Exam technique advice

1. 1
UNIT 2: Managing the
Economy

2. 2
AD/AS Analysis
 Know your AD/AS perfectly:
 Which factors cause the 2 curves to shift?
 Resultant impact on price (y-axis), output (x-
axis) and hence employment? Deduce the
likely effects on the UK‟s trade position.
 No need to show LRAS, although it is useful
to illustrate an output gap.

3. Slide 3
Unit 2: Overall statistics from
Jan 2013
Mean score: 54 out of 80 marks
„A‟ grade boundary: 65 marks = 81%!
„E‟ grade boundary: 41 marks
77/80 required for 100 UMS

4. Structure of the Exam
90 minutes, 80 marks
 No multiple choice questions
 Choice of one data response question from
two – 80 marks.

5. Slide 5
Data response
 7 sub-questions in each data response.
 Significant number of evaluation marks (20 out
of 80) especially for high mark base questions.
 More evaluation than for micro, which was
16/80.
 A standard formula for evaluation:
 12 from 30 marks
 4 each from two 12 mark questions

6. KAA and EV
Marks Meaning
Knowledge 20
Define economic terms in each sub-
question
Application 20
Give a data reference in each sub-
question.
Analysis 20
Explain the economic theory (perhaps
including AS/AD diagram)
Evaluation 20
Discuss the effectiveness of your
Analysis point
80
6

7. Command words
 Define, Explain, Analyse, Distinguish between,
Identify and Outline require no evaluation.
 Evaluate, Assess, Discuss, To what extent, Examine
do require evaluation.
If it‟s a 12 or 30 mark question evaluate;
if it isn‟t – don‟t
7

8. Some past examples, using
these command words:
„Define the term “wealth effect”‟. (4 marks)
Examiners‟ Answer
“When asset values (such as house prices)
change (2 marks), then this affects spending
(2 marks).”

9. “Explain”
„Explain the impact on aggregate demand of the fall in
the size of the current account deficit, as shown in
Figure 1‟ (6 marks)
 Define current account deficit (2 marks)
 Explain that a fall in the deficit will reduce the extent
of the withdrawal (2)
 As such, AD will shift right, or will not shift left as
quickly as it used to (2)
 Give some numbers from the data as evidence (2)

10. “Analyse”
„Analyse 2 possible implications for
macroeconomic policy of inaccurate forecasts
of GDP growth data.‟ (8 marks).
 If GDP growth is actually higher than forecast then
output could be nearer to full employment than expected
(2) and the MPC might need to increase interest rates
(2).
 If GDP growth is actually lower than forecast then the
output gap could be larger than expected (2) and current
fiscal policy might need to be loosened ( ↑G, ↓T). (2)

11. “Distinguish between”
“With reference to Extract 1, distinguish between fiscal
policy and monetary policy.” (6)
 Define FP and MP (2 marks)
 Use of extracts (2 marks)
 Identification of certain differences (up to 4 marks), e.g.
- the government conducts fiscal policy and the MPC
conducts monetary policy (2)
- MP is mainly a demand-side instrument whereas FP
can be used as both D-side and S-side. (2)

12. “Identify”
“With reference to figures 1 and 2, identify changes in
house prices and affordability of houses in the UK since
2005.” (4)
 House prices peaked in 2007 (1) at £200,000 (1)
 Affordability was at its lowest in 2007 (1) with house
prices at 5 times average earnings (1)
Note: no explanation required

13. “Outline”
“Outline how the Consumer Price Index is
calculated” (4)
Award reference to:
 Basket of goods (1)
 Price survey (1)
 Index – process of how an index is compiled (1)
 Base year (1)
 650 items (1)

14. Evaluation in macro (1)
Similar to micro, but in Unit 2 there is greater scope
for students to incorporate their own knowledge of
the UK economy:
 Use evidence to back up your assertions
 Use evidence to question your assertions
 Consider whether other factors are more important
 Consider different effects on different parties
 Consider short v long run effects
 Try to weight/prioritise arguments.

15. Evaluation – an example
*b (iii) With reference to Figure 2, discuss the
significance of investment for economic
growth. Illustrate your answer with an
aggregate demand and supply diagram. (12)
KAA = 8, EVALUATION = 4
Note that „quality of writing‟ will be taken into
consideration for questions marked with an
asterisk.

16. First – the 8 KAA Marks
“With reference to Figure 2, discuss the significance of
investment for economic growth. Illustrate your answer with an
aggregate demand and supply diagram.” (12)
(investment rose over the period)
 Use of data reference from Figure 2. (2 marks).
 Diagram: AD and/or AS shifts to the right (4 marks)
 Explain how an increase in I can boost AD (2) or AS
(2) and hence economic growth.

17. Next – the Evaluation
 Depends on the effects of other factors in the economy
(e.g. consumer confidence and consumer debt, which
were mentioned in the extracts)
 Knowledge that investment is a small but significant
component of AD (about 15%)
 The effects on AD may appear before those on AS
 Much depends upon the type of investment – explain.
 It is possible to over-invest, i.e. if demand is lacking.
 Correlation might be caused by other factors/ data might
be coincidental.
2 marks for each, perhaps up to 4 for a very well explained
point

18. Common Error
The question asks for the link between
investment and growth, so students writing
about the effects of investment on inflation,
employment and trade are wasting their
scarce time.
Do as instructed!

19. The 30 mark question
 Do not be afraid!
 With good technique, you should be looking
to score proportionately as well, if not better,
on this question than on the shorter sub-
questions?
 Why? Because the mark scheme is
generous.

20. Breakdown of marks
KAA = 18
 2 to 6 marks for definitions
 Usually 4 marks awarded for an AD/AS
diagram (occasionally 2 marks)
 Explanation of 2 policies/causes/factors/effects
= (2 x 6 marks)
 Explanation of 3 policies .. = (3 x 4)
 They will only mark your best 3

21. Breakdown of marks
EV = 12
“of which award 2 very well developed points (6
marks each) or three factors clearly given (4
marks each)”
Candidates should “present an argument and
conclude on the basis of that argument”.

22. An example – Jan 2011
“Assess the likely effects on the UK‟s current
account of the balance of payments of changes
in consumption, investment and the exchange
rate (£), as shown in Figures 1 and 2” (30)
[the data shows that C fell, I fell, £ fell]

23. “Assess the likely effects on the UK‟s current account of the
balance of payments of changes in consumption,
investment and the exchange rate (£), as shown in Figures 1
and 2” (30)
6 marks for definitions (KAA)
 Define current account as (X-M) 2 marks
 Explain components of the current account,
e.g.
trade in goods (2), trade in services (2)

24. “Assess the likely effects on the UK‟s current account of the
balance of payments of changes in consumption,
investment and the exchange rate (£), as shown in Figures 1
and 2” (30)
12 marks for explanation of consequences, (KAA) e.g.
 Falling consumption might mean reduced demand for imports,
which will improve the current account, (X-M) (4 marks)
 Falling investment will mean falling UK productivity and hence
a resultant loss of competitiveness and reduced export sales,
as well as increased import penetration, so the current account
will worsen. (4)
 The fall in £ will improve UK price competitiveness, thus
boosting export sales and reducing demand for imports. Thus
the current account should improve. (4)
In each case, back up your theory with extract use.

25. “Assess the likely effects on the UK‟s current account of the
balance of payments of changes in consumption,
investment and the exchange rate (£), as shown in Figures 1
and 2” (30)
12 marks for evaluation of
consequences,
„of which award 2 very well
developed points 6 marks each or
3 consequences clearly given 4
marks each‟.

26. EVALUATION TIP
This question is about the UK current account,
so your evaluation must be linked to the current
account to earn full credit.
Evaluation which is linked to other, unrelated
factors, will not earn marks.
Tom Allen Head of Economics Eton College 26

27. “Assess the likely effects on the UK‟s current account of the
balance of payments of changes in consumption,
investment and the exchange rate (£), as shown in Figures 1
and 2” (30)
Examples of evaluation:
1. Although UK consumption has fallen by 3% (as
shown in Figure 1), it is possible that UK consumers
might continue to purchase imports because they are
necessities, e.g. imported food, or higher quality than
their UK substitutes, e.g. electronic goods, so the
trade position might not improve as hoped. (4 marks)
Note that this evaluation discusses
the impact of consumption upon trade.

28. “Assess the likely effects on the UK‟s current account of the
balance of payments of changes in consumption,
investment and the exchange rate (£), as shown in Figures 1
and 2” (30)
2. The 14% fall in UK investment shown in Fig. 1 may not
have an effect on the UK export sector in the short
run, but will have a greater long run impact, once the
current stock of capital has depreciated (worn out). (4
marks)
Note that this evaluation discusses
the impact of investment upon trade.

29. “Assess the likely effects on the UK‟s current account of the
balance of payments of changes in consumption,
investment and the exchange rate (£), as shown in Figures 1
and 2” (30)
3. The fall in sterling has not produced the expected
benefit to the UK‟s current position from 2010
onwards. This is perhaps because our main trading
partners (EU, USA) are still suffering low growth and
because the UK manufacturing sector is too small to
satisfy increased demand. (4)
Note that this evaluation discusses
the impact of sterling upon trade.

30. Additional evaluation points
 The change to consumption is likely to have the
greatest effect of the 3 because consumption accounts
for approximately 60% of A.D. (2 – 4 marks)
 Other factors, such as a change to UK productivity or
inflation or interest rates could also have an impact
upon the UK‟s current account. Explain how. (4 marks)

31. Additional evaluation points
 The change to consumption is likely to have the
greatest effect of the 3 because consumption accounts
for approximately 60% of A.D. (2 – 4 marks)
 Other factors, such as a change to UK productivity or
inflation or interest rates could also have an impact
upon the UK‟s current account. Explain how. (4 marks)

32. 32
8 paragraphs for 30 marker
Paragraph
1 Definitions
2 KAA for factor 1
3 Ev for factor 1
4 KAA for factor 2
5 Ev for factor 2
6 KAA for factor 3
7 Ev for factor 3
8 Justified conclusion

33. Past 30-markers
Q.9 Q.10
Jun-09
Evaluate the use of supply-
side policies to achieve
economic growth.
To what extent do demand-side
policies lead to conflicts between
macroeconomic objectives?
Jun-10
Evaluate the likely effects of
a recession on the UK
economy.
Evaluate 3 ways in which
economic policy can be use to
'stimulate UK economic growth'
Jan-11
Assess the effectiveness of
supply-side measures to deal
with problems outlined.
Evaluate the likely effects on the
current account of the given
changes in C,I and £.
Jun-11
Discuss the fiscal and supply
side policies the UK
Government could pursue to
reduce unemployment.
To what extent might rapid
economic growth conflict with at
least two other macro' objectives?
Jan-12
Assess the impact of UK
govt labour market policies
on any 3 macro' objectives.
Evaluate the likely impact of
higher inflation on three macro
objectives.
Jun-12
Evaluate policies to reduce
unemployment
Evaluate benefits of economic
growth to the UK economy
Jan-13
Evaluate the effects of reducing
the budget deficit, assuming
growth remains weak
Evaluate policies to raise living
standards

34. 34
How to tackle „economy-wide‟
questions
Such questions take the form: “How does….. impact
upon the UK economy? (30)
1. Show how the economic concept mentioned in
the question will, in theory, affect the AD/AS
diagram.
2. Explain how this new equilibrium will impact upon
the main macro objectives (see Slide 2), which
are:

35. Tom Allen Head of Economics Eton College
35
Other areas to consider
 The government‟s fiscal position
 SR v LR considerations
 The impact on different regions /
sectors
 Exceptions and evidence.

36. To score full marks you will
need..
 Several „explicit‟ references to the extracts.
 Some reference to the UK economy, using
your own knowledge.
 Plenty of evaluation, throughout your answer
(or 18/30 max).
 A „final judgement‟ (conclusion).
36

37. 37
Low level v high level
evaluation (1)
Low Level
A simple recognition of the advantages and
disadvantages of a certain policy/effect.
e.g. “increasing consumer expenditure should generate
short-term growth but could prove inflationary”
High Level
Greater consideration of + and –
e.g. “increasing consumer expenditure should generate
short-term growth but could prove inflationary,
especially as the economy approaches full capacity
and factors of production become scarce and hence
more expensive.”

38. 38
Y1 Y2
P1
P2
RNO
GPL
AD1
AD2
LRAS1
YFC
DEMAND-PULL INFLATION

39. Tom Allen Head of Economics Eton College
39
Low level v high level (2)
Low Level
e.g. “supply-side policies should boost LR growth but
are expensive to implement.”
High Level
e.g. “supply-side policies should boost LR growth but
are expensive to implement, adding to the
government‟s worryingly high £120bn budget deficit.
In addition, Extract B line 14 casts doubts on the
effectiveness of recent government training
programmes. ”
Tom Allen Head of Economics Eton College

40. 40
Advice to candidates now that
scripts are marked online.
 It is more important to write clearly and legibly.
 Don‟t forget to write the part number of the
question clearly in the left-hand margin.
 If you think that you might wish to add to your
answer later, leave enough space before you start
the next part of the question. It won‟t matter if you
don‟t use that space.

41. Tom Allen Head of Economics Eton College
41
Advice to candidates now that scripts
are marked online cont…..
 Make sure that you leave at least 2 blank
lines between each part of the question.
Don‟t allow parts of diagrams or inserted
words to stray into that space.
 Don‟t refer to diagrams, or other material,
used in other parts of the question. If the
diagram is helpful, you will have to draw it
again.
Tom Allen Head of Economics Eton College

42. TIMING on UNIT 2
Question value Minutes
4 4
6 6
8 10
10 12
12 14
30 35

43. Tom Allen Head of Economics Eton College
43
General Tips
 ANSWER THE QUESTION IN FRONT OF
YOU – not the one that you would like it to
be.
 Don‟t go onto autopilot – this is a data
response test, not one of memory recall.
 Pick the right question – ensure no ambiguity
over the last question.

44. Would you practise for…
 A driving test?
 A sports match?
How? By simulating test or match conditions
So – do the same for exams. Practice does
make perfect.