# A-Level Psychology & Economics: AQA Core Studies, Approaches, Biopsychology, Research Methods, Market Failure & Macroeconomic Policy

> High-yield A-Level Psychology (AQA/OCR) and A-Level Economics (Edexcel/AQA/OCR): Memory models, Attachment, Social Influence, Psychopathology, Biopsychology, Inferential Stats, Price/Income/Cross Elasticities, Market Failure externalities, Market Structures, and AD/AS Macro Policy.

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- **Level:** advanced
- **Languages:** en → en
- **Total Cards:** 32

## Flashcards (32 Cards)

| # | Front (Term / Prompt) | Back (Definition / Answer) | Example | Multiple-Choice Options |
| :--- | :--- | :--- | :--- | :--- |
| 1 | Compare Perfect Competition, Monopolistic Competition, Oligopoly (Kinked Demand & Game Theory), Monopoly, and Contestable Markets. | 1) Perfect Competition: many small price-taking firms (horizontal D = AR = MR), homogeneous product, zero barriers to entry, perfect information; earns normal profit (AC = AR) in the long run and is both productively and allocatively efficient. 2) Monopolistic Competition: many firms with differentiated products (downward-sloping elastic AR/MR); normal profit in long run. 3) Oligopoly: high n-firm concentration ratio, high barriers to entry, interdependence, non-price competition, price rigidity (kinked demand curve / Nash equilibrium prisoners' dilemma driving tacit or overt collusion). 4) Monopoly: single seller (or >25% market share in UK CMA definition), high barriers to entry, earns long-run supernormal profit; can practice 1st/2nd/3rd-degree Price Discrimination if markets are separable with different PEDs. 5) Contestable market: zero sunk costs and low entry/exit barriers force incumbents toward AC = AR via threat of 'hit-and-run' entry. |  |  |
| 2 | In AQA Psychology Research Methods, compare Lab, Field, Natural, and Quasi Experiments, and list the features of Science (Popper & Kuhn). | 1) Lab experiment: IV manipulated in controlled artificial setting (high internal validity/control over extraneous variables, low ecological validity/demand characteristics). 2) Field experiment: IV manipulated in natural setting. 3) Natural experiment: IV varies naturally (researcher cannot manipulate IV, e.g., Romanian orphans). 4) Quasi experiment: IV is an existing participant variable (e.g., age, gender, phobia). Features of Science: Objectivity, Empirical method, Replicability, Falsifiability (Popper 1934—ability to prove a hypothesis wrong via null hypothesis testing), Theory construction (deductive/inductive), and Paradigm shifts (Kuhn 1962). |  |  |
| 3 | How do you choose the correct Inferential Statistical Test in AQA A-Level Psychology using the 3-criterion decision matrix? | Identify: 1) Test of Difference vs Correlation; 2) Experimental Design (Independent Groups vs Repeated Measures/Matched Pairs); 3) Level of Measurement (Nominal = categories, Ordinal = ranks/scores, Interval = equal standard units). For Nominal Difference (Independent) → Chi-Squared (χ²); Nominal Difference (Repeated) → Sign Test; Ordinal Difference (Independent) → Mann–Whitney U; Ordinal Difference (Repeated) → Wilcoxon T; Interval Difference (Independent) → Unrelated t-test; Interval Difference (Repeated) → Related t-test; Ordinal Correlation → Spearman's rho; Interval Correlation → Pearson's r. |  |  |
| 4 | What is the KAA + Evaluation (25-mark essay) structure required for top-band A*/Level 5 answers in A-Level Economics (Edexcel/AQA/OCR)? | 1) Define core concepts and state an evaluative thesis in the introduction; 2) Develop 2–3 analytical chains of reasoning (Knowledge → Application to real-world data/extract → Step-by-step Analysis) integrated with large, accurately labelled micro/macro diagrams (shifting curves and marking old/new equilibria P₁Q₁ → P₂Q₂ or Y₁PL₁ → Y₂PL₂); 3) Follow each analytical paragraph with deep Evaluation (SR vs LR, elasticity sensitivity, ceteris paribus assumptions, magnitude, unintended consequences/government failure); 4) Conclude with a weighed, context-dependent final judgement ('It depends primarily on...'). |  |  |
| 5 | In A-Level Financial Economics, what are the roles of Commercial Banks vs Central Banks, and how do Systemic Risk, Moral Hazard, and Liquidity/Capital Ratios work? | Commercial banks accept deposits, provide payment mechanisms, and create credit/loans (balancing profitability against liquidity and capital adequacy). Central banks (Bank of England) set monetary policy, issue currency, act as banker to the government and Lender of Last Resort to commercial banks, and regulate financial stability (FPC/PRA/FCA). Market failures in finance include Asymmetric Information, Moral Hazard (taking excessive subprime risks knowing the state will bail out 'too big to fail' banks), Speculative Asset Bubbles, and Systemic Risk (failure of one institution triggering a credit crunch across the real economy). |  |  |
| 6 | In A-Level Option Topics (Schizophrenia), compare the Dopamine Hypothesis and Neural Correlates with Family Dysfunction and Cognitive Explanations. | Biological: Gottesman (1991) concordance 48% MZ vs 17% DZ twins; Ripke et al. (2014) 108 candidate genes (polygenic/aetiologically heterogeneous). Revised Dopamine Hypothesis: hyperdopaminergia in subcortical mesolimbic pathways (D2 receptor excess in Broca's area → positive symptoms like auditory hallucinations) AND hypodopaminergia in prefrontal mesocortical pathways (→ negative symptoms like avolition/alogia). Psychological: Double-bind theory (Bateson), High Expressed Emotion (EE → relapse), and Frith's (1992) cognitive deficits in metarepresentation (hallucinations/delusions of control) and central control (derailment of speech). |  |  |
| 7 | Compare Monetary Policy, Fiscal Policy, and Supply-Side Policies (Interventionist vs Market-Based), and evaluate their macroeconomic conflicts using the Phillips Curve. | 1) Monetary Policy (Bank of England MPC, 2% CPI inflation target): base interest rate and Quantitative Easing (QE) operating via the monetary transmission mechanism (borrowing, mortgages/wealth effect, exchange rate). 2) Fiscal Policy (HM Treasury Budget): Government spending (G) and direct/indirect taxation (T); automatic stabilisers vs discretionary fiscal policy (cyclical vs structural budget deficit vs national debt). 3) Supply-Side Policies shift LRAS right: Market-based (deregulation, privatisation, corporation/income tax cuts, trade union reform) vs Interventionist (education/training, R&D subsidies, green infrastructure). Short-run Phillips Curve shows a trade-off between low unemployment and low inflation, whereas Friedman's Long-Run Phillips Curve (LRPC) is vertical at the NAIRU. |  |  |
| 8 | In A-Level Economics, define Scarcity, Opportunity Cost, the Production Possibility Frontier (PPF), and Positive vs Normative Statements. | The basic economic problem is finite scarce resources (CELL: Capital, Enterprise, Land, Labour) relative to infinite human wants. Opportunity cost is the value of the next best alternative foregone when a choice is made. A PPF shows the maximum productive potential of an economy between capital and consumer goods: points ON the curve are productively efficient (concave due to diminishing marginal returns / imperfect factor substitutability); points INSIDE represent unemployment/inefficiency; outward shifts represent long-run economic growth (increase in quantity/quality of factors of production). |  |  |
| 9 | Distinguish between the Short Run (Law of Diminishing Marginal Returns) and the Long Run (Internal and External Economies vs Diseconomies of Scale) in Theory of the Firm. | Short run (at least one factor of production, e.g., capital, is fixed): adding variable labour initially increases marginal product (MP) due to specialisation, then MP diminishes as fixed capital becomes overcrowded, causing Marginal Cost (MC) to rise (MC cuts AC and AVC at their minimum points). Long run (all factors variable): Internal Economies of Scale (REAL FUN: Risk-bearing, Economies of scope, Managerial, Financial, Technical, Marketing, Purchasing) lower LRAC as output grows; Diseconomies of scale (control, coordination, communication/alienation) cause LRAC to rise beyond the Minimum Efficient Scale (MES). |  |  |
| 10 | Contrast Asch's (1951) Conformity baseline and variations with Milgram's (1963) Obedience study and situational variables. | Asch (1951, line judgement with confederates): 36.8% mean conformity on critical trials (75% conformed at least once); conformity dropped with a dissenter (to 5.5%) and rose with task difficulty (informational social influence, ISI) vs fear of rejection (normative social influence, NSI). Milgram (1963, electric shock generator): 65% obeyed to 450 V (100% to 300 V). Situational variables reducing obedience: Proximity (same room = 40%, touch proximity = 30%), Location (run-down office = 47.5%), and Uniform (ordinary clothes = 20%), explained by the shift from Autonomous to Agentic State and Legitimacy of Authority. |  |  |
| 11 | How do Loftus & Palmer (1974) and Gabbert et al. (2003) explain the inaccuracy of Eyewitness Testimony (EWT), and how does the Cognitive Interview improve recall? | Loftus & Palmer (1974): Leading questions alter speed estimates of a car crash ('smashed' = 40.5 mph vs 'contacted' = 31.8 mph) and cause false memory of broken glass via response-bias and memory substitution. Gabbert et al. (2003): 71% of witnesses recalled items they hadn't seen after post-event discussion (memory conformity/source monitoring error). Geiselman's Cognitive Interview uses 4 techniques: 1) Report everything; 2) Reinstate the context; 3) Reverse the order; 4) Change perspective. |  |  |
| 12 | In A-Level Economics Behavioural Economics, how do Bounded Rationality, Anchoring, Social Norms, and Nudge Theory challenge Neoclassical Rationality? | Neoclassical economics assumes Homo economicus acts with perfect information and unbounded self-control to maximise utility. Behavioural economics (Simon, Kahneman & Tversky, Thaler) shows consumers exhibit Bounded Rationality and Bounded Self-Control (satisficing and rules of thumb/heuristics) due to: 1) Anchoring bias (relying on an arbitrary initial reference price); 2) Availability bias; 3) Social norms / herding; 4) Loss aversion and Status Quo bias; 5) Altruism/fairness. Choice Architecture (Nudge Theory, e.g., automatic pension enrolment opt-out defaults) steers behaviour toward socially optimal outcomes while preserving freedom of choice. |  |  |
| 13 | Compare the Multi-Store Model of Memory (Atkinson & Shiffrin, 1968) with the Working Memory Model (Baddeley & Hitch, 1974). | Multi-Store Model (MSM): unitary stores—Sensory Register (iconic/echoic, <0.5s, huge capacity) → Attention → Short-Term Memory (STM: acoustic coding, 7±2 items, 18–30s duration) → Maintenance/Prolonged Rehearsal → Long-Term Memory (LTM: semantic coding, unlimited capacity/duration). Working Memory Model (WMM) replaces unitary STM with an active multi-component system: Central Executive (attentional supervisor) controlling the Phonological Loop (phonological store + articulatory control process), Visuo-Spatial Sketchpad (visual cache + inner scribe), and Episodic Buffer (added 2000). |  |  |
| 14 | In AQA Psychology Attachment, evaluate Van IJzendoorn & Kroonenberg's (1988) meta-analysis of cultural variations in attachment and Rutter's English and Romanian Adoptee (ERA) study. | Van IJzendoorn & Kroonenberg (1988, 32 studies across 8 countries, 1,990 infants): Secure (Type B) was the modal attachment type in ALL countries, but Insecure-Avoidant (Type A) was highest in individualist Germany (35%), whereas Insecure-Resistant (Type C) was highest in collectivist Japan (27%) and Israel (29%); intra-cultural variation was 1.5× greater than inter-cultural variation (critiqued for imposed etic). Rutter (2011) ERA longitudinal study of 165 Romanian orphans: children adopted before 6 months achieved normal cognitive recovery (mean IQ 102), whereas those adopted after 6–24 months showed disinhibited attachment and quasi-autistic traits (mean IQ 86/77). |  |  |
| 15 | Explain Comparative Advantage, Terms of Trade, Protectionism (Tariffs/Quotas), Exchange Rate systems (Marshall–Lerner & J-Curve), and the Balance of Payments. | Comparative Advantage (Ricardo): countries should specialise in producing goods where they have the lowest opportunity cost, increasing world output if the terms of trade (Index of Export Prices ÷ Index of Import Prices × 100) lie between the two countries' domestic opportunity cost ratios. A Tariff diagram shows domestic price rising from P_world to P_world + Tariff, creating domestic producer surplus gain, tax revenue, and two deadweight welfare loss triangles. Balance of Payments = Current Account (Trade in goods/services + primary investment income + secondary transfers) + Capital/Financial Account (FDI, portfolio investment, hot money). By the Marshall–Lerner Condition, a currency depreciation improves the current account ONLY if \|PED_exports + PED_imports\| > 1, causing the J-Curve effect (worsens in the short run while demand is inelastic, improves in the long run). |  |  |
| 16 | In Biopsychology, explain Localisation of Function in the Brain, Sperry's (1968) Split-Brain research, Plasticity/Functional Recovery, and Biological Rhythms. | Localisation: Motor cortex (frontal lobe), Somatosensory cortex (parietal lobe), Visual cortex (occipital lobe), Auditory cortex (temporal lobe), Broca's area (left frontal—speech production; damage = Broca's aphasia), Wernicke's area (left temporal—speech comprehension). Sperry (1968): corpus callosum severed in 11 epilepsy patients; images in left visual field (processed by right hemisphere) could not be named verbally (left hemisphere is language-dominant) but could be drawn with the left hand. Plasticity (Maguire 2000: London taxi drivers had larger posterior hippocampi) and functional recovery via axonal sprouting and neuronal unmasking. Rhythms: Circadian (~24h sleep-wake driven by suprachiasmatic nucleus SCN endogenous pacemaker + light exogenous zeitgeber; Siffre cave study), Infradian (>24h menstrual/SAD), Ultradian (<24h 90-minute 5-stage REM/NREM sleep cycle; Dement & Kleitman). |  |  |
| 17 | Compare the six core Approaches in A-Level Psychology: Learning (Behaviourist & SLT), Cognitive, Biological, Psychodynamic, and Humanistic. | 1) Behaviourist (Pavlov, Skinner): blank slate, observable behaviour shaped by classical & operant conditioning. 2) Social Learning Theory (Bandura Bobo doll): vicarious reinforcement, mediational processes (Attention, Retention, Motor reproduction, Motivation) & identification. 3) Cognitive: internal mental processes, computer analogy, schemas, cognitive neuroscience. 4) Biological: genotype/phenotype, neurochemistry, evolution. 5) Psychodynamic (Freud): unconscious mind, tripartite personality (Id, Ego, Superego), defence mechanisms, psychosexual stages. 6) Humanistic (Maslow, Rogers): free will, hierarchy of needs, self-actualisation, congruence between self-concept and ideal self, unconditional positive regard. |  |  |
| 18 | How do you measure Income and Wealth Inequality using the Lorenz Curve and Gini Coefficient, and contrast the Kuznets Curve with Piketty's r > g thesis? | Income is a flow of earnings (wages, rent, dividends); wealth is a stock of assets (property, pensions, shares). On a Lorenz Curve (plotting cumulative % of income on y-axis against cumulative % of households on x-axis), the 45° diagonal represents perfect equality, and the Gini Coefficient = Area A ÷ (Area A + Area B) (0 = perfect equality, 1 = complete inequality). Kuznets Curve (inverted-U): inequality initially rises during industrialisation then falls via progressive taxation and welfare redistribution. Piketty challenges this, arguing that under free-market capitalism, the rate of return on capital exceeds the rate of economic growth (r > g), causing wealth inequality to widen without progressive wealth taxes. |  |  |
| 19 | State the conditions for Profit Maximisation, Revenue Maximisation, Sales Volume Maximisation, and Allocative, Productive, Dynamic, and X-Efficiency. | Firm objectives: 1) Profit maximisation (normal + supernormal profit): MC = MR; 2) Revenue maximisation: MR = 0 (where PED = −1); 3) Sales volume maximisation (without making a loss): AC = AR; 4) Profit satisficing (divorce of ownership from control / principal-agent problem). Efficiencies: Allocative efficiency: P = MC (AR = MC, maximises consumer welfare); Productive efficiency: producing at the minimum point of AC (where MC = AC); Dynamic efficiency: reinvesting supernormal profits into R&D and innovation over time; X-inefficiency: operating above the AC curve due to organisational slack. |  |  |
| 20 | In AQA Psychology Social Influence, how do Dispositional Explanations (Adorno's Authoritarian Personality) and Minority Influence (Moscovici, 1969) work? | Adorno et al. (1950, F-Scale on 2,000 Americans): Authoritarian Personality develops from harsh, conditional childhood parenting, displacing hostility onto weaker out-groups (scapegoating) and showing blind obedience to authority figures. Minority Influence (Moscovici 1969, blue-green slides: consistent minority yielded 8.42% conversion vs 1.25% inconsistent): requires Consistency (synchronic and diachronic), Commitment (augmentation principle), and Flexibility (Nemeth 1986), leading to internalisation and social change via the snowball effect and social cryptoamnesia. |  |  |
| 21 | Compare the Behavioural (Mowrer's Two-Process Model), Cognitive (Beck's Negative Triad & Ellis's ABC Model), and Biological explanations/treatments of Phobias, Depression, and OCD. | Phobias: Mowrer's Two-Process Model—acquired by classical conditioning (Little Albert) and maintained by negative reinforcement/avoidance (operant conditioning); treated via Systematic Desensitisation (anxiety hierarchy + reciprocal inhibition + counterconditioning) or Flooding. Depression: Beck's cognitive vulnerability (faulty processing, negative self-schemas, Negative Triad of self/world/future) & Ellis's ABC Model (Activating event → Irrational Belief → Emotional Consequence); treated with CBT. OCD: Polygenic inheritance (COMT and SERT genes) + low serotonin + hyperactive orbitofrontal cortex; treated with SSRIs (e.g., fluoxetine, which blocks presynaptic serotonin reuptake). |  |  |
| 22 | In Labour Market Economics, how are wages determined by MRP = MCL, and how does a Trade Union interact with a Monopsony employer? | Demand for labour is a derived demand equal to the Marginal Revenue Product of labour (MRP_L = MPP_L × MR). A Monopsony (single dominant buyer of labour, e.g., the NHS for nurses) faces an upward-sloping supply of labour (ACL), so its Marginal Cost of Labour (MCL) lies steeper and above ACL; a profit-maximising monopsonist hires where MCL = MRP_L, employing fewer workers (Q_m < Q_c) and paying a lower wage (W_m < MRP) than a competitive labour market. Introducing a Trade Union or National Minimum Wage in a monopsony can simultaneously increase BOTH wages and employment. |  |  |
| 23 | Contrast the Classical Long-Run Aggregate Supply (vertical LRAS) and Keynesian LRAS curve, and distinguish Demand-Pull vs Cost-Push Inflation. | Classical LRAS is vertical at full employment output Y_fe (markets always clear in the long run via flexible wages/prices). Keynesian LRAS is L-shaped (elastic at high unemployment/spare capacity, curving upward at bottlenecks, becoming vertical at Y_max). Demand-Pull Inflation: excessive growth in AD (C+I+G+X−M) when the economy is near full capacity, pulling up the price level (or monetarist MV = PQ). Cost-Push Inflation: inward shift of SRAS due to rising raw material/energy prices, rising unit wage costs, or exchange rate depreciation (causing stagflation). |  |  |
| 24 | Define Type I vs Type II Statistical Errors, Reliability vs Validity, and the five major Issues and Debates in A-Level Psychology. | Type I Error (false positive): rejecting a true null hypothesis because p-level is too lenient (e.g., p = 0.10). Type II Error (false negative): accepting a false null hypothesis because p-level is too stringent (e.g., p = 0.01). Reliability = consistency (test-retest, inter-observer ≥ +0.80); Validity = accuracy (internal vs external ecological/population/temporal validity). Five Issues & Debates: 1) Gender & Culture bias (alpha/beta bias, ethnocentrism, etic vs emic); 2) Free Will vs Determinism (hard/soft, biological/environmental/psychic); 3) Nature vs Nurture (interactionist diathesis-stress model); 4) Holism vs Reductionism (levels of explanation); 5) Idiographic (qualitative case studies) vs Nomothetic (general laws). |  |  |
| 25 | Summarise Bowlby's Monotropic Theory of Attachment, Lorenz & Harlow's animal studies, and Ainsworth's Strange Situation classifications. | Lorenz (1935): goslings imprinted on the first moving object seen during a critical period (12–17 hours). Harlow (1958): infant rhesus monkeys preferred the cloth-covered 'contact comfort' mother over the wire milk-dispensing mother. Bowlby's Monotropic Theory: attachment is innate/adaptive, relies on social releasers, forms one primary bond (monotropy) within a critical period (~2.5 years), creating an Internal Working Model for future relationships (Maternal Deprivation Hypothesis → affectionless psychopathy in 44 Thieves study). Ainsworth's Strange Situation: Type B Secure (66%, moderate distress, easily comforted), Type A Insecure-Avoidant (22%, avoids caregiver), Type C Insecure-Resistant (12%, ambivalent/angry). |  |  |
| 26 | In Development Economics, contrast Economic Growth with Economic Development (HDI), and explain the Harrod–Domar Model, Lewis Dual-Sector Model, and Prebisch–Singer Hypothesis. | Economic growth is a quantitative rise in Real GDP per capita; Economic Development is a multidimensional improvement in living standards measured by the Human Development Index (HDI: GNI per capita PPP, life expectancy at birth, and mean/expected years of schooling; plus IHDI, GII, and MPI). Barriers & Models: 1) Savings Gap (Harrod–Domar Model: Growth Rate = Savings Ratio s ÷ Capital–Output Ratio k, addressed via microfinance/FDI/aid); 2) Foreign currency gap; 3) Prebisch–Singer Hypothesis (primary commodity dependency leads to long-run deteriorating terms of trade because YED for manufactured goods > YED for primary commodities); 4) Lewis Dual-Sector Model (structural transition from low-productivity rural agriculture to higher-productivity urban manufacturing). |  |  |
| 27 | State the formulas and interpretations for Price Elasticity of Demand (PED), Income Elasticity of Demand (YED), Cross Elasticity of Demand (XED), and Price Elasticity of Supply (PES). | Elasticity = (%Δ Quantity) ÷ (%Δ Price or Income). 1) PED: \|PED\| > 1 is price elastic (lowering price INCREASES total revenue TR = P×Q); \|PED\| < 1 is price inelastic (raising price INCREASES TR); \|PED\| = 1 maximises TR; determined by SPLAT (Substitutes, Percentage of income, Luxury/necessity, Addictiveness, Time). 2) YED: YED > 0 = Normal good (YED > 1 = Luxury good); YED < 0 = Inferior good. 3) XED: XED > 0 = Substitutes; XED < 0 = Complements. 4) PES: always positive; determined by PSSST (Production lag, Stocks, Spare capacity, Substitutability of factors, Time: momentary/short-run/long-run). |  |  |
| 28 | Compare indirect taxes, subsidies, maximum/minimum prices, tradable pollution permits, and state provision as remedies for Market Failure, and explain Government Failure. | 1) Indirect tax (specific vs ad valorem Pigouvian tax): internalises negative externalities by shifting Supply left (MPC → MSC); incidence falls mostly on consumers if demand is price inelastic. 2) Subsidy: shifts Supply right to boost merit goods. 3) Maximum price (ceiling set BELOW P*, e.g., rent caps) causes excess demand/shortages; Minimum price (floor set ABOVE P*, e.g., minimum wage/alcohol unit pricing) causes excess supply. 4) Public goods (non-excludable and non-rivalrous, e.g., street lighting/flood defences) suffer from the free-rider problem and require direct state provision. Government Failure occurs when state intervention causes a net welfare loss due to unintended consequences, regulatory capture, information gaps, or high administrative costs. |  |  |
| 29 | Contrast Negative Production Externalities (e.g., carbon emissions) and Positive Consumption Externalities (merit goods, e.g., healthcare/education) using MSB/MSC diagrams. | Socially optimum equilibrium occurs where Marginal Social Cost = Marginal Social Benefit (MSC = MSB), whereas the free market produces where Marginal Private Cost = Marginal Private Benefit (MPC = MPB). 1) Negative production externality (MSC > MPC due to external pollution costs): free market overproduces (Q_m > Q_opt) and underprices, creating a welfare loss triangle pointing towards Q_opt. 2) Positive consumption externality (MSB > MPB due to external third-party benefits + information failure): free market underconsumes (Q_m < Q_opt), creating a potential welfare gain triangle pointing towards Q_opt. |  |  |
| 30 | Explain the Circular Flow of Income (Injections vs Withdrawals), Aggregate Demand (AD = C + I + G + (X − M)), and the Keynesian Multiplier. | National Income equilibrium occurs when Injections (J = Investment I + Government Spending G + Exports X) equal Withdrawals/Leakages (W = Savings S + Taxation T + Imports M). Aggregate Demand: AD = C (~60%) + I (~15%) + G (~25%) + (X − M). The Keynesian Multiplier (k) measures how an initial injection into the circular flow leads to a greater final increase in Real GDP: k = 1 / (1 − MPC) = 1 / MPW = 1 / (MPS + MPT + MPM). |  |  |
| 31 | In AQA Psychology Memory, contrast Interference Theory (Proactive vs Retroactive) and Retrieval Failure (Encoding Specificity Principle) as explanations for forgetting. | Interference (mainly LTM): Proactive interference occurs when old memories disrupt recall of new material (Underwood 1957); Retroactive interference occurs when newly learned material disrupts recall of old memories (McGeoch & McDonald 1931—strongest when materials are semantically similar). Retrieval Failure (Tulving's Encoding Specificity Principle): memories are available in LTM but inaccessible due to absence of cues present at encoding—either Context-Dependent Forgetting (external environment: Godden & Baddeley 1975 deep-sea divers on land vs underwater) or State-Dependent Forgetting (internal physiological/emotional state: Carter & Cassaday 1998 antihistamines). |  |  |
| 32 | Explain the three functions of the Price Mechanism (Rationing, Incentive, Signalling) and distinguish Consumer Surplus from Producer Surplus. | Adam Smith's 'invisible hand' allocates scarce resources through prices: 1) Signalling: rising prices signal excess demand/scarcity to consumers and producers; 2) Incentive: higher prices create higher profit margins, incentivising firms to expand output; 3) Rationing: higher prices ration scarce goods to consumers with the highest willingness and ability to pay. Consumer surplus is the triangle below the demand curve and above equilibrium price P*; Producer surplus is the triangle above the supply curve and below P*. |  |  |

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