Ecnomics Revision Notes (F582) - AS 2

These are my F582 AS Economics notes for Edexcel 

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Economics revision
Chapter 4:aggregate demand and aggregate supply and their
Aggregate demand The total demand for a country's goods and
services at a given price level and in a given
Price level The average of each of the prices of all the
products produced in an economy
Consumer expenditure Spending by households on consumer
Investment Spending on capital goods
Government spending Spending by the central government and local
government on goods and services
Exports Products sold abroad
Imports Products bought from abroad
Net exports The value of exports minus the value of
Transfer payments Money transferred from one person or group
to another not in return for any good or
Job seeker's allowance A benefit paid by the government to those
unemployed and trying to find a job
Trade surplus The value of exports exceeding the value of
Trade deficit The value of imports exceeding the value of
Consumer confidence How optimistic consumers are about future
economic prospects
Rate of interest The charge for borrowing money and the
amount paid for lending money
Average propensity to consume The proportion of disposable income spent. It
(APC) is consumer expenditure / disposable income
Net savers People who save more than they borrow
Wealth A stock of assets, e.g. property, shares &
money held in savings account
Distribution of income How income is shared out between
households in a country
Inflation A sustained rise in the price level
Saving Real disposable income ­ spending
Average propensity to save (APS) The proportion of disposable income saved. It
is saving / disposable income
Target savers People who save with a target figure in mind
Dissave Spending more than disposable income

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Savings ratio Savings as a proportion of disposable income
Capacity utilization The extent to which firms are using their
capital goods
Corporation tax A tax on firms' profits
Retained profits Profit kept by firms to finance investment
Unit cost Average cost per unit of output
Real GDP The country's output measured in constant
prices and so adjusted for inflation
Gross domestic product (GDP) The total output of goods and services
produced in a country
Exchange rate The price of one currency in terms of another…read more

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Trend growth The expected increase in potential output over
AD = C + I + G + (X - M)
Key macroeconomic policy objectives:
Stable & sustainable economic growth
Low unemployment
Low & stable inflation
A satisfactory balance of payments position
An equitable redistribution of income
An increase in UK productivity
Macroeconomic policy instruments
Fiscal policy: using taxation & government spending to influence economic
Monetary policy: using the rate of interest, the money supply &/ ot the
exchange rate to influence government activity…read more

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Interest rates/ lower interest rates means:
Cheaper to borrow
Less incentive to save
Less money to pay on mortgage &/ or loans therefore more discretionary
6) A change in the age structure of the population
The young and elderly spend a relatively high proportion of their disposable
7) Inflation
It is difficult to determine what impact inflation has on consumer spending
Higher prices could = higher spending if they expect prices to increase further
However, higher prices could = higher saving to maintain…read more

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Government spending
Government expenditure by central & local government on state provided goods &
services including public & merit goods
Transfer payments are not included in G because they are not a payment to a factor
of production or any output produced.
Factors that determine the level of government spending:
Political agenda of the government - its view of market failure and desire to
win votes.…read more

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Aggregate supply
In the long run, the aggregate-supply curve is assumed to be vertical
In the short run, the aggregate-supply curve is assumed to be upward sloping
Short run aggregate supply (SRAS) shows total planned output when prices in the
economy can change but the prices and productivity of all factor inputs e.g. wage
rates and the state of technology are assumed to be held constant.…read more

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In turn, they will spend some of the money they receive. So there is a knock
on effect, with AD rising by more than the initial amount
Output gap
Positive output gap ­ occurs when actual output is above potential output.…read more

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­ absence of fluctuations, stable economic growth, low and stable
inflation...…read more

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Chapter 5: Government economic policy objectives and indicators
of national economic performance
Economic growth In short run, an increase in real GDP, & in the
long run, an increase in productive capacity,
that is, in the maximum output that the
economy can produce
Unemployment A situation where people are out of work but
are willing and able to work
Labour force The people
Economically inactive People of working age who are neither
employed nor unemployed
Deflation A sustained fall in the general price level
Balance…read more

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Labour force survey A measure of unemployment based on a
survey using the ILO definition of
International Labour Organisation A member organization of the United Nations
(ILO) that collects statistics on Labour market
conditions and seeks to improve working
Claimant count A measure of unemployment that includes
those receiving unemployment ­ related
Consumer prices index (CPI) A measure of changes in the price of a
representative basket of consumer goods
and services.…read more


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