Edexcel A-level Economics Paper 2 Questions with Complete Solutions (Latest 2025) The study of the economy as a whole, including inflation, growth and unemployment. - Correct Answers ✅Macroeconomics The total of all demands or expenditures in the economy at any given price. - Correct Answers ✅Aggregate demand Shows the relationship between the price level and equilibrium national income. As the price level rises the equilibrium level of national income falls. - Correct Answers ✅Aggregate demand curve
Business confidence: the mood of managers and owners of
firms about the future of their industry and the wider economy. - Correct Answers ✅Animal spirits The addition to capital stock, both to replace the existing capital stock which has been used up (depreciation) and the creation of additional capital. - Correct Answers ✅Gross investment The addition to the capital stock of the economy. - Correct Answers ✅Investment 1 / 4
Edexcel A-level Economics Paper 2 Questions with Complete Solutions (Latest 2025) Profit kept back by a firm for its own use which is not distributed to shareholders or used to pay taxation. - Correct Answers ✅Retained profit Exports minus imports. - Correct Answers ✅Net exports or the net trade balance The relationship between the average level of prices in the economy and the level of total output. - Correct Answers ✅Aggregate supply curve The level of output where no extra production can take place in the long run with existing resources. The full capacity level of output for an economy is shown by the classical long run aggregate supply curve or the vertical part of a Keynesian aggregate supply curve. - Correct Answers ✅Full capacity The upward sloping aggregate supply curve which assumes that money wage rates are fixed. - Correct Answers ✅Short-run aggregate supply curve Factors such as changes in wage rates or commodity prices which cause the short run aggregate supply curve to shift. - Correct Answers ✅Supply-side shocks 2 / 4
Edexcel A-level Economics Paper 2 Questions with Complete Solutions (Latest 2025) A model of the economy which shows the flow of goods, services and factors and their payments around the economy.
- Correct Answers ✅Circular flow of income
An economy where there is no foreign trade. - Correct Answers ✅Closed economy Rent, interest, wages and profits earned from wealth owned by economic actors. - Correct Answers ✅Income In the circular flow of income, spending which is not generated by households including investment, government spending and exports. - Correct Answers ✅Injections The value of the output, expenditure or income of an economy over a period of time. - Correct Answers ✅National income An economy where there is trade with other countries. - Correct Answers ✅Open economy A stock of assets which can be used to generate a flow of production or income. For example, physical wealth such as factories and machines is used to make goods and services. - Correct Answers ✅Wealth 3 / 4
Edexcel A-level Economics Paper 2 Questions with Complete Solutions (Latest 2025) In the circular flow of income, spending by households which does not flow back to domestic firms. It includes savings, taxes and imports. - Correct Answers ✅Withdrawals or leakages The increase in imports divided by the increase in income that caused them (i.e. change in M / change in Y) - Correct Answers ✅Marginal propensity to import (MPM) The increase in saving divided by the increase in income that caused it (i.e. change in S / change in Y) - Correct Answers ✅Marginal propensity to save (MPS) The increase in tax revenues divided by the increase in income that caused them (i.e. change in T / change in Y) - Correct Answers ✅Marginal propensity to tax (MPT) The increase in withdrawals from the circular flow (S + T + M) divided by the increase in income that caused them (i.e.change in W / change in Y); this is the same as the sum of the marginal propensity to save, tax and import (MPS + MPT + MPM). - Correct Answers ✅Marginal propensity to withdraw (MPW)
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