Edexcel-AS-2016 -NEW

What is the primary aim of economics as a social science?

To increase economic and social welfare.

Define the economic problem.

The issue of scarcity and how to best produce and distribute limited resources.

What does Ceteris Paribus mean?

All other things being equal.

What is the difference between positive and normative economic statements?

Positive statements are based on facts that can be tested, while normative statements are based on opinions or value judgments.

What is opportunity cost?

The next best alternative foregone when a choice is made.

What does a Production Possibility Frontier (PPF) illustrate?

The maximum output that an economy can produce if it is utilizing its resources efficiently.

What typically causes market failure?

Market failure can be caused by externalities, information asymmetries, or monopolies.

What are public goods?

Goods that are non-rival and non-excludable, often under-provided in a free market.

How do taxes affect supply?

Taxes shift the supply curve to the left, increasing the cost of goods and reducing demand.

What is the role of government in a mixed economy?

The government implements taxes, provides services that may be underconsumed, and regulates markets.

What is the multiplier effect in economic terms?

The phenomenon where an increase in injections in the economy leads to a larger overall increase in national income.

What is Aggregate Demand (AD)?

The total demand for goods and services in the economy.

What influences consumer spending?

Factors include disposable income, consumer confidence, and the cost of living.

Describe the relationship between demand and supply in market equilibrium.

Market equilibrium occurs when quantity demanded equals quantity supplied, with no tendency for price to change.

What are the potential effects of high inflation?

High inflation can erode the purchasing power of savings, lead to increased costs for borrowers, and create uncertainty for businesses.

What is the difference between nominal and real GDP?

Nominal GDP measures the value of goods and services at current prices, while real GDP adjusts for inflation to reflect true purchasing power.

What is the significance of the balance of payments?

It records a country's transactions with the rest of the world, affecting its currency stability and economic policies.

How does immigration impact the labor market?

Immigration can increase the supply of labor, fill job vacancies, and help offset the effects of an aging population.

What are the characteristics of a free market economy?

No government intervention, with supply and demand determining production and pricing.

Identify two types of economic policies for reducing unemployment.

Fiscal policy (e.g., tax cuts) and training programs for skill development.

Explain the significance of the Phillips curve.

It shows the inverse relationship between inflation and unemployment in the short run.

Define inelastic demand and provide an example.

Inelastic demand means that a change in price leads to a smaller percentage change in quantity demanded, such as for essential goods.

What can be the consequences of a current account deficit?

A current account deficit can lead to reduced AD, depreciation of the exchange rate, and increased reliance on capital flows.

What is the impact of supply-side policies?

Supply-side policies aim to increase productivity and the efficiency of the economy, shifting the aggregate supply curve to the right.