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by the Chief Examiner

Economics is a real life, dynamic subject. To allow for the associated changes in real world economics the Ordinary level GCE syllabus is periodically revised. The latest revision had its subsequent first examination in May 2002.

It is important to realise that the study of Economics not only enlightens students into the intricacies of an academic subject but may also stimulate their interest in associated issues affecting their own economies as well as the wider global economy. Students gain much from the study Economics to GCE O level and, if they feel inclined, will benefit from the sound basic knowledge included in the course should they wish to progress to Economics at the newly formulated higher AS and Advanced levels.

The content of the revised syllabus, for first examination May 2002, covers nine major topics:

Business Enterprise
Location
Economic Systems
Incomes
Population
International Trade
Financial Institutions and Monetary Policy
The Government and Fiscal Policy
National Income, Growth and the Standard of Living

The major topics have not changed since the last syllabus revision but their content and emphasis reflect the ways in which countries now deal with economic issues. Some of the older theories have been omitted to make way for greater emphasis to be placed on more current ways of managing the economy. The following are examples of some of the changes which have occurred and are contained in the new syllabus:

The growth of the free market, a major example of which is privatisation together with an appreciation of both its advantages and disadvantages;

* The emergence and growing importance of multinationals: reasons or their location and their effects;

* Direct government interference in the labour market in the form of minimum wage legislation and the omission from the syllabus of the marginal revenue productivity theory of wages;

* The consequences of population changes on individual countries as well as the world economy;

* The growing problem of international debt;

* Interest rates as the main instrument of monetary policy in many economies.

Anyone following the syllabus should look closely at each section so that all changes are identified. There are some topics which form the basis of economics at all levels and in these sections of the syllabus either no changes have been made or the changes are of emphasis rather than content.

There has been no change to the way in which the subject is assessed. The paper is divided into two sections A and B. Section A (40% of the total marks) consists of compulsory questions, several of which may be based on stimulus material. It is important to recognise that students of Economics at all levels should be able to interpret and use data in a variety of forms and Section A attempts examine this ability. Section B (60% of the total marks) requires candidates to answer three out of six extended answer questions. It is section B which gives candidates the opportunity to apply the higher skills of analysis and evaluation, thus preparing them for the rigours of AS and Advanced levels.

An example from Section A of the specimen paper is;

In 1990:

1. Bookings by British people or holidays abroad fell by nearly 50%

2. A major Japanese motor company started building a factory in the UK;

3. The German mark (DM) strengthened against the British pound

(a) Briefly explain the effects of events 1 and 2 on the UK balance of payments.

(b) Give a numerical example to illustrate number 3 above.

(2x2 marks)

(2 marks)

(Total 6 marks)

Mark scheme:

(a) 1: There will be a decrease (1 mark) in invisible imports (1 mark).Candidates who say that there will be an improvement in the balance of payments (1 mark only).

2. Inflow (1 mark) of investment/capital (1 mark). Candidates who say that there will be an improvement in the balance of payments (1 mark only).

(b) E.g. Original exchange rate: 1 pound 2DM: new exchange rate 1 pound = IDM

(2 marks)

Too often candidates, in their eagerness to proceed to the next question, omit simple, yet vital, pieces of information which might have gained them crucial extra marks. In order to gain maximum marks candidates should try to pay attention to the number of marks allocated to each part of the question. This question from Section A on the specimen paper shows clearly how marks can be lost by even the best candidates if they state only that there has been an improvement in the balance of payments without explaining why this has occurred.

Governments and economists are continually changing the way in which the official balance of payments statistics are displayed and calculated. However, at this level, it is sufficient that students are able to distinguish between two major categories of international money flows. On the one hand there is the money earned (exports) and spent (imports) on goods (visibles) and services (invisible) and on the other inflow and outflow of capital and investment.

To avoid confusion it is useful to remember that money coming into a country will benefit the balance of payments and vice versa. In part (a) 1 of the question candidates should first identify that foreign holidays are invisible (service) import (outward flow of money) and then explain the significance of this situation in order to gain maximum marks. In this case there were fewer foreign holidays taken by British people, therefore this would benefit the balance of payments. Part 2 can be successfully attempted in a similar way; the Japanese motor company is investing/transferring capital to the UK, money is entering the country from abroad, therefore this will be seen as an improvement in the balance of payments.

Part (b) shows how quickly Economics can change. In January 2002 Germany adopted the Euro and therefore the DM became outdated.

This, however, has no relevance to this question but does serve to remind us that between the setting of papers and the time of the examination changes in Economics may occur.

Examiners are aware of this and will not penalise candidates if their responses are a little out of date. On the other hand, credit may well be given to those candidates who show an awareness of recent changes in economic affairs. In part (b) a simple numerical example should refer to the data int he question, i.e. MD and Sterling Pound not any other currencies. A strengthening of a currency is the same as an appreciation of the currency. The candidates need to identify the currency which has strengthened, in this case the DM, and simply show that more Sterling Pound can be obtained.

Too often teachers think it unnecessary to teach the whole of the syllabus, especially if time is short. For several years some teachers have chosen to omit the section on International Trade. One of the conditions, which must be met when setting the examination papers, is that there must be a question on each of the nine major topics.

Therefore, teachers who omit any part of the syllabus are disadvantaging their candidates, not only at this level but also at higher levels, if students are not given a good foundation in the subject. For this reason the second question to be addressed in more detail is the International Trade question in Section B of the specimen paper:

(a) Define the term "trading bloc". (4 marks)

(b) Outline the role of the World Trading Organisation (WTO). (4 marks)

(c) Discuss the impact of a trading bloc, such as the European Union, upon either your own country or the UK economy. (12 marks)

The mark scheme provides comprehensive answers to parts (a) and (b) together with an outline of how to score maximum marks in part (c):

(a) Group of countries which combine together to reduce internal trade barriers (2 marks) and erect external trade barriers (2 marks). (4 marks)

(b) To reduce trade barriers between countries (2 marks). To prevent unfair competition e.g. "dumping" (2 marks). Candidates who show knowledge of how the WTO operates i.e. through "round" and negotiations should be credited with 2 marks.

(c) Each effect identified (1 mark) e.g. if a member of a bloc there will be an increased market, free movement of goods, increased competition. If not a member of a bloc there will be an increased tariff barrier (CET - Common External Tariff), reduction of exports. Each effect described (1 mark) and explained (2 marks). Two points very well explained could earn 10 marks (2 X 5 marks).(12 marks)

The phrase "trading bloc" has produced one of the most consistent mistake in recent years. Some candidates make the incorrect interpretation of the word "bloc" and refer to "blocks to trade" e.g. tariffs, not to the customs unions and free trade areas as required. Examiners are aware and usually impressed with the standard of English of the international candidates. This examination is concerned with knowledge of Economics and candidates are not penalised for mistakes relating to their knowledge of the English language.

However, when a term is incorrectly defined then marks cannot be awarded. This particular mistake has been referred to several times in the Chief Examiner's reports and teachers are hereby reminded that these reports are full of useful tips on technique as well as giving a comprehensive analysis of previous papers.

The World Trade Organisation is one of two international institutions referred to in the syllabus, the other being the International Monetary Fund. In a straightforward question, like (b) maximum marks should be within the reach of all candidates by a simple description of the institution.Part (c) is the final and most heavily weighted part in terms of marks. If candidates haven't already realised which "bloc" or "block" was referred to in (a) then this part should clarify the confusion. To allow the better candidates to excel, many questions encourage the use of real life rather than hypothetical examples. It is for this reason that the phrases, "using examples from your own country" or "a country of your choice" are included in the more rigorous and consequently the most differentiating parts of the question.

The term "discuss" should immediately signal to candidates that they should try to aim to address the higher skills of analysis and evaluation rather than simply listing the effects of a trading bloc. In the teaching of Economics it is easier if the students look at their own country.

If it happens to be a member of a trading bloc then the arguments for and against will have probably been well documented in the newspapers. If it is not then the country studied may be considering joining a bloc or may be suffering from being outside it. No matter what the position of the country, a member of a bloc or not, it is unlikely that a trading bloc will have no effect upon its economy.Once again it is important to ensure that students see Economics as a subject which is learnt not only from textbooks but is part of every day life.

Current affairs programmes on television, newspapers and journals and the Internet should be used, where possible, as well as the normal resources associated with any examination syllabus. Economics relies on the students', (and teachers',) desire to learn about their own country a basic understanding of current issues in order to arouse an interest not only in their own country but also in the world economy.

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