CCEA A Level Economics
CCEA A Level Economics AS 2 Macroeconomic Objectives Exam Questions
Free CCEA A Level Economics revision for AS 2 Macroeconomic Objectives: what you need to know, common mistakes and exam-style questions with answers. Covers growth, inflation, unemployment, balance of payments and income distribution objectives, the lorenz curve, gini coefficient and trade-offs.
Practise AS 2 Macroeconomic Objectives with past papers
Once you have learnt this topic, find the AS 2 Macroeconomic Objectives questions in real CCEA A Level Economics past papers and mark them with the mark scheme. Doing lots of real questions is the quickest way to learn how examiners ask about each idea.
About CCEA A Level Economics AS 2 Macroeconomic Objectives
Macroeconomic objectives explains what governments are trying to achieve in Unit AS 2: Managing the National Economy. You need to know the main objectives: sustainable economic growth, low and stable inflation, low unemployment, a satisfactory balance of payments position, and a fairer distribution of income, along with environmental goals. You also need to measure inequality using the Lorenz curve and the Gini coefficient, and explain conflicts and trade-offs between objectives, such as inflation against unemployment or growth against the environment. This topic links to inflation, unemployment and growth, and to the policies used to achieve them. CCEA questions often ask you to evaluate whether objectives conflict.
What you need to know
- Main objectives Sustainable economic growth, price stability (the UK inflation target is 2% CPI), low unemployment, a sustainable balance of payments, and a more equal distribution of income.
- Lorenz curve Plots the cumulative percentage of income against the cumulative percentage of households. The 45 degree line shows perfect equality; the further the curve is below it, the greater the inequality.
- Gini coefficient The ratio of the area between the line of equality and the Lorenz curve to the whole area under the line of equality. It ranges from 0 (perfect equality) to 1 (perfect inequality).
- Inflation and unemployment trade-off Rapid growth in AD can reduce unemployment but cause demand-pull inflation; reducing inflation by cutting AD may raise unemployment.
- Growth and other objectives Fast growth may worsen the current account as imports rise and may harm the environment. Growth may also widen inequality if gains go mainly to higher earners.
Common mistakes in AS 2 Macroeconomic Objectives
- Stating that governments aim for zero inflation; the UK target is low and stable inflation of 2%.
- Reading a Lorenz curve the wrong way round; inequality increases as the curve bows further from the diagonal.
- Describing a Gini coefficient of 0.4 as 40% of people being poor; it is a summary measure of inequality.
- Assuming objectives always conflict; supply-side improvements can raise growth and reduce inflation together.
Try three AS 2 Macroeconomic Objectives exam-style questions
1. Explain how the Gini coefficient is calculated from a Lorenz curve. (3 marks)
Show the mark scheme answer
Measure the area between the line of equality and the Lorenz curve (A); divide by the total area under the line of equality (A + B); Gini = A/(A + B), from 0 to 1.
2. Explain why there may be a conflict between low unemployment and low inflation. (4 marks)
Show the mark scheme answer
To cut unemployment the government raises AD; as the economy nears full capacity firms bid up wages and costs; demand-pull and cost pressures push up the price level; so lower unemployment comes at the cost of higher inflation.
3. Evaluate the view that economic growth will always help the government achieve its other macroeconomic objectives. (8 marks)
Show the mark scheme answer
Growth raises employment and tax revenue and reduces poverty; but rapid demand-led growth can cause inflation; imports rise worsening the current account; environmental damage; inequality may widen; supply-side growth less likely to conflict; conclusion that it depends on the source and speed of growth.
AS 2 Macroeconomic Objectives FAQs
What does CCEA A Level Economics AS 2 Macroeconomic Objectives cover?
The government's main macroeconomic objectives, measuring inequality with the Lorenz curve and Gini coefficient, and the conflicts and trade-offs between objectives.
Which unit is this topic examined in?
It is in Unit AS 2: Managing the National Economy, a 1 hour 30 minute paper with short-answer questions, a case study and an extended response question.
How do I revise policy conflicts?
Make a table of each pair of objectives, with the mechanism that links them, a real example and the conditions under which the conflict is weaker, such as when growth comes from the supply side.
