Unit 12 - Investigating Economic Issues

Managing the Economy

In this section students will consider targets and policies the government may use to achieve its objectives. Students will consider fiscal, monetary and supply side policies within the context of the trade cycle. Students will consider the European Union and its effect on the UK Economy.



1.1 Economic Objectives of the Government

  • government objectives
  • methods of measurement and trends over time
  • government objectives, conflicts and ethical issues
  • the welfare state and its alternatives.

Students should understand the principal government objectives of economic growth, full employment, stable prices and balance of payments.

Students should be aware of the methods available to measure economic performance, such as: inflation, economic growth, balance of payments, budget deficits and surpluses.

Students should be aware that conflicts can arise when attempting to achieve these objectives and the links to equity and equality.

Students should consider how ethical issues affect the achievement of government objectives.

Students should be aware of the benefits and drawbacks of the welfare state and the alternative of individuals providing for themselves.

1.2 The Economy at Work

  • types of economy
  • market failure
  • externalities
  • the concept of an economic cycle
  • government revenue and expenditure
  • fiscal policies
  • monetary policies
  • supply side policies.

Students should be aware of the differences between free market and mixed economies.

Students should understand market failure as the inability of the market system to allocate resources efficiently.

Students should understand externalities as the difference between social costs (benefits) and private costs (benefits), and apply the concepts in a relevant context.

Students should be able to explain the characteristics of the economic cycle: boom, recession, slump and recovery.

Students need to consider how the government collects revenue and its patterns of expenditure.

Students should be aware of how the government can affect levels of income and expenditure through fiscal policies.

Students should be familiar with the role of the Bank of England in controlling the level of demand. Students should be aware of the use of interest rates to control inflation.

Students should be familiar with supply side policies such as: education and training, incentives to work and competition policy. 

1.3 The Role of the European Union (EU)

  • the effects of membership of the EU
  • the Euro
  • the impact of EU enlargement on the UK.

Students should understand the significance of the EU as a Single European Market with a single European currency.

Students should know the potential benefits and drawbacks of the UK joining the Euro.

A detailed knowledge of the European Commission and European Central Bank is not required.

Students should have an appreciation of the potential impact on the UK economy of EU enlargement.

Current Economic Issues

Two topics will be chosen from this section each year for students to study in depth. One topic will be based on local, UK or EU issues and the other will relate to the global economy. Students will be expected to apply appropriately economic theories and concepts they have covered in Unit 11 and the Managing the Economy section of this unit.

The aim of these topics is to encourage students to undertake investigative research into current economic issues and be able to analyse and evaluate the topics under consideration. Where possible, students are encouraged to investigate the local aspects of the issue.

The chosen topics for investigation will be pre-issued to centres each year. Topics will be selected from the following:

  • environmental issues: causes, consequences and solutions
  • global warming and its effect on different economies and societies
  • globalisation: the benefits and drawbacks from an economic viewpoint and ethical issues with the development of the world economy
  • developing economies: India and China – issues of growth and the impact on developed countries
  • underdevelopment: its causes and cures, focusing on least developed economies, eg sub-Saharan Africa
  • dominant firms: impact on consumers and producers plus issues of control and regulation
  • poverty: disparities in living standards and the ethical issues that arise from the implications of choice for society.


This unit will be assessed by an external written assessment of 70 marks and 1 hour 15 minutes in length.
There will be three questions, one assessing Managing the Economy and two assessing Current Economic Issues.