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EnglandEconomics

3.2 How the economy works

11 dot points across 11 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

Why are incomes unequal, and what can the government do about it?

The distribution of income and the causes of inequality, how the government redistributes income, and the difference between progressive, proportional and regressive taxes.
A focused answer for AQA GCSE Economics on the distribution of income, the causes of inequality, how governments redistribute income, and progressive, proportional and regressive taxes.
10 min answer →

What makes an economy grow, and is growth always good?

What economic growth is, the causes of growth, the stages of the economic cycle, and the benefits and costs of economic growth.
A focused answer for AQA GCSE Economics on what economic growth is, its causes, the stages of the economic cycle, and the benefits and costs of growth.
9 min answer →

What is the government trying to achieve for the economy?

The four main macroeconomic objectives, what gross domestic product (GDP) measures, how living standards are judged, and the possible conflicts between objectives.
A focused answer for AQA GCSE Economics on the main macroeconomic objectives, what GDP measures, how living standards are assessed, and the conflicts between objectives.
9 min answer →

Why are some people out of work even when the economy is doing well?

What unemployment is and how it is measured, the main types and causes of unemployment, the costs of unemployment, and the meaning of full employment.
A focused answer for AQA GCSE Economics on what unemployment is, how it is measured, the main types and causes, the costs of unemployment, and the idea of full employment.
9 min answer →

How does the government manage the whole economy?

Fiscal policy through government spending and taxation, monetary policy through interest rates and the money supply, the role of the Bank of England, and how these policies are used to meet macroeconomic objectives.
A focused answer for AQA GCSE Economics on fiscal policy (spending and taxation), monetary policy (interest rates), the role of the Bank of England, and how policy is used to meet objectives.
11 min answer →

How has the world economy become so interconnected?

What globalisation is, its causes, the role of multinational companies, and the benefits and drawbacks of globalisation for countries, firms and workers.
A focused answer for AQA GCSE Economics on what globalisation is, its causes, the role of multinational companies, and the benefits and drawbacks of globalisation.
9 min answer →

Where does the government get its money, and what does it spend it on?

The main sources of government income, the main types of government spending, the difference between a budget deficit and surplus, and the meaning of the national debt.
A focused answer for AQA GCSE Economics on the sources of government income, types of government spending, the budget deficit and surplus, and the national debt.
10 min answer →

Why do prices rise, and why does it matter?

What inflation is and how it is measured by the CPI, the causes of inflation, the effects of inflation, and the meaning of deflation.
A focused answer for AQA GCSE Economics on what inflation is, how the CPI measures it, the causes of inflation, its effects, and what deflation means.
10 min answer →

Why do countries trade with each other?

The reasons for international trade, the meaning of imports and exports, the balance of payments, the role of exchange rates, and the benefits and drawbacks of trade.
A focused answer for AQA GCSE Economics on why countries trade, imports and exports, the balance of payments, exchange rates, and the benefits and drawbacks of trade.
10 min answer →

How can the government raise what the economy can produce in the long run?

What supply-side policies are, the main examples such as education and training, tax and benefit reform and infrastructure, how they aim to raise productive capacity, and their strengths and limits.
A focused answer for AQA GCSE Economics on supply-side policies, the main examples, how they raise the economy's productive capacity, and their strengths and limits.
10 min answer →

What do banks and financial markets do for the economy?

The role of money in the wider economy, the functions of commercial banks and the central bank, the importance of financial markets, and how the financial sector supports households and firms.
A focused answer for AQA GCSE Economics on the role of money in the economy, the functions of commercial banks and the central bank, financial markets, and how the financial sector supports households and firms.
9 min answer →