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The national and international economy
The national and international economy provides the main content base for Paper 2 National and international economy. Students need accurate definitions, clear diagram or data use, and chains of reasoning that link economic causes to outcomes for consumers, producers, governments and the wider economy. Revision should practise aggregate demand, policy transmission, macroeconomic data, trade-offs, international context, while keeping each answer tied to the precise specification concept. Strong responses apply theory to the context in the question, explain each step in the mechanism, and evaluate by considering assumptions, magnitude, time lags and who gains or loses. Use examples, numerical evidence or diagrams where they sharpen the argument: the aim is to show why an economic relationship changes, how that change is transmitted, and whether the final effect is likely to hold in the context given.
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90 min
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Syllabus checklist
What you need to know
25 objective pages available
The measurement of macroeconomic performance4 objectives
- Explain AQA section 3.2.1.1 The objectives of government economic policy.
- Explain AQA section 3.2.1.2 Macroeconomic indicators.
- Explain AQA section 3.2.1.3 Uses of index numbers.
- Explain AQA section 3.2.1.4 Uses of national income data.
How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts6 objectives
- Explain AQA section 3.2.2.1 The circular flow of income.
- Explain AQA section 3.2.2.2 Aggregate demand and aggregate supply analysis.
- Explain AQA section 3.2.2.3 The determinants of aggregate demand.
- Explain AQA section 3.2.2.4 Aggregate demand and the level of economic activity.
- Explain AQA section 3.2.2.5 Determinants of short-run aggregate supply.
- Explain AQA section 3.2.2.6 Determinants of long-run aggregate supply.
Economic performance4 objectives
- Explain AQA section 3.2.3.1 Economic growth and the economic cycle.
- Explain AQA section 3.2.3.2 Employment and unemployment.
- Explain AQA section 3.2.3.3 Inflation and deflation.
- Explain AQA section 3.2.3.4 Possible conflicts between macroeconomic policy objectives.
Financial markets and monetary policy4 objectives
- Explain AQA section 3.2.4.1 The structure of financial markets and financial assets.
- Explain AQA section 3.2.4.2 Commercial banks and investment banks.
- Explain AQA section 3.2.4.3 Central banks and monetary policy.
- Explain AQA section 3.2.4.4 The regulation of the financial system.
Fiscal policy and supply-side policies2 objectives
- Explain AQA section 3.2.5.1 Fiscal policy.
- Explain AQA section 3.2.5.2 Supply-side policies.
The international economy5 objectives
- Explain AQA section 3.2.6.1 Globalisation.
- Explain AQA section 3.2.6.2 Trade.
- Explain AQA section 3.2.6.3 The balance of payments.
- Explain AQA section 3.2.6.4 Exchange rate systems.
- Explain AQA section 3.2.6.5 Economic growth and development.
Key terms
Exam tips
- Use real-world examples: In your answers, incorporate real-world examples of government policies to illustrate your points.
- Use Real-World Examples: When discussing macroeconomic indicators, incorporate current events or historical examples to illustrate your points.
Common mistakes
- Confusing objectives with means: Remember that objectives are the goals (e.g., full employment), while means are the policies or tools used to reach those goals (e.g., fiscal policy).
- Confusing GDP with GNP: Remember that GDP measures the value of all goods and services produced within a country's borders, while GNP includes the value produced by the residents of a country, regardless of where the production occurs.
Practice preview
- Which of the following is NOT one of the main objectives of government economic policy?
- Explain how the objective of full employment can conflict with the objective of price stability.
- Evaluate the effectiveness of government policies aimed at achieving economic growth in the context of potential environmental impacts.
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