Syllabus: AQA - GCSE Economics
Module: How the Economy Works
Lesson: 3.2.3 How the Government Manages the Economy

Introduction

This topic, part of the AQA GCSE Economics specification (3.2.3), explores how the UK government manages the economy. It sits within the broader macroeconomic theme, providing learners with a framework to understand government objectives and policy tools. From inflation and employment to economic growth and balance of payments, students investigate how policy decisions affect both national outcomes and personal circumstances. It’s a critical unit for helping students link theory to the decisions that shape headlines—and their future.

Key Concepts

According to AQA, this section covers:

• Economic Objectives: Understand the government’s main macroeconomic goals—economic growth, low inflation, low unemployment, and a stable balance of payments.

• Policy Instruments:

  • Fiscal Policy: Government spending and taxation decisions.

  • Monetary Policy: How the Bank of England uses interest rates and money supply to influence demand.

  • Supply-side Policies: Long-term strategies to boost productive potential (e.g. education, training, deregulation).

• Conflicts Between Objectives: For example, policies to reduce inflation might increase unemployment.

• Indicators: Including GDP, CPI, unemployment rate, and balance of payments figures.

• Trade-offs and Prioritisation: Why a government might favour one goal over another at different times.

• Short-term vs Long-term Measures: Immediate fixes versus structural change.

These concepts help students analyse the rationale behind government decisions and develop a more nuanced view of economic policymaking.

Real-World Relevance

This topic is tailor-made for bringing learning to life. Students can link classroom theory to:

• Current Events: From budget announcements to changes in interest rates and employment figures.

• Recent Case Study: The UK government’s economic response to the COVID-19 pandemic—expansionary fiscal policy, furlough schemes, and Bank of England rate cuts—offers a clear example of coordinated intervention.

• Inflation and the Cost of Living: Debates around interest rate rises by the Bank of England to manage inflation show the balancing act between protecting savers and not overburdening borrowers.

• Youth Employment: Government apprenticeship incentives and Kickstart schemes provide practical links to employment policy.

Students aren’t just studying economics—they’re becoming informed citizens who understand the world around them.

How It’s Assessed

In AQA GCSE Economics, this topic is examined through a mix of question styles:

• Multiple-choice: Testing definitions and basic understanding.

• Short-answer: For example, explaining one reason why a government might increase spending.

• Data-response: Interpreting charts or extracts (e.g. CPI trends, unemployment rates).

• Extended response: Evaluate-style questions, such as “Discuss whether low inflation is the most important government objective.”

Command words to focus on: explain, analyse, evaluate, discuss. Encourage students to structure longer answers using chains of reasoning and, where appropriate, diagrams (e.g. AD/AS or circular flow).

Enterprise Skills Integration

This topic is rich with plug-and-play opportunities to build enterprise capabilities:

• Problem Solving: Students can work through scenarios (e.g. What if the government increases tax?) to consider policy impacts.

• Decision-Making: Which objective should be prioritised in a given situation? Encourage structured debate.

• Data Literacy: Interpreting economic indicators builds confidence in handling real-world data.

• Critical Thinking: Students must weigh up trade-offs, question assumptions, and justify recommendations.

Use Enterprise Skills tools like the MarketScope AI simulator to model the impact of different policy choices on inflation and unemployment—ready-made, classroom-friendly.

Careers Links

This module offers a springboard for discussions around:

• Public Sector Roles: Including economists in the Treasury, civil servants, Bank of England analysts.

• Private Sector Impact: Understanding how policies influence business decisions (e.g. investment, hiring).

• Gatsby Benchmarks:

  • Benchmark 4: Linking curriculum to careers—economic policymaking in the real world.

  • Benchmark 5: Encounters with employers and employees—invite local civil servants or economists to speak.

You’re not just teaching economics—you’re equipping future policy advisors, researchers, and business leaders.

Teaching Notes

Common Pitfalls:

• Students often confuse fiscal and monetary policy—mnemonics and visuals help.

• Over-simplified views of government goals—reinforce the idea of trade-offs and competing priorities.

Lesson Ideas:

• Mini Budget Simulation: Students allocate a fictional government budget across objectives.

• Policy Case Study Debate: Did the Bank of England do the right thing with recent interest rate changes?

• Data Dig: Use current ONS statistics for GDP or inflation to analyse trends and policy responses.

Differentiation:

• Scaffolded templates for extended answers.

• Stretch tasks: Apply UK policy analysis to a developing economy.