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EnglandEconomics

Theme 2: The UK economy - performance and policies

6 dot points across 6 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

What determines the total demand for goods and services in an economy?

The components of aggregate demand, the determinants of consumption, investment, government spending and net trade, and the shape and shifts of the AD curve.
An Edexcel A-Level Economics A answer to aggregate demand, covering the four components C, I, G and X minus M, the determinants of consumption and investment, the shape of the AD curve and the factors that shift it, and the role of the marginal propensity to consume.
10 min answer →

What determines how much an economy can produce in the short and long run?

Short-run aggregate supply and its determinants, long-run aggregate supply, the Keynesian and classical LRAS curves, and the factors that shift the productive capacity of an economy.
An Edexcel A-Level Economics A answer to aggregate supply, covering the determinants of short-run aggregate supply, the difference between the classical and Keynesian long-run aggregate supply curves, and the factors that shift the productive potential of the economy.
10 min answer →

What causes an economy to grow, and what are the costs and benefits of growth?

Actual and potential growth, the causes of short-run and long-run growth, the output gap, the economic cycle, and the costs and benefits of growth.
An Edexcel A-Level Economics A answer to economic growth, covering actual and potential growth, the demand-side and supply-side causes of growth, positive and negative output gaps, the phases of the economic cycle, and the costs and benefits of growth for individuals and the environment.
10 min answer →

What are the government's macroeconomic objectives, and which policies can it use to meet them?

The main macroeconomic objectives, fiscal policy, monetary policy, supply-side policies, the conflicts between objectives, and the use of policies in different contexts.
An Edexcel A-Level Economics A answer to macroeconomic objectives and policies, covering the main objectives of growth, low inflation, low unemployment and a stable current account, the tools of fiscal, monetary and supply-side policy, and the conflicts and trade-offs between objectives.
12 min answer →

How do economists measure whether an economy is performing well?

Economic growth and real GDP, inflation and its measurement, employment and unemployment, the balance of payments on current account, and the limitations of these indicators.
An Edexcel A-Level Economics A answer to measures of economic performance, covering real and nominal GDP, GDP per capita, the CPI and RPI measures of inflation, the causes of inflation and deflation, the measurement of unemployment, the balance of payments on current account, and the limitations of each indicator.
12 min answer →

How is the equilibrium level of national output determined, and how do injections and withdrawals affect it?

The circular flow of income, injections and withdrawals, equilibrium real national output, and the multiplier effect.
An Edexcel A-Level Economics A answer to national income and equilibrium, covering the circular flow of income, injections and withdrawals, macroeconomic equilibrium where AD meets AS, and the multiplier effect including the formula based on the marginal propensities.
10 min answer →