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A number of business groups have signed an open letter to the UK Government asking it to commit to delivering the full High Speed 2 rail link - Edexcel - A-Level Economics A - Question 4 - 2021 - Paper 2
Question 4
A number of business groups have signed an open letter to the UK Government asking it to commit to delivering the full High Speed 2 rail link. This will connect Lond... show full transcript
Worked Solution & Example Answer:A number of business groups have signed an open letter to the UK Government asking it to commit to delivering the full High Speed 2 rail link - Edexcel - A-Level Economics A - Question 4 - 2021 - Paper 2
Step 1
Explain one likely impact of this project on aggregate supply in the UK.
Answer
One likely impact of this project is that it will increase aggregate supply in the UK. This is because the investment of £56 billion in the High Speed 2 rail link will enhance the UK's capital infrastructure. Improved transport links will facilitate easier movement of goods and people, subsequently leading to increased productivity in the economy. Furthermore, faster travel times will allow workers to commute more efficiently, thereby boosting their productivity. Additionally, the enhancement of transport networks can lead to a more interconnected economy, attracting further investments.
Step 2
Explain the likely impact of the change in the exchange rate of the pound shown in the graph from 1st January 2018 to 1st January 2019 on the UK current account of the balance of payments.
Answer
The graph depicts a weakening of the pound during this period, which typically makes UK exports cheaper and imports more expensive. As a result, one likely impact on the UK current account would be an increase in export volumes due to more competitive pricing in international markets. Conversely, the more expensive imports may result in a decrease in import volumes. This shift could lead to an improvement in the current account balance as export revenues increase relative to import costs.
Step 3
Government spending on the High Speed 2 rail link is an example of which of the following?
Answer
The correct option is B: Capital expenditure. This expenditure represents government spending on long-term investments in infrastructure, which is aimed at enhancing the economic capacity of the country. This is not an example of current expenditure, automatic stabilisers, or transfer payments.