WJEC A Level Economics
WJEC A Level Economics Economic Growth Exam Questions
Free WJEC A Level Economics revision for Economic Growth: what you need to know, common mistakes and exam-style questions with answers. Covers actual and potential growth, real GDP, output gaps, causes of growth and the benefits and costs of growth.
Practise Economic Growth with past papers
Once you have learnt this topic, find the Economic Growth questions in real WJEC 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 WJEC A Level Economics Economic Growth
Economic growth is the first of the A2 macroeconomic objectives in WJEC Economics, building on the AS overview of government objectives. The specification organises it around three areas: actual versus potential economic growth, the causes of growth, and the benefits and costs of growth. You need to use real GDP data, explain output gaps and the economic cycle, and show short run growth with AD shifts and long run growth with LRAS and PPF shifts. Evaluation centres on whether growth is sustainable and who benefits from it, including regional differences such as Wales compared with the UK. It is examined in A2 Units 3 and 4.
What you need to know
- Actual versus potential growth Actual growth is the annual percentage change in real GDP. Potential (trend) growth is the rate at which productive capacity increases. The difference between actual and potential output is the output gap.
- Output gaps and the cycle A positive output gap means the economy is operating above capacity, with inflationary pressure; a negative gap means spare capacity and higher unemployment. Recession is two successive quarters of falling real GDP.
- Demand side causes Increases in consumption, investment, government spending and net exports raise AD and actual growth in the short run, especially when there is spare capacity.
- Supply side causes Increases in the quantity and quality of labour and capital, technological progress, enterprise and productivity raise potential growth by shifting LRAS and the PPF outwards.
- Benefits of growth Higher real incomes and living standards, more employment, higher tax revenue to fund public services and a lower debt to GDP ratio, plus more resources for investment.
- Costs of growth Inflation if growth exceeds trend, wider current account deficits, environmental damage and resource depletion, and uneven gains that increase inequality between groups and regions.
Common mistakes in Economic Growth
- Using nominal GDP figures as if they show growth. Use real GDP, which removes inflation.
- Describing a slowdown as a recession. A recession needs two consecutive quarters of negative real growth.
- Showing long run growth only on the AD curve. Potential growth requires an LRAS or PPF shift.
- Listing costs and benefits without judgement. Explain which matter most and under what conditions.
Try three Economic Growth exam-style questions
1. Real GDP rises from £2,100bn to £2,163bn. Calculate the rate of economic growth. (2 marks)
Show the mark scheme answer
Change = 63; 63 / 2,100 x 100 = 3%.
2. Explain what is meant by a negative output gap and one consequence of it. (3 marks)
Show the mark scheme answer
Actual output is below potential output; resources such as labour are underused; consequence: higher cyclical unemployment (or low inflationary pressure, lower tax revenue).
3. Evaluate whether investment in capital is the most important cause of long run economic growth. (15 marks)
Show the mark scheme answer
A strong answer would analyse how investment raises AD in the short run and increases the capital stock and productivity, shifting LRAS; evaluate the role of human capital, technology, enterprise and institutions, diminishing returns to capital and the quality of investment; consider UK productivity weaknesses; reach a judgement that several factors interact.
Economic Growth FAQs
What does WJEC A Level Economics Economic Growth cover?
It covers actual and potential growth, real GDP and output gaps, the demand side and supply side causes of growth and the benefits and costs of growth.
Which unit is Economic Growth examined in?
It is A2 content, so it is examined in A2 Unit 3 (Exploring Economic Behaviour) and A2 Unit 4 (Evaluating Economic Models and Policies).
What diagrams do I need for economic growth?
Use AD/AS for short run growth, an LRAS shift and a PPF outward shift for long run growth, and an economic cycle diagram showing actual output around trend with positive and negative output gaps.
