AQA ECONOMICS 2025/2026 QUESTIONS AND SOLUTIONS
MARKED A+
✔✔Monetary Policy - ✔✔the use by the government and its agent the Bank of England,
of interest rates and other monetary instruments to try to achieve the government's
policy objectives
✔✔Fiscal Policy - ✔✔the use by the government of government spending and taxation
to try to achieve the government's policy objectives
✔✔Performance Indicator - ✔✔provides information for judging the success or failure of
a particular type of government policy such as fiscal policy or monetary policy
✔✔Index Number - ✔✔data figure reflecting price or quantity compared with a standard
or base value. The base year index number is typically 100.
✔✔National capital stock - ✔✔the stock of capital goods, such as buildings and
machinery, in the economy that has accumulated over time and is measured at a point
in time
✔✔Wealth - ✔✔the stock of assets which have value at a point in time, (as distinct from
income, which is a flow generated over a period of time)
✔✔National wealth - ✔✔the stock of all goods that exist at a point in time that have
value in the economy
✔✔National income - ✔✔the flow of new output produced by the economy in a
particular period
✔✔National output - ✔✔the same as national income, namely the flow of new output
produced by the economy in a particular period
✔✔National product - ✔✔another name for national income and national output
✔✔Consumption - ✔✔total planned spending by households on consumer goods and
services produced within the economy
✔✔Closed economy - ✔✔an economy with no international trade
✔✔Saving - ✔✔income which is not spent
✔✔Withdrawal - ✔✔a leakage of spending power out of the circular flow of income into
savings, taxation or imports
, ✔✔Investment - ✔✔total planned spending by firms on capital goods produced within
the economy
✔✔Injection - ✔✔spending entering the circular flow of income as a result of investment,
government spending and exports
✔✔Open economy - ✔✔an economy open to international trade
✔✔Reflationary policies - ✔✔policies that increase aggregate demand with the intention
of increasing real output and employment
✔✔Equilibrium national income - ✔✔the level of real output at which aggregate demand
equals aggregate supply. Alternatively, it is the level of income at which withdrawals
from the circular flow of income equals injections into the flow
✔✔Aggregate demand - ✔✔the total planned spending on real output produced within
the economy
✔✔Aggregate supply - ✔✔the level of real national output that producers are prepared
to supply at different average price levels
✔✔Economic shock - ✔✔an unexpected event hitting the economy. Economic shocks
can be demand-side or supply-side (sometimes both) and unfavourable or favourable
✔✔Rate of interest - ✔✔the reward for lending savings to somebody else and the cost
of borrowing
✔✔Life-cycle theory of consumption - ✔✔a theory that explains consumption and
saving in terms of how people expect their incomes to change over the whole of their
life cycles
✔✔Availability of credit - ✔✔funds available for households and firms to borrow
✔✔Credit crunch - ✔✔occurs when there is a lack of funds available in the credit
market, making it difficult for borrowers to obtain financing, and leads to a rise in the
cost of borrowing
✔✔Distribution of income - ✔✔the spread of different incomes among individuals and
different income groups in the economy
✔✔Accelerator - ✔✔a change in the level of investment in new capital goods is induced
by a change in the rate of growth of national income or aggregate demand
MARKED A+
✔✔Monetary Policy - ✔✔the use by the government and its agent the Bank of England,
of interest rates and other monetary instruments to try to achieve the government's
policy objectives
✔✔Fiscal Policy - ✔✔the use by the government of government spending and taxation
to try to achieve the government's policy objectives
✔✔Performance Indicator - ✔✔provides information for judging the success or failure of
a particular type of government policy such as fiscal policy or monetary policy
✔✔Index Number - ✔✔data figure reflecting price or quantity compared with a standard
or base value. The base year index number is typically 100.
✔✔National capital stock - ✔✔the stock of capital goods, such as buildings and
machinery, in the economy that has accumulated over time and is measured at a point
in time
✔✔Wealth - ✔✔the stock of assets which have value at a point in time, (as distinct from
income, which is a flow generated over a period of time)
✔✔National wealth - ✔✔the stock of all goods that exist at a point in time that have
value in the economy
✔✔National income - ✔✔the flow of new output produced by the economy in a
particular period
✔✔National output - ✔✔the same as national income, namely the flow of new output
produced by the economy in a particular period
✔✔National product - ✔✔another name for national income and national output
✔✔Consumption - ✔✔total planned spending by households on consumer goods and
services produced within the economy
✔✔Closed economy - ✔✔an economy with no international trade
✔✔Saving - ✔✔income which is not spent
✔✔Withdrawal - ✔✔a leakage of spending power out of the circular flow of income into
savings, taxation or imports
, ✔✔Investment - ✔✔total planned spending by firms on capital goods produced within
the economy
✔✔Injection - ✔✔spending entering the circular flow of income as a result of investment,
government spending and exports
✔✔Open economy - ✔✔an economy open to international trade
✔✔Reflationary policies - ✔✔policies that increase aggregate demand with the intention
of increasing real output and employment
✔✔Equilibrium national income - ✔✔the level of real output at which aggregate demand
equals aggregate supply. Alternatively, it is the level of income at which withdrawals
from the circular flow of income equals injections into the flow
✔✔Aggregate demand - ✔✔the total planned spending on real output produced within
the economy
✔✔Aggregate supply - ✔✔the level of real national output that producers are prepared
to supply at different average price levels
✔✔Economic shock - ✔✔an unexpected event hitting the economy. Economic shocks
can be demand-side or supply-side (sometimes both) and unfavourable or favourable
✔✔Rate of interest - ✔✔the reward for lending savings to somebody else and the cost
of borrowing
✔✔Life-cycle theory of consumption - ✔✔a theory that explains consumption and
saving in terms of how people expect their incomes to change over the whole of their
life cycles
✔✔Availability of credit - ✔✔funds available for households and firms to borrow
✔✔Credit crunch - ✔✔occurs when there is a lack of funds available in the credit
market, making it difficult for borrowers to obtain financing, and leads to a rise in the
cost of borrowing
✔✔Distribution of income - ✔✔the spread of different incomes among individuals and
different income groups in the economy
✔✔Accelerator - ✔✔a change in the level of investment in new capital goods is induced
by a change in the rate of growth of national income or aggregate demand
