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Edexcel A-Level Economics A 9EC0
The Nature of Economics
Topic overviewEconomics as a social sciencePositive and normative economic statementsThe economic problemWhat a production possibility frontier showsShifts in the PPF, and capital against consumer goodsThe division of labour and its advantagesSpecialisation for trade between countriesThe four functions of moneyFree market, command and mixed economiesThe advantages and disadvantages of the free marketCommand and mixed economies assessed
How Markets Work
Topic overviewRational decision makingDemandPrice, income and cross elasticity: formulae and valuesInterpreting income and cross elasticity of demandWhat determines the elasticity of demandUsing elasticities: taxes, subsidies and business planningElasticity and total revenueSupplyPrice elasticity of supply and its valuesWhat determines elasticity of supply, and the short and long runPrice determinationPrice mechanismConsumer and producer surplusIndirect taxes and the incidence of a taxSubsidies and how their benefit is sharedAlternative views of consumer behaviour
Market Failure
Government Intervention
Measures of Economic Performance
Topic overviewMeasuring growth: real GDP, GDP per capita and GNIPurchasing power parity and the limitations of GDPNational wellbeing and the Easterlin paradoxInflation, deflation and how the CPI measures themThe limitations of the CPI, and the RPIDemand-pull, cost-push and monetary causes of inflationThe effects of inflationMeasuring employment, unemployment and inactivityThe causes of unemployment, migration and skillsThe effects of unemploymentThe components of the current accountCurrent account deficits, surpluses and global imbalances
Aggregate Demand
Aggregate Supply
National Income
Topic overviewThe circular flow of incomeThe distinction between income and wealthInjections, withdrawals and the equilibrium conditionWhat counts as an injection and a withdrawalMacroeconomic equilibrium and shifts in AD and ASThe shape of AS, demand-pull inflation and stagflationThe multiplier processMarginal propensities to consume, save, tax and importCalculating the multiplier and why its size matters
Economic Growth
Topic overviewWhat causes economic growthActual against potential growth, and export-led growthTrend growth and positive and negative output gapsIdentifying an output gap on an AD/AS diagramThe four phases of the trade cycle, and the boomRecession, recovery and the output gapThe impact of economic growth
Macroeconomic Objectives and Policies
Topic overviewPossible macroeconomic objectivesMonetary policy: interest rates and quantitative easingFiscal policy: spending, taxation and the budgetDemand-side policy on an AD/AS diagramThe Bank of England, and policy in the 1930s and 2008The strengths and weaknesses of demand-side policyMarket-based and interventionist supply-side policiesLabour market, skills and infrastructure policiesThe strengths and weaknesses of supply-side policyConflicts between growth, inflation and the current accountThe Phillips curve and the trade-offs in a policy mix
Business Growth
Business Objectives
Revenues, Costs and Profits
Topic overviewTotal, average and marginal revenueRevenue, elasticity and the revenue-maximising outputTotal, fixed, variable, average and marginal costWhy short-run cost curves take their shapeThe long-run average cost curve and returns to scaleTypes of economies and diseconomies of scaleInternal and external economies of scaleNormal profit, supernormal profit and lossesThe short-run and long-run shut-down points
Market Structures
Topic overviewEfficiencyThe assumptions of perfect competition and its revenue curvesPerfect competition: equilibrium and efficiencyThe characteristics of monopolistic competitionMonopolistic competition: short-run and long-run equilibriumExcess capacity and efficiency in monopolistic competitionThe characteristics of oligopoly and concentration ratiosCollusive and non-collusive behaviourGame theory, price and non-price competitionThe characteristics of monopoly and its equilibriumThird degree price discriminationThe costs and benefits of monopoly, and natural monopolyWhat monopsony is and where its power comes fromThe costs and benefits of monopsonyContestable markets and hit-and-run competitionBarriers to entry and exitSunk costs and the degree of contestability
The Labour Market
Topic overviewDemand for labourWhat determines the supply of labourGeographical and occupational immobility of labourWage determination in competitive and monopsony marketsCurrent issues in the UK labour marketMinimum and maximum wages, and public sector payThe elasticity of demand for and supply of labour
Government Intervention in Markets
International Economics
Topic overviewWhat globalisation is and what has driven itThe winners and losers from globalisationAbsolute and comparative advantageThe assumptions and limitations of comparative advantageThe gains and costs of international specialisationPattern of tradeTerms of tradeTypes of trading bloc and the hierarchy of integrationTrade creation, trade diversion and the costs of trading blocsThe World Trade OrganisationWhy governments restrict trade, and the instruments usedThe effects of protectionismBalance of payments in a global contextExchange rate systems, and appreciation against revaluationWhat moves a floating rate, and how governments interveneThe Marshall-Lerner condition and the J-curve effectMeasuring competitiveness: unit labour costs and export pricesWhat determines competitiveness, and the cost of losing it
Poverty and Inequality
Emerging and Developing Economies
Topic overviewThe Human Development Index and its three dimensionsThe limits of the HDI, and other development indicatorsPrimary product dependency, the savings gap and Harrod-DomarPopulation, debt, financial exclusion and infrastructureGovernance, corruption, conflict and geographyMarket-orientated strategies: trade liberalisation and FDIInterventionist strategies: human capital and protectionismInfrastructure, joint ventures and buffer stock schemesThe Lewis model, tourism, primary industries and FairtradeAid, debt relief, the World Bank, the IMF and NGOs
The Financial Sector
The Role of the State in the Macroeconomy
Topic overviewCapital, current and transfer spending, and what drives itThe effects of public expenditure, and crowding outProgressive, proportional and regressive taxesThe Laffer curve and the effects of tax changesAutomatic stabilisers, deficits and the national debtWhat drives deficits and debt, and why their size mattersReducing fiscal deficits and national debtPolicies to reduce poverty and inequalityMonetary, exchange rate and supply-side policy across countriesDirect controls, and why policy works differently elsewhereWhat an external shock is, and the kinds that occurFiscal, monetary and supply-side responses to a shockPolicy lags and the constraints on respondingMeasures to control global companies' (transnationals') operationsProblems facing policymakers when applying policies
Macroeconomic Objectives and Policies
- 11 subtopics
- 33 things to know
- Papers 2 and 3
What Macroeconomic Objectives and Policies covers
Covers what governments are trying to achieve and the instruments they use: monetary and fiscal policy on the demand side, supply-side measures, and the conflicts that make it impossible to hit every objective at once.
Where it is assessed
Papers 2 and 3
The national and global economy, then the synoptic paper.
Check the Pearson Edexcel specification ↗The 11 subtopics
Each one has its own page.
- Possible macroeconomic objectivesRecall questions on economic growth, low unemployment, low and stable inflation, balance of payments equilibrium on the current account, a balanced government budget, protecting the environment and greater income equality as macroeconomic objectives.Open →
- Monetary policy: interest rates and quantitative easingRecall questions on how interest rates transmit to aggregate demand, and on what quantitative easing does and why it is used.Open →
- Fiscal policy: spending, taxation and the budgetRecall questions on expansionary and contractionary fiscal policy, budget deficits and surpluses, and direct against indirect taxation.Open →
- Demand-side policy on an AD/AS diagramRecall questions on how expansionary and contractionary policy move the AD curve, and how the shape of AS decides the outcome.Open →
- The Bank of England, and policy in the 1930s and 2008Recall questions on the Monetary Policy Committee and its remit, and on the classical and Keynesian readings of the Great Depression and the response to the 2008 crisis.Open →
- The strengths and weaknesses of demand-side policyRecall questions on speed and independence against time lags, the liquidity trap, crowding out and the cost of persistent deficits.Open →
- Market-based and interventionist supply-side policiesRecall questions on tax cuts, welfare reform, privatisation, deregulation and trade liberalisation, and on the interventionist alternatives.Open →
- Labour market, skills and infrastructure policiesRecall questions on trade union reform, hiring and firing rules, education and training, apprenticeships and infrastructure investment.Open →
- The strengths and weaknesses of supply-side policyRecall questions on non-inflationary growth and reduced structural unemployment, set against long time lags, fiscal cost and effects on income distribution.Open →
- Conflicts between growth, inflation and the current accountRecall questions on why growth pulls against inflation, the current account, the environment and equality.Open →
- The Phillips curve and the trade-offs in a policy mixRecall questions on what the short-run Phillips curve shows, what shifts it, and the trade-offs any policy mix forces.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Evaluation
What limits the effectiveness of demand-side policy?
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Distinguish between a budget deficit and national debt.
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What are direct taxes?
Process
How does the shape of the aggregate supply curve affect the outcome of demand-side policies?
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What was the classical interpretation of the Great Depression regarding government intervention?
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Why can monetary policy be implemented more quickly than fiscal policy?
Process
What are the effects on real GDP and price level when LRAS shifts right due to supply-side policies, ceteris paribus?
Process
Why might rapid economic growth lead to demand-pull inflation?
Process
Through what mechanism do rising wages contribute to inflation?
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What does an outward shift of the short-run Phillips curve mean for the economy?
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What does the macroeconomic objective of economic growth refer to?
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What is monetary policy?
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Who conducts monetary policy and who conducts fiscal policy?
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What happens to the aggregate demand curve and the economy when expansionary monetary or fiscal policy is implemented?
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What is the Bank of England?
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What are supply-side policies?
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What characterises interventionist supply-side policies?
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What is an interventionist approach to improving skills and labour force quality?
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What are private finance initiatives and public-private partnerships?
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What happens to the long-run aggregate supply curve when supply-side policies are successful?
Who and when
What happens to unemployment and inflation when the government uses expansionary policy, according to the short-run Phillips curve?
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Why is economic growth measured in 'real' terms rather than nominal terms?
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How do interest rates function as a monetary policy instrument?
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How does government spending function as a fiscal policy instrument?
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What happens to the aggregate demand curve when contractionary monetary or fiscal policy is implemented?
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What is the Monetary Policy Committee?
Evaluation
How does central bank independence strengthen monetary policy?
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What is privatisation?
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Give examples of interventionist infrastructure investment.
Evaluation
Why are long time lags a weakness of supply-side policies?
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How does higher aggregate demand affect the general price level?
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How does contractionary policy affect unemployment and inflation along the short-run Phillips curve?
Take Macroeconomic Objectives and Policies further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Fiscal policy vs Monetary policy
Fiscal policy: the use of government spending and taxation to influence the level of activity. Monetary policy: the use of interest rates and the money supply to influence the level of activity.
Expansionary policy vs Contractionary policy
Expansionary policy: a loosening intended to raise aggregate demand, output and employment. Contractionary policy: a tightening intended to reduce aggregate demand and bring inflation down.
Questions from this topic
Each one with the model answer underneath.
- 1
What does the macroeconomic objective of economic growth refer to?
Model answer
An increase in the real output of an economy over time.
- 2
Why is economic growth measured in 'real' terms rather than nominal terms?
Model answer
To account for inflation and reflect genuine increases in output rather than just price rises.
- 3
What is the macroeconomic objective of low unemployment aiming to achieve?
Model answer
To maximise the proportion of the labour force in work.
- 4
Why might a government prioritise low unemployment as a policy objective?
Model answer
To reduce welfare costs, increase tax revenues, improve living standards, and make productive use of labour resources.
- 5
What does the objective of a low and stable rate of inflation seek to maintain?
Model answer
Price stability without deflation.
- 6
Why do governments aim for low inflation rather than zero inflation?
Model answer
To maintain price stability while avoiding the risks of deflation, such as falling demand and rising real debt burdens.
What is inside Levo
Six ways to work the same material.
Macroeconomic Objectives and Policies revision questions
- What does Macroeconomic Objectives and Policies cover in Edexcel A-Level Economics A?
- 11 subtopics: possible macroeconomic objectives, monetary policy: interest rates and quantitative easing, fiscal policy: spending, taxation and the budget, demand-side policy on an ad/as diagram, the bank of england, and policy in the 1930s and 2008, the strengths and weaknesses of demand-side policy, market-based and interventionist supply-side policies, labour market, skills and infrastructure policies, the strengths and weaknesses of supply-side policy, conflicts between growth, inflation and the current account and the phillips curve and the trade-offs in a policy mix. Each one has its own page with questions and model answers.
- How is Macroeconomic Objectives and Policies organised?
- By the Edexcel 9EC0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Macroeconomic Objectives and Policies, 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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