AQA A-Level Economics 2027 Predicted Practice Paper — Paper 1

Answer ALL questions. Write your answers in the spaces provided. You must write down all the stages in your working.

Section A

Data response questions - choose one context. Answer one context from Section A and one essay from Section B.

• 1

  Question SECTION-A1 (4 marks)

  The following context relates to Questions 01 to 04. Extract A: The UK childcare market, 2026 In 2026, the average price of a full-time nursery place for a child under two in England was estimated at GBP 15,700 per year, up from GBP 11,900 in 2021. Nurseries reported that staff wages, energy costs and rent had risen sharply, while a statutory minimum staff-to-child ratio limited the ability of providers to cut costs. The government funds a set number of 'free' hours per week for eligible families, paying providers a fixed hourly rate per funded child. Many providers argued that this funded rate was below their cost of provision, forcing them either to raise fees on non-funded hours or to exit the market. Between 2021 and 2026, around 2,000 private nurseries closed. Some economists argue that formal childcare generates external benefits, because it enables parents (especially mothers) to return to paid work, raising labour-force participation and future tax revenue. Question 01 With reference to Extract A, explain what is meant by an 'external benefit' and identify one external benefit of formal childcare provision.

  (Total for Question SECTION-A1 is 4 marks)
• 2

  Question SECTION-A2 (6 marks)

  Question 02 Extract A states that the average price of a full-time nursery place for a child under two rose from GBP 11,900 in 2021 to GBP 15,700 in 2026. Calculate, to one decimal place, the percentage increase in this average price between 2021 and 2026, and using a supply and demand diagram, explain one likely cause of this price increase referred to in the extract.

  (Total for Question SECTION-A2 is 6 marks)
• 3

  Question SECTION-A3 (10 marks)

  Question 03 Extract A states that 'the government funds a set number of free hours per week... paying providers a fixed hourly rate per funded child', but that many providers argued this rate 'was below their cost of provision'. Using a diagram, analyse how setting the funded hourly rate below the cost of provision could lead to a shortage of childcare places.

  (Total for Question SECTION-A3 is 10 marks)
• 4

  Question SECTION-A4 (20 marks)

  Question 04 Extract A notes that some economists argue formal childcare generates external benefits. Using the data in the extract and your knowledge of economics, evaluate the case for the government increasing its subsidy to childcare providers in order to correct the market failure in this market.

  (Total for Question SECTION-A4 is 20 marks)

Section B

Essay questions - choose one from three. Answer one context from Section A and one essay from Section B.

• 1

  Question SECTION-B1 (20 marks)

  Question 05 In 2026, the Bank of England's Monetary Policy Committee held the UK Bank Rate elevated for an extended period in response to persistent above-target inflation, even as economic growth slowed. Evaluate the view that a central bank raising interest rates is the most effective way to reduce demand-pull inflation in an economy such as the UK.

  (Total for Question SECTION-B1 is 20 marks)
• 2

  Question SECTION-B2 (20 marks)

  Question 06 UK labour productivity growth has been persistently weak since the 2008 financial crisis, a phenomenon sometimes called the 'productivity puzzle'. Evaluate the view that supply-side policies are the best way to raise long-run economic growth and improve living standards in the UK.

  (Total for Question SECTION-B2 is 20 marks)