GCE Economics 6EC04 01 3IntroductionREPORT ON 6EC04 JUNE 2011General CommentsThis was the second 6EC04 paper from the new specification launched in September 2008. The structure of the paper requires candidates to answer one essay question, divided intotwo parts, from a choice of three (worth 50 marks) and one data response question, dividedinto five parts, from a choice of two (also worth 50 marks).Most candidates completed the paper in the time available but there was evidencethat some candidates did not spend enough time on the last part of the data responsequestion.The paper appeared to be accessible for most candidates and differentiated well. The meanmark and standard deviation was lower than last year. The main explanation for the lowermean mark is that the essays were more challenging than last year, especially the part bsections.Once again it was pleasing to see some superb responses which demonstrated breadthand depth of knowledge and understanding combined with a rigorous analysis andevaluation of the issues. In these answers it was evident that candidates answered thequestions in context and had read beyond the syllabus. Such scripts are not only a credit tothe candidates themselves but also to their teachers whose inspiration and sound teachingmust have played a crucial role.Some candidates struggled to express their views precisely and accurately. This is significantfor the essays and those parts of the data response questions with an asterisk. The qualityof written communication is judged on the candidate’s ability• to present an argument and conclude on the basis of that argument• to organise information clearly and coherently• to use economics vocabulary appropriately• to use grammar, spelling and punctuation appropriatelySection A: Essay QuestionsThe most popular question was number 3 followed by question 1, with question 2 being theleast popular. Question 1 on the fiscal deficit provided an opportunity for those candidateswho had studied the recent financial crisis to use their knowledge and understanding togood effect. Similarly, question 2(a) enabled candidates to apply case study material appropriately toexplain causes of absolute poverty while question 3(b) allowed students to make referenceto the current problems facing several Eurozone countries. In weaker responses there was frequently a failure to answer directly the question set; littleknowledge about recent economic events; an inability to construct an argument and a lackof detailed analysis.
4 GCE Economics 6EC04 01Section B: Data Response QuestionsIn Section B (data response) question 5 was more popular than question 4. Question 4 provided an opportunity to use economic analysis in the context of Sub-Sahara Africa and there were many convincing answers. However, in parts (c), (d) and(e) there was sometimes confusion between FDI, trade and aid. The concept of economicdevelopment was not always clearly understood with respect to part 4(e).Question 5 included questions about the WTO, exchange rates, trade imbalances and tariffs. Although the first two parts were answered quite well, the responses to parts (c) and (d)on trade imbalances were less convincing. Given the significance of these in the globaleconomy, centres would be advised to cover this area of the syllabus carefully. It wasperformance on these questions which probably explains the slightly lower mean mark onquestion 5 as compared with question 4.In weaker responses the data and information provided was frequently ignored or poorlyunderstood; there was little analysis; and there was evidence of candidates not spendingenough time answering the final part of the question.
GCE Economics 6EC04 01 5Question 1This question was the second most popular choice for candidates. The best answers to part(a) focused on the reasons for the increased size of fiscal deficits since 2008 and consideredboth the significance of automatic stabilisers and discretionary fiscal policy. There werevarious weaknesses in responses: some candidates ignored the requirement to relate theiranswers to a particular question; others confused a fiscal deficit with a current accountdeficit.In part (b) the best responses assessed the implications of cutting public expenditure andof raising taxes. There was some very good analysis and evaluation of the Laffer curve. Weaker answers contained superficial analysis and/or only considered the effects of one ofthe two options. Some of these seemed to think that raising taxes would reduce aggregatedemand but cutting public expenditure would not.
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GCE Economics 6EC04 01 11In part (a), knowledge of recent economic events marked out the bestanswers from the mediocre because these reponses usually consideredboth automatic stailisers and discretionary fiscal policy.In part (a), knowledge of recent economic events marked out the bestExaminer Tip(a) There is a good explanation of two aspects of discretionary fiscal policy followed by theimpact of the financial crisis on government tax revenues and expenditure. There is someevaluation of these polices. Awarded 16/20 i.e. a Level 4 response.(b) There is a consideration of a reduction in ‘crowding out’; and also of the impact of highertaxes on those on low incomes and on incentives to work. The second point about highertaxes reducing consumption is less convincing because aggregate demand would also bereduced following a reduction in government expenditure. This answer was awarded 18/30(Level 3 response)Examiner Comments(a) There is a good explanation of two aspects of discretionary fiscal policy followed by theExaminer Comments
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18 GCE Economics 6EC04 01Stronger and more detailed evaluative comments could have enabled thecandidate to score a higher mark on both parts.Stronger and more detailed evaluative comments could have enabled theExaminer Tip(a) The answer identified and explained three factors which accounted for the rise in theUK’s fiscal deficit, namely, expansionary fiscal policy; the imapct of rising unemployment onpublic finances and bank bailouts. Although brief evaluative comments were included, themost impressive one related to bank bailouts. Level 4: 16/20(b) Several valid points were included i.e. disincentive effects of higher taxes; incentiveeffect of cutting unemoployment benefits; impact on inequality; and the impact of publicspending cuts on local authorities. There is a little evaluation on the second and fourthpoints so this answer was just awarded a level 4 mark - 22/40Examiner Comments(a) The answer identified and explained three factors which accounted for the rise in theExaminer Comments
GCE Economics 6EC04 01 19Question 2Part (a) of this question was relatively straightforward and many candidates referred tocase study material which they had studied. A weakness was that some responses made noreference to a specific country and an alarming number of answers referred to Africa as acountry.Part (b) proved to be quite challenging but the best responses discussed the meaning ofdevelopment and then considered the extent to which a reduction in absolute poverty wasnecessary for economic development. The main weakness was the absence of a discussionof the meaning of economic development.
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GCE Economics 6EC04 01 25In part (b), it is important to explain the possible links between areduction in absolute poverty and economic development and also whythese links may not be very strong.In part (b), it is important to explain the possible links between aExaminer Tip(a) Four relevant causes of absolute poverty related to the Democratic Republicof the Congo are considered: corruption; civil war; drought and AIDs. However,there is only a little evaluation in relation to drought and AIDs. Level 4: 16/20(b) This answer was poorly related to the question. However, some credit wasgiven for comments on over-dependency on aid and impact on environmentalsustainability. Just Level 2: 12/30.Examiner Comments(a) Four relevant causes of absolute poverty related to the Democratic RepublicExaminer Comments
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GCE Economics 6EC04 01 31The introduction to part (b) should include a discussion of the meaning ofeconomic development.The introduction to part (b) should include a discussion of the meaning ofExaminer Tip(a) Three causes of absolute poverty are identified and explained: primary productdependency; debt and corruption. There is good evaluation of the government debtissue. Level 4: 15/20(b) The answer to this part focuses more on growth than to development but somevalid points are made including reference to a larger, healthier workforce; improvedinfrastructure; increased FDI and greater willingness of banks to lend. Not all these areexplained convincingly and the evaluation is rather limited. Level 3: 17/30Examiner Comments(a) Three causes of absolute poverty are identified and explained: primary productExaminer Comments
32 GCE Economics 6EC04 01Question 3In part (a) there was good analysis of trade creation and trade diversion in many answers. However, there was often inadequate discussion of the impact of the growth of tradingblocs on the global economy. Also this question caused problems for some candidates whointerpreted trading blocs as meaning methods of protectionism.Part (b) was generally answered quite well although some focused on less impressive pointssuch as transiition costs. Better responses considered the current crisis in the Eurozone asan argument against membership of a monetary union.
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GCE Economics 6EC04 01 39(a) Although there is an attempt to relate the points to the impact of trading blocs on theglobal economy, they are not developed or explained in much depth. There is, however, agood evaluative comment on the accessibility of trading blocs to transantional companies.This answer was therefore deemed to be worth a top Level 3 mark of 14/20(b) Several relevant points are made and most are evaluated e.g. absence oftransaction costs; price transparency and predictability; loss of independent monetarypolicy (explained well) and a thin point on transition costs. This answer was thereforeconsidered to be a Level 4 response: 24/30Examiner Comments(a) Although there is an attempt to relate the points to the impact of trading blocs on theExaminer CommentsIn part (a), high marks were only awarded to those who examined the impactof trading blocs on the global economy since this was specifically demandedby the question.(b) Knowledge of recent events affecting eurozone countries would provide auseful backdrop to an examination of the benefits and costs of membershipon a monetary union.In part (a), high marks were only awarded to those who examined the impactExaminer Tip
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48 GCE Economics 6EC04 01(a) This is a very good answer which considers the issues of trade creation and tradediversion as well as implications for producers both within and outside the tradingblocs. 19/20(b) Again, a well structured answer which identifies and explains several relevantissues: reduction in transaction costs; price transparency; increased businessconfidence; loss of independent monetary policy and individual exchange ratetogether with evaluation and conclusions. Just level 5: 27/30Examiner Comments(a) This is a very good answer which considers the issues of trade creation and tradeExaminer CommentsThis is a good example of an answer in which economic concepts are appliedaccurately and knowledge about current economic issues enhances the qualityof the essay.This is a good example of an answer in which economic concepts are appliedExaminer Tip
GCE Economics 6EC04 01 49Question 4 (a)Although there was a clear reference in the extract about the significance of risingpopulations, many answers did not make the point that if the population is rising fasterthan GDP, then GDP per capita would fall. There was also an absence of examples in manyresponses.In this answer there is a reference to the huge increase in population and then anexample is included of where economic growth is less than the rise in population.Unfortunately, there is no consideration of the impact on GDP per capita.Examiner CommentsIn this answer there is a reference to the huge increase in population and then anExaminer CommentsInclude reference to the relationship between population growth and the rateof economic growth.Include reference to the relationship between population growth and the rateExaminer Tip
50 GCE Economics 6EC04 01Answer includes reference to rapidly rising populations and the possibility of areduction GDP per capita. However, there is no specific data reference to a country.Examiner CommentsAnswer includes reference to rapidly rising populations and the possibility of aExaminer CommentsIn questions which make reference to the information provided, it is importantto include relevant data references.In questions which make reference to the information provided, it is importantExaminer Tip
GCE Economics 6EC04 01 51Question 4 (b)Many answers made good use of the material provided to explain why Growth rates in Sub-Saharan Africa were higher than those in Advanced Economies. Weaker answers wentlitlle further than identifying key factors from the extract and/or made no specific datareferences.
52 GCE Economics 6EC04 01This answer identified several relevant factors including FDI, possession of rawmaterials, cheap loans and included appropriate data references. However, therewas very little explanation of the points made. 5/8Examiner CommentsThis answer identified several relevant factors including FDI, possession of rawExaminer CommentsThe command word in the question is ‘analyse’ so it is important to developthe points raised to show their significance in explaining why the growth rateof Sub-Saharan countries was higher than that of Advanced Economies.The command word in the question is ‘analyse’ so it is important to developExaminer Tip
GCE Economics 6EC04 01 53This answer identified two key factors: reliance on raw materials and the isolation ofAfrica’s banks. The first point was analysed well, gaining but there was no furtherexplanation of the second point. The data reference to Angolan oil was sufficient togain 2 application marks. Mark 6/8Examiner CommentsThis answer identified two key factors: reliance on raw materials and the isolation ofExaminer CommentsIt is important to explain the significance of the points made inanswering the question.It is important to explain the significance of the points made inExaminer Tip
54 GCE Economics 6EC04 01Question 4 (c)The best answers considered a variety of benefits associated with FDI e.g. increasedgrowth; increased employment; higher tax revenues; positive effects on the Balance ofPayments and the outlined some disadvantages. However, weaker answers confused FDIwith aid and debt relief.
GCE Economics 6EC04 01 55It is important to stick to the context of the questionwhich, in this case, is clearly about the benefits of FDI.It is important to stick to the context of the questionExaminer TipBenefits of FDI are identified with brief explanation (1 + 1 marks)in the first paragarph with the inclusion of appropriate examples (2marks). The second paragraph includes a relevant evaluative comment(2 marks). The last two paragraphs are not relevant because there isdiscussion about aid rather than FDI. Total: 6/10Examiner CommentsBenefits of FDI are identified with brief explanation (1 + 1 marks)Examiner Comments
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GCE Economics 6EC04 01 57This answer shows the importance of using the informationprovided to gain high marks.This answer shows the importance of using the informationExaminer TipIn the first paragraph there is 1 mark for identification of improvedinfrastructure and 2 for the subsequent analysis. 2 marks are also awardedfor the example in the last sentence.In the second paragraph, there is a mark for analysis. The last paragraphwas awarded 3 evaluation marks. Total 9/10Examiner CommentsIn the first paragraph there is 1 mark for identification of improvedExaminer Comments
58 GCE Economics 6EC04 01Question 4 (d)Some responses failed to focus on the benefits and problems associated with increasedtrade in primary products with BRIC countries. Of those which did address the questiondirectly, many did not apply concepts such as the law of comparative advantage or includeexamples of countries or products to illustrate the points made.
GCE Economics 6EC04 01 59When discussing the benefits of trade, specialisation based onthe law of comparative advantage would be a useful line ofanalysis and evaluation.When discussing the benefits of trade, specialisation based onExaminer TipThe main problem with this answer is weak analysis. Two benefits areidentified: increased growth and reduction in absolute poverty (2) with someanalysis of the second point (1). Two examples of products are provided (2)and there is some evaluation in the second paragraph (2). Total: 7/12.Examiner CommentsThe main problem with this answer is weak analysis. Two benefits areExaminer Comments
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GCE Economics 6EC04 01 61Points made should be supported by relevant analysis. For example,the first point could be developed by noting that exports are acomponent of aggregate demand and an injection and therefore, anincrease in exports would cause a more than proportionate rise inGDP.Points made should be supported by relevant analysis. For example,Examiner TipTwo benefits are identified but not explained well (2). There is someevaluation at the end of the answer which picks the issue of primary productdependency mentioned in the extract. (2). Total 4/12Examiner CommentsTwo benefits are identified but not explained well (2). There is someExaminer Comments
62 GCE Economics 6EC04 01Question 4 (e)There was some very good application and analysis in answers to this question bothin relation to the potential benefits of aid and to problems associated with aid. However,weaknesses included an inability to relate aid to development and to a confusion betweenaid and FDI.
GCE Economics 6EC04 01 63This is a brief answer suggesting that the time spent answering it wasinsufficient. Given that the question is worth 15 marks it is importantto plan time carefully.This is a brief answer suggesting that the time spent answering it wasExaminer TipTwo points area identified: reduction in absolute poverty and investment in humancapital (2). The latter point is developed so gaining 2 analysis marks. The secondparagraph makes reference to China (1) and includes a thin evaluative commentrelating to conditions attached to aid. (1). Total 6/15Examiner CommentsTwo points area identified: reduction in absolute poverty and investment in humanExaminer Comments
64 GCE Economics 6EC04 01A further example would have obtained another application mark.A further example would have obtained another application mark.Examiner TipReduction in absolute poverty is identified and brieﬂy explained in the firstparagraph (1 + 1). This is followed by a brief evaluative comment in the nextparagraph (1). The improvement in human capital is explained in the thirdparagraph ( 1 + 2). The final paragraph includes the example of China (1) andsome evaluation relating to corruption. (2). Total 9/15Examiner CommentsReduction in absolute poverty is identified and brieﬂy explained in the firstExaminer Comments
GCE Economics 6EC04 01 65Question 5 (a)This question was answered well: most answers referred to the key role of the WTO inreducing trade barriers and many referred to its role in settling disputes, giving an examplefrom the extract or from their own knowledge.This answer shows that the first 3 marks may be gained by a verysuccinct outline of the main functions of the WTO.This answer shows that the first 3 marks may be gained by a veryExaminer TipThe first sentence gains 3 marks for identifying 2 key roles of the WTO. This isfollowed by an example relating to Brazil which gains 2 application marks. 5/5Examiner CommentsThe first sentence gains 3 marks for identifying 2 key roles of the WTO. This isExaminer Comments
66 GCE Economics 6EC04 01When there is a reference to the extract, it is important to include anexample of the work of the WTO.When there is a reference to the extract, it is important to include anExaminer TipThis response explains the role of the WTO in terms of promoting free trade andsettling disputes but does not gain any application marks. 3/5Examiner CommentsThis response explains the role of the WTO in terms of promoting free trade andExaminer Comments
GCE Economics 6EC04 01 67Question 5 (b)This question was generally answered well and most candidates examined the effect ofthe undervaluation of the Chinese currency on the price of imports and on the US currentaccount including specific data references. Better responses went on to consider otherimplications e.g. for employment in the US.The points identified need to be explained to gain all theanalysis marks.The points identified need to be explained to gain all theExaminer TipThe marks are gained in the second paragraph for identifying two points (cheapimports and increase in current account deficit) with some explanation of thefirst point (2 + 1). The penultimate line gains 2 application marks for specificreference to US debt. 5/8Examiner CommentsThe marks are gained in the second paragraph for identifying two points (cheapExaminer Comments
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GCE Economics 6EC04 01 69It is important to use the data as this candidate has donerather than writing a purely theoretical response. 2 marksare available for a reference to the information.It is important to use the data as this candidate has doneExaminer TipIn the first paragraph, the increase in imports is identified (1) and there is aspecific data reference relating to the increase in the size of the US trade deficit(2). A further point relating to increased unemployment is identified (1) andexplained (3) in the second paragraph. Total 7/8Examiner CommentsIn the first paragraph, the increase in imports is identified (1) and there is aExaminer Comments
70 GCE Economics 6EC04 01Question 5 (c)This is the first time that a question has been set specifically on the subject of tradeimbalances and it proved to be quite challenging for many candidates. Nevertheless, therewere some impressive responses which analysed the effects of an increase in savings onconsumption, imports and on the trade balance and then went on to consider the possiblelink between increased savings and investment. Evaluation included comments on the sizeof the US trade deficit; and the possible effect of changes in the value of the dollar but suchcomments were relatively rare.
GCE Economics 6EC04 01 71The theme of trade imbalances is mentioned in the syllabusand given its significance for the global economy, this is anarea which should be studied carefully.The theme of trade imbalances is mentioned in the syllabusExaminer TipThis answer received 2 marks for the first paragraph which identified the impactof higher savings on imports and the trade deficit. The second paragraph wasnot considered worthy of credit.Examiner CommentsThis answer received 2 marks for the first paragraph which identified the impactExaminer Comments
72 GCE Economics 6EC04 01Including a specific reference to the size of the US trade deficit is agood strategy both in terms of application and evaluation.Including a specific reference to the size of the US trade deficit is aExaminer TipIn the first two sentences there is identification of the impact on consumptionand its impact on the trade deficit (1 + 1). There is then good analysis of the linkbetween savings and investment (2). The last paragraph makes a specific datareference to the US trade deficit (2) and good evaluation (3). Total 9/10Examiner CommentsIn the first two sentences there is identification of the impact on consumptionExaminer Comments
GCE Economics 6EC04 01 73Question 5 (d)In the past, questions have been set on the implications of a trade deficit and manycandidates interpreted this question in this way. The best responses considered theimplications of both trade deficits and surpluses, examining both the reasons why eachmay or may not be a cause for concern. Relatively few candidates provided examplesof countries with trade surpluses or deficits. In general, this proved to be a challengingquestion and candidates struggled to analyse and evaluate their points.
74 GCE Economics 6EC04 01Answers could consider why trade deficits or trade surpluses are acause for concern and then examine the counter arguments.Answers could consider why trade deficits or trade surpluses are aExaminer Tip2 application marks were awarded for the examples provided in the first paragraph.The second paragraph was irrelevant but 1 identification mark was awarded for thepoint made in the third paragraph. Total 3/10Examiner Comments2 application marks were awarded for the examples provided in the first paragraph.Examiner Comments
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76 GCE Economics 6EC04 012 application marks could have been gained by giving examples ofcountries with larger trade surpluses or deficits.2 application marks could have been gained by giving examples ofExaminer TipThe second paragraph identifies a loss of competitiveness (1) as a cause for concernfollowed by analysis of the possible effects (2). 3 evaluation marks were awarded forthe impact on the value of the currency. A further identification mark was awardedfor the point about high employment being associated with a trade surplus andassociated analysis (1 + 1). The last paragraph earned the 2 remaining evaluationmarks. Total 10/12Examiner CommentsThe second paragraph identifies a loss of competitiveness (1) as a cause for concernExaminer Comments
GCE Economics 6EC04 01 77Question 5 (e)Most candidates were able to draw an accurate tariff diagram and many included datareferences from the material provided. The best responses considered the impact of tariffsby Mexico and Brazil on US producers in terms of sales, revenues, profits and possibleimplications for pricing and then went on to consider the implications for US consumers interms of redundancies in US industries. Given the wording of the question, credit was givento those who interpreted the question as the imposition of tariffs by the US.
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GCE Economics 6EC04 01 79Evaluation is worth 6 marks on this question so the omission of anyevaluative comments was very costly.Evaluation is worth 6 marks on this question so the omission of anyExaminer TipThe tariff diagram was awarded 2 marks. Following this there is an application markfor mentioning the revenue from the tariff to Brazil. The analysis of the effects on USproducers was worth 2 marks with a further 3 marks for the analysis of the effects onUS consumers. However, there is no evaluation. Total 8/15.Examiner CommentsThe tariff diagram was awarded 2 marks. Following this there is an application markExaminer Comments
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82 GCE Economics 6EC04 01The analysis of the effect on producers could have been developed byconsidering the impact on sales; profits; pricing policy.Examiner Tip2 marks for the tariff diagram; 2 for specific data references (there are at least 3 ofthese); 2 for analysis of the implications for US consumers/workers and 6 marks for3 evaluative comments (at end of first page; on the impact on consumers and onproducers). Total 12/15Examiner Comments2 marks for the tariff diagram; 2 for specific data references (there are at least 3 ofExaminer Comments
GCE Economics 6EC04 01 83Grade BoundariesGrade boundaries for this, and all other papers, can be found on the website on thislink:http://www.edexcel.com/iwantto/Pages/grade-boundaries.aspx
Further copies of this publication are available fromEdexcel Publications, Adamsway, Mansfield, Notts, NG18 4FNTelephone 01623 467467Fax 01623 450481Email firstname.lastname@example.orgOrder Code UA027741 June 2011For more information on Edexcel qualifications, please visitwww.edexcel.com/qualsPearson Education Limited. Registered company number 872828with its registered office at Edinburgh Gate, Harlow, Essex CM20 2JE