OCR A Level Economics: Macroeconomics (H460)

This guide covers Component 2: Macroeconomics (H460/02), one of three equally weighted components (each worth 33.33% of the full A Level) in OCR A Level Economics (H460), for first assessment 2021. It sits alongside Microeconomics (H460/01) and Themes in Economics (H460/03), the latter a fully synoptic paper drawing on both Microeconomics and Macroeconomics content.

Syllabus coverage

OCR A LEVEL ECONOMICS H460 – COMPONENT 02 MACROECONOMICS

• 1. Aggregate demand and aggregate supply – 1.1 the circular flow of income, including injections, leakages and methods of measuring national income; 1.2 aggregate demand and its components, the relationship between aggregate demand and price level, and shifts of the AD curve; 1.3 aggregate supply and its relationship with price level in the short and long run; 1.4 the interaction of aggregate demand and supply and macroeconomic equilibrium; and 1.5 the multiplier and accelerator, including calculating average and marginal propensities to consume, save and withdraw, the size of the national income multiplier, and output gaps.
• 2. Economic policy objectives – 2.1 economic growth, including calculating growth rates and GDP per capita; 2.2 development, including alternative measures such as the Human Development Index; 2.3 employment, including measures of unemployment; 2.4 inflation, including measuring it via the Consumer Prices Index; 2.5 the balance of payments and its components; 2.6 trends in UK macroeconomic performance over the last 20 years; 2.7 income distribution and welfare, including Gini coefficients and the Lorenz curve; and 2.8 the Phillips Curve, including the natural rate of unemployment (NAIRU).
• 3. Implementing policy – 3.1 fiscal policy (government budgets, types of taxation, budget deficits/surpluses, discretionary policy versus automatic stabilisers, crowding out, and the Laffer curve); 3.2 monetary policy (interest rates, money supply, inflation targets, quantitative easing); 3.3 supply-side policy (privatisation, deregulation, investment in infrastructure/education/training, and labour market flexibility); and 3.4 policy conflicts and trade-offs between objectives.
• 4. The global context – 4.1 international trade and its patterns over time; 4.2 exchange rates, including their determination and the effects of changes; 4.3 globalisation, international competitiveness, and comparative advantage; and 4.4 trade policies and negotiations, including protectionism, trading blocs, and the role of the World Trade Organisation.
• 5. The financial sector – 5.1 money and interest rates, including the creation and supply of money; 5.2 the role of the financial sector in promoting economic development, including the Harrod-Domar model and microfinance; and 5.3 financial regulation, including the role of a central bank and international bodies such as the IMF and World Bank.

Why the five sub-topics form one connected argument

The specification’s own framing of this component matters: it states that students “will learn how the macroeconomy functions on both a domestic and global level and develop an understanding of the objectives, limitations and conflicts of macroeconomic policies.” That last phrase – conflicts of policy – is the thread that runs through every sub-topic here. Aggregate demand and supply (section 1) sets up the model; policy objectives (section 2) defines the targets a government aims for; implementing policy (section 3) shows the tools available; and section 3.4 explicitly requires evaluating when those tools conflict with each other – for example, when a policy that boosts growth also raises inflation, or when reducing unemployment conflicts with controlling the balance of payments. The global context and financial sector sections then extend the same policy-conflict logic to an international and monetary setting.

Worked example: calculating the multiplier

The marginal propensity to consume (MPC) in an economy is 0.75. Find the value of the national income multiplier.

multiplier = 1 ÷ (1 − MPC) = 1 ÷ (1 − 0.75) = 1 ÷ 0.25 = 4

This means an initial injection of £10 million into the economy would ultimately generate £40 million of total extra national income, once the multiplier effect works through successive rounds of spending – a calculation that appears frequently in questions combining sections 1.5 (the multiplier) and 3.1 (fiscal policy, where government spending is the initial injection).

Common mistakes

• Treating a shift in aggregate demand and a movement along it as the same thing – a change in the price level causes a movement along the AD curve; a change in any of AD’s components (consumption, investment, government spending, net exports) for a reason other than price shifts the whole curve.
• Confusing fiscal and monetary policy, or describing supply-side policy only as “cutting taxes” without addressing its actual aim of shifting long-run aggregate supply through structural reform.
• Evaluating policy in isolation from its trade-offs. Section 3.4 is explicitly about conflicts between objectives, so an answer that only lists the benefits of a policy without discussing what it might worsen elsewhere in the economy misses a core assessment objective of this component.
• Misreading the Phillips Curve as a fixed, permanent relationship between inflation and unemployment, rather than distinguishing the short-run trade-off from the long-run vertical curve at the natural rate of unemployment.
• Ignoring the global context when answering a domestic policy question, when in reality exchange rates, international competitiveness and trade policy frequently interact with domestic fiscal and monetary decisions in exam scenarios.

How to approach it

Revise sections 1 and 2 together first, since aggregate demand and supply is the model that every policy objective in section 2 is ultimately measured against – inflation, unemployment and growth are all outcomes read off the same AD/AS diagram. Once that foundation is solid, treat section 3 (implementing policy) as the natural next step, explicitly practising policy-conflict evaluation questions rather than only questions that ask you to describe a single policy’s effect. Since Component 3 (Themes in economics) is fully synoptic across both Microeconomics and Macroeconomics, revise the global context and financial sector sections with an eye to how they connect back to microeconomic content such as market structures and exchange-rate determination, rather than treating Macroeconomics as entirely self-contained.

Related resources

• Macroeconomics revision notes
• Macroeconomics practice questions

Official syllabus

OCR, A Level in Economics (H460) Specification, version 3.0 (June 2026), Section 2d, Content of Component 2: Macroeconomics (H460/02), https://www.ocr.org.uk/Images/536455-specification-accredited-a-level-gce-economics-h460.pdf, fetched and verified in full 2026-09-02.