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Policy Instruments (A2)

  • 7 subtopics
  • 19 things to know
  • A2 Units 3 and 4

What Policy Instruments (A2) covers

Policy Instruments (A2) is A2 content, examined in both A2 Unit 3 and A2 Unit 4, which each cover all A level content. 94 recall questions across 7 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 7 subtopics

Each one has its own page.

What you need to know

Answer each one before you reveal it.

Your recallNot started
Process

How does quantitative easing work?

Process

What happens to the real economy when an asset price bubble bursts?

Key term

How does a budget deficit in one year affect the national debt?

Key term

What is a discretionary deficit?

Key term

What confidence issues can arise when public sector debt is high and existing debt matures?

Key term

Explain how high public sector debt may cause crowding out.

Key term

In quantitative easing, how does the central bank obtain the funds used to purchase assets?

Key term

Why might QE lead to inflation in the future?

Key term

Describe one method by which a central bank can implement quantitative tightening.

Key term

What happens to commercial bank reserves during quantitative tightening?

Key term

Why do low interest rates encourage asset bubble formation?

Key term

Name two types of risk management services provided by the UK financial sector.

Key term

What is systemic risk and how can it harm the real economy?

Key term

Define a cyclical deficit.

Key term

What is the potential long-term growth consequence of crowding out caused by high public debt?

Key term

What type of financial assets does a central bank primarily purchase during quantitative easing?

Key term

What is meant by direct intervention in the banking system by a central bank?

Key term

What role does herd behaviour play in creating asset bubbles?

Key term

Why might excessive risk-taking by financial institutions impose costs on taxpayers?

Take Policy Instruments (A2) further

The same content, four other ways.

Questions from this topic

Each one with the model answer underneath.

  1. 1

    What is the national (public sector) debt?

    Model answer

    The cumulative total of all past budget deficits minus any surpluses, representing the total amount owed by the government at a point in time.

  2. 2

    How does a budget deficit in one year affect the national debt?

    Model answer

    Each year's deficit adds to the stock of national debt, while a budget surplus reduces it.

  3. 3

    What is a discretionary deficit?

    Model answer

    A deficit that results from deliberate government policy decisions to increase spending or reduce taxation.

  4. 4

    Define an automatic (cyclical) deficit.

    Model answer

    A deficit that results from the operation of automatic stabilisers during economic downturns, where tax revenues fall and welfare spending rises without deliberate policy changes.

  5. 5

    What is a structural deficit?

    Model answer

    The part of the budget deficit that would exist even if the economy were operating at full capacity, resulting from underlying imbalances between spending commitments and revenue-raising capacity.

  6. 6

    Define a cyclical deficit.

    Model answer

    The part of the budget deficit caused by the economy operating below full capacity, which automatically disappears when the economy returns to trend output.

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Policy Instruments (A2) revision questions

What does Policy Instruments (A2) cover in WJEC A-Level Economics?
7 subtopics: control of the national (public sector) debt: causes, control of the national (public sector) debt: implications, the operation of monetary policy: interest rates and how quantitative easing works, the operation of monetary policy: effects and criticisms of quantitative easing, the operation of monetary policy: quantitative tightening, funding for lending and the financial sector, monetary stability: asset bubbles and financial crises and financial stability. Each one has its own page with questions and model answers.
How is Policy Instruments (A2) organised?
By the WJEC 1520QS specification, subtopic by subtopic, so it matches the order you are taught it in.

Every question in Policy Instruments (A2), on a schedule.

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