AS
ECONOMICS
Paper 2 The National Economy in a Global Context
Insert
DO NOT WRITE ANY ANSWERS IN THIS INSERT. YOU MUST ANSWER THE
QUESTIONS IN THE ANSWER BOOKLET PROVIDED.
CONTEXT 1: TROUBLING TIMES FOR THE UK ECONOMY
Questions 21 to 26
• Extract A: Inflation and the growth in average weekly real earnings,
December 2020 to November 2022
• Extract B: Is inflation out of control?
• Extract C: Concerns about government borrowing?
CONTEXT 2: THE LEVELLING-UP AGENDA
Questions 27 to 32
• Extract D: Employment and inactivity rates, February 2023, and
nominal GDP per capita, 2020, in selected regions of the UK
• Extract E: Is the UK Government serious about levelling up?
• Extract F: Why is levelling up so important?
IB/M/Jun24/G4002/E6 7135/2
, 2
Context 1 Total for this context: 50 marks
TROUBLING TIMES FOR THE UK ECONOMY
Extract A: Inflation and the growth in average weekly real earnings, December 2020 to
November 2022
Note: CPIH is a measure of inflation based on the Consumer Prices Index which also includes owner occupiers’ housing costs
Source: ONS, Average Weekly Earnings in Great Britain, January 2023
Extract B: Is inflation out of control?
Inflation rose significantly throughout the global economy in 2022. In the UK, rapid increases in
the price of commodities, such as gas and wheat, combined with rising levels of consumption,
led to a 40-year high inflation rate of 11.7%, as measured by the Consumer Prices Index (CPI).
High inflation makes some people poorer, it disrupts firms’ planning, reduces confidence and
creates uncertainty. 5
As wage growth failed to keep up with rising inflation, there was much discussion of a ‘cost-of-
living crisis’ that affected low-income households most of all. Industrial action spread across the
UK, with railway workers, NHS workers and teachers, among others, striking for better pay to
restore the purchasing power of their incomes. However, there were fears that higher wages,
leading to rising costs, would make inflation worse. 10
In response, as inflation rose above the target rate, the Bank of England’s Monetary Policy
Committee acted by increasing Bank Rate. However, this added to the financial pressure on
homeowners, as monthly mortgage repayments increased. The Chancellor, Jeremy Hunt,
acknowledged that householders and firms faced tough times, but stressed the importance of
dealing with inflation to reduce instability and allow the economy to grow. These were troubling 15
times for the UK economy.
Source: News reports, March 2023
IB/M/Jun24/7135/2
ECONOMICS
Paper 2 The National Economy in a Global Context
Insert
DO NOT WRITE ANY ANSWERS IN THIS INSERT. YOU MUST ANSWER THE
QUESTIONS IN THE ANSWER BOOKLET PROVIDED.
CONTEXT 1: TROUBLING TIMES FOR THE UK ECONOMY
Questions 21 to 26
• Extract A: Inflation and the growth in average weekly real earnings,
December 2020 to November 2022
• Extract B: Is inflation out of control?
• Extract C: Concerns about government borrowing?
CONTEXT 2: THE LEVELLING-UP AGENDA
Questions 27 to 32
• Extract D: Employment and inactivity rates, February 2023, and
nominal GDP per capita, 2020, in selected regions of the UK
• Extract E: Is the UK Government serious about levelling up?
• Extract F: Why is levelling up so important?
IB/M/Jun24/G4002/E6 7135/2
, 2
Context 1 Total for this context: 50 marks
TROUBLING TIMES FOR THE UK ECONOMY
Extract A: Inflation and the growth in average weekly real earnings, December 2020 to
November 2022
Note: CPIH is a measure of inflation based on the Consumer Prices Index which also includes owner occupiers’ housing costs
Source: ONS, Average Weekly Earnings in Great Britain, January 2023
Extract B: Is inflation out of control?
Inflation rose significantly throughout the global economy in 2022. In the UK, rapid increases in
the price of commodities, such as gas and wheat, combined with rising levels of consumption,
led to a 40-year high inflation rate of 11.7%, as measured by the Consumer Prices Index (CPI).
High inflation makes some people poorer, it disrupts firms’ planning, reduces confidence and
creates uncertainty. 5
As wage growth failed to keep up with rising inflation, there was much discussion of a ‘cost-of-
living crisis’ that affected low-income households most of all. Industrial action spread across the
UK, with railway workers, NHS workers and teachers, among others, striking for better pay to
restore the purchasing power of their incomes. However, there were fears that higher wages,
leading to rising costs, would make inflation worse. 10
In response, as inflation rose above the target rate, the Bank of England’s Monetary Policy
Committee acted by increasing Bank Rate. However, this added to the financial pressure on
homeowners, as monthly mortgage repayments increased. The Chancellor, Jeremy Hunt,
acknowledged that householders and firms faced tough times, but stressed the importance of
dealing with inflation to reduce instability and allow the economy to grow. These were troubling 15
times for the UK economy.
Source: News reports, March 2023
IB/M/Jun24/7135/2
