Aggregate demand and supply - OCR A-Level Economics (H460) overview

The aggregate-demand-and-supply module of OCR A-Level Economics (specification H460) builds the central model of the whole economy and explains how output, employment and the price level are determined. This page maps the dot points and how they are examined.

The dot points in this module

The circular flow of income

The flow between households and firms, injections (investment, government spending and exports) and withdrawals (saving, taxation and imports), the equilibrium level of national income, and why income, expenditure and output are equal.

Aggregate demand and its components

The four components of AD and their determinants, why the AD curve slopes downward, and the causes of shifts in aggregate demand.

Aggregate supply and macroeconomic equilibrium

Short-run and long-run aggregate supply, the Keynesian and classical views of LRAS, macroeconomic equilibrium, and the effect of AD and AS shifts on output and the price level.

The multiplier and the accelerator

The multiplier process, the marginal propensities and the multiplier formula, the accelerator effect, and their role in the economic cycle.

Causes of economic growth and the cycle

The demand-side and supply-side causes of growth, the phases of the economic cycle, output gaps, and the costs and benefits of growth.

How this module is examined

OCR Economics is a two-year linear course with three papers at the end. This module is examined in Component 2 (Macroeconomics), an 80-mark, 2-hour paper using data-response questions and a chosen extended-response essay of up to 25 marks. The content also appears synoptically in Component 3 (Themes in economics). AD-AS diagrams and multiplier calculations are heavily rewarded, and higher-mark questions are marked by levels of response.

How to study this module

1. Master the AD-AS diagram. Practise shifting AD, SRAS and LRAS and reading off the new equilibrium output and price level.
2. Drill the multiplier calculation. Use the full marginal propensity to withdraw ($MPS + MPT + MPM$) and find the final change in income.
3. Build evaluation lines. Whether a change causes growth or inflation depends on the output gap and the shape of AS.
4. Use real examples. The 2008 to 2009 recession, the 2022 energy shock and fiscal stimulus make application marks easy.

Work through the dot points

Each dot point has its own focused answer page with worked exam questions and cross-links: the circular flow of income; aggregate demand and its components; aggregate supply and macroeconomic equilibrium; the multiplier and the accelerator; and causes of economic growth and the cycle.

For the official specification

OCR publishes the full specification (H460), past papers and mark schemes at ocr.org.uk. Always revise from the current specification and OCR's own past papers, because the question style and the levels-of-response mark schemes are board-specific.