A LEVEL ECONOMICS FULL STUDY SHEET
QUESTIONS AND CORRECT ANSWERS
COLLECTION
●● 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
QUESTIONS AND CORRECT ANSWERS
COLLECTION
●● 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
