OCR A Level Economics: Income and wealth distribution, poverty and UK trends (H460) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover “Income distribution and welfare” and “Trends in macroeconomic indicators” from Component 2, Macroeconomics, of the OCR A Level Economics (H460) specification, Version 3.0 (June 2026), for first assessment in 2021. All of it is A Level. All countries, firms and figures are invented and illustrative unless a question states a real-world fact.

Read the study guide or the revision notes first. Course pages: the OCR Economics hub, the printable checklist and the free 10-minute diagnostics.

Questions

1. Distinguish between income and wealth. [2]

2. Ten staff in a small bakery earn the following monthly pay (thousands): 1.2, 1.4, 1.5, 1.6, 1.8, 2.0, 2.2, 2.5, 3.0 and 7.8.

(a) Calculate the mean and the median pay. [2] (b) Explain why the two differ and which better represents a typical member of staff. [2]

3. In Country C the shares of household income, from the poorest fifth to the richest fifth, are 3%, 9%, 16%, 24% and 48%.

(a) Using cumulative shares, calculate an approximate Gini coefficient. [3] (b) Country D has a Gini coefficient of 0.35. Compare the two countries. [1]

4. A government moves 800m from high-income households (marginal propensity to consume 0.1) to low-income households (0.7).

(a) Calculate the net change in consumption. [2] (b) State why this could matter for a macroeconomic objective. [1]

5. Country G has ten households with real incomes (thousands) of 5, 7, 10, 12, 14, 16, 20, 24, 30 and 62. The absolute poverty line is 8. The relative poverty line is 60% of median income.

(a) Calculate the relative poverty line and the number of households below each line. [2] (b) Every household’s real income then rises by 20%. Show the number of households below each line. [2] (c) Explain why the two results differ. [2]

6. In Country H the top fifth of households receive 44% of income and own 66% of wealth. The poorest fifth receive 6% of income and own 2% of wealth.

(a) Calculate the ratio of the top fifth’s share to the bottom fifth’s for income and for wealth. [2] (b) Explain two reasons why wealth is usually distributed more unequally than income. [3]

7. A part-time worker is offered extra hours. Gross earnings rise by 160 a week, benefits fall by 84 and tax and national insurance rise by 28.

(a) Calculate the net gain and the effective marginal rate on the extra earnings. [3] (b) Explain how this could help poverty to persist. [3]

8. Evaluate the consequences of high levels of poverty and inequality for an economy. [8]

9. Identify and explain two key trends in UK macroeconomic performance over the last 20 years. [4]

10. In Country K real GDP falls 8% in a recession, and in the same period nominal wages rise 4% while prices rise 5.5%.

(a) Calculate the percentage rise in real GDP needed to return to its former level. [2] (b) Calculate the percentage change in real wages. [2] (c) State one consequence of falling real wages. [1]

11. GDP per head (invented): Country M, a developed economy, 36,000, growing 1.8% a year; Country N, an emerging economy, 6,500, growing 5.5%; Country P, a developing economy, 1,200, growing 2.5%.

(a) Calculate GDP per head after 10 years for M and for N, and the ratio of M to N at the start and the end. [3] (b) Evaluate whether N is catching up with M and what other evidence you would need. [5]

Answers

1. Income is money received per period of time, for example wages or dividends [1]. Wealth is the net value of assets held at one moment, after subtracting debts [1]. [2] Examiner insight: Answers that use the words flow and stock, and that attach each to a time frame, make the distinction clear; two lists of examples do not.

2. (a) Total = 25.0, so mean = 25.0 / 10 = 2.5 [1]. Median = (1.8 + 2.0) / 2 = 1.9 [1]. (b) The top salary of 7.8 pulls the mean above the median [1]. The median is the middle value and is less affected by extremes, so it better represents a typical member of staff [1]. Examiner insight: Naming the cause (one high value skewing the mean) and giving a conclusion about which measure to use shows more than stating that they differ.

3. (a) Cumulative shares are 3, 12, 28, 52 and 100 [1]. Strip averages: 1.5, 7.5, 20, 40 and 76, total 145, so area = 145 x 0.2 / 100 = 0.29 [1]. Gini = 1 - 2 x 0.29 = 0.42 [1]. (b) Country C is more unequal, because 0.42 is above 0.35 [1]. Examiner insight: Show the cumulative shares and the area. Say that the straight-line method gives an approximation, and give the comparison in words, not just two numbers.

4. (a) Consumption falls by 0.1 x 800 = 80 [1] and rises by 0.7 x 800 = 560, so net +480m [1]. (b) Higher consumption raises aggregate demand and may raise growth and employment [1]. Examiner insight: Both changes must be shown, not just the net figure. Link the result to an objective by name, not just to spending.

5. (a) Median = (14 + 16) / 2 = 15, so relative line = 9 [1]. Below 9: households on 5 and 7, so 2; below 8: the same two. Both counts are 2 [1]. (b) New incomes: 6, 8.4, 12, 14.4, 16.8, 19.2, 24, 28.8, 36 and 74.4 [1]. Absolute line stays at 8: 1 household. New median = 18, relative line = 10.8: 6 and 8.4, so 2 households [1]. (c) The absolute line is fixed in real terms, so higher real incomes lift households over it [1]. The relative line rises with the median, so a uniform rise leaves the same households below it [1]. Examiner insight: State both lines and both counts. Strong answers say that a uniform rise leaves the distribution unchanged, so relative poverty cannot fall.

6. (a) Income: 44 / 6 = 7.3 [1]. Wealth: 66 / 2 = 33 [1]. (b) Inheritance passes wealth between generations regardless of current income [1]. Wealth compounds: high earners save more and earn returns on assets [1]. Age or rising asset prices also benefit existing owners [1]. [3] Examiner insight: Each reason needs a mechanism. A list of causes without a link to the stock building up over time tends to gain less credit.

7. (a) Net gain = 160 - 84 - 28 = 48 [1]. Amount lost = 84 + 28 = 112 [1]. Effective marginal rate = 112 / 160 = 70% [1]. (b) The worker keeps only 30% of each extra unit earned, so the incentive to work more is weak [1]. Hours and pay stay low, so income stays near the line [1]. Low income limits saving and training, so the position persists over time [1]. Examiner insight: Define the effective rate as the share lost from extra earnings. Chain the weak incentive to the outcome that poverty persists.

8. A chain from poverty to lower human capital: poor health and education lower skills and productivity, reducing potential output and tax revenue [1], while raising public spending on health and benefits [1]. Inequality may reduce consumption growth because lower-income households have a higher propensity to spend, so demand is weaker [1]. Wider gaps can reduce cohesion and mobility, with costs such as crime [1]. Counter-point: some inequality rewards effort and risk-taking and encourages enterprise and investment [1]. The effects depend on size: moderate inequality may promote growth, extreme inequality wastes talent [1]. Judgement: the effect depends on the time period and on how any gap is narrowed [1], and the conclusion rests on a stated value judgement about fairness [1]. [8] Examiner insight: Pick a few consequences and develop them as chains. A judgement that says what the outcome depends on tends to gain more than a list of effects.

9. Trend 1: a deep recession in 2008-09 after the financial crisis, followed by a slow recovery [1]. Weak confidence, tight credit and slow productivity growth held back output and real earnings [1]. Trend 2: inflation stayed close to the 2% target for much of the period but rose above 10% in late 2022 [1], as cost pressures and the rebound in demand after the pandemic pushed prices up [1]. Other valid trends: unemployment falling to low levels before the pandemic, or the sharp fall and rebound of output in 2020. [4] Examiner insight: Name the trend, give a period, and add a cause or consequence. A trend stated with no time frame is hard to credit.

10. (a) Real GDP is 92 per 100, so it must rise by 100 / 92 - 1 = 8.7% [1], which is greater than 8% because the base is smaller [1]. (b) Real wage change = 1.04 / 1.055 - 1 = -1.4% [1], so purchasing power fell [1]. (c) For example lower consumption and weaker demand, or more households near the poverty line [1]. Examiner insight: Use the ratio, not 4 - 5.5. Explain why the recovery rate exceeds the fall.

11. (a) M = 36,000 x 1.018^10 = 43,031 [1]. N = 6,500 x 1.055^10 = 11,103 [1]. Ratio M to N falls from 5.5 to 3.9 [1]. (b) N is catching up in ratio terms: its income per head grows faster from a low base [1]. The money gap widens from 29,500 to about 31,928 [1]. Catching up in rates does not mean closing the gap in money terms [1]. Evidence needed: inequality, inflation, unemployment, debt, the external balance [1], and a longer period, because a run of years may be unrepresentative [1]. [5] Examiner insight: Distinguish the ratio from the money gap. Evaluation tends to score where it asks for other indicators and a longer period.

Where marks are usually lost

• Calling wealth a flow or income a stock.
• Giving a Gini or quintile ratio without showing the cumulative shares or the division.
• Reading a lower Gini as higher living standards.
• Using a falling relative poverty line to talk about absolute poverty.
• Listing consequences of inequality without a chain.
• Stating a UK trend with no period or cause.
• Judging a country on growth alone.
• Not stating the value judgement behind a conclusion.

Next steps

• Check your recall with the revision notes.
• Study the topic in the study guide.
• Tick off the OCR Economics checklist and see the course hub.
• Find weak spots with the free 10-minute diagnostics.
• Book a free trial class: /trial/.

Official syllabus

OCR, A Level in Economics (H460) specification, Version 3.0 (June 2026), for first assessment in 2021: Component 2, topics “Income distribution and welfare” and “Trends in macroeconomic indicators”.