Key term
Eduqas A-Level Economics A520QS
Scarcity, Choice and the Economic Problem
Topic overviewScarcity, choice and the basic economic problemThe factors of production and their rewardsOpportunity cost for individuals, firms and governmentEconomic goods, free goods and the three fundamental questionsThe production possibility frontier and its shapeMovements along and shifts in the frontierEfficiency, unemployed resources and the frontierSpecialisation, the division of labour and exchangeProductivity and how it is raised
Demand, Supply and Market Equilibrium
Topic overviewProduct markets and the objectives of economic agentsMarginal utility and the derivation of demandThe demand curve and why it slopes downwardThe conditions of demand and shifts in the demand curveSupply and why the supply curve slopes upwardThe conditions of supply and shifts in the supply curveEquilibrium price and output in a competitive marketShifts in demand and supply and the new equilibriumConsumer surplus, producer surplus and market welfare
Elasticities of Demand and Supply
Topic overviewPrice elasticity of demand and its calculationWhat determines price elasticity of demandPrice elasticity of demand and total revenueElasticity along a straight-line demand curveIncome elasticity of demand, normal and inferior goodsCross price elasticity of demand, substitutes and complementsPrice elasticity of supply and its determinantsElasticity and the incidence of taxes and subsidiesElasticity in decision-making by firms and government
The Labour Market
Topic overviewThe demand for labour and what shifts itThe supply of labour and what shifts itWage determination in a competitive labour marketThe elasticity of demand and supply of labourWage differentials and their causesLabour market flexibility and trade union powerWelfare payments, income tax and labour market performanceThe national minimum wageMigration and the labour market
Costs, Revenues, Profits and the Growth of Firms
Topic overviewPrices, profit and the allocation of resourcesThe short run, the long run and diminishing returnsTotal, average and marginal productFixed and variable costs in the short runAverage and marginal cost curves and their shapesTotal, average and marginal revenueEconomies and diseconomies of scale and the long run average cost curveProfit maximisation and the MC = MR ruleNormal profit, abnormal profit and economic profitInternal and external growth and types of integrationProductive, allocative, dynamic and Pareto efficiency
Market Structures
Topic overviewMarket structure, contestability and barriers to entryBusiness objectives and satisficingPerfect competition and its assumptionsShort run and long run equilibrium in perfect competitionThe efficiency of perfect competitionMonopolistic competition and its assumptionsShort run and long run equilibrium in monopolistic competitionThe efficiency of monopolistic competitionMonopoly and its assumptionsMonopoly compared with perfect competitionThe costs and benefits of monopolyOligopoly, interdependence and concentration ratiosPrice and non-price competition, collusion and price leadershipGame theory and the Nash equilibrium
Competition Policy and Privatisation
Topic overviewWhy governments are concerned about monopoly powerMerger control and market investigationsCartels, restrictive practices and abuse of dominanceCompetition authorities and how they workRegulating natural monopolies and the utilitiesContestable markets and barriers to entryThe limits of competition as a policy goalPrivatisation and the forms it takesEvaluating privatisation and the case for renationalisation
Market Failure and Government Intervention
Topic overviewMarket failure and economic efficiencyExternalities, welfare loss and the socially efficient outputPublic goods, free riding and property rightsMerit goods, demerit goods and information failureMonopoly power, factor immobility and volatile pricesTaxation, subsidies and tradable pollution permitsRegulation, state provision and information provisionMaximum and minimum prices in agriculture, housing and labourGovernment failure and distortions in marketsIncome inequality as a market failure
The Circular Flow and Aggregate Demand
Topic overviewThe circular flow of incomeInjections, withdrawals and equilibrium national incomeThe multiplierThe acceleratorAggregate demand and its componentsConsumption and savingInvestment and its determinantsGovernment spending and net tradeThe AD function: why it slopes down and what shifts it
Aggregate Supply and the Phillips Curve
Topic overviewAggregate supply and the AD/AS frameworkThe short run aggregate supply curveShifts in short run aggregate supplyThe Neo-Classical long run aggregate supply curveThe Keynesian long run aggregate supply curveShifts in long run aggregate supplyMacroeconomic equilibrium and adjustment to the long runThe short run Phillips curveExpectations, the long run Phillips curve and the NAIRUShifts in the long run Phillips curve
Economic Growth
Topic overviewMacroeconomic policy objectives and the conflicts between themMeasuring economic growthActual growth and potential growthIllustrating growth on the PPF and in AD/AS analysisOutput gapsThe business cycle and recessionThe causes of economic growthPolicy instruments used to create growthThe benefits and costs of economic growth
Unemployment
Topic overviewThe labour force, economic activity and inactivityMeasuring unemploymentProblems in measuring unemployment accuratelyThe economic and social costs of unemploymentCyclical unemployment and demand side causesFrictional, structural and seasonal unemploymentReal wage unemployment and incentives to workThe natural rate of unemploymentDemand side solutions to unemploymentSupply side solutions to unemploymentChoosing between demand side and supply side approaches
Inflation and Deflation
Topic overviewInflation, deflation and disinflation definedPrice indices, the basket and weightingCalculating index numbers and the inflation rateThe main measures of inflation comparedDemand-pull inflationCost-push inflationThe quantity theory of money and inflation expectationsThe costs of inflationPolicies to control inflationDeflation and the deflationary spiral
The Balance of Payments
Topic overviewThe balance of payments accountsThe current account and its four componentsThe capital and financial accountsWhy the balance of payments sums to zeroCauses of current account imbalancesThe terms of trade and the current accountThe consequences of a deficit or a surplusPolicies to correct a current account deficit
Control of the National Debt
Topic overviewDeficits, surpluses and the national debtMeasurement of the deficit and the debtStructural and cyclical deficitsDiscretionary policy and automatic stabilisersThe cost of servicing debt and credit ratingsRefinancing, confidence and market disciplineCrowding out and the effect of debt on growthAusterity in a downturn and whether debt is always bad
Fiscal Policy
Topic overviewThe budget and the fiscal stanceGovernment spending and where it goesTaxation and the sources of government revenueDirect and indirect taxesFiscal policy, aggregate demand and AD/AS analysisThe Keynesian case for demand side fiscal policyCriticisms of demand side fiscal policyThe Laffer curve and tax ratesSupply side fiscal policy
Monetary Policy and Financial Stability
Topic overviewThe Bank of England and monetary stabilityThe inflation target and the Bank of England remitThe Monetary Policy Committee and how Bank Rate is setThe transmission mechanism of monetary policyInterest rates, aggregate demand and inflationInterest rates and the exchange rateEvaluating interest rates as a policy toolQuantitative easing and how it worksThe risks of quantitative easing and its unwindingDirect intervention in bank lendingThe financial sector and the real economyAsset bubbles and the financial crisis of 2007-08Systemic risk, moral hazard and the lender of last resortRegulating the financial systemUK economic turning points since 1990
Exchange Rates and Supply Side Policies
Topic overviewExchange rate determination in a free marketFactors that cause a currency to appreciate or depreciateThe exchange rate index and effects on households and firmsExchange rates, aggregate demand and the macroeconomic objectivesManaged floats, fixed rates and central bank interventionThe terms of trade and the Marshall-Lerner conditionSupply side policies and long-run aggregate supplyMarket-based and interventionist supply side policiesEvaluating supply side policies
International Trade and Protectionism
Topic overviewWhy countries tradeAbsolute and comparative advantageCalculating comparative advantageThe gains from trade and the terms of tradeLimits and criticisms of comparative advantageThe case for free tradeThe case against free tradeTariffs and their effectsQuotas, subsidies and other methods of protectionThe arguments for and against protectionism
Globalisation and the UK in the World Economy
Topic overviewWhat globalisation is and what drives itThe benefits of globalisationThe costs of globalisationThe United Kingdom in the world economyThe World Trade OrganisationEconomic problems of developed, developing and emerging economiesThe European Union and the single marketThe advantages and disadvantages of membershipEnlargement of the European UnionEconomic and monetary union and the euroOptimal currency areas and the European Central Bank
Economic Development
Topic overviewWhat economic development meansNational income as a measure of developmentPurchasing power parity and comparing countriesThe Human Development IndexOther indicators of developmentEconomic structure and developmentObstacles: health, education and populationObstacles: capital, infrastructure and institutionsObstacles: trade, resources and external conditionsSolutions: liberalisation and foreign investmentSolutions: aid and debt reliefSolutions: industrialisation strategies
Control of the National Debt
- 8 subtopics
- 24 things to know
- All three components
What Control of the National Debt covers
Control of the National Debt is examined in Macroeconomics — assessed across all three components. It covers deficits, surpluses and the national debt, measurement of the deficit and the debt, structural and cyclical deficits, discretionary policy and automatic stabilisers, the cost of servicing debt and credit ratings, refinancing, confidence and market discipline, crowding out and the effect of debt on growth and austerity in a downturn and whether debt is always bad.
Where it is assessed
All three components
Macroeconomics, assessed across Components 1, 2 and 3.
Check the Eduqas specification ↗The 8 subtopics
Each one has its own page.
- Deficits, surpluses and the national debtBalanced budget, national debt and public sector net borrowing.Open →
- Measurement of the deficit and the debtA flow measured over a year against a stock measured at a moment, why a falling deficit still raises the debt, and what debt interest costs.Open →
- Structural and cyclical deficitsCyclical budget deficit, structural budget deficit and cyclically adjusted deficit.Open →
- Discretionary policy and automatic stabilisersDiscretionary fiscal change, automatic stabilisers and three lags that slow discretionary fiscal policy.Open →
- The cost of servicing debt and credit ratingsCredit rating agency, credit downgrade and bond yield.Open →
- Refinancing, confidence and market disciplineRefinancing risk, sovereign debt crisis and market discipline.Open →
- Crowding out and the effect of debt on growthFinancial crowding out, resource crowding out and keynesian reply to the crowding out argument.Open →
- Austerity in a downturn and whether debt is always badFiscal consolidation, expansionary fiscal contraction and three alternatives to spending cuts for reducing the debt ratio.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Key term
Why is a falling deficit mistaken for a falling debt, and what is debt interest?
Numbers
Government spending is £900bn and revenue is £830bn. Calculate the fiscal deficit.
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What is a cyclical budget deficit?
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From what two kinds of government policy can a deficit result?
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Why is the opportunity cost of debt interest a concern?
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What is refinancing risk?
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What is financial crowding out?
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Why have governments been concerned about high levels of public sector debt?
Numbers
The national debt stands at £2,500bn and this year's deficit is £70bn. Calculate the debt at the end of the year.
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What is a structural budget deficit?
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What is a discretionary fiscal change?
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What is the main implication of a rising debt interest bill for public services?
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Why must a government keep returning to the bond market?
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What is resource crowding out?
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What is fiscal consolidation?
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What does it mean for the public finances to be in deficit in a given year?
Numbers
Debt is £2,570bn and national income is £2,600bn. Calculate the debt as a percentage of national income.
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Why does a recession widen the deficit with no change in policy at all?
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What are automatic stabilisers?
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What determines the size of the annual debt interest bill?
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What happens if investors lose confidence in a government's finances?
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Why does crowding out reduce long-run growth?
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Why might it be appropriate to tighten fiscal policy during a period of economic downturn?
Take Control of the National Debt further
The same content, four other ways.
Questions from this topic
Each one with the model answer underneath.
- 1
What does it mean for the public finances to be in deficit in a given year?
Model answer
A deficit means government spending in that year exceeds government revenue. The shortfall is added to the national debt.
- 2
What does a budget surplus allow a government to do?
Model answer
A surplus lets a government repay part of the national debt. The stock of outstanding borrowing then falls rather than rising.
- 3
What is a balanced budget?
Model answer
A balanced budget occurs when government revenue exactly equals government spending. Neither fresh borrowing nor repayment is needed.
- 4
What is the national debt?
Model answer
The national debt is the total stock of government borrowing still outstanding. The debt is the accumulation of past deficits less past surpluses.
- 5
Explain the relationship between the fiscal deficit and the national debt.
Model answer
A deficit is a flow added to the debt each year, and the debt is the resulting stock. Every year spent in deficit raises the national debt.
- 6
Why does the national debt keep rising even when the deficit is falling?
Model answer
A smaller deficit is still an addition to the stock of debt. The debt only falls once the budget moves into surplus.
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Control of the National Debt revision questions
- What does Control of the National Debt cover in Eduqas A-Level Economics?
- 8 subtopics: deficits, surpluses and the national debt, measurement of the deficit and the debt, structural and cyclical deficits, discretionary policy and automatic stabilisers, the cost of servicing debt and credit ratings, refinancing, confidence and market discipline, crowding out and the effect of debt on growth and austerity in a downturn and whether debt is always bad. Each one has its own page with questions and model answers.
- How is Control of the National Debt organised?
- By the Eduqas A520QS specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Control of the National Debt, 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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