IBMJun25 G4002 V6 - Monday 19 May 2025 Afternoo...

IB/M/Jun25 /G4002 /V6

7136/2

Monday 19 May 2025 Afternoon Time allowed: 2 hours

Materials

For this paper you must have:

• an AQA 12-page answer book • a calculator.

Instructions • Use black ink or black ball-point pen. Pencil should only be used for drawing.• Write the information required on the front cover of your answer book.The Paper Reference is 7136/2.• In Section A, answer EITHER Context 1 OR Context 2.• In Section B, answer ONE essay.

Information • The marks for questions are shown in brackets.• The maximum mark for this paper is 80.• There are 40 marks for Section A and 40 marks for Section B.

Advice • You are advised to spend 1 hour on Section A and 1 hour on Section B .

A-level

ECONOMICS

Paper 2 National and International Economy 1 / 2

2 IB/M/Jun25/7136/2

Section A

Answer EITHER Context 1 OR Context 2.

EITHER

Context 1 The value of the Norwegian krone and its effects on Norway’s economy

Total for this context: 40 marks

Study Extracts A, B and C, and then answer all parts of Context 1 which follow.

Extract A:

Figure 1: Norwegian krone (NOK) to Singapore

dollar (SGD) exchange rate, January 2020 to December 2023

Figure 2: Macroeconomic performance

indicators for Germany, Norway and Singapore, average rates between 2020 and 2023

Source: Investing.com, 2024 Source: World Bank, 2024

Extract B: Norway’s currency, the krone, has depreciated

The value of the Norwegian currency, the krone, has depreciated. Over the past 10 years, the krone has fallen by over 20% against the euro and the US dollar. Although a fall in the value of the krone may help some macroeconomic objectives, it can make others harder to achieve.

Inflation has decreased since its peak of 7.5% in October 2022. However, the depreciating krone means that it will take longer for inflation to reach its target rate as imported goods become more expensive. Some analysts hope that, before long, the currency will start to appreciate which could help Norway reduce inflation.

Norway’s average CPI inflation rate for 2023 was 5.5%, with nominal wage growth of 5.1%.Thus, real wage growth was negative, reducing average living standards. Norway’s economy is heavily reliant on the export of oil, which makes the krone sensitive to changes in oil prices.Sales of oil and gas helped Norway record a current account surplus of 17.5% of GDP in 2023.

Some economists argue that in a small open economy like Norway’s, managing the exchange rate, by intervening in currency markets, is the best way to achieve economic and price stability.They believe that, over the medium-term, there is a stable and predictable link between the exchange rate and inflation. However, targeting the exchange rate means the central bank gives up control of interest rates.

5

10

15

Source: News reports, 2024

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