Edexcel A-level Economics Theme 2.2-2.4 Questions & Answers 100% Correct!

Aggregate demand - AnswersThe total of all demands or expenditures in the economy at any given price. Aggregate demand curve - AnswersShows the relationship between the price level and equilibrium national income. As the price level rises the equilibrium level of national income falls. Animal spirits - AnswersBusiness confidence: the mood of managers and owners of firms about the future of their industry and the wider economy. Investment - AnswersThe addition to the capital stock of the economy. Retained profit - AnswersProfit 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 - AnswersExports minus imports. Aggregate supply curve - AnswersThe relationship between the average level of prices in the economy and the level of total output. Full capacity - AnswersThe 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 - AnswersThe upward sloping aggregate supply curve which assumes that money wage rates are fixed. Circular flow of income - AnswersA model of the economy which shows the flow of goods, services and factors and their payments around the economy. Closed economy - AnswersAn economy where there is no foreign trade. Income - AnswersRent, interest, wages and profits earned from wealth owned by economic actors.