This revision guide offers a selection of data response questions and model answers.
It is designed to help for:
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Readers Question: Does the level of real income grow as the economy grows? Can we say that real income grows as the economy grows? If yes, what factors surround it? Summary In a period of positive economic growth, usually, you would expect a rise in real wages and higher pay. However, it is not guaranteed. …
All economic forecasts are subject to margins of error. This is because: There are many variables affecting the economy. For example, the role of shadow banking was largely ignored in 2007 forecasts but failed sub-prime mortgage debt had a much bigger impact on the wider economy than ever before. There is always a big element …
Economic growth means an increase in national income, but does economic growth actually help to reduce relative poverty and income inequality – or can economic growth exacerbate existing income inequalities? There are two types of poverty: Relative poverty: This is when income is a certain percentage less than the average income. For example, in the …
Economics combines elements of both science and art. Economists try to develop analytical mathematical models which seek to explain economic behaviour in a way that can be theoretically proved. For example, working out the elasticity of demand through using calculus. In macroeconomic models, there are many models which seek to explain macro variables such as …
Interest rates have been cut to a record low of 0.25% – essentially due to grim economic news from the short-run demand side shock of Brexit. Economic theory states that in normal circumstances, lower interest rates should boost aggregate demand (AD). To give a quick recap, lower interest rates should in theory: Reduce the incentive …
How to judge George Osborne’s and David Cameron’s economic record since May 2010? They inherited an economy recovering from a deep recession, high unemployment and large budget deficit. It was a difficult economic circumstance, but at the same time you might expect a strong economic recovery as there was much unused capacity and potential for …
There have been a couple of thoughtful pieces from Paul Krugman challenging the consensus that Brexit will have very high short-term economic cost. Krugman’s argument is: There is uncertainty, but uncertainty on itself is not enough to create a significant demand side shock. In fact, when the uncertainty is resolved, we could have a mini-boom …