchange, the price level will increase by

1 1 Systemic risk is most likely to occur in financial systems when

A investment banks have low capital-output ratios.

B most banks carry out both commercial and

C the central bank acts as lender of last resort

D the commercial banks have high liquidity ratios.

A A decrease in the natural rate of unemployment

B A loss of consumer and producer confidence

C A natural disaster, damaging productive capacity

D A rise in factor prices, resulting in cost-push inflation

A Helping countries settle disputes over tariffs and quotas

B Lending money to countries with balance of payments problems

C Monitoring the stability of the international monetary system

D Providing loans at low rates of interest to low-income countries

A Car manufacturers’ stocks of unsold cars are low

B The demand for cars is also price elastic

C The marginal cost of producing cars increases significantly with output

D There is considerable spare capacity in the car industry

Turn over for the next question

on an economy of an improvement in technology in the production process?

B The Gini coefficient in some countries is low.

C The income of some households is significantly less than the median

Income (£) Tax paid (£)

This tax is an example of a

A lump sum tax.

A Government retraining schemes for structurally unemployed workers

B Increasing legal protection against unfair dismissal for employees

C Increasing the real value of the national minimum wage