The Role of the State in the Macroeconomy | Edexcel A-Level Economics A (9EC0)
The Role of the State in the Macroeconomy
- 211 questions
- 15 subtopics
- Theme 4: a global perspective
- Paper 2 and Paper 3
Covers public spending, taxation and the public finances, and how governments use policy in a global setting: reducing deficits, tackling poverty and inequality, responding to external shocks, and the constraints that limit what any of it can achieve..
It covers capital, current and transfer spending, and what drives it, the effects of public expenditure, and crowding out, progressive, proportional and regressive taxes, the Laffer curve and the effects of tax changes, automatic stabilisers, deficits and the national debt, what drives deficits and debt, and why their size matters, reducing fiscal deficits and national debt, policies to reduce poverty and inequality, monetary, exchange rate and supply-side policy across countries, direct controls, and why policy works differently elsewhere, what an external shock is, and the kinds that occur, fiscal, monetary and supply-side responses to a shock, policy lags and the constraints on responding, measures to control global companies' (transnationals') operations and problems facing policymakers when applying policies.
Sample questions from The Role of the State in the Macroeconomy
Answer each one closed book first, then open the answer.
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Capital, current and transfer spending, and what drives it
How does capital expenditure differ from current expenditure in terms of productive capacity?
Show the answer
Capital expenditure creates assets that enhance productive capacity, while current expenditure maintains existing services without adding to the capital stock. -
The effects of public expenditure, and crowding out
How can progressive taxation combined with transfer payments reduce income inequality?
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By redistributing income from higher to lower income groups through taxing the wealthy more heavily and providing benefits to those on lower incomes. -
The Laffer curve and the effects of tax changes
Why do regressive indirect taxes tend to increase income inequality?
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Lower-income households spend a higher proportion of their income on taxed goods, so they bear a proportionally greater tax burden. -
Automatic stabilisers, deficits and the national debt
What is a structural deficit?
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The part of the fiscal deficit that would exist even if the economy were operating at full capacity or trend output. -
Reducing fiscal deficits and national debt
What term describes a package of measures that combines both tax increases and spending cuts to reduce a fiscal deficit?
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Austerity measures (or austerity packages) -
Policies to reduce poverty and inequality
What is a wealth tax and how does it address inequality?
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A wealth tax is a levy on the total value of assets owned; it reduces inequality by taking more from those with greater accumulated wealth -
Direct controls, and why policy works differently elsewhere
What are capital controls?
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Government restrictions on the flow of money into or out of a country, used to manage exchange rates or prevent capital flight -
What an external shock is, and the kinds that occur
How does a recession in a major trading partner act as a demand-side external shock?
Show the answer
It reduces demand for a country's exports, lowering aggregate demand and potentially causing unemployment and slower growth.
The 15 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Capital, current and transfer spending, and what drives it | Recall questions on the three categories of public expenditure and on ageing, the economic cycle, ideology, globalisation and debt interest as drivers. | 12 |
| The effects of public expenditure, and crowding out | Recall questions on productivity, growth, living standards and equality, and on financial and resource crowding out. | 16 |
| Progressive, proportional and regressive taxes | Recall questions on the three tax structures, direct against indirect taxes, and how tax rates affect incentives to work. | 13 |
| The Laffer curve and the effects of tax changes | Recall questions on what the Laffer curve shows, and on the effects of tax changes on income distribution, output, prices, trade and foreign investment. | 17 |
| Automatic stabilisers, deficits and the national debt | Recall questions on automatic stabilisers against discretionary fiscal policy, the fiscal deficit as a flow and the national debt as a stock, and structural against cyclical deficits. | 15 |
| What drives deficits and debt, and why their size matters | Recall questions on how spending, taxes, ageing and interest rates affect the deficit, what determines the national debt, and why deficits and debt matter, from crowding out and lost confidence to fiscal flexibility, sustainability and intergenerational equity. | 16 |
| Reducing fiscal deficits and national debt | Recall questions on fiscal consolidation, primary surpluses, growth and debt restructuring, and on the conflict with growth objectives. | 8 |
| Policies to reduce poverty and inequality | Recall questions on progressive taxation, transfer payments, means-tested benefits, wealth and inheritance taxes, and public service spending. | 8 |
| Monetary, exchange rate and supply-side policy across countries | Recall questions on the transmission mechanism, quantitative easing, exchange rate regimes and currency unions, and supply-side measures for competitiveness. | 17 |
| Direct controls, and why policy works differently elsewhere | Recall questions on price, wage, import, capital and credit controls, and on why the same policy has different effects in developed and developing economies. | 11 |
| What an external shock is, and the kinds that occur | Recall questions on commodity price shocks, natural disasters, pandemics, supply chain disruption, recession abroad and financial contagion. | 8 |
| Fiscal, monetary and supply-side responses to a shock | Recall questions on the expansionary and contractionary responses available, and on supply-side measures to raise resilience. | 18 |
| Policy lags and the constraints on responding | Recall questions on recognition, implementation and impact lags, and on debt levels, bond market confidence, the zero lower bound and fiscal space. | 15 |
| Measures to control global companies' (transnationals') operations | Recall questions on transfer pricing, tax avoidance and regulation, and on the difficulty of controlling firms that operate across borders. | 18 |
| Problems facing policymakers when applying policies | Recall questions on inaccurate, revised and outdated information, risks against uncertainties, the complexity of the economy and unpredictable responses, and external shocks that policymakers cannot control and that offset what policy intends. | 19 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
Edexcel A-Level Economics A Active Recall Guide
Every topic, not just this one. 2,508 questions with their answers.