EDEXCEL A –LEVEL ECONOMICS
THEME 2 :2026 ACTUAL EXAM
QUESTIONS AND CORRECT
ANSWERS
Macroeconomics - ANSWER- The study of the economy as a whole,
including inflation, growth and unemployment.
Aggregate demand - ANSWER- The total of all demands or
expenditures in the economy at any given price.
Aggregate demand curve - ANSWER- Shows the relationship between
the price level and equilibrium national income. As the price level rises
the equilibrium level of national income falls.
Animal spirits - ANSWER- Business confidence: the mood of managers
and owners of firms about the future of their industry and the wider
economy.
Gross investment - ANSWER- The addition to capital stock, both to
replace the existing capital stock which has been used up (depreciation)
and the creation of additional capital.
,Investment - ANSWER- The addition to the capital stock of the
economy.
Retained profit - ANSWER- Profit kept back by a firm for its own use
which is not distributed to shareholders or used to pay taxation.
Net exports or the net trade balance - ANSWER- Exports minus imports.
Aggregate supply curve - ANSWER- The relationship between the
average level of prices in the economy and the level of total output.
Full capacity - ANSWER- The level of output where no extra production
can take place in the long run with existing resources. The full capacity
level of output for an economy is shown by the classical long run
aggregate supply curve or the vertical part of a Keynesian aggregate
supply curve.
Short-run aggregate supply curve - ANSWER- The upward sloping
aggregate supply curve which assumes that money wage rates are fixed.
Supply-side shocks - ANSWER- Factors such as changes in wage rates
or commodity prices which cause the short run aggregate supply curve
to shift.
, Circular flow of income - ANSWER- A model of the economy which
shows the flow of goods, services and factors and their payments around
the economy.
Closed economy - ANSWER- An economy where there is no foreign
trade.
Income - ANSWER- Rent, interest, wages and profits earned from
wealth owned by economic actors.
Injections - ANSWER- In the circular flow of income, spending which
is not generated by households including investment, government
spending and exports.
National income - ANSWER- The value of the output, expenditure or
income of an economy over a period of time.
Open economy - ANSWER- An economy where there is trade with
other countries.
Wealth - ANSWER- A stock of assets which can be used to generate a
flow of production or income. For example, physical wealth such as
factories and machines is used to make goods and services.
Withdrawals or leakages - ANSWER- In the circular flow of income,
spending by households which does not flow back to domestic firms. It
includes savings, taxes and imports.
THEME 2 :2026 ACTUAL EXAM
QUESTIONS AND CORRECT
ANSWERS
Macroeconomics - ANSWER- The study of the economy as a whole,
including inflation, growth and unemployment.
Aggregate demand - ANSWER- The total of all demands or
expenditures in the economy at any given price.
Aggregate demand curve - ANSWER- Shows the relationship between
the price level and equilibrium national income. As the price level rises
the equilibrium level of national income falls.
Animal spirits - ANSWER- Business confidence: the mood of managers
and owners of firms about the future of their industry and the wider
economy.
Gross investment - ANSWER- The addition to capital stock, both to
replace the existing capital stock which has been used up (depreciation)
and the creation of additional capital.
,Investment - ANSWER- The addition to the capital stock of the
economy.
Retained profit - ANSWER- Profit kept back by a firm for its own use
which is not distributed to shareholders or used to pay taxation.
Net exports or the net trade balance - ANSWER- Exports minus imports.
Aggregate supply curve - ANSWER- The relationship between the
average level of prices in the economy and the level of total output.
Full capacity - ANSWER- The level of output where no extra production
can take place in the long run with existing resources. The full capacity
level of output for an economy is shown by the classical long run
aggregate supply curve or the vertical part of a Keynesian aggregate
supply curve.
Short-run aggregate supply curve - ANSWER- The upward sloping
aggregate supply curve which assumes that money wage rates are fixed.
Supply-side shocks - ANSWER- Factors such as changes in wage rates
or commodity prices which cause the short run aggregate supply curve
to shift.
, Circular flow of income - ANSWER- A model of the economy which
shows the flow of goods, services and factors and their payments around
the economy.
Closed economy - ANSWER- An economy where there is no foreign
trade.
Income - ANSWER- Rent, interest, wages and profits earned from
wealth owned by economic actors.
Injections - ANSWER- In the circular flow of income, spending which
is not generated by households including investment, government
spending and exports.
National income - ANSWER- The value of the output, expenditure or
income of an economy over a period of time.
Open economy - ANSWER- An economy where there is trade with
other countries.
Wealth - ANSWER- A stock of assets which can be used to generate a
flow of production or income. For example, physical wealth such as
factories and machines is used to make goods and services.
Withdrawals or leakages - ANSWER- In the circular flow of income,
spending by households which does not flow back to domestic firms. It
includes savings, taxes and imports.
