2024 H2 Economics Paper 1 Case Study 2: Suggested Answers
The case study looks at changing economic relationships in the Asia-Pacific Rim, including the appreciation of the Chinese yuan, the US and China trade dispute and trade diversion, and accession to the CPTPP.
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A two mark question asking how the appreciation of the Chinese yuan against the US dollar is shown over a particular period in Figure 2.
From around mid 2020 to early 2022 the Chinese yuan appreciated against the US dollar. It initially cost about 7.2 yuan to buy 1 US dollar, but by early 2022 it cost about 6.4 yuan to buy 1 US dollar. Fewer yuan were needed to purchase 1 US dollar, which shows the yuan had become more valuable relative to the dollar.
Identify the period and use the figures to show fewer yuan per dollar over time.
Tests: Exchange rate policy
A two mark question asking, using demand and supply analysis, for one possible reason the Chinese yuan has appreciated against the US dollar.
An increase in demand for Chinese exports raises the demand for the Chinese yuan on the foreign exchange market. The demand curve for yuan shifts rightward, so the price of the yuan in US dollars rises, which is an appreciation of the yuan against the dollar. A short forex diagram showing demand for yuan shifting right and the price rising would support this. Investment inflows into China would have a similar effect.
Link a stated cause to a rightward shift in demand for the currency and a higher price.
A four mark question on how the change in the exchange rate from March to September 2018 shown in Figure 2 might have affected China's balance of payments.
From March to September 2018 the yuan depreciated. A weaker yuan makes Chinese exports cheaper in foreign currency, raising the quantity demanded of exports and so export revenue, while imports become more expensive in yuan, reducing import expenditure. Both effects tend to improve the trade balance.
The size of the improvement depends on elasticities. By the Marshall Lerner condition, if the sum of the price elasticities of demand for exports and imports exceeds one, the depreciation improves the trade balance. Assuming this holds, the depreciation improves the current account and so improves China's balance of payments.
Trace the depreciation through exports and imports, and qualify with the Marshall Lerner condition.
A four mark question on how increased exports of health supplies and equipment from China might have affected national income and the general price level in China.
Higher exports of health supplies raise net exports, a component of aggregate demand, shifting AD rightward. Through the multiplier, real national income rises. During the pandemic China was likely operating below full employment with spare capacity, so the increase in AD raises output and employment with only limited upward pressure on the general price level.
Real national income therefore rises, while the general price level rises only marginally or stays broadly stable. An AD and AS diagram with AD shifting right along the upward sloping section of a Keynesian AS curve would illustrate this.
AD component identified, multiplier effect, and a price level outcome that depends on the level of spare capacity.
An eight mark discussion of the extent to which countries such as Vietnam, Malaysia and Taiwan are the real winners in the US and China trade dispute.
- Set up the trade diversion mechanism and the short run gains channel for the third party economies.
- Develop the positive case through the relevant aggregate demand component and a supply side capacity effect, citing the table evidence.
- Build the counter case around these economies' dependence on their two largest trading partners.
- Distinguish short run from medium to long run effects when weighing the two sides.
- Conclude with a judgment on the extent, stating what it is contingent on.
This part is gated. The full model answer with the worked ad and as analysis and the evaluative judgment, 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.
A ten mark discussion of whether the UK or China will benefit more from joining the CPTPP.
- Define the trade agreement and anchor the analysis in comparative advantage.
- Build the benefit case for the first country, identifying which sectors and channels gain.
- Build the benefit case for the second country through its own distinct trade motivation.
- Select the criteria that decide which country gains more, such as trade share of GDP and the marginal value of new market access.
- Apply the criteria and reach a comparative judgment.
This part is gated. The full model answer comparing the gains to each country, 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: Comparative advantage, Protectionism
Questions students ask
Where can I get the full worked answers to the 2024 H2 Economics paper 1 case study 2?
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 2024 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 are these case study suggested answers structured?
The lower mark parts are answered in full. The higher mark parts are outlined here, with the full worked answers reserved for the ETG TYS Answers book and the TYS Crashcourse.
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