Government and the Macroeconomy · 2 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 6% of your exam marks.
New emphasis in the 2027 syllabus; economic growth and recession are now a distinct topic, including causes and consequences of recession. Guidance based on specimen materials.
Real GDP rises when the economy either spends more or can produce more. The syllabus groups the causes into three.
When total spending in the economy rises (because consumers spend more, firms invest more, the government spends more, or exports rise), firms respond by producing more to meet the extra demand. Higher output means higher real GDP. This is short-run growth: it works as long as the economy has spare capacity (idle workers and machines) to put to use.
The economy grows when it has more of the factors of production to work with: a larger workforce (through population growth or immigration), more capital equipment, the discovery of new natural resources, or more land brought into use. With more resources, the economy can produce more.
Growth also comes from better resources rather than just more of them. Better-educated and better-trained workers are more productive; newer and more advanced machinery produces more per hour. Rising productivity means the same number of workers and machines can turn out more output, raising real GDP.