AQA AS ECONOMICS 7135 2 PAPER 2 ACTUAL
EXAM PAPER 2026 QUESTIONS WITH
SOLUTIONS GRADED A+
◉ What do the four main economic objectives aim to provide?
Answer: macro stability
◉ What is long-run trend of economic growth in the UK? Answer:
2.5%
◉ What do governments aim for with economic growth? Answer:
long-run sustainable growth
◉ Why do governments want economic growth? Answer: higher
living standards and employment, as well as expansion of productive
capacity
◉ Why might governments focus on economic development before
economic growth? Answer: in emerging markets/developing
economies - will improve living standards/life expectancy/improve
literacy
,◉ What do governments aim for with unemployment? Answer: near
full employment- account for frictional unemployment so 3%
(labour force also employed in productive work)
◉ What is the government inflation target in the UK? Answer: 2%
CPI (plus or minus 1%)
◉ Why do governments inflation target? Answer: provide price
stability for firms and consumers and help with long run economic
decision making
◉ What do they aim for the balance of payments? Answer: -
satisfactory current account to avoid large deficit (near equilibrium)
◉ Why do they aim for a stable balance of payments? Answer:
means the country can sustainably finance the current account for
long term growth
◉ What are some other potential economic objectives of a
government? Answer: - balanced government budget (ensure kept
control of state borrowing to prevent escalation of national debt-
allows them to borrow cheaply in future and make easier
repayments)
,- greater income inequality (avoid extreme gap between richest and
poorest - income and wealth equally distributed)
◉ What is the conflict between economic growth and inflation?
Answer: growing economy likely to experience inflationary pressure
on price level (especially with a positive output gap and AD
increasing faster than AS)
◉ What is the conflict between economic growth and the current
account? Answer: periods of growth associated with high levels of
spending- in UK high marginal propensity to import leading to
worsened current account deficit
- export-led growth (e.g. China or Germany) can run current account
surplus with high levels of growth
◉ What is the conflict between economic growth and the budget
deficit? Answer: - reducing budget deficit requires less expenditure
and more tax revenue (austerity measures) resulting in fallen AD
and less economic growth
◉ What is the conflict between unemployment and inflation?
Answer: - short run trade off as creation of more jobs causes wages
to increase resulting in inflationary pressure due to increased
consumption (can be limited by effective use of supply side policies
to reduce structural unemployment)
, ◉ What does the short-run Phillip's curve do? Answer: - represents
the trade off between unemployment and inflation
- L-shaped showing how as unemployment increases inflation
decreases
(means if gov. tries to lower unemployment in the short run
inflationary pressure could result - demand-deficient
unemployment encouraging use of demand side policies)
◉ What does the long-run Phillip's curve do? Answer: -
demonstrates the natural rate of unemployment - no trade off
between unemployment and inflation
(means policies can be more flexible- focus on supply side policies as
no cyclical unemployment in long-run)
◉ What does GDP measure? Answer: the quantity of goods and
services produced in an economy (national output)
◉ What is GDP used to show? Answer: economic growth
◉ What is real GDP? Answer: value of GDP adjusted for inflation
EXAM PAPER 2026 QUESTIONS WITH
SOLUTIONS GRADED A+
◉ What do the four main economic objectives aim to provide?
Answer: macro stability
◉ What is long-run trend of economic growth in the UK? Answer:
2.5%
◉ What do governments aim for with economic growth? Answer:
long-run sustainable growth
◉ Why do governments want economic growth? Answer: higher
living standards and employment, as well as expansion of productive
capacity
◉ Why might governments focus on economic development before
economic growth? Answer: in emerging markets/developing
economies - will improve living standards/life expectancy/improve
literacy
,◉ What do governments aim for with unemployment? Answer: near
full employment- account for frictional unemployment so 3%
(labour force also employed in productive work)
◉ What is the government inflation target in the UK? Answer: 2%
CPI (plus or minus 1%)
◉ Why do governments inflation target? Answer: provide price
stability for firms and consumers and help with long run economic
decision making
◉ What do they aim for the balance of payments? Answer: -
satisfactory current account to avoid large deficit (near equilibrium)
◉ Why do they aim for a stable balance of payments? Answer:
means the country can sustainably finance the current account for
long term growth
◉ What are some other potential economic objectives of a
government? Answer: - balanced government budget (ensure kept
control of state borrowing to prevent escalation of national debt-
allows them to borrow cheaply in future and make easier
repayments)
,- greater income inequality (avoid extreme gap between richest and
poorest - income and wealth equally distributed)
◉ What is the conflict between economic growth and inflation?
Answer: growing economy likely to experience inflationary pressure
on price level (especially with a positive output gap and AD
increasing faster than AS)
◉ What is the conflict between economic growth and the current
account? Answer: periods of growth associated with high levels of
spending- in UK high marginal propensity to import leading to
worsened current account deficit
- export-led growth (e.g. China or Germany) can run current account
surplus with high levels of growth
◉ What is the conflict between economic growth and the budget
deficit? Answer: - reducing budget deficit requires less expenditure
and more tax revenue (austerity measures) resulting in fallen AD
and less economic growth
◉ What is the conflict between unemployment and inflation?
Answer: - short run trade off as creation of more jobs causes wages
to increase resulting in inflationary pressure due to increased
consumption (can be limited by effective use of supply side policies
to reduce structural unemployment)
, ◉ What does the short-run Phillip's curve do? Answer: - represents
the trade off between unemployment and inflation
- L-shaped showing how as unemployment increases inflation
decreases
(means if gov. tries to lower unemployment in the short run
inflationary pressure could result - demand-deficient
unemployment encouraging use of demand side policies)
◉ What does the long-run Phillip's curve do? Answer: -
demonstrates the natural rate of unemployment - no trade off
between unemployment and inflation
(means policies can be more flexible- focus on supply side policies as
no cyclical unemployment in long-run)
◉ What does GDP measure? Answer: the quantity of goods and
services produced in an economy (national output)
◉ What is GDP used to show? Answer: economic growth
◉ What is real GDP? Answer: value of GDP adjusted for inflation
