Edexcel A-Level Economics – Macro
Questions with Correct Answers 2025
Macroeconomic objectives of government - CORRECT ANSWER -- Economic growth
- Low inflation (2%)
- Full employment, low unemployment
- Balance of payments
- Fair distribution of income
Non-core government objectives - CORRECT ANSWER -- Environmental sustainability
- Productivity growth
...
Circular flow of income diagram - CORRECT ANSWER -
Leakages in the circular flow - CORRECT ANSWER -
Leaked from factor incomes that firms give to households.
- S: savings
- T: taxes
- M: imports
Injections in the circular flow - CORRECT ANSWER -
Injected into consumer expenditure that households give to firms.
- G: gov spending
- I: investment
- X: exports
Methods of measuring GDP - CORRECT ANSWER -- Output method (g+s)
- Income (factor incomes)
- Expenditure (consumer expenditure)
,Therefore, GDP = output = income = expenditure.
Base year index number = - CORRECT ANSWER -100
Index number calculation - CORRECT ANSWER -(Raw number / base year raw number) * 100
% change calculation - CORRECT ANSWER -(new - old/old)* 100
(change/original) * 100
Measures of economic growth -ECORRECT ANSWER -- GDP (= income = expenditure = output)
- GDP per capita
- GNI
- PPP
GDP - CORRECT ANSWER -Gross Domestic Product -
the total market value of all final goodsEand services produced annually in an economy.
GDP per capita = - CORRECT ANSWER -GDP/population
GNI - CORRECT ANSWER -GrossEnational income = GDP + net factor income from abroad.
The total value of goods and services produced within a country together with the balance of income an
d payments from or to other countries.
E.g: remittances are included...
Economic growth - CORRECT ANSWER -
The increase in the potential level of real output the economy can produce over a period of time.
, The expansion in the productive capability of an economy (increased production in g+s).
Aggregate demand equation - CORRECT ANSWER -AD = C + I + G + (X-M)
= Consumption + Investments + Gov expenditure + (ExportsE- Imports)
PPF (Production Possibilities Frontier) - CORRECT ANSWER -
AEgraph that shows the max combos of output that the economy can possibly produce given the availabl
e factors of production (inputs) in a given time period at the lowest cost.
Short-run economicEgrowth - CORRECT ANSWER -Increase in actual GDP, increase in AD.
Short-run economicEgrowth PPF graph - CORRECT ANSWER -
Short-run economicEgrowth S+D graph -ECORRECT ANSWER -
Factors of SR economic growth - CORRECT ANSWER -As SR economic growth is due to in increase in AD.
And AD = C + I + G + (X -EM)
Increase in C / I / G / X = increase in AD = SR economic growth.
Explain how these factors affect economic growth:
- Lower interest rates
- Weaker exchange rates - CORRECT ANSWER -Lower interest rates:
= less saving (less reward for saving) = more disposable income = more spending = C increase = AD increa
ses (shifts right) = SR eco growth.
Weaker exchange rates:
Questions with Correct Answers 2025
Macroeconomic objectives of government - CORRECT ANSWER -- Economic growth
- Low inflation (2%)
- Full employment, low unemployment
- Balance of payments
- Fair distribution of income
Non-core government objectives - CORRECT ANSWER -- Environmental sustainability
- Productivity growth
...
Circular flow of income diagram - CORRECT ANSWER -
Leakages in the circular flow - CORRECT ANSWER -
Leaked from factor incomes that firms give to households.
- S: savings
- T: taxes
- M: imports
Injections in the circular flow - CORRECT ANSWER -
Injected into consumer expenditure that households give to firms.
- G: gov spending
- I: investment
- X: exports
Methods of measuring GDP - CORRECT ANSWER -- Output method (g+s)
- Income (factor incomes)
- Expenditure (consumer expenditure)
,Therefore, GDP = output = income = expenditure.
Base year index number = - CORRECT ANSWER -100
Index number calculation - CORRECT ANSWER -(Raw number / base year raw number) * 100
% change calculation - CORRECT ANSWER -(new - old/old)* 100
(change/original) * 100
Measures of economic growth -ECORRECT ANSWER -- GDP (= income = expenditure = output)
- GDP per capita
- GNI
- PPP
GDP - CORRECT ANSWER -Gross Domestic Product -
the total market value of all final goodsEand services produced annually in an economy.
GDP per capita = - CORRECT ANSWER -GDP/population
GNI - CORRECT ANSWER -GrossEnational income = GDP + net factor income from abroad.
The total value of goods and services produced within a country together with the balance of income an
d payments from or to other countries.
E.g: remittances are included...
Economic growth - CORRECT ANSWER -
The increase in the potential level of real output the economy can produce over a period of time.
, The expansion in the productive capability of an economy (increased production in g+s).
Aggregate demand equation - CORRECT ANSWER -AD = C + I + G + (X-M)
= Consumption + Investments + Gov expenditure + (ExportsE- Imports)
PPF (Production Possibilities Frontier) - CORRECT ANSWER -
AEgraph that shows the max combos of output that the economy can possibly produce given the availabl
e factors of production (inputs) in a given time period at the lowest cost.
Short-run economicEgrowth - CORRECT ANSWER -Increase in actual GDP, increase in AD.
Short-run economicEgrowth PPF graph - CORRECT ANSWER -
Short-run economicEgrowth S+D graph -ECORRECT ANSWER -
Factors of SR economic growth - CORRECT ANSWER -As SR economic growth is due to in increase in AD.
And AD = C + I + G + (X -EM)
Increase in C / I / G / X = increase in AD = SR economic growth.
Explain how these factors affect economic growth:
- Lower interest rates
- Weaker exchange rates - CORRECT ANSWER -Lower interest rates:
= less saving (less reward for saving) = more disposable income = more spending = C increase = AD increa
ses (shifts right) = SR eco growth.
Weaker exchange rates:
