Economics Alevel Economics Unit 2 essay guide

1. Econ 2
How to write a 25 Mark Essay
The 5 Minute guide

2. You will get two questions:
Performance
Recovery
Economic health
Economic Growth Balance Of Payments

3. Conflicting government objectives
Constant debate
Unemployment rate
Budget deficit
Evaluation Points
Monetary and Fiscal Policy
Interest rates on inflation

4. You will get two questions:
Growth
• Consumption - Is when goods and services are purchased in an
economy
• Investment - Is when goods are purchased for future use in the
hope of future gains
• Government Spending - Is spending on consumption or investment
by the government and is known as fiscal policy. It excludes transfer
payments.
• (Exports – Imports) - Is the current account whereby the amount of
non-UK goods purchased by UK consumers is taken away from the
amount of UK goods purchased by buyers non-UK consumers.
Supply-side measures/policies are aimed at boosting the amount of
goods and services produced in an economy.
Policies that boost supply include;
Education and Training
Productivity
Investment
Balance Of Payments
(Exports – Imports) - Is the current account whereby the amount of
non-UK goods purchased by UK consumers is taken away from the
amount of UK goods purchased by buyers non-UK consumers.
Current account also includes :
• Net investment incomes
• Net transfers
Key terms: Trade deficit, trade surplus, exchange rate
When you are asked about the Balance of Payments it is often in
relation to the effect on the UK economy if exports
increased/decreased for a given reason or if imports
increased/decreased for a given reason.
Therefore, AS/AD diagrams will be necessary to analyse and effect of
import or export changes.
As well as this your analysis you would use for any shift in AD is still
relevant and you can include the effects of a shift in AD on price level
and real national output. However, you will need to take into account
other variables to expand on your answer such as he exchange rate
and you will have consider international markets and consider the
wider context when considering imports and exports as it is affected
by other countries and is also affected by interest rates.

5. N.B. This is a
simplified example.
Your analysis and
evaluation can and
should be
developed further
Point
•The government is likely to encounter
several problems when attempting to boost
the rate of growth
Application
•This is because, as extract C states, it is often
accompanied by rising demand which can
lead to inflation and a balance of payments
deficit.
Analysis
•An increase in the Growth rate may shift
AD to the right from AD-AD1 causing the
price level to rise from P1-P2 (Use diagram)
Analysis
Analysis
Evaluation
 As a result the inflation rate will increase
reducing the value of money (Use
diagram)
 Consequently, the government may have to
increase interest rates to reduce the
increase in the price level, which may result
in a reduction in consumption and thus slow
the rate of growth.
 However, it may depend
upon the magnitude of the
rise in price level and
whether the growth is solely
demand pull inflation.