EDEXCEL A-LEVEL
ECONOMICS PAPER 2
EXAM (2025) VERIFIED
QUESTIONS AND
ANSWERS | WITH 100%
CORRECT ANSWERS
GRADED A+
GUARANTEED
[Document subtitle]
[DATE]
[COMPANY NAME]
[Company address]
,Certainly! Here are all the questions and answers numbered for you:
1. What is Macroeconomics?
**Answer:** The study of the economy as a whole, including inflation, growth and
unemployment.
2. What is Aggregate demand?
**Answer:** The total of all demands or expenditures in the economy at any given price.
3. What is the 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.
4. What are Animal spirits?
**Answer:** Business confidence: the mood of managers and owners of firms about the
future of their industry and the wider economy.
5. What is 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.
6. What is Investment?
**Answer:** The addition to the capital stock of the economy.
7. What is Retained profit?
**Answer:** Profit kept back by a firm for its own use which is not distributed to
shareholders or used to pay taxation.
8. What are Net exports or the net trade balance?
**Answer:** Exports minus imports.
,9. What is the Aggregate supply curve?
**Answer:** The relationship between the average level of prices in the economy and the
level of total output.
10. What is 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.
11. What is the Short-run aggregate supply curve?
**Answer:** The upward sloping aggregate supply curve which assumes that money wage
rates are fixed.
12. What are Supply-side shocks?
**Answer:** Factors such as changes in wage rates or commodity prices which cause the
short run aggregate supply curve to shift.
13. What is the 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.
14. What is a Closed economy?
**Answer:** An economy where there is no foreign trade.
15. What is Income?
**Answer:** Rent, interest, wages and profits earned from wealth owned by economic
actors.
16. What are Injections?
, **Answer:** In the circular flow of income, spending which is not generated by households
including investment, government spending and exports.
17. What is National income?
**Answer:** The value of the output, expenditure or income of an economy over a period
of time.
18. What is an Open economy?
**Answer:** An economy where there is trade with other countries.
19. What is 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.
20. What are 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.
21. What is 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).
22. What is 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).
23. What is 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).
ECONOMICS PAPER 2
EXAM (2025) VERIFIED
QUESTIONS AND
ANSWERS | WITH 100%
CORRECT ANSWERS
GRADED A+
GUARANTEED
[Document subtitle]
[DATE]
[COMPANY NAME]
[Company address]
,Certainly! Here are all the questions and answers numbered for you:
1. What is Macroeconomics?
**Answer:** The study of the economy as a whole, including inflation, growth and
unemployment.
2. What is Aggregate demand?
**Answer:** The total of all demands or expenditures in the economy at any given price.
3. What is the 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.
4. What are Animal spirits?
**Answer:** Business confidence: the mood of managers and owners of firms about the
future of their industry and the wider economy.
5. What is 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.
6. What is Investment?
**Answer:** The addition to the capital stock of the economy.
7. What is Retained profit?
**Answer:** Profit kept back by a firm for its own use which is not distributed to
shareholders or used to pay taxation.
8. What are Net exports or the net trade balance?
**Answer:** Exports minus imports.
,9. What is the Aggregate supply curve?
**Answer:** The relationship between the average level of prices in the economy and the
level of total output.
10. What is 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.
11. What is the Short-run aggregate supply curve?
**Answer:** The upward sloping aggregate supply curve which assumes that money wage
rates are fixed.
12. What are Supply-side shocks?
**Answer:** Factors such as changes in wage rates or commodity prices which cause the
short run aggregate supply curve to shift.
13. What is the 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.
14. What is a Closed economy?
**Answer:** An economy where there is no foreign trade.
15. What is Income?
**Answer:** Rent, interest, wages and profits earned from wealth owned by economic
actors.
16. What are Injections?
, **Answer:** In the circular flow of income, spending which is not generated by households
including investment, government spending and exports.
17. What is National income?
**Answer:** The value of the output, expenditure or income of an economy over a period
of time.
18. What is an Open economy?
**Answer:** An economy where there is trade with other countries.
19. What is 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.
20. What are 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.
21. What is 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).
22. What is 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).
23. What is 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).
