1 Exampromax - Stuvia US
Edexcel A-level Economics Paper 2 Questions
and Answers 100% Correct Answers Already
Graded A+
Q: Macroeconomics
Ans: The study of the economy as a whole, including inflation, growth and
unemployment.
Q: Aggregate demand
Ans: The total of all demands or expenditures in the economy at any given
Exampromax - Stuvia US
price.
Q: Aggregate demand curve
Ans: Shows the relationship between the price level and equilibrium national
income. As the price level rises the equilibrium level of national income falls.
Q: Animal spirits
Ans: Business confidence: the mood of managers and owners of firms about the
future of their industry and the wider economy.
Q: Gross investment
Ans: The addition to capital stock, both to replace the existing capital stock
which has been used up (depreciation) and the creation of additional capital.
Q: Investment
Ans: The addition to the capital stock of the economy.
Q: Retained profit
Ans: Profit kept back by a firm for its own use which is not distributed to
shareholders or used to pay taxation.
, 2 Exampromax - Stuvia US
Q: Net exports or the net trade balance
Ans: Exports minus imports.
Q: Aggregate supply curve
Ans: The relationship between the average level of prices in the economy and
the level of total output.
Q: Full capacity
Ans: 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.
Q: Short-run aggregate supply curve
Exampromax - Stuvia US
Ans: The upward sloping aggregate supply curve which assumes that money
wage rates are fixed.
Q: Supply-side shocks
Ans: Factors such as changes in wage rates or commodity prices which cause the
short run aggregate supply curve to shift.
Q: Circular flow of income
Ans: A model of the economy which shows the flow of goods, services and
factors and their payments around the economy.
Q: Closed economy
Ans: An economy where there is no foreign trade.
Q: Income
Ans: Rent, interest, wages and profits earned from wealth owned by economic
actors.
Q: Injections
, 3 Exampromax - Stuvia US
Ans: In the circular flow of income, spending which is not generated by
households including investment, government spending and exports.
Q: National income
Ans: The value of the output, expenditure or income of an economy over a
period of time.
Q: Open economy
Ans: An economy where there is trade with other countries.
Q: Wealth
Ans: 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.
Exampromax - Stuvia US
Q: Withdrawals or leakages
Ans: In the circular flow of income, spending by households which does not
flow back to domestic firms. It includes savings, taxes and imports.
Q: Marginal propensity to import (MPM)
Ans: The increase in imports divided by the increase in income that caused them
(i.e. change in M / change in Y)
Q: Marginal propensity to save (MPS)
Ans: The increase in saving divided by the increase in income that caused it (i.e.
change in S / change in Y)
Q: Marginal propensity to tax (MPT)
Ans: The increase in tax revenues divided by the increase in income that caused
them (i.e. change in T / change in Y)
Q: Marginal propensity to withdraw (MPW)
, 4 Exampromax - Stuvia US
Ans: 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).
Q: Multiplier or national income multiplier or Keynesian multiplier or real
multiplier
Ans: The figure used to multiply a change in an injection into the circular flow,
such as investment, to find the final change in income (assuming the injection is
not determined by income). It is the ratio of the final change in income to the
initial change in an injection. It can be calculated as
1
________
1 - MPC
or
Exampromax - Stuvia US
1
___________________
MPS + MPT + MPM
or
1
____
MPW
Q: Multiplier effect or process
Ans: An increase in investment or other injection will lead to an even greater
increase in income (assuming the injection is not determined by income).
Q: Gross domestic product (GDP)
Ans: A measure of the output or value added of an economy which does not
include output or income from investments abroad or an allowance for the
depreciation of the nation's capital stock.
Q: Gross national income (GNI)
Ans: The value of goods and services produced by an economy over a period of
time (GDP) plus net overseas interest payments and dividends (factor incomes).
Q: Gross national product (GNP)
Edexcel A-level Economics Paper 2 Questions
and Answers 100% Correct Answers Already
Graded A+
Q: Macroeconomics
Ans: The study of the economy as a whole, including inflation, growth and
unemployment.
Q: Aggregate demand
Ans: The total of all demands or expenditures in the economy at any given
Exampromax - Stuvia US
price.
Q: Aggregate demand curve
Ans: Shows the relationship between the price level and equilibrium national
income. As the price level rises the equilibrium level of national income falls.
Q: Animal spirits
Ans: Business confidence: the mood of managers and owners of firms about the
future of their industry and the wider economy.
Q: Gross investment
Ans: The addition to capital stock, both to replace the existing capital stock
which has been used up (depreciation) and the creation of additional capital.
Q: Investment
Ans: The addition to the capital stock of the economy.
Q: Retained profit
Ans: Profit kept back by a firm for its own use which is not distributed to
shareholders or used to pay taxation.
, 2 Exampromax - Stuvia US
Q: Net exports or the net trade balance
Ans: Exports minus imports.
Q: Aggregate supply curve
Ans: The relationship between the average level of prices in the economy and
the level of total output.
Q: Full capacity
Ans: 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.
Q: Short-run aggregate supply curve
Exampromax - Stuvia US
Ans: The upward sloping aggregate supply curve which assumes that money
wage rates are fixed.
Q: Supply-side shocks
Ans: Factors such as changes in wage rates or commodity prices which cause the
short run aggregate supply curve to shift.
Q: Circular flow of income
Ans: A model of the economy which shows the flow of goods, services and
factors and their payments around the economy.
Q: Closed economy
Ans: An economy where there is no foreign trade.
Q: Income
Ans: Rent, interest, wages and profits earned from wealth owned by economic
actors.
Q: Injections
, 3 Exampromax - Stuvia US
Ans: In the circular flow of income, spending which is not generated by
households including investment, government spending and exports.
Q: National income
Ans: The value of the output, expenditure or income of an economy over a
period of time.
Q: Open economy
Ans: An economy where there is trade with other countries.
Q: Wealth
Ans: 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.
Exampromax - Stuvia US
Q: Withdrawals or leakages
Ans: In the circular flow of income, spending by households which does not
flow back to domestic firms. It includes savings, taxes and imports.
Q: Marginal propensity to import (MPM)
Ans: The increase in imports divided by the increase in income that caused them
(i.e. change in M / change in Y)
Q: Marginal propensity to save (MPS)
Ans: The increase in saving divided by the increase in income that caused it (i.e.
change in S / change in Y)
Q: Marginal propensity to tax (MPT)
Ans: The increase in tax revenues divided by the increase in income that caused
them (i.e. change in T / change in Y)
Q: Marginal propensity to withdraw (MPW)
, 4 Exampromax - Stuvia US
Ans: 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).
Q: Multiplier or national income multiplier or Keynesian multiplier or real
multiplier
Ans: The figure used to multiply a change in an injection into the circular flow,
such as investment, to find the final change in income (assuming the injection is
not determined by income). It is the ratio of the final change in income to the
initial change in an injection. It can be calculated as
1
________
1 - MPC
or
Exampromax - Stuvia US
1
___________________
MPS + MPT + MPM
or
1
____
MPW
Q: Multiplier effect or process
Ans: An increase in investment or other injection will lead to an even greater
increase in income (assuming the injection is not determined by income).
Q: Gross domestic product (GDP)
Ans: A measure of the output or value added of an economy which does not
include output or income from investments abroad or an allowance for the
depreciation of the nation's capital stock.
Q: Gross national income (GNI)
Ans: The value of goods and services produced by an economy over a period of
time (GDP) plus net overseas interest payments and dividends (factor incomes).
Q: Gross national product (GNP)
