Edexcel A-level Economics Paper 2 2025 Updated Exam Questions & Answers

Edexcel A-level Economics Paper 2 2025 Updated Exam Questions & Answers Absolute advantage - ANSWER-When a country can produce a product using fewer factors of production than another nation .Absolute poverty - ANSWER-Cannot access the most basic, life sustaining goods and services .Access to credit and banking - ANSWER-Difficult to save in a country with a poor banking system .Active population - ANSWER-Those in work or actively seeking work; also known as the labour force. .Activity rate or participation rate - ANSWER-The number of those in work or unemployed divided by the population of working age expressed as a percentage. .Actual growth - ANSWER-Economic growth as measured by recorded changes in real GDP over time. .Advantages of a fixed exchange rate - ANSWER-Stability attracts FDI Stability controls inflation Leads to lower borrowing costs Less speculation .Advantages of a floating exchange rate (4) - ANSWER-Reduces need to hold large foreign currency reserves Freedom to set interest rates Automatic correction Less risk .Advantages of aid - ANSWER-Helpful in short-term Helps projects for long-term development .Advantages of buffer stock schemes - ANSWER-Reduces price volatility Incomes of farmers remain stable .Advantages of fairtrade schemes - ANSWER-Ensures farmers recieve fair price for goods Helps farmers plan for long-term due to stable income Encourages sustainability, environmental protection and stops child labour .Advantages of globalisation (5) - ANSWER-Lower prices Benefits of trade Greater employment Large economies of scale Free movement of labour and captial .Advantages of protectionism - ANSWER-Reduces trade deficit Protects infant industries .Advantages of specialisation (5) - ANSWER-Larger range of goods and services Greater output Greater quality Benefits of trade Reduces problem of scarcity .Advantages of the HDI - ANSWER-Broad measure Focuses on development outcomes Allows progress to be measured over time .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. .Aggregate supply curve - ANSWER-The relationship between the average level of prices in the economy and the level of total output. .Aim of trade subsidy - ANSWER-To reduce costs of production → passed onto consumer as lower prices → makes firm more competitive .Animal spirits - ANSWER-Business confidence: the mood of managers and owners of firms about the future of their industry and the wider economy. .Anticipated inflation - ANSWER-Increases in prices which economic actors are able to predict with accuracy. .Appreciation - ANSWER-When the value of the currency increases .Balance of Payments - ANSWER-Measures the inflows and outflows of money into and out of a country .Balance of payments account - 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 - ANSWER-The value of exports minus imports. .Balanced budget - 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 - 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 - ANSWER-Period of time when the economy is growing strongly and is operating above its productive potential. .Bottlenecks - ANSWER-Supply-side constraints in a particular market in an economy which prevent higher growth for the whole economy. .Budget - 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 - 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 - 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 account - ANSWER-Minor payments/transfers .Capital and financial accounts - ANSWER-That part of the balance of payments account where flows of savings, investments and currency are recorded. .Capital flight - ANSWER-When money leaves the economy through outward investment