A-LevelEconomicsThe macroeconomy9708/42 · May/June 2017 · Q425 Marks
Explain why people demand money according to the liquidity preference theory.
- (a)Explain why people demand money according to the liquidity preference theory.[12]
- (b)In 2016 the Trade Unions called a strike of bus and train drivers after a demand for higher wages was rejected. Use the economic theory of wages to discuss whether a demand for higher wages is likely to be successful.[13]
Mark scheme
Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.
- Description of transactions, precautionary and speculative motives.
- Level 4 (9-12 marks): for a sound description and a clear understanding of the principles involved for all three motives
- Analysis of the theory of wages distinguishing between perfect and imperfect markets and recognising that the success of a higher wage claim will depend on where the original wage level was and how much extra the claim was for. There is a bigger scope for wage claim success in imperfect competition.
- Level 4 (9-13 marks): for an analysis of wage determination including a clear analysis of MRP and a clear comparison of perfect and imperfect markets recognising the comparison of the initial and the final wage level. There should be a conclusion. (Without MRP cannot reach L4)
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