Macroeconomic Performance and Policy

Worked examples (6)

• 1Calculate a rate of economic growth
• 2Convert nominal GDP to real GDP
• 3Calculate GNI from GDP and net income from abroad
• 4Distinguish total GDP growth from per-capita growth
• 5Explain why PPP is used to compare living standards
• 6Evaluate GDP per capita as a welfare measure

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Calculate the unemployment rate from labour-market data
• 2Calculate the participation rate
• 3Employed, unemployed or economically inactive?
• 4Explain why the claimant count differs from the ILO measure
• 5Identify and classify the type of unemployment
• 6Build the fiscal-cost chain of high unemployment

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Calculation and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks)
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Calculate net investment (gross − depreciation)
• 2Find depreciation when net investment is zero
• 3Explain how a fall in interest rates affects investment
• 4Apply the accelerator effect
• 5Analyse how a rise in business confidence affects investment and AD
• 6Examine the effect of a cut in corporation tax on investment

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), best-fit levels
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (5)

• 1Classify: inflation, deflation or disinflation?
• 2Calculate the rate of inflation from index numbers
• 3Build a weighted price index
• 4Analyse demand-pull inflation with an AD/AS diagram
• 5Analyse cost-push inflation with an AD/AS diagram

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application / calculation (4 marks)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Classify transactions into the current account
• 2Read a balance and name deficit or surplus
• 3Calculate a current account balance from components
• 4Trade balance vs current account balance
• 5Express the deficit as a percentage of GDP
• 6Examine the consequences of a persistent deficit

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), best-fit levels
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1State and add up the components of AD
• 2Identify the largest and most volatile components
• 3Draw AD and explain why it slopes downward
• 4Movement along AD vs shift of AD
• 5Show a rightward shift of AD on a diagram
• 6Analyse the effect of a weaker exchange rate on AD

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Calculate the marginal propensity to consume (MPC)
• 2Calculate the average propensity to consume and to save
• 3Use MPC + MPS = 1 to find a missing value
• 4Read a consumption function (C against income)
• 5Analyse how an interest-rate cut affects consumption and AD
• 6Examine the effect of falling consumer confidence on the savings ratio

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), best-fit levels
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Classify current, capital and transfer spending
• 2Find government spending's share of AD
• 3Explain why transfer payments are excluded from AD
• 4Explain automatic stabilisers over the cycle
• 5Analyse how higher government spending affects AD
• 6Examine the influences on the level of government spending

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), best-fit levels
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Classify exports and imports as injections or withdrawals
• 2Read a net-trade figure and name surplus or deficit
• 3Calculate a net-trade balance and add it to AD
• 4Explain a determinant: rising domestic income
• 5Analyse a weaker exchange rate on net trade and AD
• 6Calculate the change in net trade and its AD effect

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Distinguish short-run AS from long-run AS
• 2Classify SRAS shifters and their direction
• 3Draw a rightward SRAS shift
• 4Draw and explain the Keynesian LRAS curve
• 5Show economic growth as a classical LRAS shift
• 6Distinguish an SRAS shift from an LRAS shift

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Identify and classify injections and withdrawals
• 2Stock or flow?
• 3Explain the three methods of measuring national income
• 4Explain the flows in the circular flow of income
• 5Analyse a move to a new equilibrium national income
• 6Examine the difference between real and nominal national income

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks)
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Identify: injection or withdrawal?
• 2State the injections and the withdrawals
• 3Test for equilibrium from the figures
• 4Does a budget deficit rule out equilibrium?
• 5Analyse a rise in exports (J u003e W)
• 6Analyse a rise in saving (J u003c W)

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Define macroeconomic equilibrium and read it off a diagram
• 2Short-run vs long-run equilibrium
• 3Draw macroeconomic equilibrium (AD = SRAS)
• 4Show a rise in AD on equilibrium
• 5Show a fall in SRAS (stagflation)
• 6Why the effect of a rise in AD depends on spare capacity

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, diagram expected)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Cost of growth or benefit of growth?
• 2Name the cost of growth
• 3Explain how growth can cause demand-pull inflation
• 4Growth versus development
• 5Examine the costs of rapid economic growth
• 6Evaluate whether the costs of growth outweigh the benefits

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), best-fit levels
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Calculate the multiplier from the MPC
• 2Calculate the multiplier from withdrawals (MPW)
• 3Calculate the change in national income (ΔY = k × injection)
• 4Trace the multiplier process round by round
• 5The negative (reverse) multiplier
• 6Evaluate the real-world size of the multiplier

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Define an output gap and its sign
• 2Classify positive and negative output gaps
• 3Draw a negative output gap on an AD/AS diagram
• 4Read output gaps off a trend-vs-actual diagram
• 5Trace the consequences of a positive output gap
• 6Explain why an output gap is hard to measure

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Identify which macroeconomic objectives conflict
• 2Read the short-run Phillips curve
• 3Draw the short-run Phillips curve trade-off
• 4AD/AS diagram: growth vs inflation
• 5Explain growth vs the environment
• 6Examine the deficit-vs-growth conflict

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Distinguish actual growth from potential growth
• 2Classify causes as actual or potential growth
• 3Show actual growth on an AD/AS diagram
• 4Show actual and potential growth on a PPF
• 5Analyse potential growth from investment on an LRAS diagram
• 6Explain export-led growth as actual and potential

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Economic growth vs economic development
• 2Match the benefit to the stakeholder
• 3Explain how growth benefits workers
• 4Why growth improves the government's finances
• 5Analyse the virtuous circle of growth
• 6Examine why growth may not raise everyone's living standards

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Define a supply-side policy
• 2Classify market-based vs interventionist policies
• 3Draw the LRAS rightward-shift diagram
• 4Show how education spending raises LRAS
• 5Build the incentive chains for market-based policies
• 6Match each supply-side drawback to the right evaluation point

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Match each objective to its indicator
• 2Identify the realistic target for each objective
• 3Explain what 'sustainable economic growth' means
• 4Explain why a government targets a satisfactory current account
• 5Discuss whether growth and low inflation can be met together
• 6Evaluate which objective should take priority

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), best-fit levels
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels

Worked examples (6)

• 1Classify fiscal vs monetary policy
• 2Expansionary vs contractionary — direction of AD
• 3Trace the monetary transmission mechanism
• 4Draw an expansionary AD-shift diagram
• 5Analyse an expansionary policy and its limit
• 6Examine why a rate cut may not raise AD

Model answers (6)

• ✓Model answer — WEC12/01 Section C(a) style — Knowledge (2 marks, point-marked)
• ✓Model answer — WEC12/01 Section B style — Knowledge and application (4 marks, point-marked)
• ✓Model answer — WEC12/01 Section C(c) style — KAA (6 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(d) style — KAA (8 marks), Levels 1–3, diagram expected
• ✓Model answer — WEC12/01 Section C(e) style — KAA (8 marks) + Evaluation (6 marks), diagram expected
• ✓Model answer — WEC12/01 Section D style — KAA (12 marks) + Evaluation (8 marks), best-fit levels