Key term
OCR A-Level Economics H460
Introduction to Microeconomics
Topic overviewEconomic and free goods, scarcity and positive and normative statementsEconomic agents and the factors of productionFactor rewards, rationality and the objectives of economic agentsIncentives and the functions of the price mechanismMarket, planned and mixed economies and allocative and productive efficiencyOpportunity cost, trade-offs and the production possibility curveShifts of the production possibility curve and uses of opportunity cost
Microeconomics: The Role of Markets
Topic overviewSpecialisation, the division of labour and barterMoney as a medium of exchange and the gains from specialisationIndividual and market demand and joint, competitive and composite demandMovements along and shifts of the demand curveIndividual and market supply and joint and competitive supplyMovements along and shifts of the supply curveConsumer surplus and producer surplusHow changes in price affect consumer and producer surplusCeteris paribus and market equilibrium and disequilibriumChanges in demand and supply and their effects on related marketsPrice and income elasticity of demand and total revenueCross elasticity, price elasticity of supply and the uses of elasticityMarginal utility, marginal cost and decisions at the marginMarket failure and marginal social cost and benefitPositive and negative production and consumption externalitiesInformation failure, asymmetric information and merit and demerit goodsMerit and demerit good diagrams and correcting information failurePublic, private and quasi-public goodsThe free rider problem and the provision of public goodsIndirect taxes and subsidies to correct market failureState provision, price controls, buffer stocks and legislationRegulation, tradable pollution permits and government failure
Microeconomics: Business Objectives
Topic overviewProfit maximisation and alternative business objectivesCorporate social responsibility and the principal-agent problemFixed, variable, average and marginal costsDiminishing returns and economies and diseconomies of scaleTotal, average and marginal revenueProfit, loss and normal and supernormal profit
Microeconomics: Market Structures
Topic overviewPerfect competition in the short and long run and allocative efficiencyProductive efficiency and perfect competition as a benchmarkMonopoly characteristics, equilibrium and static efficiencyDynamic efficiency, price discrimination and natural monopolyCharacteristics of monopolistic competition and its short run equilibriumLong run equilibrium and efficiency in monopolistic competitionCharacteristics of oligopoly, concentration ratios and the kinked demand curveNon-price competition, collusion and the pros and cons of oligopolyCharacteristics of contestable markets, sunk costs and hit-and-run entryEfficiency, barriers and the limits of contestable markets
Microeconomics: The Labour Market
Topic overviewDerived demand for labour and wage elasticity of demandLabour productivity, unit labour costs and marginal revenue productSupply of labour and wage elasticity of supplyShort and long run labour supply, transfer earnings and economic rentWage differentials, labour mobility and monopsonyTrade unions, bilateral monopoly and the effects of monopsonyWage determination in a competitive labour market and labour market flexibility
Macroeconomics: Aggregate Demand and Aggregate Supply
Topic overviewThe circular flow of income, injections and leakagesMethods of measuring national incomeComponents of aggregate demand and their determinantsThe slope of the aggregate demand curve and what shifts itConsumption, income and the role of expectationsShort run and long run aggregate supply curvesShifts in short run and long run aggregate supplyMacroeconomic equilibrium and the effects of demand and supply shiftsThe national income multiplier and marginal propensitiesThe accelerator, the economic cycle and output gaps
Macroeconomics: Economic Policy Objectives
Topic overviewEconomic growth, real and nominal GDP and GDP per capitaShort and long run growth, the economic cycle and the effects of growthEconomic structure, deindustrialisation and sustainable developmentLimitations of GDP and the Human Development IndexEmployment, unemployment rates and the objective of full employmentMeasures, types and costs of unemployment and the effects of full employmentInflation, deflation, real values and the CPI and RPICalculating inflation with index numbers and its causes and consequencesBalance of payments accounts and current account calculationsCauses and consequences of current account imbalancesKey trends in UK macroeconomic performanceComparing UK performance internationally and the limits of economic dataIncome and wealth, redistribution and absolute and relative povertyLorenz curves, the Gini coefficient and the causes of povertyThe natural rate of unemployment and Keynesian and neo-classical aggregate supplyShort and long run Phillips Curves and their usefulness
Macroeconomics: Implementing Policy
Topic overviewThe government budget, types of tax and the budget balanceNational debt, cyclical and structural deficits and crowding outThe Laffer curve, average and marginal tax rates and limits of fiscal policyInterest rates, the money supply and inflation targetsQuantitative easing, the exchange rate and limits of monetary policyPrivatisation, deregulation and subsidies as supply side policiesCompetition policy, infrastructure, education and tax and benefit reformLabour market flexibility, immigration control and limits of supply side policyConflicts between macroeconomic policy objectives
Macroeconomics: The Global Context
Topic overviewPatterns of international trade and global supply chainsAdvantages and disadvantages of international tradeExchange rate calculations and how exchange rates are determinedExchange rate changes, the Marshall-Lerner condition and exchange rate systemsGlobalisation, international competitiveness and comparative advantageTerms of trade and the impact of globalisation and emerging economiesProtectionism and the effects of a tariffQuotas, trade creation, economic integration and the World Trade Organisation
Macroeconomics: The Financial Sector
Topic overviewFunctions of money, credit creation and narrow and broad moneyThe quantity theory of money and interest rates in the money marketRoles of the financial sector, saving and investmentThe Harrod-Domar model and microfinanceFinancial regulation and the functions of a central bankMonetary policy effectiveness, limits of regulation and the IMF
Quantitative Skills for Economics
Themes in Economics: Synoptic Application
Macroeconomics: The Financial Sector
- 6 subtopics
- 15 things to know
- Component 02
What Macroeconomics: The Financial Sector covers
The Financial Sector is examined on component 02 of OCR Economics, Macroeconomics. 84 recall questions across 6 subtopics.
Where it is assessed
Component 02
Macroeconomics, the whole of the second paper.
Check the OCR specification ↗The 6 subtopics
Each one has its own page.
- Functions of money, credit creation and narrow and broad moneyRecall questions on the functions and characteristics of money, credit creation by commercial banks, the credit multiplier calculation, and narrow and broad money.Open →
- The quantity theory of money and interest rates in the money marketRecall questions on the Fisher equation MV = PQ with calculations, liquidity preference and the demand for money, and how the money market sets the interest rate.Open →
- Roles of the financial sector, saving and investmentRecall questions on the roles of the financial sector, financial intermediation, maturity transformation, equity markets, saving and investment, savings gaps and the poverty cycle.Open →
- The Harrod-Domar model and microfinanceRecall questions on the Harrod-Domar growth model with calculations and criticisms, microfinance and group lending, and how financial sectors help or hinder development.Open →
- Financial regulation and the functions of a central bankRecall questions on the purposes of financial regulation, systemic risk and moral hazard, capital and liquidity requirements, stress tests, ring-fencing and the functions of a central bank.Open →
- Monetary policy effectiveness, limits of regulation and the IMFRecall questions on the effectiveness of quantitative easing and interest rate cuts, costs of regulation, regulatory capture and arbitrage, and the roles of the IMF and World Bank.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Key term
Why might an increase in the money supply raise real output rather than prices?
Key term
What is maturity transformation, and why does it leave banks vulnerable?
Key term
Describe the vicious circle of poverty in terms of saving and investment.
Numbers
State the Harrod-Domar growth relationship, and calculate growth for a savings ratio of 12% and a capital-output ratio of 4.
Process
How does group lending allow a microfinance institution to lend without collateral?
Process
How does asymmetric information justify the regulation of financial products?
Key term
What is regulatory arbitrage, and how does it undermine national rules?
Key term
Why does an economy that relies on barter trade far less than one that uses money?
Key term
Which three factors stop banks creating as much money as the credit multiplier suggests?
Evaluation
Why is systemic risk an argument for regulating banks more heavily than other firms?
Key term
Why does a sustained rise in the money supply tend to raise the price level?
Key term
How does the financial sector allow individuals and firms to reduce risk?
Numbers
An economy saves 12% of national income and has a capital-output ratio of 4. Calculate its Harrod-Domar growth rate.
Key term
Name two forms of market abuse that financial regulators exist to prevent.
Take Macroeconomics: The Financial Sector further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Narrow money vs Broad money
Narrow money: cash in circulation together with balances that can be spent immediately. Broad money: the wider measure that adds savings and time deposits to what can be spent at once.
Financial intermediation vs Microfinance
Financial intermediation: channelling funds from those with a surplus to those who want to borrow. Microfinance: the provision of very small loans and services to people outside the ordinary banking system.
Savings gap vs Capital-output ratio
Savings gap: the shortfall between the saving a country generates and the investment it needs. Capital-output ratio: the amount of capital required to produce one unit of output.
Questions from this topic
Each one with the model answer underneath.
- 1
Name the four functions an asset must perform if it is to serve as money.
Model answer
It must act as a medium of exchange, a store of value, a unit of account and a standard of deferred payment.
- 2
Why does an economy that relies on barter trade far less than one that uses money?
Model answer
Barter needs a double coincidence of wants, so every trade requires each side to want what the other offers; money removes that requirement and cuts the transaction costs of exchange.
- 3
Name four characteristics that make an asset suitable for use as money.
Model answer
It should be durable, portable, divisible and difficult to counterfeit.
- 4
Why must the supply of an asset be limited if it is to work as money?
Model answer
If it can be produced freely its purchasing power collapses, so it stops being a reliable store of value and people stop accepting it.
- 5
Which function of money breaks down first during hyperinflation, and why?
Model answer
The store of value function, because purchasing power falls so quickly that holding money for even a short time destroys wealth, which is why people switch to goods or a foreign currency.
- 6
How does a commercial bank create money when it grants a loan?
Model answer
It credits the borrower's account with a new deposit rather than handing over someone else's savings, so the act of lending itself adds to the money supply.
What is inside Levo
Six ways to work the same material.
Macroeconomics: The Financial Sector revision questions
- What does Macroeconomics: The Financial Sector cover in OCR A-Level Economics?
- 6 subtopics: functions of money, credit creation and narrow and broad money, the quantity theory of money and interest rates in the money market, roles of the financial sector, saving and investment, the harrod-domar model and microfinance, financial regulation and the functions of a central bank and monetary policy effectiveness, limits of regulation and the imf. Each one has its own page with questions and model answers.
- How is Macroeconomics: The Financial Sector organised?
- By the OCR H460 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Macroeconomics: The Financial Sector, 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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