Economics 9708 · AS & A Level · Perfect competition
Explain, with the aid of a circular flow of income diagram, how equilibrium is established in an open economy, and consider whether a budget deficit or a trade deficit is more likely to create lasting disequilibrium.
Assess whether more investment in new infrastructure projects will always have a beneficial effect on the circular flow of income in an economy.
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “AO1 Knowledge and understanding (max 3 marks): understanding of the circular flow of income shown through an accurate diagram showing income flows between firms and households (1); proper inclusion of exports and imports (1); correct inclusion of government spending and taxation (1).” …