A* Macroeconomics Mastery: Edexcel Economics (A Level) Comprehensive Revision Guide
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Macroeconomics (ECONOMICSA)
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PEARSON (PEARSON)
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Edexcel Economics A Student Guide
Elevate your understanding of macroeconomics with these comprehensive revision notes meticulously crafted for success. Developed by an A-grade achiever, these notes provide a strategic and in-depth review of key macroeconomic concepts. Covering everything from GDP and inflation to monetary policy a...
A* Microeconomics Excellence: Edexcel Business (A Level) Comprehensive Revision Guide
A level Edexcel Unit 1 Economics
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PEARSON (PEARSON)
Economics
Macroeconomics (ECONOMICSA)
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Macroeconomics:
Theme 0 Macro Quant Skills:
Ratios = Shows the relative sizes of two or more values
Mean = The average (Add all up ÷ by how many there are)
Median = Order values cross out to find the middle value
Percentage Change = New - Old / Old × 100
Percentage = Figure(Recent/New) / Total × 100
Index Numbers = Used to aid comparison overtime by setting a base time period as 100 and
comparing all other figures to this = Current Figure / Figure in the base time period × 100 =
New / Old × 100
Decile = Is a quantitative method of splitting up ranked Data into 10 subsections, 1st decile =
lowest/poorest data value, 10 = Highest data value
Quintile = Data is split into 5 parts, first lowest, fifth highest data value
Quartile = Ranked Data divided into 4 parts, 1st = lowest, 4th = highest
All 3 of these puts information in a format to be easily analysed and measured
Final Value ÷ Initial Value × 100 = Index Number
Jeremy Hunt = pull 6.6 million working adults who are economically inactive back into work.
Major barrier to economic growth due to reduction productivity, shortage of workers/staffing
is forces wages up which leads to cost push inflation
Annual growth 2022 = 4.1%
2020 = UK economy contracted by 11%
Q4 2022 = 0.1% growth
2023 = Shrink by 0.2% = High inflation, supply shocks leads to high cost of living
(oil,gas,electricity and food prices) = Higher interest rates
Demand side = Low consumer confidence, low business confidence = less consumption and
investment
Contractionary fiscal and monetary policy
Negative output gap of -1.6% q3 2023 OBR
GDP Per Capita = £33,000
Total GDP = 2.4 Trillion = 79%
,3.8% = Unemployment rate = lagging figure will go up to 4%
Economic Inactivity Rate = 21.4% = risen during covid, early retirement,Ageing pop
Wage growth = 6.6% = good sign = trade unions in the UK have been striking = still below
the rate of inflation so nothing changes in real terms = more competitive private sector is
increasing wages = More employment of disabled people and econ inactive is forcing wages
up = more competitiveness = Higher labour productivity
10.1 % = Inflation CPI = disproportionately harming those on low incomes = mainly food
energy oil gas
Inflation Expectations = 5.4%
Food Price Inflation = 19.1% = War in Ukraine
Weak exchange rate = BAD BECAUSE UK IS A NET IMPORTER OF GOODS AND
SERVICES (AS) = Raw material, semi finished goods and capital machinery are all imported
which are now more Dearer = worsen trade and inflation cost push
Current account deficit
Investment = poor since brexit
UK productivity = 20% lower than the G7 = eroding export competitiveness and costs rising
for firms
Slowdown in UK and Eurozone = Bad for UK exports less RDI
6.1% budget deficit
Corp tax move from 19% to 25%
0.343 = Gini Coefficient
4.25% Bank Base Rate = its not demand side inflation so increasing the interest rates is
pointless = its supply side nothing to do with consumption
116 billion pounds on debt interest = spent more on debt than education
Fiscal Drag occurring = income tax bands have frozen till 2028 = stealth tax rise = every
year peoples goes up in line with inflation only,so in real terms they are not better off = they
can easily be dragged into higher rac bands making them pay higher tax
National debt = 100.1% / 2.072 Trilli9n
Greece 210% debt
Japan 250% debt
Germany 70% of debt
No:
Automatic Stabilisers = more tax in a boom pays for itself
Made back by tax and tourism
Higher Qol and sol lr
,reduce inequality
Interest low = worst ir
Inflation = borrowing cheaper
Supply side investment
Why industry I'd small:
Small market size
Lack of export access = no sea
Lack of non price factors on G/S
No ecos of scale
Lack of finance
Lack of educated workforce / poor quality of human capital
Lack of infrastructure
International action making it more difficult
Lack of TNCs
Current volatility
Remain close to consumer = remain niche with Inelastic demand
Monopolistic Competition
Natural Disasters
Political tensions
Drought
Depressed global demand
Lack of economic Stability
Slow down of FDI
Low employment
High interest rates
High import costs
Outward migration = brain drain
Covid = massive expansionary fiscal policy = spend = big deficit = demand pull Inflation =
national debt greater 100% real gdp = healthczre spending boosts AD = Furlough Scheme
Wage Subsidies, despite no production, no increase in national income or output = welfare
spending increased, unemployed claimed universal credit =
Leisure, Hospitality, Tourist Industries VAT Tax Cuts
Exempt from paying business rates = tax on the value ofcphysicla property
Expansionary fiscal policy to close a negative output gap, boost AD, Reduced
unemployment and Avoid Deflation
Massive Injections of money into the economy = with no direct impact on the production of
goods and services = purely inflationary
Budget deficit = 14.5% of GDP = 305 billion pounds 2020 = highest since ww2 =
116 billion on debt interest
,Objective Prioritisation
Resilient private sector = less likely to shutdown
Better business management and managers = Better productivity = more profitable = better
for growth
Half the productivity Gap = poor management
Lots of competition = better managers
Managers = reduce production waste, raise employee retention and achieves greater
productivity
Train managers vs train apprenticeship and get their foot in the door
Wages spiral = only if wages are above inflation
Supply side inflation = oil gas food
Stop spending = stimulus from covid = pent up demand = firm price increase ev can't
continue for long
Weaker exchange rate = Improved inflation
Labour Shortages = forces prices up to pay higher wages cuz less supply of labour
Time lags
Thatcher sold off all the council houses
MPc = overturned
Poor harvests = Spain and Morocco have a shortage of out of season produce which
increases prices
Forecasts are near perfect = geopolitics affects stuff
Uks recovery from 2020 recession wasn't fast enough to bring up back to precovid levels
Brexit = EU rich part of the world and we've made trade harder with them which is making it
harder for the economy to grow
Brexit reduced investment by 29milloin
Hospitality,agriculture and care sectors struggle to find staff forcing wages up = temporary
though
Young people chosen to study instead of work
,Early retirements = 565,000 people became economically inactive = sickness + ageing
population + brexit stopping migration = tightness in the labour market
Long term sickness benefits
2.5m ppl not looking for a job
= provide part time job, retraining, key information, appretishihsp
Inflation Expectations = consumer think prices are going to increase so firms can increase
prices up a little more than expected = if you expect a price rise demand won't fall as much
Theme 1 Introduction To The UK Economy:
Macroeconomics = Examines the economy as a whole and its behaviour in aggregate (In
total/as a whole)
External Factors = Macroeconomics studies connections between developed and
developing countries in the global economy
Macro Policies = Macroeconomics includes looking at the effect of policies such as a change
in tax or higher/lower interest rates and its effects on the economy in aggregate
Macroeconomic Objectives = The aims and targets of a government to improve economic
welfare
Macro Objectives vary country to country and often depends on political priorities
EV = Some objectives have higher weighting and their often an opportunity cost sacrificing
one objective to attain another
The Government Manages the economy to attain these objectives and these objectives
provide a criteria which judgement can be made based on economic performance of the UK.
T = Trade Balance (Balance of Payments)
I = Low Inflation (2% CPI UK)
G = Sustainable Economic Growth (Sol + Qol)
E = High Employment (Or Low Unemployment)
R = Redistribution of Income and Wealth
S = Stability in the Economy
Additional Objectives:
● 1 = Price Stability with the Consumer price Index at 2%
● 2 = Growth in Real GDP/ National Output
● 3 = Falling Unemployment / Rising Employment
● 4 = Higher Average Living Standards and Higher National Income Per Capita
● 5 = Stable Balance of payments on the Current Account
● 6 = Equitable Distribution of Wealth and Income
● 7 = Balancing the Government Budget and Reducing National Debt
, ● 8 = Improve Economic Well Being and National Happiness Beyond Materialistic
things and GDP per Capita, but the people's mental health etc
● 9 = Better Regional Balance I.e Reduction in the difference between the North and
South of the UK and investment in the North
● 10 = Improved Public Goods and Merit Goods and access to public services =
Public Services = Education,Health(NHS),Housing,Welfare
● 11 = Lower Inequality between the Poorest of society and Wealthiest of society within
the UK
● 12 = Improved Competitiveness
● 13 = Environment Sustainability
● 14 = Improved Productivity in the Production of goods and services in an economy
Economic Growth + Price and Cost Inflation + High Employment = Key Domestic Objectives
Improved Productivity + Improved International Competitiveness + Stable Balance of
payments = External Objectives
Improved National Wellbeing + Lower Inequality + Improved Public Services + Sustainable
Government Finance = Aims of the Government
Trade Balance:
The Trade Balance Measures the difference between the value of exports of goods and
services (X) and the value of imports of goods and services (M). An economy can operate at
a trade surplus (X > M) where the economy is exporting more than it is importing meaning
other economies rely on them and their trade of goods and services. Or it can operate at a
trade deficit (X < M) where the economy is importing more than it exports meaning it relies
on other economies for its goods and services. Achieving a trade surplus or Equilibrium on
the Current Account of the balance of is one of the government's focuses. ( X >= M).
EV: Having a current account deficit is a problem as it must be financed in some way and
indicates an economy has an uncompetitive manufacturing industry (Secondary) and
constraining export led growth.
Historically the UK in goods has operated at a trade deficit persistently but has compensated
for this with a trade surplus in services
Low and Stable Inflation + Price Stability:
Price Stability Exists when average consumer prices for goods and services are constant
over a period of time, or prices are rising at a low and predictable rate. In the UK the inflation
target for the Consumer Price Index is 2%. Low and Stable Inflation means the increase in
the general prices of the economy is also at a low and stable rate. 2% for the UK on the CPI
provides a stable environment for businesses to invest and grow and protects international
competitiveness of the UK goods and services as well as maintaining consumer purchasing
power of their real disposable income.
Economic Growth:
Economic growth is a long term expansion of the productive potential of an economy
(Outward Shift on the PPF). The growth needs to be sustainable and meet the needs of
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