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Edexcel A-Level Economics A:
Definitions Questions and Expert
Answers the Latest Version
Question: Absolute advantage
Answer: When a country's output of a product per unit of input is greater than
that of any other country.
Question: Absolute poverty
Answer: When a person does not have the income or wealth to fulfil their
basic needs.
Question: Aggregate Demand (AD)
Answer: The total demand/spending in an economy at a given price level over
a given period of time. Made up of consumption, investment, government
spending and net external demand.
Question: Aggregate Supply (AS)
Answer: The total amount of goods and services that can be supplied in an
economy at a given price level over a given period of time.
Question: Aid
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Answer: The transfer of resources from one country to another.
Question: Allocative efficiency
Answer: Where the price of a good is equal to the price consumers are willing
to pay. This occurs when all resources are allocated efficiently.
Question: Asymmetric information
Answer: Where buyers have more information than sellers in a market, or vice
versa.
Question: Automatic stabilisers
Answer: Parts of fiscal policy that automatically react to changes in the
economic cycle.
Question: Average Cost (AC)
Answer: The cost of production per unit of output.
Question: Average Revenue (AR)
Answer: The revenue per unit sold.
Question: Backward vertical integration
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Answer: Where a firm merges with or takes over a firm further back in the
production process.
Question: Balance of payments
Answer: A record of the international transactions of an economy.
Question: Bank rate
Answer: The official rate of interest set by the central bank (e.g. by the
Monetary Policy Committee of the Bank of England)
Question: Barriers to entry
Answer: Potential difficulties that make it hard for firms to enter a market.
Question: Barriers to exit
Answer: Potential difficulties that make it hard for firms to leave a market.
Question: Black market
Answer: Economic activity that occurs without taxation and government
intervention.
Question: Budget deficit
Answer: When government spending exceeds tax revenues.
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Question: Budget surplus
Answer: When tax revenues exceed government spending.
Question: Capital account of the balance of payments
Answer: A part of the balance of payments that shows transfers of non-
monetary and fixed assets into and out of the economy.
Question: Cartel
Answer: A group of products who collude to limit output in order to keep
prices high.
Question: Central bank
Answer: The institution responsible for issuing banknotes in an economy,
acting as a lender of last resort, and implementing monetary policy.
Question: Ceteris paribus
Answer: All other things remaining equal
Question: Circular flow of income
Answer: The flow of national output, income and expenditure between firms
and households.
Question: Command economy
Edexcel A-Level Economics A:
Definitions Questions and Expert
Answers the Latest Version
Question: Absolute advantage
Answer: When a country's output of a product per unit of input is greater than
that of any other country.
Question: Absolute poverty
Answer: When a person does not have the income or wealth to fulfil their
basic needs.
Question: Aggregate Demand (AD)
Answer: The total demand/spending in an economy at a given price level over
a given period of time. Made up of consumption, investment, government
spending and net external demand.
Question: Aggregate Supply (AS)
Answer: The total amount of goods and services that can be supplied in an
economy at a given price level over a given period of time.
Question: Aid
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Answer: The transfer of resources from one country to another.
Question: Allocative efficiency
Answer: Where the price of a good is equal to the price consumers are willing
to pay. This occurs when all resources are allocated efficiently.
Question: Asymmetric information
Answer: Where buyers have more information than sellers in a market, or vice
versa.
Question: Automatic stabilisers
Answer: Parts of fiscal policy that automatically react to changes in the
economic cycle.
Question: Average Cost (AC)
Answer: The cost of production per unit of output.
Question: Average Revenue (AR)
Answer: The revenue per unit sold.
Question: Backward vertical integration
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Answer: Where a firm merges with or takes over a firm further back in the
production process.
Question: Balance of payments
Answer: A record of the international transactions of an economy.
Question: Bank rate
Answer: The official rate of interest set by the central bank (e.g. by the
Monetary Policy Committee of the Bank of England)
Question: Barriers to entry
Answer: Potential difficulties that make it hard for firms to enter a market.
Question: Barriers to exit
Answer: Potential difficulties that make it hard for firms to leave a market.
Question: Black market
Answer: Economic activity that occurs without taxation and government
intervention.
Question: Budget deficit
Answer: When government spending exceeds tax revenues.
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Question: Budget surplus
Answer: When tax revenues exceed government spending.
Question: Capital account of the balance of payments
Answer: A part of the balance of payments that shows transfers of non-
monetary and fixed assets into and out of the economy.
Question: Cartel
Answer: A group of products who collude to limit output in order to keep
prices high.
Question: Central bank
Answer: The institution responsible for issuing banknotes in an economy,
acting as a lender of last resort, and implementing monetary policy.
Question: Ceteris paribus
Answer: All other things remaining equal
Question: Circular flow of income
Answer: The flow of national output, income and expenditure between firms
and households.
Question: Command economy
