Cambridge AS & A Level Economics 9708/42 is the May/June 2026 Paper 4 (A Level Data Response and Essays), variant 2. It is an A Level component worth 60 marks, and it lasts 2 hours. You answer three questions: the compulsory 20-mark data response on US foreign trade and interest rate policy, then one essay from Section B and one from Section C, each worth 20. The essays have no parts, so each one is a single 20-mark answer marked with two level grids, and together they make up two thirds of the paper. This guide goes through every question and shows what the official mark scheme gave marks for. The paper and its mark scheme are free on the Tutopiya Learning Portal.

For an overview of all four 9708 papers from this series, see A Level Economics 9708 May/June 2026 past papers: what came up and how it was marked.

9708/42 at a glance

The rubric is: answer Question 1 in Section A, one question from Section B and one question from Section C. You may refer to any economy you have studied where it is relevant.

Question	Section	Topic	Marks
1	A (compulsory)	US trade deficit, import tariffs, high interest rates and low-income countries	20
2	B (choose 2 or 3)	Marginal utility theory and demand for normal and inferior goods	20
3	B (choose 2 or 3)	Governments, trade unions and wage negotiations, with diagrams	20
4	C (choose 4 or 5)	The quantity theory of money as an explanation of inflation	20
5	C (choose 4 or 5)	GNI as a measure of living standards in a high-income country	20
		Total answered (Question 1 + one from B + one from C)	60

Question-by-question walkthrough

Question 1: US foreign trade and interest rate policy (20 marks)

The source reported a US trade deficit of US$69.4 billion in March 2024 and governments’ preference for import tariffs to reduce it. Inflation had passed 10% in 2022 and was brought down to 2.9% by December 2023, still above the 2% target, so the Federal Reserve held interest rates at 5.5% and kept selling securities to reverse quantitative easing. The high rates had helped the dollar appreciate by 6.25% over five years, raising the cost of dollar-priced imports such as raw materials, food and oil for low-income countries (LICs), which also carry large US dollar debts.

• 1(a) Why a trade deficit might be undesirable (2 marks): 1 mark each, up to 2, from: a worse (X − M) leading to job losses, a reduction in GDP, imported inflation, and a fall in foreign exchange reserves.
• 1(b) How import tariffs lead to expenditure switching, with a diagram (4 marks): the mark scheme’s diagram shows US demand and US supply, a horizontal world supply line at a low price, and a higher world supply plus tariff line. Up to 2 marks for the diagram’s axes and labels, and the diagram must show world supply. Up to 2 more for comments or explanation (one developed point for 1 + 1, or two separate points): imports shrink because the gap between domestic supply and demand narrows at the higher price, US producers’ output rises, and the quantity bought from world supply falls. Spending switches from foreign to domestic producers.
• 1(c) Would a high interest rate move inflation, job creation and growth all in the right direction? (7 marks): three pairs of points, 1 + 1 each, up to 6: high rates cut investment, which lowers job creation (1) and the growth rate (1); they raise the exchange rate through hot money inflows (1), which makes imports cheaper and reduces inflation (1); and they reduce consumer demand (1), cutting growth and inflation (1). The final mark was for the conclusion that not all the stated aims are likely to be achieved at the same time: a high rate helps inflation but works against jobs and growth.
• 1(d) Is the information sufficient to conclude that the Federal Reserve’s policy benefitted LICs? (7 marks): the same 3 × (1 + 1) structure, up to 6. The high US rate makes the dollar appreciate (1), so raw materials, food and oil cost LICs more (1); US dollar debt interest payments rise, or you point out that the information does not mention higher debt servicing costs (1), and the debt becomes harder to repay (1); and repayment costs (1) make economic development more difficult (1). The conclusion mark went to judging that the evidence is insufficient to show any benefit to LICs.

Question 2: marginal utility theory and market demand (Section B, 20 marks)

Asks you to evaluate whether marginal utility theory adequately explains market demand for both normal and inferior goods.

• Knowledge and analysis: the assumptions (rational consumers who prefer more to less, a two-good world, goods that can substitute for each other, perfect knowledge); definitions of marginal and total utility; diminishing marginal utility; how much a consumer buys as price changes; the equi-marginal principle, MUx/Px = MUy/Py, and how consumers rebalance spending when one price changes; and adding individual demand curves horizontally to get market demand.
• Evaluation: consumers may not calculate rationally across many combinations of goods; the theory has no place for income and substitution effects, so it does not explain inferior goods; it struggles with infrequent, indivisible purchases (the mark scheme’s example is one fridge against four weeks’ food); and real consumers buy many goods, not two.

Question 3: governments, trade unions and unemployment (Section B, 20 marks)

Asks you to evaluate, with diagrams, the claim that governments and trade unions should be kept out of wage negotiations because they always cause higher unemployment.

• Knowledge and analysis: wage determination in perfect competition; marginal physical product (MPP); marginal revenue product, MRP = MPP × price, as the demand for labour; the supply of labour; a diagram of wages set by MRP and labour supply; and a diagram of a government or union minimum wage above equilibrium, where the quantity of labour demanded falls and the quantity supplied rises, creating unemployment.
• Evaluation: whether perfect competition’s assumptions (perfect knowledge, free movement of labour) are realistic; unions can agree productivity deals that raise MPP and so the demand for labour; and governments often act as monopsony employers, so higher wages may simply reflect MRP.

Question 4: the quantity theory of money (Section C, 20 marks)

Asks you to evaluate whether the quantity theory satisfactorily explains the cause of inflation.

• Knowledge and analysis: the monetarist view that inflation comes from growth in the money supply; MV = PQ and the meaning of M, V, P and Q; and why, with V and Q assumed constant, P moves in proportion to M.
• Evaluation: Q need not be fixed, since output can grow in the short run as unemployment falls and in the long run through new technology or resources; V may change with the transactions and precautionary demand for money; the theory ignores exchange rate effects, since more money lowers interest rates, the currency depreciates and net exports and Q change; other explanations of inflation may be better; and the theory is an identity, not an equation.

Question 5: GNI and living standards in a high-income country (Section C, 20 marks)

Asks you to consider whether GNI alone is enough to measure the standard of living in a high-income country.

• Knowledge and analysis: definitions of GNI, the material and non-material standard of living and a high-income country; converting GNI into real GNI per capita as a measure of the material standard of living; the link between material and non-material living standards; and whether differences in real GNI per capita among high-income countries are significant in real terms.
• Evaluation: problems measuring real GNI per capita (data collection, the informal economy and non-marketed activities); the changing range of goods and services; positive and negative externalities; the long hours and commuting that can come with high incomes; sustainability; alternative measures such as the HDI and MPI; and the Gini coefficient.

How the essays are marked

Every essay uses the same two grids:

• Table A (AO1 knowledge and understanding and AO2 analysis), up to 14 marks. Level 1 (1–5) has a few relevant points, significant errors and largely descriptive analysis. Level 2 (6–10) covers the general theme with limited development and diagrams that are only partly accurate or not fully explained. Level 3 (11–14) is detailed, fully developed and well organised, with accurate, fully explained diagrams where they are needed.
• Table B (AO3 evaluation), up to 6 marks. Level 1 (1–3) is simple comments and a vague or general conclusion. Level 2 (4–6) is developed, well-supported evaluation and a justified conclusion that answers the specific question.

The mark scheme lists indicative content and accepts all valid responses, so other relevant arguments and examples are credited.

Where the marks are on 9708/42

Split by task, for a candidate answering Question 1 and two essays:

Task	Marks
Explain (1(a))	2
Explain with a diagram (1(b))	4
Consider and assess with a conclusion (1(c), 1(d))	14
Essay knowledge, understanding and analysis (Table A, two essays)	28
Essay evaluation (Table B, two essays)	12
Total	60

• The essays are 40 of the 60 marks. Their analysis grids alone are worth 28.
• Evaluation is a fixed 6 marks per essay, plus the two conclusion marks in 1(c) and 1(d), so 14 marks depend on judging and concluding.
• Questions 1(c) and 1(d) reward paired reasoning: each point earns 1 and its consequence another 1, so three developed chains reach the maximum of 6 before the conclusion mark.

How to self-mark 9708/42 with the mark scheme

1. Mark Question 1 point by point. For 1(a), stop at 2 marks. For 1(b), check that world supply is labelled before awarding the diagram marks.
2. Pair your 1(c) and 1(d) points. Give 1 for each cause and 1 for its effect, cap at 6, then add the conclusion mark only if you said that not all aims can be met together (1(c)) or that the evidence shows no benefit to LICs (1(d)).
3. Level each essay with Table A first. Ask whether the analysis is detailed and fully developed (Level 3) or general with limited development (Level 2), and whether every diagram is accurate and explained.
4. Then level it with Table B. A developed, reasoned evaluation and a justified conclusion that answers the exact question reach Level 2 (4–6); a general conclusion stays in Level 1.
5. Compare your essay with the indicative content. For Question 2, did you deal with inferior goods? For Question 4, did you challenge the constancy of V and Q?
6. Log each lost mark as missing theory, an undeveloped chain, an unexplained diagram or a weak conclusion, and practise that skill next.

Sit 9708/42 as a timed mock

The paper allows 120 minutes for 60 marks, two minutes per mark. A workable plan:

Block	Marks	Time
Read the source and Question 1	–	5 minutes
Answer Question 1	20	31 minutes
Choose and plan your Section B essay	–	5 minutes
Write the Section B essay	20	37 minutes
Choose and plan your Section C essay	–	5 minutes
Write the Section C essay	20	37 minutes

Use the planning time to list your analysis chains, the counter-arguments and your conclusion, and sketch any diagram the question asks for, such as the labour market diagrams in Question 3.

Other May/June 2026 9708 papers

• 9708 Paper 12 (AS Level Multiple Choice)
• 9708 Paper 22 (AS Level Data Response and Essays)
• 9708 Paper 32 (A Level Multiple Choice)

Practise and download

• Download 9708/42 and its mark scheme on the Learning Portal →
• All 9708 May/June 2026 papers: overview and marking patterns
• Try a free A Level Economics quiz

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Frequently asked questions

What topics were on 9708 Paper 42 May/June 2026? +

Question 1 was a data response on the US trade deficit, import tariffs, the Federal Reserve's high interest rate and its effect on low-income countries. The essays were on marginal utility theory, trade unions and government in wage setting, the quantity theory of money, and GNI as a measure of living standards.

How many marks is 9708/42 and how long is it? +

It is out of 60 marks and lasts 2 hours. Question 1 is worth 20 marks, and you write one 20-mark essay from Section B and one from Section C.

How was the import tariff diagram in 9708/42 Question 1(b) marked? +

Up to 2 marks for the diagram's axes and labels, which had to include world supply, and up to 2 for comments or explanation: imports shrinking, domestic output rising and the quantity bought from world supply falling once the tariff raises the price.

What conclusion did the mark scheme expect for 9708/42 Question 1(d)? +

That the information is insufficient to show any benefit to low-income countries. The analysis marks went to the costs: a stronger US dollar making raw materials, food and oil dearer, and higher US dollar debt payments making development harder.

How are the 9708/42 essays marked? +

Each 20-mark essay gets up to 14 marks for knowledge, understanding and analysis (Table A: 1–5, 6–10 and 11–14) and up to 6 for evaluation (Table B: 1–3 and 4–6). Evaluation in Level 2 needs developed comments and a justified conclusion.

Where can I download 9708/42 May/June 2026 and its mark scheme? +

Both are free to download and print on the Tutopiya Learning Portal, on the Cambridge AS & A Level Economics 9708 past papers page.

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