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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
Monetary Policy and Financial Stability
- 15 subtopics
- 45 things to know
- All three components
What Monetary Policy and Financial Stability covers
Monetary Policy and Financial Stability is examined in Macroeconomics — assessed across all three components. It covers the Bank of England and monetary stability, the inflation target and the Bank of England remit, the Monetary Policy Committee and how Bank Rate is set, the transmission mechanism of monetary policy, interest rates, aggregate demand and inflation, interest rates and the exchange rate, evaluating interest rates as a policy tool, quantitative easing and how it works, the risks of quantitative easing and its unwinding, direct intervention in bank lending, the financial sector and the real economy, asset bubbles and the financial crisis of 2007-08, systemic risk, moral hazard and the lender of last resort and regulating the financial system.
Where it is assessed
All three components
Macroeconomics, assessed across Components 1, 2 and 3.
Check the Eduqas specification ↗The 15 subtopics
Each one has its own page.
- The Bank of England and monetary stabilityBank of England, monetary stability and financial stability.Open →
- The inflation target and the Bank of England remitUK inflation target, symmetrical nature of the inflation target and cost-push shock.Open →
- The Monetary Policy Committee and how Bank Rate is setMonetary Policy Committee, forward guidance and core inflation.Open →
- The transmission mechanism of monetary policyMonetary policy transmission mechanism, main channels of the transmission mechanism and wealth effect of an interest rate change.Open →
- Interest rates, aggregate demand and inflationDemand-pull inflation, real interest rate and zero lower bound.Open →
- Interest rates and the exchange rateHot money, interest rate differential and risk of relying on a weaker currency to raise inflation.Open →
- Evaluating interest rates as a policy toolThe lags, the blunt reach across the whole economy, the zero lower bound, and the cases where a rate change achieves less than intended.Open →
- Quantitative easing and how it worksAsset purchases with newly created reserves, the routes through which they are meant to raise spending, and the distributional criticisms made of them.Open →
- The risks of quantitative easing and its unwindingMain inflation risk of quantitative easing, quantitative tightening and two ways quantitative easing may eventually be reversed.Open →
- Direct intervention in bank lendingDirect intervention in the banking system, funding for Lending Scheme and term funding scheme.Open →
- The financial sector and the real economyThree functions the financial sector performs for the real economy, finance curse and financial intermediation.Open →
- Asset bubbles and the financial crisis of 2007-08Asset bubble, fundamental value of an asset and speculation in an asset market.Open →
- Systemic risk, moral hazard and the lender of last resortSystemic risk, bank run and contagion in a financial system.Open →
- Regulating the financial systemPurpose of regulating the financial system, asymmetric information in banking and microprudential and macroprudential regulation.Open →
- UK economic turning points since 1990Black Wednesday and the ERM in 1992, Bank of England independence in 1997, the 2007–08 crisis, austerity, the Brexit vote, pandemic support, the 2021–23 inflation surge and rate rises, and the 2022 mini-budget.Open →
What you need to know
Answer each one before you reveal it.
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Process
How does a rise in Bank Rate work through to household spending and business investment?
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State the UK inflation target.
Key term
What is the Monetary Policy Committee?
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Which components of aggregate demand does a change in Bank Rate act on?
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How does a rise in Bank Rate affect the value of sterling?
Evaluation
Give two strengths of interest rates as a macroeconomic policy tool.
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What is quantitative easing?
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What is the main inflation risk of quantitative easing?
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What is meant by direct intervention in the banking system?
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What does the financial sector consist of?
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What is an asset bubble?
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What is systemic risk?
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What is the purpose of regulating the financial system?
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What is the Bank of England?
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What is meant by the symmetrical nature of the inflation target?
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How many members sit on the Monetary Policy Committee?
Process
What is the monetary policy transmission mechanism?
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Explain the effect of a cut in Bank Rate using an AD/AS diagram.
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What is hot money?
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Why is monetary policy described as a blunt instrument?
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When did the Bank of England begin quantitative easing?
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Why did quantitative easing after 2009 not produce high inflation immediately?
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What was the Funding for Lending Scheme?
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State three functions the financial sector performs for the real economy.
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What is meant by the fundamental value of an asset?
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Why are banks especially vulnerable to a loss of confidence?
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What is asymmetric information in banking?
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State the two core purposes of the Bank of England.
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Which price index is the UK inflation target measured on?
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Who are the internal members of the Monetary Policy Committee?
Process
Name the main channels of the transmission mechanism.
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What happens to inflation and output when the Bank of England raises Bank Rate?
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Why does the exchange rate often move before a rate change actually happens?
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Why do interest rate changes affect households unevenly?
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Which assets does the Bank of England buy under quantitative easing?
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How does quantitative easing worsen wealth inequality?
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How did the Funding for Lending Scheme try to increase lending?
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How has the structure of the UK economy changed in recent decades?
Process
Describe the stages through which an asset bubble may arise and then burst.
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What is a bank run?
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Distinguish between microprudential and macroprudential regulation.
Process
What happened on Black Wednesday in September 1992?
Process
How did the Brexit referendum of 2016 affect the UK economy in the short run?
Process
How did the government support the economy during the COVID-19 pandemic in 2020?
Take Monetary Policy and Financial Stability further
The same content, four other ways.
Questions from this topic
Each one with the model answer underneath.
- 1
What is the Bank of England?
Model answer
The Bank of England is the central bank of the United Kingdom. The Bank of England was founded in 1694 and is owned by the state.
- 2
State the two core purposes of the Bank of England.
Model answer
The Bank of England is charged with creating monetary stability and financial stability. Monetary stability means stable prices and confidence in the currency.
- 3
What is meant by monetary stability?
Model answer
Monetary stability means low and predictable inflation and confidence in the value of money. The Bank of England pursues monetary stability through the inflation target.
- 4
What is meant by financial stability?
Model answer
Financial stability means a financial system able to absorb shocks and keep credit flowing. A stable system does not need a taxpayer rescue in a downturn.
- 5
When was the Bank of England given operational independence over interest rates?
Model answer
The Bank of England was given operational independence in May 1997. The Bank of England Act 1998 put the arrangement into law.
- 6
Distinguish between operational independence and goal independence.
Model answer
Operational independence means a central bank chooses the instruments to hit a target set by government. Goal independence would mean the central bank chose the target itself.
What is inside Levo
Six ways to work the same material.
Monetary Policy and Financial Stability revision questions
- What does Monetary Policy and Financial Stability cover in Eduqas A-Level Economics?
- 15 subtopics: the bank of england and monetary stability, the inflation target and the bank of england remit, the monetary policy committee and how bank rate is set, the transmission mechanism of monetary policy, interest rates, aggregate demand and inflation, interest rates and the exchange rate, evaluating interest rates as a policy tool, quantitative easing and how it works, the risks of quantitative easing and its unwinding, direct intervention in bank lending, the financial sector and the real economy, asset bubbles and the financial crisis of 2007-08, systemic risk, moral hazard and the lender of last resort, regulating the financial system and uk economic turning points since 1990. Each one has its own page with questions and model answers.
- How is Monetary Policy and Financial Stability organised?
- By the Eduqas A520QS specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Monetary Policy and Financial Stability, 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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