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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
The Role of the State in the Macroeconomy
- 15 subtopics
- 45 things to know
- Papers 2 and 3
What The Role of the State in the Macroeconomy covers
Covers public spending, taxation and the public finances, and how governments use policy in a global setting: reducing deficits, tackling poverty and inequality, responding to external shocks, and the constraints that limit what any of it can achieve.
Where it is assessed
Papers 2 and 3
The national and global economy, then the synoptic paper.
Check the Pearson Edexcel specification ↗The 15 subtopics
Each one has its own page.
- Capital, current and transfer spending, and what drives itRecall questions on the three categories of public expenditure and on ageing, the economic cycle, ideology, globalisation and debt interest as drivers.Open →
- The effects of public expenditure, and crowding outRecall questions on productivity, growth, living standards and equality, and on financial and resource crowding out.Open →
- Progressive, proportional and regressive taxesRecall questions on the three tax structures, direct against indirect taxes, and how tax rates affect incentives to work.Open →
- The Laffer curve and the effects of tax changesRecall questions on what the Laffer curve shows, and on the effects of tax changes on income distribution, output, prices, trade and foreign investment.Open →
- Automatic stabilisers, deficits and the national debtRecall questions on automatic stabilisers against discretionary fiscal policy, the fiscal deficit as a flow and the national debt as a stock, and structural against cyclical deficits.Open →
- What drives deficits and debt, and why their size mattersRecall questions on how spending, taxes, ageing and interest rates affect the deficit, what determines the national debt, and why deficits and debt matter, from crowding out and lost confidence to fiscal flexibility, sustainability and intergenerational equity.Open →
- Reducing fiscal deficits and national debtRecall questions on fiscal consolidation, primary surpluses, growth and debt restructuring, and on the conflict with growth objectives.Open →
- Policies to reduce poverty and inequalityRecall questions on progressive taxation, transfer payments, means-tested benefits, wealth and inheritance taxes, and public service spending.Open →
- Monetary, exchange rate and supply-side policy across countriesRecall questions on the transmission mechanism, quantitative easing, exchange rate regimes and currency unions, and supply-side measures for competitiveness.Open →
- Direct controls, and why policy works differently elsewhereRecall questions on price, wage, import, capital and credit controls, and on why the same policy has different effects in developed and developing economies.Open →
- What an external shock is, and the kinds that occurRecall questions on commodity price shocks, natural disasters, pandemics, supply chain disruption, recession abroad and financial contagion.Open →
- Fiscal, monetary and supply-side responses to a shockRecall questions on the expansionary and contractionary responses available, and on supply-side measures to raise resilience.Open →
- Policy lags and the constraints on respondingRecall questions on recognition, implementation and impact lags, and on debt levels, bond market confidence, the zero lower bound and fiscal space.Open →
- Measures to control global companies' (transnationals') operationsRecall questions on transfer pricing, tax avoidance and regulation, and on the difficulty of controlling firms that operate across borders.Open →
- Problems facing policymakers when applying policiesRecall questions on inaccurate, revised and outdated information, risks against uncertainties, the complexity of the economy and unpredictable responses, and external shocks that policymakers cannot control and that offset what policy intends.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Process
How do automatic stabilisers work?
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What does a government give up when it fixes its exchange rate?
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Why are the effects of economic policies uncertain?
Evaluation
What are transfer payments?
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What does variation in public expenditure as a proportion of GDP between countries reflect?
Who and when
Why is tax revenue zero at both a zero percent and a one hundred percent tax rate according to the Laffer curve?
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What is meant by a 'race to the bottom' in corporation tax rates?
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Explain the difference between a fiscal deficit and national debt in terms of flow and stock concepts.
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In what ways do changes in tax rates and the tax base affect fiscal deficits?
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How can economic growth reduce national debt as a proportion of GDP without any change in the absolute debt level?
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Explain how economic growth can reduce the national debt burden without directly paying off debt.
Evaluation
How do inheritance taxes help reduce inequality?
Process
Explain the asset price effect within the monetary policy transmission mechanism.
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What are credit controls?
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Why do countries with independent monetary policy have greater flexibility than those in currency unions or with fixed exchange rates?
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How do pandemics function as supply-side external shocks?
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How can supply-side policies improve productive capacity in response to external shocks?
Evaluation
Define implementation lag in the context of policy responses to external shocks.
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What policy dilemma arises when responding to a stagflationary external shock?
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Which international organisation establishes guidelines for consistent transfer pricing regulation across countries?
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Why are the responses of economic agents unpredictable?
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How can public expenditure on infrastructure and education enhance productivity?
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What is a progressive tax?
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Define a proportional tax.
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What term describes a package of measures that combines both tax increases and spending cuts to reduce a fiscal deficit?
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What are transfer payments and how do they reduce poverty?
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What is an external shock in macroeconomics?
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How can increased government spending respond to a negative demand shock?
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What documentation requirements may tax authorities impose on multinational companies regarding transfer pricing?
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What is capital expenditure in the context of government spending?
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Under what circumstances might higher public expenditure as a proportion of GDP reduce economic growth?
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What is a regressive tax?
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What does the Laffer curve illustrate?
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What are automatic stabilisers in fiscal policy?
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What is the primary factor determining the size of national debt over time?
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What short-run effect on aggregate demand might result from reducing fiscal deficits through spending cuts?
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How do welfare benefits function as a fiscal policy measure to reduce poverty?
Process
Through the monetary policy transmission mechanism, how do interest rate changes affect consumption?
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What are wage controls?
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In what way do natural disasters constitute a supply-side external shock?
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Explain how cutting taxes can be used as an expansionary fiscal response to a negative demand shock.
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What is a recognition lag in macroeconomic policy?
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What actions can governments take if a company's transfer pricing is found to artificially reduce tax liabilities?
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Why does inaccurate information make it difficult for policymakers to design appropriate policy responses?
Take The Role of the State in the Macroeconomy further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Protectionism vs Free trade
Protectionism: government measures restricting trade. Free trade: international exchange without government barriers.
Supply-side policy vs Demand-side policy
Supply-side policy: measures intended to increase productive potential. Demand-side policy: measures intended to influence total spending.
Questions from this topic
Each one with the model answer underneath.
- 1
What is capital expenditure in the context of government spending?
Model answer
Government spending on physical assets that provide services over many years, such as infrastructure, buildings, and equipment.
- 2
Define current expenditure.
Model answer
Government spending on day-to-day running costs that are consumed within the financial year, such as wages, salaries, and consumables.
- 3
What are transfer payments?
Model answer
Government payments to individuals for which no goods or services are received in return, such as pensions, unemployment benefits, and welfare payments.
- 4
Why do transfer payments not directly contribute to GDP?
Model answer
Because they redistribute income rather than directly purchasing resources or producing goods and services.
- 5
How does capital expenditure differ from current expenditure in terms of productive capacity?
Model answer
Capital expenditure creates assets that enhance productive capacity, while current expenditure maintains existing services without adding to the capital stock.
- 6
Explain how an ageing population affects public expenditure.
Model answer
It increases public expenditure through higher pension payments and healthcare costs as the proportion of elderly citizens rises.
What is inside Levo
Six ways to work the same material.
The Role of the State in the Macroeconomy revision questions
- What does The Role of the State in the Macroeconomy cover in Edexcel A-Level Economics A?
- 15 subtopics: capital, current and transfer spending, and what drives it, the effects of public expenditure, and crowding out, progressive, proportional and regressive taxes, the laffer curve and the effects of tax changes, automatic stabilisers, deficits and the national debt, what drives deficits and debt, and why their size matters, reducing fiscal deficits and national debt, policies to reduce poverty and inequality, monetary, exchange rate and supply-side policy across countries, direct controls, and why policy works differently elsewhere, what an external shock is, and the kinds that occur, fiscal, monetary and supply-side responses to a shock, policy lags and the constraints on responding, measures to control global companies' (transnationals') operations and problems facing policymakers when applying policies. Each one has its own page with questions and model answers.
- How is The Role of the State in the Macroeconomy organised?
- By the Edexcel 9EC0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in The Role of the State in the Macroeconomy, 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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