Mark Scheme (Results)

Summer 2022

Pearson Edexcel GCE AS Level

In Economics A (8EC0)
Paper 02 The UK Economy - Performance and
Policies
Edexcel and BTEC Qualifications

Edexcel and BTEC qualifications are awarded by Pearson, the UK’s largest awarding body. We
provide a wide range of qualifications including academic, vocational, occupational and
specific programmes for employers. For further information visit our qualifications websites
at www.edexcel.com or www.btec.co.uk. Alternatively, you can get in touch with us using the
details on our contact us page at www.edexcel.com/contactus.

Pearson: helping people progress, everywhere

Pearson aspires to be the world’s leading learning company. Our aim is to help everyone
progress in their lives through education. We believe in every kind of learning, for all kinds of
people, wherever they are in the world. We’ve been involved in education for over 150 years,
and by working across 70 countries, in 100 languages, we have built an international
reputation for our commitment to high standards and raising achievement through
innovation in education. Find out more about how we can help you and your students at:
www.pearson.com/uk

Summer 2022
Question Paper Log Number 66111
Publications Code 8EC0_02_2206_MS
All the material in this publication is copyright
© Pearson Education Ltd 2022
General Marking Guidance

• All candidates must receive the same treatment.

Examiners must mark the first candidate in exactly the
same way as they mark the last.
• Mark schemes should be applied positively. Candidates
must be rewarded for what they have shown they can
do rather than penalised for omissions.
• Examiners should mark according to the mark scheme
not according to their perception of where the grade
boundaries may lie.
• There is no ceiling on achievement. All marks on the
mark scheme should be used appropriately.
• All the marks on the mark scheme are designed to be
awarded. Examiners should always award full marks if
deserved, i.e. if the answer matches the mark scheme.
Examiners should also be prepared to award zero marks
if the candidate’s response is not worthy of credit
according to the mark scheme.
• Where some judgement is required, mark schemes will
provide the principles by which marks will be awarded
and exemplification may be limited.
• When examiners are in doubt regarding the application
of the mark scheme to a candidate’s response, the team
leader must be consulted.
• Crossed out work should be marked UNLESS the
candidate has replaced it with an alternative response.
Question Answer Mark
Number
1(a) The only correct answer is C

A is not correct because quantitative easing will

increase AD and therefore economic growth

B is not correct because quantitative easing increases

inflationary pressures due to an increase in AD

D is not correct because quantitative easing would lead

to increase in AD and a fall in the level of unemployment
as real output increases (1)

Question Answer Mark

Number
1(b) Knowledge 1, Application 1, Analysis 1

Knowledge/understanding:
1 mark for, e.g.
• Decreases reward for saving (1)
• Decreases cost of borrowing (1)
• Decreases hot money flows (1)

Application:
1 mark for, for e.g.
• Cut the UK’s base interest rate from 0.75% to 0.1%
in March 2020 (1)
• Interest rate decreased by 0.65 percentage points
in March 2020 (1)
• Interest rate already at a very low level (1)
• Cheaper mortgages/loans (1)
• Greater R&D spending by firms (1)

Analysis:
1 mark for linked development, e.g.
• Consumption will increase, AD and inflation rises (1)
• Investment will increase as cost of production will
decrease, AD and inflation rises (1)
• Exchange rate will depreciate and will raise (X-M);
therefore AD and inflation rises (1) (3)
Question Answer Mark
Number
2(a) Knowledge 1

Knowledge:
1 mark for definition, e.g.
• Not adjusted for inflation (1)
• Figures at current prices/market value (1) (1)

Question Answer Mark

Number
2(b) The only correct answer is B

A is not correct because this figure is the index number for

2016 using 2018 as the base year

C is not correct because this figure is the index number for

2017 using 2016 as the base year

D is not correct because this figure is the index number

for 2018 using 2016 as the base year (1)

Question Answer Mark

Number
2(c) Application 2

Application:
1 mark for appropriate calculation, e.g.

2 061 408 / 66.4 (1)

Answer = £31 045.30

Allow 31 045 / £31 000

• Award 2 marks for correct answer (£31 045.30 /

£31 045 / £31 000)
• If million is given after the answer, then award up
to 1 mark (2)
Question Answer Mark
Number
3(a) The only correct answer is C

A is not correct because earnings are adjusted for inflation

and not interest rates

B is not correct because between nominal earnings have

increased by nearly £125

D is not correct because real earnings have remained

steady throughout the given period (1)

Question Answer Mark

Number
3(b) Knowledge 1, Application 1, Analysis 1

Knowledge/understanding:
1 mark for, e.g.
• Defining subjective happiness: happiness that may
differ between individuals (1)
• As real incomes increase, happiness increases (1)

Application:
1 mark for reference to the chart, for e.g.
• Real earnings have been steady throughout the time
period given (1)
• Real earnings have been constant at approximately
£450-£460 per week (1)

Analysis:
1 mark for linked development, e.g.
• Higher earnings increase an individual’s ability to
afford/buy/spend on more goods and services (1)
• As real earnings have not increased, people are
unlikely to experience a big improvement in their
living standards (1) (3)
Question Answer Mark
Number
4(a) Knowledge 1

Knowledge/understanding:
1 mark for definition, e.g.
• The value/price of one currency in terms of
another (1)
• The rate at which the money of one country can
be changed for the money of another country (1) (1)

Question Answer Mark

Number
4(b) The only correct answer is B

A is not correct because this is the difference between

$1.53 and $1.22

C is not correct because this uses the present year to

calculate the percentage change

D is not correct because this is the calculation of an index

number taking 2015 as the base year (1)

Question Answer Mark

Number
4(c) Application 2
Application:
2 marks for,
• Correct rightward shift of AD (1)
• Correct new equilibrium point showing
higher price level and higher real output (1)

(2)
Question Answer Mark
Number
5(a) The only correct answer is A

B is incorrect as although prices rising more slowly, the

average price level were still increasing

C is incorrect as there was disinflation between August

2018 and January 2019

D is incorrect as there was inflation between October

2016 and May 2017 (1)

Question Answer Mark

Number
5(b) Knowledge 1, Application 1, Analysis 1

Knowledge/understanding:
1 mark for identifying one limitation, e.g.
• Does not include housing costs (1)
• There are sampling problems (1)
• Basket of goods is updated only once a year (1)
• Only measures the cost of living for an average
household (1)

Application:
1 mark, for e.g.
• Reference to chart (1)
• Current inflation rate (1)
• CPI target is 2% +/- 1% (1)
• Fewer than 60% reply to the survey (1)
• New items such as canned pulses included (1)

Analysis:
1 mark for linked development, e.g.
• Monthly rent or mortgage interest repayments form
a large part of consumers spending (1)
• Not all the people respond to the survey or may not
provide with accurate information (1)
• Tastes and preferences change very frequently, and
the basket may not reflect these new items (1)
• The top and bottom 4% of income brackets are not
included, and nor are pensioners (1) (3)
Question Answer Mark
Number
6(a) Knowledge 2, Application 2

Knowledge/understanding
2 marks for, e.g.
• An increase in (1) capital stock of the economy (1)
• Money spent on purchasing capital goods/improving
factors of production (1) to raise productivity/LRAS/
produce consumer goods (1)
• An injection (1) into the circular flow of income (1)

Application
2 marks for 2 data references from Figure 1 (1+1), e.g.
• In Q1 2015, investment increased by 4% (1) and
in Q1 2016, investment decreased by 2% (1)
• Between Q3 2018 and Q2 2019, investment has
been falling each quarter (1)
• In Q2 2014, highest percentage change (1) was
approximately 8.2% (1) (4)

Question Answer Mark

Number
6(b) Knowledge 2, Application 2, Analysis 2

Knowledge/understanding and analysis

1 mark for identification of each influence (1+1) and 1
mark each for linked development (1+1), e.g.
• Business confidence/expectations/animal spirits (1K):
firms will only invest if there is less uncertainty about
future costs and revenues, and sales (1AN)
• Demand for exports (1K): lower the demand in a
country to which a firm is trying to export, the less
the investment (1AN)
• Rate of economic growth (1K): fall in GDP will mean
firms do not invest in capital goods as there is lower
demand (1AN)

Application
1 mark for each data reference (1+1), e.g.
• Firms are reluctant to commit to capital spending
while there is economic uncertainty (1)
• uncertainty over the UK’s future trade relationship
has discouraged companies from investing (1)
• trade tensions are also affecting investment (1)
• fall of 0.2% in Gross Domestic Product (GDP) (1)
• another recession? (1)

NB Award up to 4 marks for one influence well

developed (1kn + 1ap + 2an) (6)
Question Indicative content Mark
Number
6(c) Knowledge 2, Application 2, Analysis 2

Understanding of the term GDP / living standards

Limitations may include:

• Percentage changes are misleading without any
reference to total GDP
• Presence of an informal and unpaid economy will
imply that some output is unrecorded as it is not
bought or sold and there is no resulting income
• Differences in distribution of income as growth
varies across the country with jobs and wages
distributed unevenly
• Quality of life issues such as spending on health
and education – impact is difficult to measure
• Subsistence, barter, and the hidden economy will
undervalue the real output and national income
shall not reflect true living standards
• Currency values do not effectively calculate an
accurate purchasing power parity
• Population growth in developing countries may
account for most growth in GDP
• Spending on investment goods may raise future
living standards at the expense of the current
• Methods of calculation and reliability of data
• Size of the public sector spending which may or
may not improve the standard of living

Students may consider the limitations of real or nominal GDP (6)

Level Mark Descriptor

0 A completely inaccurate response.
Level 1 1–2 Displays isolated or imprecise knowledge and understanding
of terms, concepts, theories and models.
Use of generic or irrelevant information or examples.
Descriptive approach which has no link between causes and
consequences.
Level 2 3–4 Displays elements of knowledge and understanding of
economic principles, concepts and theories.
Applies economic ideas and relates them to economic
problems in context, although does not focus on the broad
elements of the question.
A narrow response or the answer may lack balance.
Level 3 5–6 Demonstrates accurate knowledge and understanding of the
concepts, principles and models.
Ability to link knowledge and understanding in context using
relevant and focused examples which are fully integrated.
Economic ideas are applied appropriately to the broad
elements of the question.
Question Indicative content Mark
Number
6(c) Evaluation 4
continued
Points may include:

• Ease of using GDP data for comparison over time

• Benefits of using GDP for comparison – standard
measure and well understood
• GDP is internationally recognised and still possibly
the best measure available for comparison
• Other measures might be better, e.g. GDP per
capita gives an indication of average incomes,
which is a key determinant of living standards
• Standard of living is subjective, and it cannot be
measured effectively and accurately (4)

Level Mark Descriptor

0 No evaluative comments.
Level 1 1–2 Identification of generic evaluative comments without
supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2 3–4 Evaluative comments supported by chains of reasoning and
appropriate reference to context. Evaluation is balanced and
considers the broad elements of the question.
Question Answer Mark
Number
6(d) Knowledge 1, Application 2, Analysis 2

Knowledge/understanding and analysis

1 mark for identification of one reason and up to 2 marks
for linked development (1+1), for e.g.

• Export-led growth (1K): a decrease in net exports

will decrease their AD (1AN), leading to lower real
output/economic growth (this may be shown
diagrammatically) (1AN)

• Slowdown in economic growth of trading partners

(1K): so when Germany and Italy encounter lack
of demand for their exports (1AN) there is a fall in
the net trade component of their AD (1AN)

NB Answers can be analysed and explained in any

combination of the above points

Application
2 marks (1+1), for e.g.
• Germany and Italy are export-focused (1)
• The UK economy is consumption driven (1)
• Highly exposed to the slowdown in world trade (1)
• There has been a fall in average global incomes (1)
• Contribution of exports to Germany’s and Italy’s
GDP/economic growth is greater than that of UK (1)
• Germany and Italy are more reliant/dependent on
international trade than the UK (1) (5)
Question Indicative content Mark
Number
6(e) Knowledge 3, Application 3, Analysis 3

Impact (cost) may include:

• Consumers will receive lower average incomes and

they will not be able to afford more goods/services
nor increase their standard of living; poverty rates
could potentially rise; house prices depressed
• With lower real GDP, firms employ less workers
creating unemployment; wages fall and creates
greater inequality .. “low income households
cannot cope with a new downturn”
• Firms are likely to make less profits as consumer
spending falls; less production implies lower future
investment into R&D/innovation
• With lower GDP, fewer resources can be devoted
to promoting the use of renewable resources
• Reduction in tax revenues and higher government
spending on unemployment and welfare benefits;
greater borrowing and debt to GDP ratios
• High social dislocation/crime/civil unrest/stress
issues/high divorce rates; worsens health; lower
life expectancy

NB Responses can discuss costs as KAA and benefits

as EV (and vice versa) (9)

Level Mark Descriptor

0 A completely inaccurate response.
Level 1 1–3 Displays isolated or imprecise knowledge and understanding
of terms, concepts, theories and models.
Use of generic or irrelevant information or examples.
Descriptive approach which has no chains of reasoning or
links between causes and consequences.
Level 2 4–6 Displays elements of knowledge and understanding of
economic principles, concepts and theories.
Applies economic ideas and relates them to economic
problems in context, although does not focus on the broad
elements of the question. A narrow response; chains of
reasoning are developed but the answer may lack balance.
Level 3 7–9 Demonstrates accurate knowledge and understanding of the
concepts, principles and models.
Ability to link knowledge and understanding in context using
relevant and focused examples which are fully integrated.
Economic ideas are carefully selected and applied
appropriately to economic issues and problems. The answer
demonstrates logical and coherent chains of reasoning.
Question Indicative content Mark
Number
6(e) Evaluation 6
continued
Impact (benefit) may include:

• Lower demand may reduce demand-pull and cost-

push inflationary pressures; the central bank may
decide to lower interest rates to control inflation
• Lower external costs due to less output production
by firms; less exploitation of finite resources and
less depletion of non-renewable resources
• Lower spending on imports as marginal propensity
to import will fall, causing an improvement in the
current account deficit of the balance of payments
• Lower inequality: those with assets may witness a
proportionally smaller rise in the market value of
their income on their wealth
• Depressed house prices make houses affordable to
non-homeowners
• Many problems of crime/excessive consumption of
demerit goods are committed by people in work –
this is likely to fall

• Other evaluative comments: just a -0.2% contraction

thus the impact will be relatively small/the size of the
recession is important in terms of the impact
• Recession did not occur in 2019 as there were no two
quarters negative growth (6)

Level Mark Descriptor

0 No evaluative comments.
Level 1 1–2 Identification of generic evaluative comments without
supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2 3–4 Evidence of evaluation of alternative approaches which is
unbalanced.
Evaluative comments with supporting evidence/reference to
context and a partially developed chain of reasoning.
Level 3 5–6 Evaluative comments supported by relevant chain of
reasoning and appropriate reference to context.
Evaluation is balanced and considers the broad elements of
the question.
Question Indicative content Mark
Number
6(f) Knowledge 4, Application 4, Analysis 6

KAA:
• Definition of expansionary fiscal policy
• AD/AS diagram showing change in AD/AS consistent
with analysis

Possible policies include:

• Increase government expenditure, e.g. on training
and apprenticeship programmes
• Education spending by offering more bursaries for
university courses and subsidies to universities
• Government spending on infrastructure and housing
policies (mortgage relief, key worker subsidies)
• Cut in the rate of income tax – increase purchasing
power and disposable income; will lead to greater
consumption and promote economic growth
• Lower corporation tax will reduce the firms cost of
production giving them an incentive to invest more
– use of Figure 1
• Increased income tax threshold, decrease in national
insurance contributions
• Lower indirect taxes, e.g. VAT
• Relaxation of austerity measures
• Increase in unemployment benefits

Evaluation 6

• Significance of the fiscal policy - monetary policy

may be seen as an ineffective tool (as interest
rates have been historically low) in tackling future
downturns
• Conflict with other macroeconomic objectives such
as reducing budget deficit and national debt (can
award conflicts with different objectives)
• Long run and short run impacts (18 to 24 months
time lags)/implementation lags
• Depends on the value of the multiplier in the UK
• If consumer and business confidence is low, the
effects may not be as large or significant
• Depends on the level of spare capacity in the
economy/elasticity of the LRAS
• Relative importance and likely effectiveness of the
policies discussed, e.g. raising benefits provides
less incentive to find employment
• Free market economists argue that higher spending
will be wasted on inefficient spending projects
• Can lead to higher bond yields, increasing the cost (20)
of debt repayments
Knowledge, application and analysis
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–3 Displays isolated or imprecise knowledge and understanding
of terms, concepts, theories and models.
Use of generic or irrelevant information or examples.
Descriptive approach which has no chains of reasoning or
links between causes and consequences.
Level 2 4–6 Displays elements of knowledge and understanding of
economic principles, concepts and theories.
Applies economic ideas and relates them to economic
problems in context, although does not focus on the broad
elements of the question.
A narrow response or superficial, two-stage chain of
reasoning only.
Level 3 7–10 Demonstrates accurate knowledge and understanding of the
concepts, principles and models.
Ability to apply economic concepts and relate them directly to
the broad elements of the question with evidence integrated
into the answer.
Analysis is clear and coherent, although it may lack balance.
Chains of reasoning are developed but the answer may lack
balance.
Level 4 11–14 Demonstrates precise knowledge and understanding of the
concepts, principles and models.
Ability to link knowledge and understanding in context using
appropriate examples. Analysis is relevant and focused with
evidence fully and reliably integrated.
Economic ideas are carefully selected and applied
appropriately to economic issues and problems. The answer
demonstrates logical and coherent chains of reasoning.

Evaluation
Level Mark Descriptor
0 No evaluative comments.
Level 1 1–2 Identification of generic evaluative comments without
supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2 3–4 Evidence of evaluation of alternative approaches which is
unbalanced leading to unsubstantiated judgements.
Evaluative comments with supporting evidence/reference to
context and a partially developed chain of reasoning.
Level 3 5–6 Evaluative comments supported by relevant reasoning and
appropriate reference to context.
Evaluation is balanced and considers the broad elements of
the question, leading to a substantiated judgement.
Question Indicative content Mark
Number
6(g) Knowledge 4, Application 4, Analysis 6
KAA:
• Understanding/definition of supply-side policies
• Understanding/definition of productivity
• AD/AS diagram showing change in AS consistent
with analysis/use of PPF diagram
• Increased government spending on education and/or
training - this would increase skills and productivity
• Increased government spending on healthcare – this
should reduce the number of days absent from work
• Reducing level of benefits and/or income tax – this
would incentivise employment and will increase the
output per worker of those in work and increase the
number of workers in work
• Cutting cost of bureaucracy and/or reduce regulation
of firms – this would raise productivity
• Improving regulation and/or competition of inefficient
industries – this would increase the UK’s productivity
• Privatisation - this may lead to increased competition,
innovation and efficiency in the UK
• Increased government spending on infrastructure
investment (e.g. broadband or roads) – this would
reduce industry costs or improve access to market
• Reducing corporation tax – therefore increasing the
international competitiveness for investment
• Government schemes to improve childcare provision
• Increased flexibility and/or mobility of labour

NB Award a maximum of Level 3 if there is no link to

or discussion of productivity

Evaluation 6

• Significant time lag for supply-side policies

• Difficult to accurately measure productivity
• Consideration of effectiveness of supply-side policies
such as infrastructure, education and healthcare at
delivering sustainable growth
• Privatisation may lead to private monopolies and less
efficiency and lower economic growth
• Cut in income tax designed as an incentive to work
and investment may be ineffective if workers use it
as an opportunity to work less for the same income
• Cut in corporation tax ineffective if companies use the
cut in corporation tax to boost their short-term profits
rather investment on productivity-boosting technology
• Increase in UK taxation elsewhere may have an effect
on incentives to work (20)
Knowledge, application and analysis
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–3 Displays isolated or imprecise knowledge and understanding
of terms, concepts, theories and models.
Use of generic or irrelevant information or examples.
Descriptive approach which has no chains of reasoning or
links between causes and consequences.
Level 2 4–6 Displays elements of knowledge and understanding of
economic principles, concepts and theories.
Applies economic ideas and relates them to economic
problems in context, although does not focus on the broad
elements of the question.
A narrow response or superficial, two stage chains of
reasoning only.
Level 3 7–10 Demonstrates accurate knowledge and understanding of the
concepts, principles and models.
Ability to apply economic concepts and relate them directly to
the broad elements of the question with evidence integrated
into the answer.
Analysis is clear and coherent, although it may lack balance.
Chains of reasoning are developed but the answer may lack
balance.
Level 4 11–14 Demonstrates precise knowledge and understanding of the
concepts, principles and models.
Ability to link knowledge and understanding in context using
appropriate examples. Analysis is relevant and focused with
evidence fully and reliably integrated.
Economic ideas are carefully selected and applied
appropriately to economic issues and problems. The answer
demonstrates logical and coherent chains of reasoning.

Evaluation
Level Mark Descriptor
0 No evaluative comments.
Level 1 1–2 Identification of generic evaluative comments without
supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2 3–4 Evidence of evaluation of alternative approaches which is
unbalanced leading to unsubstantiated judgements.
Evaluative comments with supporting evidence/reference to
context and a partially developed chain of reasoning.
Level 3 5–6 Evaluative comments supported by relevant reasoning and
appropriate reference to context.
Evaluation is balanced and considers the broad elements of
the question, leading to a substantiated judgement.
Pearson Education Limited. Registered company number 872828
with its registered office at 80 Strand, London, WC2R 0RL, United Kingdom