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Every spec point, and what actually teaches it
The real numbered content list from the official Pearson specification, each point matched to the lesson that covers it. Click through to a lesson from its spec point below, or rate how confident you feel — saved in this browser so it’s there next time you come back. Any point with no matching lesson is flagged, not hidden.
24 spec points · 24 covered
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2.3.1 — Measures of economic performance
- 2.3.1.1
Economic growth
- a) The rate of change of real Gross Domestic Product (GDP) as a measure of economic growth and living standards.
- b) Gross National Income (GNI) as an alternative measure of national income.
- c) The distinction between the following measures of GDP/GNI: real and nominal; total and per capita; value and volume.
- d) Comparison of GDP/GNI rates of growth between countries and over time.
- e) The concept of Purchasing Power Parities (PPPs) in making international comparisons of real GDP/GNI.
- f) The distinction between positive economic growth rates and negative economic growth rates.
- g) The concept of 'recession' as two consecutive quarters of negative economic growth.
- h) The limitations of using GDP/GNI to compare living standards between countries and over time.
- i) National happiness and wellbeing: indicators of national happiness and wellbeing; the relationship between real incomes and subjective happiness.
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- 2.3.1.2
Inflation
- a) The concepts of inflation, deflation and disinflation.
- b) Calculating inflation using a consumer price index (CPI), including role of weighted basket of goods and services.
- c) Limitations of the CPI as a measure of the rate of inflation.
- d) The producer (wholesale) price index as an indicator of future trends in the rate of inflation.
- e) Causes of inflation: demand-pull; cost-push; excessive growth of money supply.
- f) Causes of deflation: falling aggregate demand (AD); increase in aggregate supply (AS); fall in the money supply.
- g) Effects of inflation and deflation on: Consumers; the government; firms; workers; income distribution; investment; competitiveness; the current account of the balance of payments.
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- 2.3.1.3
Employment and unemployment
- a) How unemployment is measured, using the International Labour Organization (ILO) definition.
- b) The causes of unemployment: frictional; seasonal; structural; demand deficiency; real wage inflexibility.
- c) The effects of unemployment on: consumers; firms; workers; public finances; resource utilisation and production possibility frontier; society.
- d) The distinction between unemployment and underemployment.
- e) The significance of changes in rates of employment, unemployment and economic inactivity.
- f) The significance of net migration for employment and unemployment.
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- 2.3.1.4
Balance of payments
- a) Components of the balance of payments, with particular reference to the current account.
- b) The distinction between deficits and surpluses in the trade in goods and services balance.
- c) The distinction between balance of payments deficits and surpluses on the current account.
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2.3.2 — Aggregate demand (AD)
- 2.3.2.1
The characteristics of AD
- a) The concept of AD.
- b) Components of aggregate demand: C + I + G + (X−M) =; the AD curve.
- c) The distinction between a movement along, and a shift of, the AD curve.
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- 2.3.2.2
Consumption (C)
- a) Influences on consumption: disposable income; interest rates; consumer confidence; level of welfare payments; wealth effects; availability of credit.
- b) The relationship between savings and consumption.
- c) The definition of the 'savings ratio'.
- d) Causes and effects of changes in the savings ratio.
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- 2.3.2.3
Investment (I)
- a) The distinction between gross investment and net investment.
- b) Influences on investment: the rate of economic growth; interest rates; business confidence and expectations; availability of credit; tax on company profits.
- c) Government policy to promote investment: tax relief; subsidies; reductions on the rate of corporation tax.
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- 2.3.2.4
Government expenditure (G)
- a) Influences on government expenditure: fiscal policy; the level of economic activity; correction of market failures; political priorities.
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- 2.3.2.5
Net trade balance (X−M)
- a) The impact on the net trade balance of changes in: real income; the exchange rate; the state of the global economy; degree of protectionism; non-price factors.
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2.3.3 — Aggregate supply (AS)
- 2.3.3.1
The characteristics of AS
- a) The concept of AS.
- b) The AS curve.
- c) The distinction between a movement along and a shift of the AS curve.
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- 2.3.3.2
Short-run AS (SRAS)
- a) Factors influencing SRAS. Changes in: costs of raw materials and energy; exchange rates; tax rates.
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- 2.3.3.3
Long-run AS (LRAS)
- a) Different shapes of AS curve: Keynesian; classical.
- b) Factors influencing LRAS. Changes in: the state of technology; productivity; education and skills; government regulations and tax; demography and net migration; competition policy.
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2.3.4 — National income
- 2.3.4.1
National income
- a) The circular flow of income.
- b) The distinction between income and wealth.
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- 2.3.4.2
Injections and withdrawals
- a) The distinction between injections and withdrawals.
- b) Injections: investment; government expenditure; exports.
- c) Withdrawals: savings; taxation; imports.
- d) The impact of net injections into, and net withdrawals from, the circular flow of income.
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- 2.3.4.3
Equilibrium level of real output
- a) The concept of equilibrium level of real national output.
- b) Causes of changes in equilibrium real national output, as a result of shifts in AD and/or AS curves.
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- 2.3.4.4
The multiplier
- a) The multiplier and multiplier process.
- b) Marginal propensities and their effects on the multiplier: the marginal propensity to consume (MPC); the marginal propensity to save (MPS); the marginal propensity to tax (MPT); the marginal propensity to import (MPM).
- c) Calculations of the multiplier using the formula 1/(1-MPC) and 1/MPW, where MPW = MPS + MPT + MPM.
- d) The significance of the multiplier for shifts in AD and the level of economic activity.
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2.3.5 — Economic growth
- 2.3.5.1
Causes of growth
- a) The distinction between actual and potential growth.
- b) Actual growth caused by an increase in the components of AD.
- c) The importance of international trade for export-led growth.
- d) Causes of potential growth: domestic investment and foreign direct investment (FDI); innovation; growth in size of labour force, including net migration; the degree of competition.
- e) The importance of productivity for the rate of economic growth.
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- 2.3.5.2
Benefits of growth
- a) Possible benefits of growth: higher living standards; lower unemployment; increased profits for firms; higher levels of investment; increased tax revenues; improved public services.
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- 2.3.5.3
Costs of growth
- a) Possible costs of growth: opportunity costs; environmental costs; balance of trade deficits; increased inequality; inflation.
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- 2.3.5.4
Output gaps
- a) The difference between actual growth rate and long-term trends in growth.
- b) The distinction between positive and negative output gaps.
- c) Characteristics of positive and negative output gaps.
- d) Difficulties of measuring output gaps.
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2.3.6 — Macroeconomic objectives and policies
- 2.3.6.1
Macroeconomic objectives
- a) Economic growth.
- b) Low and stable rate of inflation.
- c) Low unemployment.
- d) Balance of payments equilibrium on current account.
- e) Balanced government budget.
- f) Greater income equality.
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- 2.3.6.2
Possible conflicts between macroeconomic objectives
- a) Inflation and unemployment, including the short-run Phillips curve.
- b) Economic growth and protection of the environment.
- c) Inflation and equilibrium on the current account of the balance of payments.
- d) Economic growth and income equality.
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- 2.3.6.3
Macroeconomic supply-side policies
- a) Supply-side policies designed to increase productivity, competition and incentives.
- b) Free market policies: deregulation of product and labour markets; privatisation; reduction in taxation; changing the levels of welfare payments; cutting the costs of bureaucracy for firms.
- c) Interventionist policies: investment in education, training and skills; incentives to encourage investment: tax incentive or subsidies; infrastructure investment; finance for business start-ups; regional policy.
- d) Strengths and weaknesses of different supply-side policies.
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- 2.3.6.4
Macroeconomic demand-side policies
- a) Demand-side policies: the distinction between fiscal and monetary policy; the distinction between reflationary and deflationary policies.
- b) Fiscal policy instruments: government spending and taxation.
- c) Monetary policy instruments: interest rates; asset purchases to increase money supply (quantitative easing); changes in lending criteria; reserve asset (liquidity) requirements.
- d) The role of central banks in the conduct of monetary policy: implementation of monetary policy; achieving an inflation target; as banker to the government; as banker to the banks – lender of last resort.
- e) Strengths and weaknesses of different demand-side policies.
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