EDEXCEL: A-Level Economics A - Paper 2
1. what is GDP an indicator of?: the standard of living in a country
2. what is the standard measure of economic growth?: rate of change of GDP
3. what is the difference between total and per capita GDP?: total is the overall GDP
for a country and per capita is total GDP/population
4. when does GDP per capita grow?: when national output grows faster than the
opoulation
5. what is the difference between real and nominal GDP?: real GDP takes into account
inflation but nominal doesn't
6. what is the difference between volume and value?: volume is adjusted for inflation
value is monetary value at prices of the day = volume x price
7. what is gross national income?: GDP and net overseas interest and dividends
- starting to be used more due to remittances and aid
8. what is gross national product?: GDP by any citizens or property of a country
anywher e in the world
9. how is growth used to compare over time (2)?: - put figures into context - make
judgements about welfare
10. what must you use when comparing countries' GDPs and why?: real GDP per capita
as population growth varies and inflation would effect it
11. what must you consider when making comparisons in GDP between countries?:
must use per capita as total doesn't show living standards and could just increase due to
increase in prices
12. what is PPP and how is it measured?: this is an exchange rate which compares how
much a typical basket of goods costs in one country
13. why is PPP useful for comparing countries?: takes into account cost of living
14. what is an example of PPP index?: the big mac index
15. what are the limitations to using GDP to compare standard of living (6)?: - in-
accuracy of data: inefficient collecting/calculation, black market, home produced services,
errors in inflation calculation, no transfer payments
- inequalities: increase in GDP may only benefit wealthy
- quality of g+s: improvement over time not reflected
, EDEXCEL: A-Level Economics A - Paper 2
.
- comparing currency: converted to US but ppl say u should use PPP instead
- spending: some doesn't improve living standard but does GDP e.g. defence
- other factors: like education
16. how is national happiness measured?: using the measuring national wellbeing report
17 what are the key questions in the national wellbeing report?: life satisfaction, anxiety,
happiness and worthwhileness
18. how are real incomes and subjective happiness related?: they are positively related
at low incomes but higher levels of income aren't correlated
19. what is the name for the term suggesting that those on higher incomes aren't
happier when their incomes increase?: easterlin paradox
20. what else does income and happiness depend on other than each other?: the
people around you - you are happier if you have a higher income than those around you -
linked to social status
21. what is the difference between inflation, deflation and disinflation?: inflation:
general increase of prices in economy. Deflation: fall of prices
disinflation: reduction in rate of inflation
22. what are the most well-known indices for calculating rate of inflation and
which is used most?: consumer price index and retail price index,
CPI is used
23. how is the CPI calculated ?: living costs and food survey is used
weighted basket of goods
measures average price change of
goods update annually
24. what are the limitations of CPI (4)?: - doesn't represent every good
- people spend differently
- doesn't include housing
- difficult to make comparisons with past as it is new
25. what is the difference between RPI and CPI?: RPI includes:
- housing: mortgage and interest payments
- CPI takes into account that people switch products when prices change
- RPI excludes top 4% of incomes and low income pensioners
,26. what are the three types of inflation?: cost push demand pull
growth in money supply
27. what is demand pull inflation?: increase in AD
28. what is cost push inflation?: decrease in AS - businesses put up prices when costs
rise to maintain profit margin
29 what are the effects of inflation on consumers (3)?: - if incomes don't rise they spend
less and SoL falls
- those in debt have cheaper payments and savers lose out
- psychological effects of feeling less wealthy
30. what are the effects of inflation on firms (4)?: - if inflation high then less competitive
abroad
- deflation means investment postponed, less demand = less profit = long term less invest
- difficult to predict so can't plan
- menu pricing costs
31. what are the effects of inflation on the government (1)?: if they don't change excise
taxes then real revenue will fall
32. what are the effects of inflation on workers (2)?: - if they don't have a pay rise then
living standards decrease
- deflation could cause job loss due to lack of demand
33. how can inflation be anticipated?: indexation - wages or taxes increased in line with
inflation
34. what is an example of indexation?: workers negotiating with employers for wage rises
in line with predicted CPI or RPI
35. what is an evaluation for indexation?: could increase inflation because wage
increases will reflect past increases - if inflation decreases wages are still rising
36. what are the two measures of unemployment?: claimant count and UK labour force
survey
(ILO)
37. what is the difference between labour force survey and claimant count?: -
claimant is the number of people receiving benefits and survey is a sample of people used
38. how can results of claimant count and LFS differ (3)?: - some may not be in LFS:
hidden
, EDEXCEL: A-Level Economics A - Paper 2
.
economy or fraudulent claiming of benefits
- some aren't eligible for benefits (LFS tends to be higher)
- different directions due to short term changes
39. why would both claimant count and LFS underestimate unemployment?: -
underemployed
- those on training schemes who'd prefer employment - sick or
disabled
- those who aren't actively looking (hidden unemployed)
40 what is underemployment?: those who are in part time contracts or zero hour who
want to be full time or those that work under their skill level
41. when does underemployment tend to increase?: during recessions as horus are
reduced
42. significance of increase in inactivity?: decrease the size of labour force so fall in
productive potential - lower GDP and tax revenue
43. significance of decrease in inactivity?: more people are unemployed because no jobs
available
44. what are the five types of unemployment?: - frictional: moving between jobs
- structural: long term (regional, technological or sectoral)
- cyclical: due to lack of demand
- seasonal: like tourism
- real wage inflexibility: real wages are high so excess supply of labour, can be due to
minimum wage and welfare trap
45. what is the significance of migration on employment (3)?: - tends to increase jobs (less
likely to claim benefits too)
- circular flow means more employment
- lower wages as supply of labour increases (low skilled affected)
46. what is the significance of skills for employment (4)?: - higher skills needed than before
for a job
- needs to increase skill over time or risk of structural UE
1. what is GDP an indicator of?: the standard of living in a country
2. what is the standard measure of economic growth?: rate of change of GDP
3. what is the difference between total and per capita GDP?: total is the overall GDP
for a country and per capita is total GDP/population
4. when does GDP per capita grow?: when national output grows faster than the
opoulation
5. what is the difference between real and nominal GDP?: real GDP takes into account
inflation but nominal doesn't
6. what is the difference between volume and value?: volume is adjusted for inflation
value is monetary value at prices of the day = volume x price
7. what is gross national income?: GDP and net overseas interest and dividends
- starting to be used more due to remittances and aid
8. what is gross national product?: GDP by any citizens or property of a country
anywher e in the world
9. how is growth used to compare over time (2)?: - put figures into context - make
judgements about welfare
10. what must you use when comparing countries' GDPs and why?: real GDP per capita
as population growth varies and inflation would effect it
11. what must you consider when making comparisons in GDP between countries?:
must use per capita as total doesn't show living standards and could just increase due to
increase in prices
12. what is PPP and how is it measured?: this is an exchange rate which compares how
much a typical basket of goods costs in one country
13. why is PPP useful for comparing countries?: takes into account cost of living
14. what is an example of PPP index?: the big mac index
15. what are the limitations to using GDP to compare standard of living (6)?: - in-
accuracy of data: inefficient collecting/calculation, black market, home produced services,
errors in inflation calculation, no transfer payments
- inequalities: increase in GDP may only benefit wealthy
- quality of g+s: improvement over time not reflected
, EDEXCEL: A-Level Economics A - Paper 2
.
- comparing currency: converted to US but ppl say u should use PPP instead
- spending: some doesn't improve living standard but does GDP e.g. defence
- other factors: like education
16. how is national happiness measured?: using the measuring national wellbeing report
17 what are the key questions in the national wellbeing report?: life satisfaction, anxiety,
happiness and worthwhileness
18. how are real incomes and subjective happiness related?: they are positively related
at low incomes but higher levels of income aren't correlated
19. what is the name for the term suggesting that those on higher incomes aren't
happier when their incomes increase?: easterlin paradox
20. what else does income and happiness depend on other than each other?: the
people around you - you are happier if you have a higher income than those around you -
linked to social status
21. what is the difference between inflation, deflation and disinflation?: inflation:
general increase of prices in economy. Deflation: fall of prices
disinflation: reduction in rate of inflation
22. what are the most well-known indices for calculating rate of inflation and
which is used most?: consumer price index and retail price index,
CPI is used
23. how is the CPI calculated ?: living costs and food survey is used
weighted basket of goods
measures average price change of
goods update annually
24. what are the limitations of CPI (4)?: - doesn't represent every good
- people spend differently
- doesn't include housing
- difficult to make comparisons with past as it is new
25. what is the difference between RPI and CPI?: RPI includes:
- housing: mortgage and interest payments
- CPI takes into account that people switch products when prices change
- RPI excludes top 4% of incomes and low income pensioners
,26. what are the three types of inflation?: cost push demand pull
growth in money supply
27. what is demand pull inflation?: increase in AD
28. what is cost push inflation?: decrease in AS - businesses put up prices when costs
rise to maintain profit margin
29 what are the effects of inflation on consumers (3)?: - if incomes don't rise they spend
less and SoL falls
- those in debt have cheaper payments and savers lose out
- psychological effects of feeling less wealthy
30. what are the effects of inflation on firms (4)?: - if inflation high then less competitive
abroad
- deflation means investment postponed, less demand = less profit = long term less invest
- difficult to predict so can't plan
- menu pricing costs
31. what are the effects of inflation on the government (1)?: if they don't change excise
taxes then real revenue will fall
32. what are the effects of inflation on workers (2)?: - if they don't have a pay rise then
living standards decrease
- deflation could cause job loss due to lack of demand
33. how can inflation be anticipated?: indexation - wages or taxes increased in line with
inflation
34. what is an example of indexation?: workers negotiating with employers for wage rises
in line with predicted CPI or RPI
35. what is an evaluation for indexation?: could increase inflation because wage
increases will reflect past increases - if inflation decreases wages are still rising
36. what are the two measures of unemployment?: claimant count and UK labour force
survey
(ILO)
37. what is the difference between labour force survey and claimant count?: -
claimant is the number of people receiving benefits and survey is a sample of people used
38. how can results of claimant count and LFS differ (3)?: - some may not be in LFS:
hidden
, EDEXCEL: A-Level Economics A - Paper 2
.
economy or fraudulent claiming of benefits
- some aren't eligible for benefits (LFS tends to be higher)
- different directions due to short term changes
39. why would both claimant count and LFS underestimate unemployment?: -
underemployed
- those on training schemes who'd prefer employment - sick or
disabled
- those who aren't actively looking (hidden unemployed)
40 what is underemployment?: those who are in part time contracts or zero hour who
want to be full time or those that work under their skill level
41. when does underemployment tend to increase?: during recessions as horus are
reduced
42. significance of increase in inactivity?: decrease the size of labour force so fall in
productive potential - lower GDP and tax revenue
43. significance of decrease in inactivity?: more people are unemployed because no jobs
available
44. what are the five types of unemployment?: - frictional: moving between jobs
- structural: long term (regional, technological or sectoral)
- cyclical: due to lack of demand
- seasonal: like tourism
- real wage inflexibility: real wages are high so excess supply of labour, can be due to
minimum wage and welfare trap
45. what is the significance of migration on employment (3)?: - tends to increase jobs (less
likely to claim benefits too)
- circular flow means more employment
- lower wages as supply of labour increases (low skilled affected)
46. what is the significance of skills for employment (4)?: - higher skills needed than before
for a job
- needs to increase skill over time or risk of structural UE
