Economics 9708 · syllabus 4
Cambridge A Level Economics 9708 — The macroeconomy (AS Level) topical past papers
The economy as a whole: national income and the circular flow, aggregate demand and supply, economic growth, unemployment and inflation, and how each is measured.
- Questions
- 951
- Years
- 2002–2026
- With mark scheme
- 99%
- Questions 2022–2026
- 277
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What The macroeconomy (AS Level) covers
Macroeconomics studies the whole economy. National income can be measured from output, incomes or expenditure, and the main measures are gross domestic product (GDP), the value of output produced within a country; gross national income (GNI), which adds net primary income from abroad; and net national income (NNI), which subtracts depreciation. Real figures remove the effect of inflation from nominal ones, so only real GDP shows whether output has grown. In the circular flow, households supply factor services to firms and spend their incomes on firms' output; saving, taxes and imports are withdrawn from the flow, while investment, government spending and exports are injected into it.
Aggregate demand (AD) is total planned spending on an economy's output, C + I + G + (X − M), and it slopes downwards against the price level. Aggregate supply (AS) is the total output firms will produce at each price level. Short-run AS slopes upwards; long-run AS shows the economy's productive capacity, drawn either vertical at full employment or, in the Keynesian view, flat while there is plenty of spare capacity, steepening as full employment nears and vertical once it is reached. A rightward shift in AD raises real output and the price level, in proportions that depend on how close the economy is to capacity; a rightward shift in long-run AS raises potential output and eases pressure on the price level.
The topic ends with three measures of performance. Actual economic growth is an increase in real GDP; potential growth is an increase in the economy's productive capacity. Unemployment counts people of working age who are willing and able to work and looking for a job but without one, measured by a claimant count or a labour force survey; its types are frictional, structural, cyclical and seasonal. Inflation is a sustained rise in the general price level, measured by a weighted consumer price index; it can be demand-pull or cost-push, and its costs depend on whether it was anticipated. This is AS content, examined on Papers 1 and 2.
In the syllabus
The headings this topic has in the Cambridge International 2026–2028 syllabus, as the board prints them.
- 4 The Macroeconomy (AS Level)
- 4.1 National income statistics
- 4.2 Introduction to the circular flow of income
- 4.3 Aggregate Demand and Aggregate Supply analysis
- 4.4 Economic growth
- 4.5 Unemployment
- 4.6 Price stability
What you should be able to do
- Distinguish GDP, GNI and NNI, nominal from real values, and the output, income and expenditure methods of measurement
- Explain the circular flow of income with its injections and withdrawals
- Draw AD and AS diagrams and analyse the effects of shifts on real output, the price level and employment
- Explain the causes and consequences of economic growth, distinguishing actual from potential growth
- Calculate an unemployment rate, describe how unemployment is measured, and explain its types and consequences
- Calculate a weighted price index and a rate of inflation, and explain the causes and consequences of inflation and deflation
Key ideas
- AD = C + I + G + (X − M)
- GNI = GDP + net primary income from abroad; NNI = GNI − depreciation
- Real value = nominal value ÷ price index × 100, with the base year's index at 100
- Unemployment rate = number unemployed ÷ labour force × 100, the labour force being the employed plus the unemployed
- Inflation: a sustained rise in the general price level; deflation: a sustained fall; disinflation: a fall in the rate of inflation while prices are still rising
- Withdrawals (S, T, M) and injections (I, G, X): national income rises when injections exceed withdrawals
How The macroeconomy (AS Level) has been examined
From 2022 to 2026, The macroeconomy (AS Level) was on Paper 2 · AS Level Data Response and Essays in 13 of 14 exam series, worth about 32% of that paper’s marks.
| Paper | Questions | Share of marks | Series |
|---|---|---|---|
| Paper 1 · AS Level Multiple Choice | 224 | 21% | 14 of 14 |
| Paper 2 · AS Level Data Response and Essays | 53 | 32% | 13 of 14 |
Momentum’s own count, over the questions in its bank for these years: a series is one exam session, every zone included, and a question filed under two chapters counts in both. Median marks per question: 1. The bank files this topic together with neighbouring ones, so these figures count every question in its chapters, including some on those topics.
Filed in Momentum under: The Macro Economy.
A worked example
A consumer price index has three categories: food with a weight of 50, housing 30 and transport 20. Between the base year and year 1 the price index for food rises to 108 and for housing to 105, while transport falls to 90. Calculate the consumer price index for year 1 and the rate of inflation. Over the same period a worker's weekly wage rises from $400 to $420. What happened to the real wage?
- Multiply each category's index by its weight: food 108 × 50 = 5400; housing 105 × 30 = 3150; transport 90 × 20 = 1800
- Divide the total by the sum of the weights: (5400 + 3150 + 1800) ÷ (50 + 30 + 20) = 10 350 ÷ 100 = 103.5
- The base-year index is 100, so the price level rose by 3.5%
- The money wage rose by (420 − 400) ÷ 400 × 100 = 5%
- Real wage in base-year prices = $420 ÷ 103.5 × 100 = $405.80, a rise of 5.80 ÷ 400 × 100 = 1.45%
- Check: the real rise is roughly the money rise minus inflation, 5% − 3.5% = 1.5%, close to the exact figure
Answer: The index is 103.5, so inflation was 3.5%; the real wage rose by about 1.45%, to $405.80 in base-year prices
Written by Momentum for this page, with its own numbers; it is not taken from a past paper.
Mistakes that cost marks
- Treating a fall in the inflation rate as a fall in prices — if inflation falls from 6% to 2%, prices are still rising, only more slowly; that is disinflation, not deflation
- Using a rise in nominal GDP as evidence of growth — if prices rose faster than nominal GDP, real output fell
- Calculating the unemployment rate as a share of the whole population — the denominator is the labour force, which leaves out children, retired people and others not seeking work
- Shifting AD for a change in the price level — a change in the price level is a movement along the AD curve; only a change in spending at every price level, such as a rise in investment, shifts it
- Explaining the slope of AD by consumers switching to substitutes, as for a market demand curve — AD slopes down because a lower price level raises the real value of wealth, tends to lower interest rates and makes exports more competitive
Exam technique
- In Paper 1, decide first whether a change acts on AD (spending) or AS (costs and capacity), then how close the economy is to capacity, which decides how much of the effect falls on output and how much on prices
- In data-response questions on national income or inflation, quote figures from the source with their units and dates, and say whether they are nominal or real before drawing a conclusion
- When analysing the consequences of inflation or unemployment, follow them through to particular groups — savers, borrowers, people on fixed incomes, exporters, the government's budget — rather than calling them bad in general
- In essays, evaluate by asking what caused the change: growth led by AD has different effects from growth led by AS, and demand-pull inflation needs different policies from cost-push
Practising in Momentum
- Every question in a chapter as one list, from every paper and year in the bank, newest first or shuffled.
- Each question turns over to its own part of the mark scheme, where the board published one.
- Narrow by paper, year, session, zone and marks, and star the questions worth keeping.
- Pick chapters, a number of questions and a time, and the exam builder draws a mock to sit and mark.
Past-paper questions and mark schemes are the copyright of Cambridge International. Momentum shows them to signed-in learners for revision and does not publish them on these pages.