A LEVEL ECONOMICS A: Actual May 2025 PAST PAPER 2: The National
and Global Economy. All Assessment Questions & Mark Scheme
[Edexcel 9ECO/02]
1. Which of the following best defines Aggregate Demand (AD)?
a) The total value of goods and services produced by an economy in a year
b) The total of all demands or expenditures in the economy at any given price level
c) The total value of exports minus imports
d) The total money supply in the economy
Answer: b) The total of all demands or expenditures in the economy at any given price level
Explanation: Aggregate demand represents the total planned spending on an economy's goods and
services at a given price level. It is calculated as C + I + G + (X-M). The value of goods and services
produced is GDP (option a). Exports minus imports is net trade (a component of AD). The money supply
is different from spending .
2. According to the Edexcel Economics A specification, Theme 2 focuses on:
a) Markets and market failure
b) The UK economy – performance and policies
c) Business behaviour and the labour market
d) A global perspective
Answer: b) The UK economy – performance and policies
Explanation: The Edexcel A Level Economics A course is divided into four themes. Theme 1 covers
markets and market failure (microeconomics). Theme 2 covers the UK economy, including
macroeconomic performance and policies. Theme 3 covers business behaviour and labour markets.
Theme 4 takes a global perspective .
,3. An increase in which component of Aggregate Demand would represent an increase in government
spending on infrastructure projects?
a) Consumption (C)
b) Investment (I)
c) Government spending (G)
d) Net exports (X-M)
Answer: c) Government spending (G)
Explanation: Government spending is the G component in the AD equation (AD = C + I + G + X - M). This
includes spending by the government on public services, infrastructure, and other projects.
Consumption is household spending, investment is spending by firms on capital goods, and net exports
are exports minus imports .
4. The diagram showing the relationship between the average price level in the economy and the level of
total output is called the:
a) Aggregate Demand curve
b) Phillips Curve
c) Aggregate Supply curve
d) Lorenz Curve
Answer: c) Aggregate Supply curve
,Explanation: The aggregate supply curve shows the relationship between the average price level in the
economy and the level of total output that firms are willing to supply. It can be upward-sloping in the
short run, and vertical (classical) or horizontal (Keynesian) in the long run depending on economic
assumptions .
5. 'Animal spirits' in macroeconomic terms refers to:
a) The behaviour of livestock markets
b) Business confidence - the mood of managers about the future of their industry
c) Consumer spending on pets
d) Government regulation of animal products
Answer: b) Business confidence - the mood of managers about the future of their industry
Explanation: The term 'animal spirits' was coined by John Maynard Keynes to describe the instincts,
emotions, and confidence levels of business managers and owners. When animal spirits are high, firms
are more likely to invest and expand. When low, they tend to hold back, affecting economic growth .
6. Gross Domestic Product (GDP) is defined as:
a) The total output or value added of an economy, excluding income from investments abroad
b) The total output including net overseas interest and dividend payments
c) The market value of goods produced by citizens anywhere in the world
d) The total money in circulation within an economy
Answer: a) The total output or value added of an economy, excluding income from investments abroad
, Explanation: GDP measures the value of output produced within a country's borders. It does not include
income from overseas investments (which would be included in GNI). GNP includes output by citizens
anywhere in the world. Option d describes the money supply, not GDP .
7. Gross National Income (GNI) is calculated as:
a) GDP minus depreciation
b) GDP plus net overseas interest and dividend payments (factor incomes)
c) GDP plus government spending
d) GDP minus net exports
Answer: b) GDP plus net overseas interest and dividend payments (factor incomes)
Explanation: GNI takes GDP and adds net overseas factor incomes - this includes interest payments,
dividends, and profits that flow into the country from abroad, minus similar outflows. This makes GNI
particularly useful for countries that receive significant remittances or have large overseas investments .
8. Real GDP differs from Nominal GDP because:
a) Real GDP excludes government spending
b) Real GDP takes into account inflation (price changes), while nominal does not
c) Nominal GDP excludes exports
d) Nominal GDP measures only goods, not services
Answer: b) Real GDP takes into account inflation (price changes), while nominal does not
and Global Economy. All Assessment Questions & Mark Scheme
[Edexcel 9ECO/02]
1. Which of the following best defines Aggregate Demand (AD)?
a) The total value of goods and services produced by an economy in a year
b) The total of all demands or expenditures in the economy at any given price level
c) The total value of exports minus imports
d) The total money supply in the economy
Answer: b) The total of all demands or expenditures in the economy at any given price level
Explanation: Aggregate demand represents the total planned spending on an economy's goods and
services at a given price level. It is calculated as C + I + G + (X-M). The value of goods and services
produced is GDP (option a). Exports minus imports is net trade (a component of AD). The money supply
is different from spending .
2. According to the Edexcel Economics A specification, Theme 2 focuses on:
a) Markets and market failure
b) The UK economy – performance and policies
c) Business behaviour and the labour market
d) A global perspective
Answer: b) The UK economy – performance and policies
Explanation: The Edexcel A Level Economics A course is divided into four themes. Theme 1 covers
markets and market failure (microeconomics). Theme 2 covers the UK economy, including
macroeconomic performance and policies. Theme 3 covers business behaviour and labour markets.
Theme 4 takes a global perspective .
,3. An increase in which component of Aggregate Demand would represent an increase in government
spending on infrastructure projects?
a) Consumption (C)
b) Investment (I)
c) Government spending (G)
d) Net exports (X-M)
Answer: c) Government spending (G)
Explanation: Government spending is the G component in the AD equation (AD = C + I + G + X - M). This
includes spending by the government on public services, infrastructure, and other projects.
Consumption is household spending, investment is spending by firms on capital goods, and net exports
are exports minus imports .
4. The diagram showing the relationship between the average price level in the economy and the level of
total output is called the:
a) Aggregate Demand curve
b) Phillips Curve
c) Aggregate Supply curve
d) Lorenz Curve
Answer: c) Aggregate Supply curve
,Explanation: The aggregate supply curve shows the relationship between the average price level in the
economy and the level of total output that firms are willing to supply. It can be upward-sloping in the
short run, and vertical (classical) or horizontal (Keynesian) in the long run depending on economic
assumptions .
5. 'Animal spirits' in macroeconomic terms refers to:
a) The behaviour of livestock markets
b) Business confidence - the mood of managers about the future of their industry
c) Consumer spending on pets
d) Government regulation of animal products
Answer: b) Business confidence - the mood of managers about the future of their industry
Explanation: The term 'animal spirits' was coined by John Maynard Keynes to describe the instincts,
emotions, and confidence levels of business managers and owners. When animal spirits are high, firms
are more likely to invest and expand. When low, they tend to hold back, affecting economic growth .
6. Gross Domestic Product (GDP) is defined as:
a) The total output or value added of an economy, excluding income from investments abroad
b) The total output including net overseas interest and dividend payments
c) The market value of goods produced by citizens anywhere in the world
d) The total money in circulation within an economy
Answer: a) The total output or value added of an economy, excluding income from investments abroad
, Explanation: GDP measures the value of output produced within a country's borders. It does not include
income from overseas investments (which would be included in GNI). GNP includes output by citizens
anywhere in the world. Option d describes the money supply, not GDP .
7. Gross National Income (GNI) is calculated as:
a) GDP minus depreciation
b) GDP plus net overseas interest and dividend payments (factor incomes)
c) GDP plus government spending
d) GDP minus net exports
Answer: b) GDP plus net overseas interest and dividend payments (factor incomes)
Explanation: GNI takes GDP and adds net overseas factor incomes - this includes interest payments,
dividends, and profits that flow into the country from abroad, minus similar outflows. This makes GNI
particularly useful for countries that receive significant remittances or have large overseas investments .
8. Real GDP differs from Nominal GDP because:
a) Real GDP excludes government spending
b) Real GDP takes into account inflation (price changes), while nominal does not
c) Nominal GDP excludes exports
d) Nominal GDP measures only goods, not services
Answer: b) Real GDP takes into account inflation (price changes), while nominal does not
