Edexcel A-level Economics Paper 2
ACTUAL EXAM WITH ACCURATE
QUESTIONS AND ANSWERS
(VERIFIED ANSWERS) | LATEST
(2026/2027) UPDATED VERSION |
100% GUARANTEED PASS
{JUST RELEASED}
1. Macroeconomics - ANSWER ✓ The study of the economy as a whole,
including inflation, growth and unemployment.
2. Aggregate demand - ANSWER ✓ The total of all demands or expenditures in
the economy at any given price.
3. 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.
4. Animal spirits - ANSWER ✓ Business confidence: the mood of managers and
owners of firms about the future of their industry and the wider economy.
,5. Gross investment - ANSWER ✓ The addition to capital stock, both to replace
the existing capital stock which has been used up (depreciation) and the
creation of additional capital.
6. Investment - ANSWER ✓ The addition to the capital stock of the economy.
7. Retained profit - ANSWER ✓ Profit kept back by a firm for its own use which
is not distributed to shareholders or used to pay taxation.
8. Net exports or the net trade balance - ANSWER ✓ Exports minus imports.
9. Aggregate supply curve - ANSWER ✓ The relationship between the average
level of prices in the economy and the level of total output.
10. Full capacity - ANSWER ✓ The 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.
11. Short-run aggregate supply curve - ANSWER ✓ The upward sloping aggregate
supply curve which assumes that money wage rates are fixed.
,12. Supply-side shocks - ANSWER ✓ Factors such as changes in wage rates or
commodity prices which cause the short run aggregate supply curve to shift.
13. Circular flow of income - ANSWER ✓ A model of the economy which shows
the flow of goods, services and factors and their payments around the
economy.
14. Closed economy - ANSWER ✓ An economy where there is no foreign trade.
15. Income - ANSWER ✓ Rent, interest, wages and profits earned from wealth
owned by economic actors.
16. Injections - ANSWER ✓ In the circular flow of income, spending which is not
generated by households including investment, government spending and
exports.
17. National income - ANSWER ✓ The value of the output, expenditure or income
of an economy over a period of time.
18. Open economy - ANSWER ✓ An economy where there is trade with other
countries.
, 19. Wealth - ANSWER ✓ A stock of assets which can be used to generate a flow of
production or income. For example, physical wealth such as factories and
machines is used to make goods and services.
20. Withdrawals or leakages - ANSWER ✓ In the circular flow of income,
spending by households which does not flow back to domestic firms. It
includes savings, taxes and imports.
21. Marginal propensity to import (MPM) - ANSWER ✓ The increase in imports
divided by the increase in income that caused them (i.e. change in M / change
in Y)
22. Marginal propensity to save (MPS) - ANSWER ✓ The increase in saving
divided by the increase in income that caused it (i.e. change in S / change in Y)
23.Marginal propensity to tax (MPT) - ANSWER ✓ The increase in tax revenues
divided by the increase in income that caused them (i.e. change in T / change
in Y)
24. Marginal propensity to withdraw (MPW) - ANSWER ✓ The increase in
withdrawals from the circular flow (S + T + M) divided by the increase in
income that caused them (i.e. change in W / change in Y); this is the same as
the sum of the marginal propensity to save, tax and import (MPS + MPT +
MPM).
ACTUAL EXAM WITH ACCURATE
QUESTIONS AND ANSWERS
(VERIFIED ANSWERS) | LATEST
(2026/2027) UPDATED VERSION |
100% GUARANTEED PASS
{JUST RELEASED}
1. Macroeconomics - ANSWER ✓ The study of the economy as a whole,
including inflation, growth and unemployment.
2. Aggregate demand - ANSWER ✓ The total of all demands or expenditures in
the economy at any given price.
3. 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.
4. Animal spirits - ANSWER ✓ Business confidence: the mood of managers and
owners of firms about the future of their industry and the wider economy.
,5. Gross investment - ANSWER ✓ The addition to capital stock, both to replace
the existing capital stock which has been used up (depreciation) and the
creation of additional capital.
6. Investment - ANSWER ✓ The addition to the capital stock of the economy.
7. Retained profit - ANSWER ✓ Profit kept back by a firm for its own use which
is not distributed to shareholders or used to pay taxation.
8. Net exports or the net trade balance - ANSWER ✓ Exports minus imports.
9. Aggregate supply curve - ANSWER ✓ The relationship between the average
level of prices in the economy and the level of total output.
10. Full capacity - ANSWER ✓ The 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.
11. Short-run aggregate supply curve - ANSWER ✓ The upward sloping aggregate
supply curve which assumes that money wage rates are fixed.
,12. Supply-side shocks - ANSWER ✓ Factors such as changes in wage rates or
commodity prices which cause the short run aggregate supply curve to shift.
13. Circular flow of income - ANSWER ✓ A model of the economy which shows
the flow of goods, services and factors and their payments around the
economy.
14. Closed economy - ANSWER ✓ An economy where there is no foreign trade.
15. Income - ANSWER ✓ Rent, interest, wages and profits earned from wealth
owned by economic actors.
16. Injections - ANSWER ✓ In the circular flow of income, spending which is not
generated by households including investment, government spending and
exports.
17. National income - ANSWER ✓ The value of the output, expenditure or income
of an economy over a period of time.
18. Open economy - ANSWER ✓ An economy where there is trade with other
countries.
, 19. Wealth - ANSWER ✓ A stock of assets which can be used to generate a flow of
production or income. For example, physical wealth such as factories and
machines is used to make goods and services.
20. Withdrawals or leakages - ANSWER ✓ In the circular flow of income,
spending by households which does not flow back to domestic firms. It
includes savings, taxes and imports.
21. Marginal propensity to import (MPM) - ANSWER ✓ The increase in imports
divided by the increase in income that caused them (i.e. change in M / change
in Y)
22. Marginal propensity to save (MPS) - ANSWER ✓ The increase in saving
divided by the increase in income that caused it (i.e. change in S / change in Y)
23.Marginal propensity to tax (MPT) - ANSWER ✓ The increase in tax revenues
divided by the increase in income that caused them (i.e. change in T / change
in Y)
24. Marginal propensity to withdraw (MPW) - ANSWER ✓ The increase in
withdrawals from the circular flow (S + T + M) divided by the increase in
income that caused them (i.e. change in W / change in Y); this is the same as
the sum of the marginal propensity to save, tax and import (MPS + MPT +
MPM).
