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Macroeconomic Theory (A2)

  • 5 subtopics
  • 15 things to know
  • A2 Units 3 and 4

What Macroeconomic Theory (A2) covers

Macroeconomic Theory (A2) is A2 content, examined in both A2 Unit 3 and A2 Unit 4, which each cover all A level content. 78 recall questions across 5 subtopics.

Where it is assessed

A2 Units 3 and 4

Exploring Economic Behaviour and Evaluating Economic Models and Policies, both covering all A level content.

Check the WJEC specification ↗

The 5 subtopics

Each one has its own page.

What you need to know

Answer each one before you reveal it.

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Process

In the Neo-Classical model, how does an economy below full employment return to it?

Process

In the Neo-Classical model, how does an economy above full employment return to it?

Key term

Give two factors that contribute to wage stickiness.

Key term

If wages are sticky in the short run and the price level increases, what happens to firms' profit margins and why?

Key term

What assumption does SRAS analysis make about input prices?

Key term

What happens to unemployment in the Keynesian model when wages fail to adjust downward?

Key term

What relationship does the short run Phillips curve illustrate between unemployment and inflation?

Key term

What factor plays a central role in causing shifts of the short run Phillips curve?

Key term

What happens to the short run Phillips curve when workers and firms expect higher inflation?

Key term

Explain how higher inflation expectations lead to changes in wage and price behaviour.

Key term

What assumption does SRAS analysis make about productivity?

Who and when

According to the Neo-Classical view, what shape is the long run aggregate supply curve and where is it positioned?

Key term

What is the key difference between Neo-Classical and Keynesian views of the LRAS?

Key term

How do higher inflation expectations among workers and firms affect the short run Phillips curve?

Key term

How does rational expectations theory differ from adaptive expectations in terms of inflation forecasting?

Take Macroeconomic Theory (A2) further

The same content, four other ways.

Questions from this topic

Each one with the model answer underneath.

  1. 1

    What is the shape of the short run aggregate supply (SRAS) curve and what relationship does it show?

    Model answer

    The SRAS curve slopes upwards from left to right, showing a positive relationship between the price level and real output supplied in the short run.

  2. 2

    Why does the SRAS curve slope upwards?

    Model answer

    In the short run, input prices (especially wages) are assumed to be fixed or sticky. When the general price level rises, firms can sell output at higher prices while their costs remain constant, increasing profit margins and incentivising greater production.

  3. 3

    If wages are sticky in the short run and the price level increases, what happens to firms' profit margins and why?

    Model answer

    Profit margins increase because firms receive higher prices for their output while their wage costs remain constant.

  4. 4

    What assumption does SRAS analysis make about input prices?

    Model answer

    SRAS analysis assumes that input prices are fixed in the short run.

  5. 5

    What assumption does SRAS analysis make about productivity?

    Model answer

    SRAS analysis assumes that productivity is fixed in the short run.

  6. 6

    What assumption does SRAS analysis make about technology?

    Model answer

    SRAS analysis assumes that technology is fixed in the short run.

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AThe demand curve shifts to the left.
BExcess supply exists at the original price.
CPrice falls until a new equilibrium is reached.

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Actual growth means a realised increase in output.
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Macroeconomic Theory (A2) revision questions

What does Macroeconomic Theory (A2) cover in WJEC A-Level Economics?
5 subtopics: short run aggregate supply (sras), long run aggregate supply (lras): neo-classical view of the process, long run aggregate supply (lras): keynesian economists disagree with this process of adjustment, the short run phillips curve and the long run phillips curve. Each one has its own page with questions and model answers.
How is Macroeconomic Theory (A2) organised?
By the WJEC 1520QS specification, subtopic by subtopic, so it matches the order you are taught it in.

Every question in Macroeconomic Theory (A2), on a schedule.

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