EDEXCEL A-LEVEL ECONOMICS PAPER 2
EXAM 2026 WITH VERIFIED QUESTIONS AND
ANSWERS|| GUARANTEED PASS|| LATEST
UPDATE
how does protectionism affect net trade balance? - ANSWER-these make it
harder for producers from abroad to sell in the UK so imports will decrease, but
this leads to retaliation so exports also likely to increase - free trade means net
trade will be more or less significant to AD
what non-price factors affect the net trade balance? - ANSWER-quality and
design and marketing - exports will be high with good quality and more
inelastic
how do prices affect the net trade balance? - ANSWER-high prices means less
competitive so volume of exports decrease and volume of imports increase -
depends on productivity and inflation
what is aggregate supply? - ANSWER-volume of goods and services produced
in an economy at any given price level
is short run AS likely to be elastic or inelastic? - ANSWER-elastic so output is
responsive to a change in price but the increases in prices will be relatively
small as factors are constant
,what is the difference between a movement and a shift in AS? - ANSWER-
movement is caused by change in price level but a shift is caused by other
factors
what is the relationship between short and long-run AS? - ANSWER-short run
is where at least one factor is fixed but in the long-run all are variable
what are the three factors that would shift short-run AS? - ANSWER-- changes
in costs of raw materials and energy
- changes in exchange rate
- changes in tax rates
why do changes in costs of raw materials and energy affect short run AS? -
ANSWER-this will increase cost of production and so it will shift to the left
what is the cost of protectionist policies on consumers - ANSWER-- higher
prices
- less choice
what is the cost of protectionist policies on producers - ANSWER-- suffer
higher costs on imports
- foreign producers lose out
what is the cost of protectionist policies on workers - ANSWER-- little
difference
what is the cost of protectionist policies on governments - ANSWER-inefficient
economy can stifle growth
what is the cost of protectionist policies on living standard - ANSWER--
deadweight welfare loss
- retaliation
,what is the cost of protectionist policies on equity - ANSWER-regressive effect
as poorer people can't afford products
what are the two components of the balance of payments - ANSWER-- current
account
- capital and financial accounts
what is the capital account on the balance of payments - ANSWER-records
repatriation in and out of country and government transfers out of country
what are the three parts of the financial account - ANSWER-- FDI: flow to
purchase part of foreign firm
- portfolio investment: same but less than 10% of foreign company
- other investments: loans, purchasing currency and bank deposits
what are 3 short term causes of deficits/surplus on current account - ANSWER--
high levels of consumer demand
- strong exchange rate: expenditure-switching effect + improve ToT
- high relative inflation
what is a medium term cause of deficits/surplus on current account - ANSWER-
- losing comparative advantage
what are 5 long term causes of a deficit/surplus on the current account -
ANSWER-- lack of capital investment
- deindustrialisation
- large amount of natural resources
- international competitiveness
- corrupt countries
, what are the two main causes of a deficit on the current account - ANSWER-
demand side issues, supply side issues
how can demand side policies be used to reduce the trade imbalance -
ANSWER-- reduce AD, reduce income, reduce demand for imports
why do changes in exchange rates affect short-run AS? - ANSWER-weaker
pound means import more expensive so SRAS will shift left as cost of
production rises
why do changes in tax rates affect short-run AS? - ANSWER-taxes increase
costs of production so they cause a fall and the same for subsidies
when do supply side shocks occur? - ANSWER-when there are significant
changes in any factor influencing SRAS
what is the classical LRAS curve? - ANSWER-this is perfectly inelastic, so it is
not affected by price
what is the keynesian LRAS curve? - ANSWER-economy is fixed until
economy reaches full employment, spare capacity in horizontal
what are the six factors influencing LRAS? - ANSWER-- technological
advances
- change in relative productivity
- change in education or skills
- change in government regulation
- demographic changes and migration
- competition policy
EXAM 2026 WITH VERIFIED QUESTIONS AND
ANSWERS|| GUARANTEED PASS|| LATEST
UPDATE
how does protectionism affect net trade balance? - ANSWER-these make it
harder for producers from abroad to sell in the UK so imports will decrease, but
this leads to retaliation so exports also likely to increase - free trade means net
trade will be more or less significant to AD
what non-price factors affect the net trade balance? - ANSWER-quality and
design and marketing - exports will be high with good quality and more
inelastic
how do prices affect the net trade balance? - ANSWER-high prices means less
competitive so volume of exports decrease and volume of imports increase -
depends on productivity and inflation
what is aggregate supply? - ANSWER-volume of goods and services produced
in an economy at any given price level
is short run AS likely to be elastic or inelastic? - ANSWER-elastic so output is
responsive to a change in price but the increases in prices will be relatively
small as factors are constant
,what is the difference between a movement and a shift in AS? - ANSWER-
movement is caused by change in price level but a shift is caused by other
factors
what is the relationship between short and long-run AS? - ANSWER-short run
is where at least one factor is fixed but in the long-run all are variable
what are the three factors that would shift short-run AS? - ANSWER-- changes
in costs of raw materials and energy
- changes in exchange rate
- changes in tax rates
why do changes in costs of raw materials and energy affect short run AS? -
ANSWER-this will increase cost of production and so it will shift to the left
what is the cost of protectionist policies on consumers - ANSWER-- higher
prices
- less choice
what is the cost of protectionist policies on producers - ANSWER-- suffer
higher costs on imports
- foreign producers lose out
what is the cost of protectionist policies on workers - ANSWER-- little
difference
what is the cost of protectionist policies on governments - ANSWER-inefficient
economy can stifle growth
what is the cost of protectionist policies on living standard - ANSWER--
deadweight welfare loss
- retaliation
,what is the cost of protectionist policies on equity - ANSWER-regressive effect
as poorer people can't afford products
what are the two components of the balance of payments - ANSWER-- current
account
- capital and financial accounts
what is the capital account on the balance of payments - ANSWER-records
repatriation in and out of country and government transfers out of country
what are the three parts of the financial account - ANSWER-- FDI: flow to
purchase part of foreign firm
- portfolio investment: same but less than 10% of foreign company
- other investments: loans, purchasing currency and bank deposits
what are 3 short term causes of deficits/surplus on current account - ANSWER--
high levels of consumer demand
- strong exchange rate: expenditure-switching effect + improve ToT
- high relative inflation
what is a medium term cause of deficits/surplus on current account - ANSWER-
- losing comparative advantage
what are 5 long term causes of a deficit/surplus on the current account -
ANSWER-- lack of capital investment
- deindustrialisation
- large amount of natural resources
- international competitiveness
- corrupt countries
, what are the two main causes of a deficit on the current account - ANSWER-
demand side issues, supply side issues
how can demand side policies be used to reduce the trade imbalance -
ANSWER-- reduce AD, reduce income, reduce demand for imports
why do changes in exchange rates affect short-run AS? - ANSWER-weaker
pound means import more expensive so SRAS will shift left as cost of
production rises
why do changes in tax rates affect short-run AS? - ANSWER-taxes increase
costs of production so they cause a fall and the same for subsidies
when do supply side shocks occur? - ANSWER-when there are significant
changes in any factor influencing SRAS
what is the classical LRAS curve? - ANSWER-this is perfectly inelastic, so it is
not affected by price
what is the keynesian LRAS curve? - ANSWER-economy is fixed until
economy reaches full employment, spare capacity in horizontal
what are the six factors influencing LRAS? - ANSWER-- technological
advances
- change in relative productivity
- change in education or skills
- change in government regulation
- demographic changes and migration
- competition policy
