Evaluation
AQA A-Level Economics 7136
Economic Methodology and the Economic Problem
Individual Economic Decision Making
Price Determination in a Competitive Market
Topic overviewDemand, the demand curve, income and wealthSubstitutes, complements and consumer preferencesPrice elasticity of demand and total revenueThe determinants of price elasticity of demandIncome and cross elasticity of demandThe determinants of supplyPrice elasticity of supplyEquilibrium, disequilibrium and how a market clearsShifts in demand and supply, and the price mechanismThe interrelationship between markets
Production, Costs and Revenue
Perfect Competition, Imperfectly Competitive Markets and Monopoly
Topic overviewThe characteristics of the four market structuresPrice takers, price makers and non-price competitionCompetitive marketsThe objectives of firmsProfit maximisation and the divorce of ownership from controlProfit maximisation and the shutdown conditionPrice taking, entry and exit, and long-run equilibriumEfficiency in perfect competition and its assumptionsMonopolistic competition in the short runMonopolistic competition in the long runThe characteristics of oligopoly and barriers to entryThe kinked demand curve and price rigidityCollusion, cartels and price leadershipNon-price competition in oligopolyThe advantages and disadvantages of oligopolyMonopoly power and barriers to entryThe monopoly diagram and supernormal profitThe costs and benefits of monopolyPrice discriminationThe dynamics of competitionCreative destruction and the competitive market processContestable and non-contestable marketsStatic and dynamic efficiencyMarket structure and resource allocationConsumer and producer surplus
The Labour Market
The Distribution of Income and Wealth: Poverty and Inequality
Topic overviewIncome, wealth and the causes of their distributionEquality, equity, the Lorenz curve and the Gini coefficientThe arguments about inequalityThe problem of povertyProgressive taxation and transfer paymentsMeans-tested benefits, universal benefits and the poverty trapWealth taxes and state provisionEvaluating redistribution
The Market Mechanism, Market Failure and Government Intervention
Topic overviewHow markets and prices allocate resourcesThe meaning of market failurePublic goods, private goods and quasi-public goodsPositive and negative externalitiesMerit and demerit goodsMarket imperfectionsAn inequitable distribution of income and wealthIndirect taxes and subsidiesPrice controls, state provision and regulationPollution permits and the extension of property rightsEvaluating intervention and the mixed economyGovernment failureCompetition policyPublic ownership, privatisation, regulation and deregulation
The Measurement of Macroeconomic Performance
How the Macroeconomy Works
Topic overviewThe circular flow of incomeThe aggregate demand and aggregate supply curvesWhat shifts short-run and long-run aggregate supplyMacroeconomic equilibrium and economic shocksConsumption and investmentGovernment spending and net exportsThe accelerator, saving and investmentAggregate demand and the level of economic activityThe determinants of aggregate supply
Economic Performance
Topic overviewShort-run and long-run economic growthThe economic cycle and output gapsDemand-side and supply-side shocksMeasuring unemployment and the types of unemploymentThe determinants of employment and policies to reduce unemploymentInflation and deflationThe quantity theory of moneyConsequences of inflation and deflationThe balance of payments on current accountOutput gaps and the growth-inflation conflictReconciling policy objectives in the AD/AS model
Financial Markets and Monetary Policy
Topic overviewThe characteristics and functions of moneyFinancial markets and their roleDebt, equity and bond yieldsCommercial banks, investment banks and the balance sheetLiquidity, profitability, security and credit creationThe instruments and institutions of monetary policyHow bank rate changes affect the economyWhat the MPC considers, and the exchange rate channelThe functions of a central bankThe bank rate and the MPC's decisionsExchange rate movements and the macroeconomyThe monetary policy transmission mechanismQuantitative easing and unconventional policyThe regulators and the risks banks faceLiquidity ratios, capital ratios and systemic risk
Fiscal Policy and Supply-Side Policies
Topic overviewFiscal policy and aggregate demandTypes of taxThe budget balance and the national debtThe purposes of public expenditure and taxationThe principles of taxationBudget deficits, surpluses and their effectsThe national debt and fiscal rulesSupply-side policies and how they workMarket-based and interventionist supply-side policies
The International Economy
Topic overviewThe causes and characteristics of globalisationThe impact of globalisation on developed and developing economiesMultinational corporationsComparative and absolute advantageThe effects of trade and changing trade patternsTariffs, quotas and the tariff diagramArguments for and against protectionismTrading blocs and the World Trade OrganisationThe components of the balance of paymentsCauses of current account imbalances and investment flowsCorrecting imbalances and their consequencesHow exchange rates are determined in a floating systemGovernment intervention and fixed exchange ratesFloating rates and currency unionsGrowth, development and less-developed economiesMeasuring development: the HDI and other indicatorsInvestment and education as drivers of developmentCorruption, governance and institutional barriersInfrastructure, human capital and property rightsMarket-based and interventionist development strategiesAid and trade as development strategiesGrowth, globalisation and inequality
The International Economy
- 22 subtopics
- 54 things to know
- Papers 2 and 3
What The International Economy covers
The international economy is examined on Papers 2 and 3, and closes the course. It covers globalisation and the firms that drive it, the theory and politics of trade, the balance of payments and exchange rates, and what separates a developed economy from a developing one.
Where it is assessed
Papers 2 and 3
The national and international economy, then the synoptic paper.
Check the AQA specification ↗The 22 subtopics
Each one has its own page.
- The causes and characteristics of globalisationContainerisation, trade liberalisation, financial deregulation and multinationals, and what globalisation looks like.Open →
- The impact of globalisation on developed and developing economiesThe gains from investment, employment and technology, against exploitation, inequality and dependency.Open →
- Multinational corporationsWhat multinationals bring to a host country, global supply chains, transfer pricing and their bargaining power.Open →
- Comparative and absolute advantageThe difference between the two, calculating opportunity cost, and why both parties can gain from trade.Open →
- The effects of trade and changing trade patternsThe benefits and costs of trade, and what has changed the UK's pattern of trade.Open →
- Tariffs, quotas and the tariff diagramTariffs, quotas and export subsidies, and reading the welfare effects off a tariff diagram.Open →
- Arguments for and against protectionismInfant industries, dumping, strategic industries and revenue, against higher prices, less choice and retaliation.Open →
- Trading blocs and the World Trade OrganisationFree trade areas, customs unions and the single market, and what the WTO does.Open →
- The components of the balance of paymentsThe current, capital and financial accounts, and what each records.Open →
- Causes of current account imbalances and investment flowsProductivity, relative inflation, the exchange rate and competitiveness, and the effect of investment flows.Open →
- Correcting imbalances and their consequencesExpenditure-switching and expenditure-reducing policies, and the risks a persistent imbalance creates.Open →
- How exchange rates are determined in a floating systemWhat moves the demand for and supply of a currency, and the part played by speculation.Open →
- Government intervention and fixed exchange ratesDirect intervention, interest rate policy and exchange controls, and the case for and against a fixed rate.Open →
- Floating rates and currency unionsThe advantages and drawbacks of floating, and what a country gains and gives up by joining a currency union.Open →
- Growth, development and less-developed economiesHow development differs from growth, and the characteristics of a less-developed economy.Open →
- Measuring development: the HDI and other indicatorsThe three dimensions of the HDI, and the other indicators used alongside it.Open →
- Investment and education as drivers of developmentHow investment raises the capital stock, and how education builds human capital.Open →
- Corruption, governance and institutional barriersHow corruption, political instability and weak institutions hold development back.Open →
- Infrastructure, human capital and property rightsWhy poor infrastructure, weak human capital and insecure property rights constrain growth.Open →
- Market-based and interventionist development strategiesTrade liberalisation, privatisation and deregulation, against industrial policy, infant industry protection and redistribution.Open →
- Aid and trade as development strategiesThe case for and against aid, and the gains and vulnerabilities that come with trade.Open →
- Growth, globalisation and inequalityWhat promotes development, what globalisation offers and exposes, and how inequality and growth interact.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Numbers
How have financial liberalisation and multinationals driven globalisation?
Numbers
What are the defining characteristics of globalisation?
Evaluation
How can globalisation benefit less-developed countries?
Evaluation
What is a multinational corporation, and what does inward investment bring?
Numbers
What do multinationals transfer to host countries, and why do they build global supply chains?
Numbers
How do multinationals influence governments, and what is transfer pricing?
Numbers
What do multinationals do to profits, culture and jobs in host countries?
Evaluation
How is opportunity cost calculated, and how does comparative advantage differ from absolute?
Evaluation
What gains follow from specialisation, larger markets and greater competition?
Numbers
How do exchange rates and trade agreements shape a country's pattern of trade?
Numbers
What are tariffs and quotas, and how has deindustrialisation changed UK trade?
Numbers
What is dumping, and why might a government protect strategic industries?
Numbers
What does protectionism do to prices, choice and government revenue?
Key term
Why does protectionism reduce efficiency in the domestic economy?
Process
How does a customs union treat imports from non-member countries?
Key term
What role does the WTO play in negotiating trade agreements?
Numbers
How do productivity, relative inflation and an appreciation affect the current account?
Numbers
What do investment inflows and overseas incomes do to a country's accounts?
Key term
What is a current account deficit, and how do direct and portfolio investment differ?
Process
How do non-price competitiveness, domestic incomes and capital inflows affect the accounts?
Numbers
What do investment flows cost a country, and what are expenditure-switching policies?
Numbers
How do tariffs, quotas and subsidies switch spending towards home producers?
Process
How does contractionary fiscal policy work as an expenditure-reducing policy?
Numbers
Why might exchange rate depreciation as an expenditure-switching policy conflict with the inflation objective?
Key term
Why can large current account surpluses create global imbalances?
Process
How do speculation and foreign investment move a floating currency?
Numbers
What happens to a floating exchange rate when speculators expect it to fall?
Numbers
How can a government intervene directly to hold up its currency?
Numbers
How can interest rates and exchange controls be used to support a currency?
Numbers
Why is a fixed rate vulnerable, and how does a floating rate adjust automatically?
Evaluation
Explain how currency depreciation under a floating system can cause imported inflation.
Key term
Give an example of a currency union.
Evaluation
Why might a single interest rate be problematic for currency union members?
Numbers
What do the Gini coefficient, clean water access and the HDI show about development?
Numbers
How do weak human capital and insecure property rights hold development back?
Numbers
What does globalisation offer developing economies, and what does it expose them to?
Process
How does investment drive development?
Process
How does corruption hold development back, and what does education contribute?
Process
How do weak governance and political instability act as barriers to development?
Evaluation
How do legal systems, accountability and bureaucracy hinder development?
Process
How do weak human capital and poor infrastructure limit productivity?
Process
How does the absence of property rights deter investment and enterprise?
Evaluation
What do interventionist development strategies involve?
Process
How does aid support education and healthcare programmes?
Key term
How might aid distort local markets?
Process
How does trade provide access to larger markets?
Process
How does investment in physical and human capital promote development?
Process
How does reducing inequality promote development?
Process
How does inequality create social instability that affects development?
Numbers
State the formula for calculating opportunity cost in a two-good model.
Numbers
State the formula for calculating the opportunity cost of producing Good A.
Key term
What are the accounts of the balance of payments, and what does the current account record?
Key term
How does economic development differ from growth, and what marks a less-developed economy?
Take The International Economy further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Tariff vs Quota
Tariff: a tax imposed on imported products. Quota: a numerical limit on imported products.
Currency appreciation vs Currency depreciation
Currency appreciation: an increase in an exchange rate value. Currency depreciation: a decrease in an exchange rate value.
Free trade area vs Customs union
Free trade area: members remove internal barriers but retain separate external policies. Customs union: members remove internal barriers and adopt a common external policy.
Questions from this topic
Each one with the model answer underneath.
- 1
What is globalisation?
Model answer
Globalisation is the increasing integration and interdependence of national economies through trade, capital flows, migration, and the spread of technology and ideas across borders.
- 2
How do technological advances in transport and communication drive globalisation?
Model answer
They reduce the costs and time required for moving goods, services, and information internationally, making cross-border economic activity more feasible and efficient.
- 3
In what ways has trade liberalisation promoted globalisation?
Model answer
Reduced tariffs, quotas, and other trade barriers under WTO agreements and regional trade blocs have lowered obstacles to international trade, encouraging greater cross-border exchange.
- 4
How has deregulation of financial markets contributed to globalisation?
Model answer
Deregulation enables freer movement of capital across borders, allowing investment to flow more easily between countries and accelerating economic integration.
- 5
Why does the growth of multinational corporations drive globalisation?
Model answer
Multinationals seek new markets, lower production costs, and economies of scale, leading them to expand operations across multiple countries and integrate global economic activity.
- 6
What political changes have expanded globalisation?
Model answer
The collapse of communism and the adoption of market-oriented policies in many countries opened previously closed economies to international trade and investment.
What is inside Levo
Six ways to work the same material.
The International Economy revision questions
- What does The International Economy cover in AQA A-Level Economics?
- 22 subtopics: the causes and characteristics of globalisation, the impact of globalisation on developed and developing economies, multinational corporations, comparative and absolute advantage, the effects of trade and changing trade patterns, tariffs, quotas and the tariff diagram, arguments for and against protectionism, trading blocs and the world trade organisation, the components of the balance of payments, causes of current account imbalances and investment flows, correcting imbalances and their consequences, how exchange rates are determined in a floating system, government intervention and fixed exchange rates, floating rates and currency unions, growth, development and less-developed economies, measuring development: the hdi and other indicators, investment and education as drivers of development, corruption, governance and institutional barriers, infrastructure, human capital and property rights, market-based and interventionist development strategies, aid and trade as development strategies and growth, globalisation and inequality. Each one has its own page with questions and model answers.
- How is The International Economy organised?
- By the AQA 7136 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in The International Economy, on a schedule.
Attempt a question from memory, write the correct version, then attempt it again. Levo records the jump between your first attempt and your last, and brings each question back on the day you are due to forget it.
Or £46 a year, about £3.83 a month. Cancel anytime.