2020 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 how government expenditure on large-scale infrastructure can contribute to a country's economic growth, then asks the extent to which such expenditure on infrastructure projects will lead to a rise in the living standards of a country.
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Explain how government expenditure on large-scale infrastructure can contribute to a country's economic growth.
Governments frequently increase expenditure on large-scale infrastructure, such as highways, airport terminals, railway lines, park connectors and universities, as part of an expansionary fiscal policy. This contributes to growth in two ways: by boosting actual economic growth and by raising potential economic growth.
Boosting actual economic growth. Government spending, G, is a component of aggregate demand, AD = C + I + G + (X minus M). An increase in infrastructure spending raises AD, shown by a rightward shift of the AD curve from AD0 to AD1, increasing real GDP from Y0 to Y1. As the government invests, industries such as construction and engineering see a surge in activity, raising production, employment and income in these sectors. The initial spending also generates a multiplier effect: those whose incomes rise then spend on goods and services, raising AD and real national income further through successive rounds.
Raising potential economic growth. New highways and railway lines improve accessibility and reduce travel time and congestion, lowering the time and cost of transporting goods, services and workers and raising the efficiency of business operations. This lowers the cost of production and allows more output within the same time frame, increasing the economy's productive capacity. The improvement is shown as a rightward shift of the long run aggregate supply curve from AS0 to AS1, raising the full employment level of output from Yf0 to Yf2. Spending on educational infrastructure such as universities develops a more skilled workforce, raising the quality of labour and the productive capacity, which also shifts LRAS to the right.
In summary, infrastructure expenditure contributes to economic growth both by boosting actual growth through higher aggregate demand and by raising potential growth through improved efficiency and human capital.
Identify G as a component of AD with a multiplier, and explain the supply-side channel that shifts LRAS rightward, covering both actual and potential growth.
Tests: Fiscal policy, Multiplier effect
Discuss the extent to which such government expenditure on infrastructure projects will lead to a rise in the living standards of a country.
- Frame living standards as having a material and a non-material dimension, and signal that both benefits and downsides will be weighed.
- Set out how infrastructure spending raises the material standard of living through income, employment and skills.
- Set out how it raises the non-material standard of living through amenities, shorter commutes and personal development.
- Build the counter case around construction disruption, poor execution and the risk of misallocated funds.
- Reach an evaluative conclusion on the extent, conditioning it on planning and transparent execution.
This part is gated. The full model answer weighing the material and non-material gains against the downsides and the conclusion, 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.
Tests: Standard of living, Fiscal policy
Questions students ask
Where can I get the full worked answers to the 2020 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 2020 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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