AQA A LEVEL ECONOMICS – COMPLETE REVISION
GUIDE / EXAM QUESTIONS & ANSWERS (2025
EDITION)
Allocative efficiency - CORRECT ANSWER ✅✅✅when an economy's factors
of production are used to produce the combination of goods and services that
maximises society's welfare
Asymmetric information - CORRECT ANSWER ✅✅✅a source of information
failure where one economic agent knows more than another, giving them
more power in a market transaction
Anchoring - CORRECT ANSWER ✅✅✅the tendency of individuals to rely on
particular pieces of information when making choices between different goods
and services
Availability bias - CORRECT ANSWER ✅✅✅when people make judgements
about the probability of events by recalling recent instances
Altruism and fairness - CORRECT ANSWER ✅✅✅individuals are motivated
to do the right thing, even if this means paying more for a good or service
Average total cost - CORRECT ANSWER ✅✅✅total costs of production
divided by the number of units of output
Average revenue - CORRECT ANSWER ✅✅✅total revenue divided by units
of output. Equal to price in a firm that sells one product at a fixed price
,Absolute poverty - CORRECT ANSWER ✅✅✅when some people can't
afford the basic necessities to sustain life, e.g food, shelter and warmth
Allocative function - CORRECT ANSWER ✅✅✅the function of prices that
acts to divert resources to where returns can be maximised
Asymmetric information - CORRECT ANSWER ✅✅✅a source of information
failure where one economic agent knows more than another, giving them
more power in a market transaction
Aggregate demand - CORRECT ANSWER ✅✅✅total planned spending in an
economy over a period of time at any given price level. It is calculated as C + I +
G+X−M
Accelerator theory - CORRECT ANSWER ✅✅✅where increases in national
income lead to firms spending more on investment, in order to expand their
capacity to exploit the rising income
Aggregate supply - CORRECT ANSWER ✅✅✅the total quantity of output
that all the firms in the economy are willing to produce at a given price level
Asset price bubble - CORRECT ANSWER ✅✅✅where a rise in an asset's
price becomes self-fulfilling and the price rises beyond the level that normal
demand and supply conditions would generate. This eventually leads to sharp
falls in its price when the bubble is burst
Animal spirits - CORRECT ANSWER ✅✅✅the collective feeling of consumer
and business confidence which can affect economic decisions, such as those
affecting consumption and investment
,Adaptive expectations - CORRECT ANSWER ✅✅✅where workers take time
to adjust their expectations of the inflation rate to match the actual inflation
rate
Ad valorem tax - CORRECT ANSWER ✅✅✅a tax based on a percentage of
added value on top of the original price
Absolute advantage - CORRECT ANSWER ✅✅✅a country has an absolute
advantage in the production of a product if it can be produced for a lower cost
than in another country
Aid - CORRECT ANSWER ✅✅✅this can refer to money, goods and services,
as well as loans at favourable interest rates given to a less developed country
Basic economic problem - CORRECT ANSWER ✅✅✅scarce economic
resources compared with society's unlimited wants
Bounded rationality - CORRECT ANSWER ✅✅✅when people try to behave
rationally but are restricted by factors such as lack of time to make decisions
Bounded self-control - CORRECT ANSWER ✅✅✅when individuals lack the
self-discipline to see their rational good intentions through
Barrier to entry - CORRECT ANSWER ✅✅✅any feature of a market that
makes it difficult or impossible for new firms to enter
, Basket of goods and services - CORRECT ANSWER ✅✅✅the selection of
products to be included within the price index based on typical household
purchases
Budget balance - CORRECT ANSWER ✅✅✅the difference between
government spending and the taxation revenue collected
Budget deficit - CORRECT ANSWER ✅✅✅government expenditure >
taxation
Budget surplus - CORRECT ANSWER ✅✅✅government expenditure <
taxation
Balanced budget - CORRECT ANSWER ✅✅✅government expenditure =
taxation
Boom - CORRECT ANSWER ✅✅✅period of above average short-run
economic growth
Benign deflation - CORRECT ANSWER ✅✅✅a fall in the price level due to
increases in aggregate supply (usually due to falling costs of production)
Broad money - CORRECT ANSWER ✅✅✅a measure of the money supply
that includes notes and coins, as well as most balances held by banks and
other financial institutions
Bonds - CORRECT ANSWER ✅✅✅a form of borrowing which gives the
holder a fixed rate of interest and the money is repaid within a set period of
time — bonds can be traded
GUIDE / EXAM QUESTIONS & ANSWERS (2025
EDITION)
Allocative efficiency - CORRECT ANSWER ✅✅✅when an economy's factors
of production are used to produce the combination of goods and services that
maximises society's welfare
Asymmetric information - CORRECT ANSWER ✅✅✅a source of information
failure where one economic agent knows more than another, giving them
more power in a market transaction
Anchoring - CORRECT ANSWER ✅✅✅the tendency of individuals to rely on
particular pieces of information when making choices between different goods
and services
Availability bias - CORRECT ANSWER ✅✅✅when people make judgements
about the probability of events by recalling recent instances
Altruism and fairness - CORRECT ANSWER ✅✅✅individuals are motivated
to do the right thing, even if this means paying more for a good or service
Average total cost - CORRECT ANSWER ✅✅✅total costs of production
divided by the number of units of output
Average revenue - CORRECT ANSWER ✅✅✅total revenue divided by units
of output. Equal to price in a firm that sells one product at a fixed price
,Absolute poverty - CORRECT ANSWER ✅✅✅when some people can't
afford the basic necessities to sustain life, e.g food, shelter and warmth
Allocative function - CORRECT ANSWER ✅✅✅the function of prices that
acts to divert resources to where returns can be maximised
Asymmetric information - CORRECT ANSWER ✅✅✅a source of information
failure where one economic agent knows more than another, giving them
more power in a market transaction
Aggregate demand - CORRECT ANSWER ✅✅✅total planned spending in an
economy over a period of time at any given price level. It is calculated as C + I +
G+X−M
Accelerator theory - CORRECT ANSWER ✅✅✅where increases in national
income lead to firms spending more on investment, in order to expand their
capacity to exploit the rising income
Aggregate supply - CORRECT ANSWER ✅✅✅the total quantity of output
that all the firms in the economy are willing to produce at a given price level
Asset price bubble - CORRECT ANSWER ✅✅✅where a rise in an asset's
price becomes self-fulfilling and the price rises beyond the level that normal
demand and supply conditions would generate. This eventually leads to sharp
falls in its price when the bubble is burst
Animal spirits - CORRECT ANSWER ✅✅✅the collective feeling of consumer
and business confidence which can affect economic decisions, such as those
affecting consumption and investment
,Adaptive expectations - CORRECT ANSWER ✅✅✅where workers take time
to adjust their expectations of the inflation rate to match the actual inflation
rate
Ad valorem tax - CORRECT ANSWER ✅✅✅a tax based on a percentage of
added value on top of the original price
Absolute advantage - CORRECT ANSWER ✅✅✅a country has an absolute
advantage in the production of a product if it can be produced for a lower cost
than in another country
Aid - CORRECT ANSWER ✅✅✅this can refer to money, goods and services,
as well as loans at favourable interest rates given to a less developed country
Basic economic problem - CORRECT ANSWER ✅✅✅scarce economic
resources compared with society's unlimited wants
Bounded rationality - CORRECT ANSWER ✅✅✅when people try to behave
rationally but are restricted by factors such as lack of time to make decisions
Bounded self-control - CORRECT ANSWER ✅✅✅when individuals lack the
self-discipline to see their rational good intentions through
Barrier to entry - CORRECT ANSWER ✅✅✅any feature of a market that
makes it difficult or impossible for new firms to enter
, Basket of goods and services - CORRECT ANSWER ✅✅✅the selection of
products to be included within the price index based on typical household
purchases
Budget balance - CORRECT ANSWER ✅✅✅the difference between
government spending and the taxation revenue collected
Budget deficit - CORRECT ANSWER ✅✅✅government expenditure >
taxation
Budget surplus - CORRECT ANSWER ✅✅✅government expenditure <
taxation
Balanced budget - CORRECT ANSWER ✅✅✅government expenditure =
taxation
Boom - CORRECT ANSWER ✅✅✅period of above average short-run
economic growth
Benign deflation - CORRECT ANSWER ✅✅✅a fall in the price level due to
increases in aggregate supply (usually due to falling costs of production)
Broad money - CORRECT ANSWER ✅✅✅a measure of the money supply
that includes notes and coins, as well as most balances held by banks and
other financial institutions
Bonds - CORRECT ANSWER ✅✅✅a form of borrowing which gives the
holder a fixed rate of interest and the money is repaid within a set period of
time — bonds can be traded
