Edexcel A-level Economics
Theme 2 QUESTIONS WITH
SOLVED ANSWERS.
Active population - CORRECT ANSWER✅✅Those in work or actively seeking work;
also known as the labour force.
Activity rate or participation rate - CORRECT ANSWER✅✅The number of those in
work or unemployed divided by the population of working age expressed as a
percentage.
Actual growth - CORRECT ANSWER✅✅Economic growth as measured by recorded
changes in real GDP over time.
Aggregate demand - CORRECT ANSWER✅✅The total of all demands or expenditures
in the economy at any given price.
Aggregate demand curve - CORRECT ANSWER✅✅Shows the relationship between
the price level and equilibrium national income. As the price level rises the equilibrium
level of national income falls.
Aggregate supply curve - CORRECT ANSWER✅✅The relationship between the
average level of prices in the economy and the level of total output.
Animal spirits - CORRECT ANSWER✅✅Business confidence: the mood of managers
and owners of firms about the future of their industry and the wider economy.
Anticipated inflation - CORRECT ANSWER✅✅Increases in prices which economic
actors are able to predict with accuracy.
Balance of payments account - CORRECT ANSWER✅✅A record of all financial
dealings over a period of time between economic agents of one country and all other
countries.
Balance of trade - CORRECT ANSWER✅✅The value of exports minus imports.
Balanced budget - CORRECT ANSWER✅✅A statement of spending and income plans
by government where spending is equal to its receipts, mainly tax revenues.
, Bank of England base rate - CORRECT ANSWER✅✅A rate of interest charged by the
Bank of England to banks to borrow money overnight. It is the most important interest
rate in the UK financial system because it influences other interest rates in the UK such
as savings rates and rates of interest on loans by banks.
Boom or peak - CORRECT ANSWER✅✅Period of time when the economy is growing
strongly and is operating above its productive potential.
Bottlenecks - CORRECT ANSWER✅✅Supply-side constraints in a particular market in
an economy which prevent higher growth for the whole economy.
Budget - CORRECT ANSWER✅✅A statement of the spending and income plans of an
individual firm or government. The Budget is the yearly statement on government
spending and taxation plans in the UK.
Budget deficit - CORRECT ANSWER✅✅A deficit which arises because government
spending is greater than its receipts. Government therefore has to borrow money to
finance the difference.
Budget surplus - CORRECT ANSWER✅✅A government surplus arising from
government spending being less than its receipts. Government can use the difference to
repay part of the National Debt.
Capital and financial accounts - CORRECT ANSWER✅✅That part of the balance of
payments account where flows of savings, investments and currency are recorded.
Circular flow of income - CORRECT ANSWER✅✅A model of the economy which
shows the flow of goods, services and factors and their payments around the economy.
Closed economy - CORRECT ANSWER✅✅An economy where there is no foreign
trade.
Consumer Prices Index (CPI) - CORRECT ANSWER✅✅A measure of the price level
used across the European Union and used by the Bank of England to measure inflation
against its target.
Contractionary fiscal policy - CORRECT ANSWER✅✅Fiscal policy which leads to a fall
in aggregate demand.
Contractionary monetary policy - CORRECT ANSWER✅✅Monetary policy which leads
to a fall in aggregate demand.
Cost-push inflation - CORRECT ANSWER✅✅Inflation caused by increases in in the
costs of production in the economy.
Theme 2 QUESTIONS WITH
SOLVED ANSWERS.
Active population - CORRECT ANSWER✅✅Those in work or actively seeking work;
also known as the labour force.
Activity rate or participation rate - CORRECT ANSWER✅✅The number of those in
work or unemployed divided by the population of working age expressed as a
percentage.
Actual growth - CORRECT ANSWER✅✅Economic growth as measured by recorded
changes in real GDP over time.
Aggregate demand - CORRECT ANSWER✅✅The total of all demands or expenditures
in the economy at any given price.
Aggregate demand curve - CORRECT ANSWER✅✅Shows the relationship between
the price level and equilibrium national income. As the price level rises the equilibrium
level of national income falls.
Aggregate supply curve - CORRECT ANSWER✅✅The relationship between the
average level of prices in the economy and the level of total output.
Animal spirits - CORRECT ANSWER✅✅Business confidence: the mood of managers
and owners of firms about the future of their industry and the wider economy.
Anticipated inflation - CORRECT ANSWER✅✅Increases in prices which economic
actors are able to predict with accuracy.
Balance of payments account - CORRECT ANSWER✅✅A record of all financial
dealings over a period of time between economic agents of one country and all other
countries.
Balance of trade - CORRECT ANSWER✅✅The value of exports minus imports.
Balanced budget - CORRECT ANSWER✅✅A statement of spending and income plans
by government where spending is equal to its receipts, mainly tax revenues.
, Bank of England base rate - CORRECT ANSWER✅✅A rate of interest charged by the
Bank of England to banks to borrow money overnight. It is the most important interest
rate in the UK financial system because it influences other interest rates in the UK such
as savings rates and rates of interest on loans by banks.
Boom or peak - CORRECT ANSWER✅✅Period of time when the economy is growing
strongly and is operating above its productive potential.
Bottlenecks - CORRECT ANSWER✅✅Supply-side constraints in a particular market in
an economy which prevent higher growth for the whole economy.
Budget - CORRECT ANSWER✅✅A statement of the spending and income plans of an
individual firm or government. The Budget is the yearly statement on government
spending and taxation plans in the UK.
Budget deficit - CORRECT ANSWER✅✅A deficit which arises because government
spending is greater than its receipts. Government therefore has to borrow money to
finance the difference.
Budget surplus - CORRECT ANSWER✅✅A government surplus arising from
government spending being less than its receipts. Government can use the difference to
repay part of the National Debt.
Capital and financial accounts - CORRECT ANSWER✅✅That part of the balance of
payments account where flows of savings, investments and currency are recorded.
Circular flow of income - CORRECT ANSWER✅✅A model of the economy which
shows the flow of goods, services and factors and their payments around the economy.
Closed economy - CORRECT ANSWER✅✅An economy where there is no foreign
trade.
Consumer Prices Index (CPI) - CORRECT ANSWER✅✅A measure of the price level
used across the European Union and used by the Bank of England to measure inflation
against its target.
Contractionary fiscal policy - CORRECT ANSWER✅✅Fiscal policy which leads to a fall
in aggregate demand.
Contractionary monetary policy - CORRECT ANSWER✅✅Monetary policy which leads
to a fall in aggregate demand.
Cost-push inflation - CORRECT ANSWER✅✅Inflation caused by increases in in the
costs of production in the economy.
