Oxford Cambridge and RSA
Friday 8 October 2021 – Afternoon
A Level Economics
H460/02 Macroeconomics
Time allowed: 2 hours
You can use:
* 8 1 9 3 4 0 3 5 8 6 *
• a scientific or graphical calculator
* H 4 6 0 0 2 *
Please write clearly in black ink. Do not write in the barcodes.
Centre number Candidate number
First name(s)
Last name
INSTRUCTIONS
• Use black ink. You can use an HB pencil, but only for graphs and diagrams.
• Answer all the questions in Section A, one question in Section B and one question in
Section C.
• Write your answer to each question in the space provided. If you need extra space use
the lined pages at the end of this booklet. The question numbers must be clearly shown.
INFORMATION
• The total mark for this paper is 80.
• The marks for each question are shown in brackets [ ].
• Quality of extended response will be assessed in questions marked with an asterisk (*).
• This document has 28 pages.
ADVICE
• Read each question carefully before you start your answer.
© OCR 2021 [601/4799/4] OCR is an exempt Charity
DC (ST/SW) 300877/10 Turn over
, 2
SECTION A
Read the following stimulus material and answer all parts of question 1 which follow in this section.
Are we moving towards a cashless society?
Recent years have seen a change in both the amount consumers spend and how they make
their payments. How much consumers spend is influenced by a variety of factors. These
include changes in income and changes in confidence. During an economic boom, consumer
expenditure is likely to be high. Indeed, an economic boom is often consumer-led. In contrast,
5 consumer expenditure can fall to a low level during a recession. Fig. 1 shows how consumer
expenditure can vary as income changes.
Consumer
expenditure
(C)
C
0
Income (Y)
Fig. 1 The relationship between changes in income and changes in consumer expenditure
Changes in injections and leakages can alter a country’s income. It has been estimated, for
instance, that an injection of $200m of government spending in the Swiss economy would cause
a rise in GDP of $300m.
10 The proportion of payments made in cash in Switzerland is declining. It is also falling in the UK.
In 2005, 70% of payments in the UK were made in cash. By 2015, this had fallen to 50% and is
forecast to decline to 30% by 2025. The extent to which cash is used influences the number of
banknotes printed and in circulation. Fig. 2 shows the value of banknotes in circulation in the UK
over a five year period.
© OCR 2021
, 3
Year £5 £10 £20 £50 Total
2014 1 540 7 182 36 483 11 025 56 230
2015 1 601 7 371 38 912 11 788 59 672
2016 1 645 7 767 41 037 13 157 63 606
2017 1 912 8 006 43 357 15 601 68 876
2018 1 910 7 789 42 692 16 508 68 899
Fig. 2 The value of banknotes in circulation (£million) 2014 –2018
15 Some central banks favour ending the use of cash. One reason is because of the role that cash
plays in a number of criminal activities including money laundering and drug dealing. A more
significant motive is probably to enable central banks to charge negative interest rates when
needed to stimulate economic activity. If people and banks can take money out of their deposits
and hold them as cash, negative interest rates are likely to have less power to encourage an
20 increase in spending.
Negative interest rates involve commercial banks having to pay to hold deposits at the central
bank. As commercial banks often have excess funds held at the central bank, a negative interest
rate may encourage them to lend the funds instead. If commercial banks pass on the negative
rates to their customers, people will have to pay to save. Negative interest rates would have an
25 impact on borrowing, the cost of servicing government debt and probably on the exchange rate.
A number of central banks, including the Bank of Japan, the Swiss National Bank, Denmark’s
National Bank and the European Central Bank (ECB) have used negative interest rates in a bid
to avoid deflation. These banks received some criticism for the effect that the negative interest
rates had on confidence, saving and bank profitability.
30 The Bank of England has yet to introduce a negative interest rate. Fig. 3 shows how the UK
interest rate has changed in recent years.
6
Base
rate of
interest 5
(%)
4
3
2
1
0
2009 2011 2013 2015 2017 2018
Fig. 3 UK interest rates 2009–2018
© OCR 2021 Turn over
Friday 8 October 2021 – Afternoon
A Level Economics
H460/02 Macroeconomics
Time allowed: 2 hours
You can use:
* 8 1 9 3 4 0 3 5 8 6 *
• a scientific or graphical calculator
* H 4 6 0 0 2 *
Please write clearly in black ink. Do not write in the barcodes.
Centre number Candidate number
First name(s)
Last name
INSTRUCTIONS
• Use black ink. You can use an HB pencil, but only for graphs and diagrams.
• Answer all the questions in Section A, one question in Section B and one question in
Section C.
• Write your answer to each question in the space provided. If you need extra space use
the lined pages at the end of this booklet. The question numbers must be clearly shown.
INFORMATION
• The total mark for this paper is 80.
• The marks for each question are shown in brackets [ ].
• Quality of extended response will be assessed in questions marked with an asterisk (*).
• This document has 28 pages.
ADVICE
• Read each question carefully before you start your answer.
© OCR 2021 [601/4799/4] OCR is an exempt Charity
DC (ST/SW) 300877/10 Turn over
, 2
SECTION A
Read the following stimulus material and answer all parts of question 1 which follow in this section.
Are we moving towards a cashless society?
Recent years have seen a change in both the amount consumers spend and how they make
their payments. How much consumers spend is influenced by a variety of factors. These
include changes in income and changes in confidence. During an economic boom, consumer
expenditure is likely to be high. Indeed, an economic boom is often consumer-led. In contrast,
5 consumer expenditure can fall to a low level during a recession. Fig. 1 shows how consumer
expenditure can vary as income changes.
Consumer
expenditure
(C)
C
0
Income (Y)
Fig. 1 The relationship between changes in income and changes in consumer expenditure
Changes in injections and leakages can alter a country’s income. It has been estimated, for
instance, that an injection of $200m of government spending in the Swiss economy would cause
a rise in GDP of $300m.
10 The proportion of payments made in cash in Switzerland is declining. It is also falling in the UK.
In 2005, 70% of payments in the UK were made in cash. By 2015, this had fallen to 50% and is
forecast to decline to 30% by 2025. The extent to which cash is used influences the number of
banknotes printed and in circulation. Fig. 2 shows the value of banknotes in circulation in the UK
over a five year period.
© OCR 2021
, 3
Year £5 £10 £20 £50 Total
2014 1 540 7 182 36 483 11 025 56 230
2015 1 601 7 371 38 912 11 788 59 672
2016 1 645 7 767 41 037 13 157 63 606
2017 1 912 8 006 43 357 15 601 68 876
2018 1 910 7 789 42 692 16 508 68 899
Fig. 2 The value of banknotes in circulation (£million) 2014 –2018
15 Some central banks favour ending the use of cash. One reason is because of the role that cash
plays in a number of criminal activities including money laundering and drug dealing. A more
significant motive is probably to enable central banks to charge negative interest rates when
needed to stimulate economic activity. If people and banks can take money out of their deposits
and hold them as cash, negative interest rates are likely to have less power to encourage an
20 increase in spending.
Negative interest rates involve commercial banks having to pay to hold deposits at the central
bank. As commercial banks often have excess funds held at the central bank, a negative interest
rate may encourage them to lend the funds instead. If commercial banks pass on the negative
rates to their customers, people will have to pay to save. Negative interest rates would have an
25 impact on borrowing, the cost of servicing government debt and probably on the exchange rate.
A number of central banks, including the Bank of Japan, the Swiss National Bank, Denmark’s
National Bank and the European Central Bank (ECB) have used negative interest rates in a bid
to avoid deflation. These banks received some criticism for the effect that the negative interest
rates had on confidence, saving and bank profitability.
30 The Bank of England has yet to introduce a negative interest rate. Fig. 3 shows how the UK
interest rate has changed in recent years.
6
Base
rate of
interest 5
(%)
4
3
2
1
0
2009 2011 2013 2015 2017 2018
Fig. 3 UK interest rates 2009–2018
© OCR 2021 Turn over
