2019 H2 Economics Paper 2 Essay 4: Suggested Answers
How to use these essay answers. The responses below, including the part (a) answer, are structured guides to the requirements of the question, the content, analysis and evaluation a strong answer must cover, rather than full essay prose with a written introduction and conclusion. Use them to see what to include and how to build the argument, then write it up in your own continuous prose, adding your own introduction and conclusion.
This essay explains a demand side and a supply side reason for a rise in the rate of inflation, then asks whether the policies used to prevent inflation in Singapore are the most appropriate policies for all economies.
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Explain a possible demand side reason and a possible supply side reason for a rise in the rate of inflation. [10]
Inflation is a sustained increase in the general price level of goods and services in an economy over a given period. It can be caused by both demand side and supply side reasons.
Demand side reason: demand pull inflation. Demand pull inflation occurs when there is an increase in overall demand for goods and services. Aggregate demand (AD) comprises Consumption (C), Investment (I), Government Expenditure (G) and Net Exports (X minus M). Positive economic sentiment can boost consumer confidence and spending, favourable conditions can encourage investment, higher government spending can act as fiscal stimulus, and a depreciation can raise net exports. If AD increases from AD0 to AD1 while the economy is operating near or at full employment, the increased demand pushes the general price level up from P0 to P1, resulting in demand pull inflation. An AD and AS diagram with AD shifting right near full capacity, raising the price level from P0 to P1, would illustrate this.
Supply side reason: cost push inflation. Cost push inflation can be caused by a fall in short run aggregate supply (SRAS), often due to a rise in the prices of factor inputs. Key inputs such as oil strongly influence production costs across many industries, since oil is used in manufacturing, transport and energy generation, so a rise in oil prices raises production costs. When costs rise across the board, the SRAS curve shifts leftward from AS0 to AS1, leading to a higher general price level at the same level of output, with the price level rising from P0 to P1. An AD and AS diagram with SRAS shifting left, raising the price level from P0 to P1, would illustrate this.
In summary, inflation can arise from an increase in aggregate demand (demand pull) or a fall in short run aggregate supply (cost push), with the specific cause depending on factors such as consumer behaviour, investment, fiscal policy and global commodity prices.
Define inflation, then develop one demand pull cause and one cost push cause, each tied to the correct AD or AS shift and a rising price level.
Tests: Inflation, Aggregate demand and supply
Assess whether policies designed to prevent a large and continuing rise in inflation in Singapore are the most appropriate policies for all economies. [15]
- Frame Singapore's anti inflation toolkit as tailored to a small, open, trade dependent economy.
- Set out the main policy and the mechanism by which it curbs inflation, then note where it is less suited.
- Set out a second policy and its mechanism, contrasting it with the position of larger economies.
- Consider a further policy and the constraints on applying it elsewhere.
- Weigh appropriateness against differences in economic structure across economies.
- Reach a supported judgment on the appropriateness of these policies for all economies.
This part is gated. The full model answer with the worked policy analysis and the assessment, with the diagrams and the full evaluation, is in the ETG TYS Answers book from SAP and is worked live in the TYS Crashcourse. ETG students also get the AI TYS coach that guides them through this exact question. Message the team to find out more.
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Where can I get the full worked answers to the 2019 H2 Economics paper 2 essay 4?
The full model answers, with the diagrams and the higher mark evaluation, are in the ETG TYS Answers book published by SAP and sold at Popular, and are worked live in the TYS Crashcourse. Every ETG student also gets the AI TYS coach on our learning management system, which guides you through how to tackle every essay and every case study question from the last ten years.
Are these the official 2019 A Level Economics answers?
No. SEAB sets and marks the A Level paper. These are suggested answers by Mr Eugene Toh, author of the H1 and H2 A Level Economics TYS answer keys, published by SAP and sold at Popular.
How should I use these suggested essay answers?
Treat them as a guide to the requirements of the question, the content, analysis and evaluation a strong answer must cover, not as full essay prose. Write the essay up in your own continuous prose, with your own introduction and conclusion.
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