Edexcel A-level Economics Paper 2
Questions with Complete Solutions
(Latest 2025)
The study of the economy as a whole, including inflation,
growth and unemployment. - Correct Answers
✅Macroeconomics
The total of all demands or expenditures in the economy at
any given price. - Correct Answers ✅Aggregate demand
Shows the relationship between the price level and
equilibrium national income. As the price level rises the
equilibrium level of national income falls. - Correct Answers
✅Aggregate demand curve
Business confidence: the mood of managers and owners of
firms about the future of their industry and the wider
economy. - Correct Answers ✅Animal spirits
The addition to capital stock, both to replace the existing
capital stock which has been used up (depreciation) and the
creation of additional capital. - Correct Answers ✅Gross
investment
The addition to the capital stock of the economy. - Correct
Answers ✅Investment
,Edexcel A-level Economics Paper 2
Questions with Complete Solutions
(Latest 2025)
Profit kept back by a firm for its own use which is not
distributed to shareholders or used to pay taxation. - Correct
Answers ✅Retained profit
Exports minus imports. - Correct Answers ✅Net exports or
the net trade balance
The relationship between the average level of prices in the
economy and the level of total output. - Correct Answers
✅Aggregate supply curve
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. - Correct Answers ✅Full capacity
The upward sloping aggregate supply curve which assumes
that money wage rates are fixed. - Correct Answers
✅Short-run aggregate supply curve
Factors such as changes in wage rates or commodity prices
which cause the short run aggregate supply curve to shift. -
Correct Answers ✅Supply-side shocks
,Edexcel A-level Economics Paper 2
Questions with Complete Solutions
(Latest 2025)
A model of the economy which shows the flow of goods,
services and factors and their payments around the economy.
- Correct Answers ✅Circular flow of income
An economy where there is no foreign trade. - Correct
Answers ✅Closed economy
Rent, interest, wages and profits earned from wealth owned
by economic actors. - Correct Answers ✅Income
In the circular flow of income, spending which is not
generated by households including investment, government
spending and exports. - Correct Answers ✅Injections
The value of the output, expenditure or income of an
economy over a period of time. - Correct Answers
✅National income
An economy where there is trade with other countries. -
Correct Answers ✅Open economy
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. -
Correct Answers ✅Wealth
, Edexcel A-level Economics Paper 2
Questions with Complete Solutions
(Latest 2025)
In the circular flow of income, spending by households which
does not flow back to domestic firms. It includes savings,
taxes and imports. - Correct Answers ✅Withdrawals or
leakages
The increase in imports divided by the increase in income
that caused them (i.e. change in M / change in Y) - Correct
Answers ✅Marginal propensity to import (MPM)
The increase in saving divided by the increase in income that
caused it (i.e. change in S / change in Y) - Correct Answers
✅Marginal propensity to save (MPS)
The increase in tax revenues divided by the increase in
income that caused them (i.e. change in T / change in Y) -
Correct Answers ✅Marginal propensity to tax (MPT)
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). - Correct Answers ✅Marginal propensity to withdraw
(MPW)
Questions with Complete Solutions
(Latest 2025)
The study of the economy as a whole, including inflation,
growth and unemployment. - Correct Answers
✅Macroeconomics
The total of all demands or expenditures in the economy at
any given price. - Correct Answers ✅Aggregate demand
Shows the relationship between the price level and
equilibrium national income. As the price level rises the
equilibrium level of national income falls. - Correct Answers
✅Aggregate demand curve
Business confidence: the mood of managers and owners of
firms about the future of their industry and the wider
economy. - Correct Answers ✅Animal spirits
The addition to capital stock, both to replace the existing
capital stock which has been used up (depreciation) and the
creation of additional capital. - Correct Answers ✅Gross
investment
The addition to the capital stock of the economy. - Correct
Answers ✅Investment
,Edexcel A-level Economics Paper 2
Questions with Complete Solutions
(Latest 2025)
Profit kept back by a firm for its own use which is not
distributed to shareholders or used to pay taxation. - Correct
Answers ✅Retained profit
Exports minus imports. - Correct Answers ✅Net exports or
the net trade balance
The relationship between the average level of prices in the
economy and the level of total output. - Correct Answers
✅Aggregate supply curve
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. - Correct Answers ✅Full capacity
The upward sloping aggregate supply curve which assumes
that money wage rates are fixed. - Correct Answers
✅Short-run aggregate supply curve
Factors such as changes in wage rates or commodity prices
which cause the short run aggregate supply curve to shift. -
Correct Answers ✅Supply-side shocks
,Edexcel A-level Economics Paper 2
Questions with Complete Solutions
(Latest 2025)
A model of the economy which shows the flow of goods,
services and factors and their payments around the economy.
- Correct Answers ✅Circular flow of income
An economy where there is no foreign trade. - Correct
Answers ✅Closed economy
Rent, interest, wages and profits earned from wealth owned
by economic actors. - Correct Answers ✅Income
In the circular flow of income, spending which is not
generated by households including investment, government
spending and exports. - Correct Answers ✅Injections
The value of the output, expenditure or income of an
economy over a period of time. - Correct Answers
✅National income
An economy where there is trade with other countries. -
Correct Answers ✅Open economy
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. -
Correct Answers ✅Wealth
, Edexcel A-level Economics Paper 2
Questions with Complete Solutions
(Latest 2025)
In the circular flow of income, spending by households which
does not flow back to domestic firms. It includes savings,
taxes and imports. - Correct Answers ✅Withdrawals or
leakages
The increase in imports divided by the increase in income
that caused them (i.e. change in M / change in Y) - Correct
Answers ✅Marginal propensity to import (MPM)
The increase in saving divided by the increase in income that
caused it (i.e. change in S / change in Y) - Correct Answers
✅Marginal propensity to save (MPS)
The increase in tax revenues divided by the increase in
income that caused them (i.e. change in T / change in Y) -
Correct Answers ✅Marginal propensity to tax (MPT)
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). - Correct Answers ✅Marginal propensity to withdraw
(MPW)
