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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 Measurement of Macroeconomic Performance
- 3 subtopics
- 10 things to know
- Papers 2 and 3
What The Measurement of Macroeconomic Performance covers
The measurement of macroeconomic performance is examined on Papers 2 and 3, and opens the macroeconomics half. It sets out what governments are trying to achieve, and the indicators used to judge whether they are getting there.
Where it is assessed
Papers 2 and 3
The national and international economy, then the synoptic paper.
Check the AQA specification ↗The 3 subtopics
Each one has its own page.
- The objectives of government economic policyGrowth, price stability, low unemployment and a stable current account, and the conflicts between them.Open →
- Macroeconomic indicators and index numbersReal GDP, CPI and RPI, unemployment and productivity, and how an index number is built and read.Open →
- Uses of national income dataComparing living standards over time and between countries, and what national income data misses.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Numbers
What is the formula for an index number, and what value is the base year given?
Numbers
Why are weights used in an index, how do they change, and what are index numbers used for?
Numbers
What do the CPI and RPI measure, and what are they based on?
Evaluation
How is a falling index read, why do unemployment measures matter, and what is the RPI used for?
Evaluation
What limits national income data as a measure of welfare?
Key term
Why are international comparisons of living standards unreliable?
Key term
What is the difference between nominal and real national income?
Numbers
Write the formula for calculating an index number.
Key term
What are the main objectives of government macroeconomic policy?
Take The Measurement of Macroeconomic Performance further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Nominal GDP vs Real GDP
Nominal GDP: national output measured at current prices. Real GDP: national output adjusted for price changes.
Economic growth vs Economic development
Economic growth: an increase in inflation-adjusted output. Economic development: a broader improvement in welfare and living standards.
CPI vs RPI
CPI: weighted price measure used for the official inflation target. RPI: weighted price measure that includes certain housing costs.
Questions from this topic
Each one with the model answer underneath.
- 1
What is the first of the four main objectives of government macroeconomic policy relating to the expansion of national output?
Model answer
Economic growth.
- 2
Which macroeconomic policy objective involves keeping inflation low and stable?
Model answer
Price stability.
- 3
Name the macroeconomic policy objective concerned with reducing joblessness in the economy.
Model answer
Minimising unemployment.
- 4
What is the fourth main macroeconomic policy objective relating to international trade and financial flows?
Model answer
A current account that stays in balance.
- 5
Why might governments face difficulties when pursuing multiple macroeconomic objectives at the same time?
Model answer
Conflict may arise between objectives, at least in the short run, making it difficult to achieve them simultaneously.
- 6
Give an example of a potential conflict between two macroeconomic policy objectives.
Model answer
Pursuing rapid economic growth may lead to higher inflation, conflicting with the objective of price stability.
What is inside Levo
Six ways to work the same material.
The Measurement of Macroeconomic Performance revision questions
- What does The Measurement of Macroeconomic Performance cover in AQA A-Level Economics?
- 3 subtopics: the objectives of government economic policy, macroeconomic indicators and index numbers and uses of national income data. Each one has its own page with questions and model answers.
- How is The Measurement of Macroeconomic Performance organised?
- By the AQA 7136 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in The Measurement of Macroeconomic Performance, 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.
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