AQA_A Level Economics Paper 3_2020 | 2020 A Level Economics Paper 3

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A-level ECONOMICS Paper 3 Economic Principles and Issues2 *02* IB/M/Jun20/7136/3 Section A Answer all questions in this section. Only one answer per question is allowed. For each question compl... etely 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 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] Do not write outside the box3 *03* Turn over ► IB/M/Jun20/7136/3 Do not write outside the 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 growth Real GDP growth Inflation 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]4 *04* IB/M/Jun20/7136/3 Do not write outside the 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 barriers Common external tariffs Common currency A Yes No Yes B No Yes No C Yes Yes No D No No Yes [1 mark]5 *05* Turn over ► IB/M/Jun20/7136/3 Do not write outside the 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%. [1 mark]6 *06* IB/M/Jun20/7136/3 Do not write outside the 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]7 *07* Turn over ► IB/M/Jun20/7136/3 Do not write outside the 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 Year Inflation Rate of growth 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]8 *08* IB/M/Jun20/7136/3 Do not write outside the 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- - - - [Show More]

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