Edexcel A-level Economics Paper 2
Exam Questions and Answers 2024
review
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.
Marginal propensity to import (MPM) - Answer>>The increase
in imports divided by the increase in income that caused them
(i.e. change in M / change in Y)
Marginal propensity to save (MPS) - Answer>>The increase in
saving divided by the increase in income that caused it (i.e.
change in S / change in Y)
Marginal propensity to tax (MPT) - Answer>>The increase in tax
revenues divided by the increase in income that caused them (i.e.
change in T / change in Y)
Marginal propensity to withdraw (MPW) - Answer>>The
increase in withdrawals from the circular flow (S + T + M) divided
by the increase in income that caused them (i.e. change in W /
change in Y); this is the same as the sum of the marginal
propensity to save, tax and import (MPS + MPT + MPM).
Multiplier or national income multiplier or Keynesian multiplier or
real multiplier - Answer>>The figure used to multiply a change
in an injection into the circular flow, such as investment, to find
, the final change in income (assuming the injection is not
determined by income). It is the ratio of the final change in income
to the initial change in an injection. It can be calculated as
1
________
1 - MPC
or
1
___________________
MPS + MPT + MPM
or
1
____
MPW
Multiplier effect or process - Answer>>An increase in
investment or other injection will lead to an even greater increase
in income (assuming the injection is not determined by income).
Gross domestic product (GDP) - Answer>>A measure of the
output or value added of an economy which does not include
output or income from investments abroad or an allowance for the
depreciation of the nation's capital stock.
Gross national income (GNI) - Answer>>The value of goods
and services produced by an economy over a period of time
(GDP) plus net overseas interest payments and dividends (factor
incomes).
Exam Questions and Answers 2024
review
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.
Marginal propensity to import (MPM) - Answer>>The increase
in imports divided by the increase in income that caused them
(i.e. change in M / change in Y)
Marginal propensity to save (MPS) - Answer>>The increase in
saving divided by the increase in income that caused it (i.e.
change in S / change in Y)
Marginal propensity to tax (MPT) - Answer>>The increase in tax
revenues divided by the increase in income that caused them (i.e.
change in T / change in Y)
Marginal propensity to withdraw (MPW) - Answer>>The
increase in withdrawals from the circular flow (S + T + M) divided
by the increase in income that caused them (i.e. change in W /
change in Y); this is the same as the sum of the marginal
propensity to save, tax and import (MPS + MPT + MPM).
Multiplier or national income multiplier or Keynesian multiplier or
real multiplier - Answer>>The figure used to multiply a change
in an injection into the circular flow, such as investment, to find
, the final change in income (assuming the injection is not
determined by income). It is the ratio of the final change in income
to the initial change in an injection. It can be calculated as
1
________
1 - MPC
or
1
___________________
MPS + MPT + MPM
or
1
____
MPW
Multiplier effect or process - Answer>>An increase in
investment or other injection will lead to an even greater increase
in income (assuming the injection is not determined by income).
Gross domestic product (GDP) - Answer>>A measure of the
output or value added of an economy which does not include
output or income from investments abroad or an allowance for the
depreciation of the nation's capital stock.
Gross national income (GNI) - Answer>>The value of goods
and services produced by an economy over a period of time
(GDP) plus net overseas interest payments and dividends (factor
incomes).
