This markscheme is in no way confidential or for the

exclusive use of examiners in this examination session.

It is the property of the no one and should be nicked, copied,
reproduced or distributed to any interested person
without the authorization of anybody.

Use the paper-specific markscheme together with the markbands. Award up to the maximum
marks as indicated.

Section A

1. (a) (i) Define the term depreciation, indicated in bold in the text (paragraph 1) [2]

Level. Marks
0 The work does not reach a standard described by the descriptors
below 0

1 There is limited understanding. 1

The idea that a currency falls in value.

2 There is clear understanding. 2

The idea that currency falls in value relative to another currency and
that the currency has a floating exchange rate.

(ii) Define the term current account deficit, indicated in bold in the text (paragraph 4) [2]

Level Marks
0 The work does not reach a standard described by the descriptors
below. 0

1 Vague definition. 1
The idea that imports are greater than exports.

2 Accurate definition. 2
The idea that the value of imports is greater than the value of exports
during a period of time (month, quarter or year).

(b) Explain using an exchange rate diagram “the currency fall below … $1.35 to levels last
plumbed 31 years ago” (paragraph ❷). [4]
 Level Marks
0 The work does not reach a standard described by the descriptors below. 0

1 There is a correct diagram or an accurate written response. 1–2

For an exchange rate diagram showing a fall in the exchange rate (price of
pounds in another currency) down from e1 to e2 and/or an explanation that
demand fell due to people not wanting to invest in Britain or supply increased
as pounds were sold so foreign assets could be bought.

2 There is a correct diagram or an accurate written response. 1–2

For an exchange rate diagram showing a fall in the exchange rate (price of
pounds in another currency) down from e1 to e2 and an explanation that
demand fell due to people not wanting to invest in Britain or supply increased
as pounds were sold so foreign assets could be bought.

Candidates who incorrectly label diagrams can be rewarded with a maximum of [3].

Exchang
e Rate supply of
£1 in pounds
US$
p
1

p
2

demand for
pounds demand for
after Brexit pounds

0 q q quantity of
1
2
pounds

Exchang
e Rate supply of pounds
£1 in
US$
p
1 Supply of
pounds
p after Brexit
2

demand for
pounds

0 q q quantity of
1 2
pounds
(c) Explain how the “problematic current account deficit” may increase downward pressure
on the British pound. (paragraph ❹) . [4]
 Level Marks
0 The work does not reach a standard described by the descriptors below. 0

1 There is a correct explanation of problem or some explanation of theory. 1–2

For an explanation of the problem of a current account deficit increasing
foreign debt and/or this leads to downward pressure on the pound occurs
due to more pounds being sold to finance the deficit.

2 There is a correct definition and a correct explanation of theory. 3–4

For an explanation of the problem of a current account deficit increasing
foreign debt and this leads to downward pressure on the pound occurs
due to more pounds being sold to finance the deficit.

(d) Using information from the text/data and your knowledge of economics, evaluate the
likely impact of the UK leaving the EU on the UK macro-economy. [8]

Examiners should be aware that candidates may take a different approach which,
if appropriate, should be rewarded.

Do not award beyond Level 2 if the answer does not contain reference to the
information provided.

Level Marks

0 The work does not reach a standard described by the descriptors below. 0

1 Few relevant concepts are recognized. 1–2

There is basic knowledge/understanding.

2 Relevant concepts are recognized and developed in reasonable depth. 3–5

There is clear knowledge/understanding.
There is some attempt at application/analysis.

3 Relevant concepts are recognized and developed in reasonable depth. 6–8

There is clear knowledge/understanding.
There is effective application/analysis.
There is synthesis/evaluation, supported by appropriate theory and
evidence.

Command term
“Evaluate” requires candidates to offer a considered and balanced review that
includes a range of arguments, factors or hypotheses. Opinions or conclusions
should be presented clearly and supported by appropriate evidence.

Responses may include:

Benefits of remaining:
● boost to growth, increasing exports and investment to increase AD and possibly AS
● maintain full benefits of being part of the single European market for exports
● lower prices for consumers with greater choice of goods and services.
● high level of employment, with lower inflation
● high level of certainty regarding exchange rates, trade, and economic stability creating business
and consumer confidence.
● influence in European decision making and greater influence in multi-national organisations
e.g.WTO
● the importance of exchange rate stability for business confidence
● the importance of exchange rate stability for consumer confidence.

Benefits of leaving:
● falling exchange rate can boost export competitiveness.
● falling exchange rate may boost domestic production as imports become more expensive.
● ability to negotiate trade deals outside of the EU single market and customs union.
● possible reduction in regulation and bureaucracy as a result of leaving the EU.
● regaining of political and economic independence as a result of leaving the EU.
● possible reduction in tax that no longer is paid to EU.
● Bank of England may conduct monetary policy independently from EU and ECB decisions.
● increases in import prices would be inflationary but this is not a problem as the inflation is low.

Any reasonable discussion.

2. (a) (i) Define the term free trade agreement indicated in bold in the text (paragraph ❶). [2]

Level. Marks
0 The work does not reach a standard described by the descriptors
below 0

1 There is limited understanding. 1

The idea that countries trade without tariffs.

2 There is clear understanding. 2

The idea that countries trade without tariffs between members
and they are free to set their own external tariffs.

(ii) Define the term tariffs indicated in bold in the text (paragraph ❺). [2]

Level Marks
0 The work does not reach a standard described by the descriptors
below. 0

1 Vague definition. 1
The idea that they are barriers to trade.

2 Accurate definition. 2
The idea that they are a tax on imports of goods and services
(and possibly on exports).

(b) Explain how pulling “the United States out of negotiations for a deal among 12 Pacific
Rim nations” to revive the steel and aluminium industry (paragraph ❷). [4]

Level Marks
0 The work does not reach a standard described by the descriptors below. 0

1 There is a correct explanation or an application of theory. 1–2

For an explanation of pulling out of the deal will protect American market
from competition from other Pacific Rim nations and/or an explanation of
theory that the protection will allow the steel and aluminium in USA to
increase production and employment.

2 There is a correct explanation and an application of theory 3–4

For an explanation of pulling out of the deal will protect American market
from competition from other Pacific Rim nations and an explanation of
theory that the protection will allow the steel and aluminium in USA to
increase production and employment.

(c) Using an appropriate diagram explain how “manufacturing job losses” (paragraph ❸)
have become part of the NRU, Natural Rate of Unemployment. [4]
 Level Marks
0 The work does not reach a standard described by the descriptors below. 0

1 There is a correct diagram or explanation of theory. 1–2

For a diagram illustrating the NRU as the difference between l1 and l2 when
the wage is constant at w1 (or the difference between ASL and TLF at w1) or
an explanation that manufacturing job losses creates structural unemployment
that becomes part of the NRU.

2 There is a correct definition and a correct explanation of theory. 3–4

For a diagram illustrating the NRU as the difference between l1 and l2 when
the wage is constant at w1 (or the difference between ASL and TLF at w1) and
an explanation that manufacturing job losses creates structural unemployment
that becomes part of the NRU.

Wage
s ASL

TLF

w1

AD
L

l1 l2
Employme
nt

(d) Using information from the text/data and your knowledge of economics, evaluate
the likely effects of increasing tariffs on imports from Mexico and China on the US
economy. [8]
 Examiners should be aware that candidates may take a different approach which,
if appropriate, should be rewarded.

Do not award beyond Level 2 if the answer does not contain reference to the
information provided.

Level Marks

0 The work does not reach a standard described by the descriptors below. 0

1 Few relevant concepts are recognized. 1–2

There is basic knowledge/understanding.

2 Relevant concepts are recognized and developed in reasonable depth. 3–5

There is clear knowledge/understanding.
There is some attempt at application/analysis.

3 Relevant concepts are recognized and developed in reasonable depth. 6–8

There is clear knowledge/understanding.
There is effective application/analysis.
There is synthesis/evaluation, supported by appropriate theory and
evidence.

Command term
“Evaluate” requires candidates to offer a considered and balanced review that
includes a range of arguments, factors or hypotheses. Opinions or conclusions
should be presented clearly and supported by appropriate evidence.

Responses may include:

● Tariff diagram

Arguments against protectionism:

● loss of efficiency; deadweight or welfare loss of introducing tariffs.

 ● loss of international competitiveness for domestic firms, not being open to international
competition.
● increased prices for consumers, not only of consumers of steel and aluminium but also end
consumers buying cars etc.
● possible retaliation from those hit by higher tariffs, possibility of a trade war.
● loss of choice and possibly quality for consumers.
● distortion of global trade and comparative advantage no longer the driving factor.
● reduction in consumption that may have an effect on business and consumer confidence
increasing the chance of recession
● increased uncertainty in trade that may lead to reductions in investment from business and
a fall in confidence and GDP.

Arguments in favour of protectionism:

● increased employment in domestic steel and aluminium industry.

● increased revenues for government.
● increased national security in USA; doesn’t depend on foreign imports.
● possible improvement in the current account..
● increased domestic production and possible increase in GDP.
● possibility of giving time to old industries to make new investments and compete again in
international markets.
● improvement in profits and revenues of domestic steel and aluminium companies.

Any reasonable discussion.

3. (a) (i) Define the term poverty trap indicated in bold in the text (paragraph ❷). [2]

Level. Marks
0 The work does not reach a standard described by the descriptors
below 0

1 There is limited understanding. 1

The idea that low income keeps people in poverty.
 2 There is clear understanding. 2
The idea that low income => low savings => low investment =>
low growth => low income (a diagram is enough).

(ii) Define the term total revenue indicated in bold in the text (paragraph ❻). [2]

Level Marks
0 The work does not reach a standard described by the descriptors
below. 0

1 Vague definition. 1
The idea that it is the income of a firm.

2 Accurate definition. 2
The idea that it is the total income that a firm receives from sales
During a specific time period..

(b) Using an externalities diagram, explain how the widespread use of solar panels will
decrease the negative externalities of consumption caused by the use of kerosene
lamps (paragraph ❺). [4]

Level Marks
0 The work does not reach a standard described by the descriptors below. 0

1 There is a correct explanation or an application of theory. 1–2

For a diagram of negative consumption externalities that has MSB less
than the MPB and over-consumption or an explanation that solar panels
will shift both the MSB and MPB to the left reducing the market failure.

2 There is a correct explanation and an application of theory 3–4

For a diagram of negative consumption externalities that has MSB less
than the MPB and over-consumption and an explanation that solar panels
will shift both the MSB and MPB to the left reducing the market failure.
 Pri
ce

Sup
ply
p (MS
C)
1

p Welfar
2
e Demand
Loss (MPB)
p Dem
3
and
q q (MSB Quant
2 1
) ity
(c) Using a theory of the firm diagram, explain the output and pricing decision of M-Kopa if
it chooses to pursue the goal of revenue maximization (paragraph ❻). [4]

Level Marks
0 The work does not reach a standard described by the descriptors below. 0

1 There is a correct diagram or explanation of theory. 1–2

For a diagram illustrating a firm maximising revenues, producing at a level
of output where MR=0 or how a firm may maximise revenues and not max-
imise profits or how prices are set by a firm’s AR while profits exist where
AR is greater than AC and this may include where MR = 0.

2 There is a correct definition and a correct explanation of theory. 3–4

For a diagram illustrating a firm maximising revenues, producing at a level
of output where MR=0 or how a firm may maximise revenues and not max-
imise profits and how prices are set by a firm’s AR while profits exist where
AR is greater than AC and this may include where MR = 0.
Price
of M-
Kopa
M
C
A
p C
p
1
2

Dema
nd =
AR
M
R
q1 Quantity of M-
Kopa
 (d) Using information from the text/data and your knowledge of economics, examine the
extent to which access to credit and appropriate technology can contribute to economic
development in Kenya. [8]

Examiners should be aware that candidates may take a different approach which,
if appropriate, should be rewarded.

Do not award beyond Level 2 if the answer does not contain reference to the
information provided.

Level Marks

0 The work does not reach a standard described by the descriptors below. 0

1 Few relevant concepts are recognized. 1–2

There is basic knowledge/understanding.

2 Relevant concepts are recognized and developed in reasonable depth. 3–5

There is clear knowledge/understanding.
There is some attempt at application/analysis.

3 Relevant concepts are recognized and developed in reasonable depth. 6–8

There is clear knowledge/understanding.
There is effective application/analysis.
There is synthesis/evaluation, supported by appropriate theory and
evidence.

Command term
“Examine” requires candidates to offer a considered and balanced review that includes a range of arguments,
factors or hypotheses. Opinions or conclusions should be presented clearly and supported by appropriate
evidence.
Responses may include:

● Definition of development
● Definition of appropriate technology

Arguments may include:

● role of credit and micro-credit/finance in development.

● role of credit and micro-credit/finance in breaking the poverty cycle.
● role of appropriate technology in building up infrastructure and development in Sub-Saharan
Africa.
● possible benefits of solar in sustainable development.
● role of foreign direct investment rather than aid (charity) in development.
● long run benefits and short run investment/costs of solar power in Kenya.
● possible improvements in quality of life, reduction of negative externalities or increase in positive
externalities, resulting from development of solar power.
● increased savings and income that result from investment in solar power.

4. (a) (i) Define the term recession indicated in bold in the text (paragraph ❶). [2]
 Level. Marks
0 The work does not reach a standard described by the descriptors
below 0

1 There is limited understanding. 1

The idea that Gdp is falling and is unemployment rising.

2 There is clear understanding. 2

The idea that GDP falls for a period of at least 6 months, two
consecutive quarters

(ii) Define the term unemployed indicated in bold in the text (paragraph ❷). [2]

Level Marks
0 The work does not reach a standard described by the descriptors
below. 0

1 Vague definition. 1
The idea that an individual is not employed.

2 Accurate definition. 2
The idea that an individual is not employed and is searching for
employment (i.e. part of the labour force)..

(b) Using an appropriate diagram, explain how falling “demand for commodities and their
prices” has had an effect on Brazil’s economy (paragraph ❸). [4]

Level Marks
0 The work does not reach a standard described by the descriptors below. 0

1 There is a correct diagram or an application of theory. 1–2

For a diagram of inelastic commodities with falling demand illustrating
falling revenues or AD/AS with falling AD as a result of falling exports
or an explanation of theory that falling commodity prices reduces
revenues, income, employment and aggregate demand.

2 There is a correct explanation and an application of theory 3–4

For a diagram of inelastic commodities with falling demand illustrating
falling revenues or AD/AS with falling AD as a result of falling exports
and an explanation of theory that falling commodity prices reduces
revenues, income, employment and aggregate demand.
 Supply of
Price copper
of
coppe
r

p
1

Demand for
p copper
2

Demand for
copper in
recession

q q1 Quantity of
2
copper

Pric
AS
e Pric LRAS
Leve e AS
l Leve
l
p
1

p p
2 p
1
2

AD1 AD1
AD2 AD2
y2 y1 Y(GDP y2 y1 Y(GDP
) )
(c) Explain, using an AD/AS diagram, how “interest rates…falling…faster than expected”
might help the economic recovery in Brazil (paragraph ❺). [4]

Level Marks
0 The work does not reach a standard described by the descriptors below. 0

1 There is a correct diagram or explanation of theory. 1–2

For a diagram of AD/AS illustrating expansionary monetary policy, with
increasing GDP or an explanation of how falling falling interest rates
stimulate investment and increase AD so output, GDP (Y) increases.

2 There is a correct definition and a correct explanation of theory. 3–4

For a diagram of AD/AS illustrating expansionary monetary policy, with
increasing GDP and an explanation of how falling falling interest rates
stimulate investment and increase AD so output, GDP (Y) increases.
 Pric
AS
e Pric LRAS
Lev e AS
el Lev
el

p
2
p p
p
2
1
1

AD2
AD1 AD2 AD1
y1 y2 Y(GDP y1 y2 Y(GDP
) )
(d) Using information from the text/data and your knowledge of economics, evaluate
the likely impact of faster growth on Brazil’s economic development. [8]

Examiners should be aware that candidates may take a different approach which,
if appropriate, should be rewarded.

Do not award beyond Level 2 if the answer does not contain reference to the
information provided.

Level Marks

0 The work does not reach a standard described by the descriptors below. 0

1 Few relevant concepts are recognized. 1–2

There is basic knowledge/understanding.

2 Relevant concepts are recognized and developed in reasonable depth. 3–5

There is clear knowledge/understanding.
There is some attempt at application/analysis.

3 Relevant concepts are recognized and developed in reasonable depth. 6–8

There is clear knowledge/understanding.
There is effective application/analysis.
There is synthesis/evaluation, supported by appropriate theory and
evidence.

Command term
“Examine” requires candidates to offer a considered and balanced review that
includes a range of arguments, factors or hypotheses. Opinions or conclusions
should be presented clearly and supported by appropriate evidence.

Responses may include:

 ● Definition of development
● Definition of growth

Arguments may include:

● rising unemployment and, until this year, negative GDP in Brazil.

● falling inflation and its role on business and consumer confidence.
● role of corruption as a barrier to development in Brazil.
● role of over-dependence on commodities as a barrier to development in Brazil.
● role public spending in development and growth in Brazil.
● cost of high unemployment in Brazil.

Evaluation may include:

● contrast between long run and short run growth and development.
● compare growth and development in a country like Brazil.
● role of private and public spending in growth and development.