A Level Economics AQA Practice Exam

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What is defined as a deficit in economics?

  1. A situation where quantity supplied exceeds quantity demanded

  2. A situation where quantity demanded exceeds quantity supplied

  3. A situation where supply meets demand

  4. A measure of consumer spending

The correct answer is: A situation where quantity demanded exceeds quantity supplied

In economics, a deficit specifically refers to a situation where quantity demanded exceeds quantity supplied. This occurs when consumers want to buy more of a good or service than what is available in the market at a given price. When this situation arises, it often leads to upward pressure on prices as sellers respond to the excess demand. Understanding this concept is crucial, as it impacts market dynamics—when demand outstrips supply, it creates a shortage, which can result in higher prices in order to balance the two forces in the market. This phenomenon is distinct from other concepts like equilibrium (where supply meets demand) or surplus situations (where supply exceeds demand). Thus, identifying a deficit as a state of excess demand relative to supply helps clarify its role in economic scenarios and market behavior.

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