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Theme 2: 2.1 - 2.5: The UK Economy – Performance and Policies
2.1 Measures of Economic Performance
Economic Growth

GDP, Real GDP, GDP per capita

Difference between real and nominal GDP

Recession definition and implications

Inflation

Consumer Prices Index (CPI), Retail Prices Index (RPI)

Demand-pull vs. cost-push inflation

Employment and Unemployment

Claimant Count vs. ILO Labour Force Survey methods

Causes of changes in unemployment rates

Economic and social consequences of unemployment

Balance of Payments

Components of the Current Account (goods/services, primary income, secondary income)

Causes and solutions for a current account deficit

2.2 Aggregate Demand (AD)
Components of AD: Consumption ©, Investment (I), Government spending (G), Net exports (X–M)

Factors affecting each component

Shifts and movements along the AD curve

2.3 Aggregate Supply (AS)
Short-run vs. long-run AS (Classical vs. Keynesian views)

Factors causing shifts in SRAS and LRAS

Effects of infrastructure investment and planning reforms on LRAS

2.4 National Income
Circular flow of income (income vs. wealth)

Multiplier effect and calculations

2.5 Economic Growth
Actual vs. potential economic growth

Output gaps (negative output gap, implications)

Business/trade cycle phases and impact on government finances

Economic growth: benefits and limitations regarding living standards

Exam Structure Included:
Multiple-choice questions with explanations

Short answer and application questions with model answers

Data response questions with explanations

Essay questions with structured model responses and evaluation tips