Unit 3.3 - Macroeconomics Objectives
What you need to know and understand:
Key concepts:
Concepts to understand:
- Economic growth
- Short-term growth
- Actual growth in the PPC model
- Role of AD in the AD/AS model
- Long-term growth
- Shifts of the PPC (growth in production possibilities)
- Role of LRAS in the AD/AS model
- Measurement of economic growth
- Consequences of economic growth, including:
- impact on living standards
- impact on the environment
- impact on income distribution
- Short-term growth
- Low unemployment
- Measurement of unemployment and the unemployment rate
- Difficulties of measuring unemployment
- Causes of unemployment—cyclical (demand deficient), structural, seasonal, frictional
- Natural rate of unemployment—sum of the structural, seasonal, frictional unemployment
- Costs of unemployment—personal costs, social costs, economic costs
- Low and stable rate of inflation
- Measuring the inflation rate, using consumer price index (CPI) data
- The limitations of the CPI in measuring inflation
- Causes of inflation—demand-pull and cost-push
- Costs of a high inflation rate—uncertainty, redistributive effects, effects on saving, damage to export competitiveness, impact on economic growth, inefficient resource allocation
- Causes of deflation—changes in AD or SRAS
- Disinflation and deflation
- Costs of deflation—uncertainty, redistributive effects, deferred consumption, association with high levels of cyclical unemployment and bankruptcies, increase in the real value of debt, inefficient resource allocation, policy ineffectiveness
- Relative costs of unemployment versus inflation
- Sustainable level of government (national) debt [HL only]
- Measurement of government (national) debt as a percentage of GDP
- Relationship between a budget deficit and government (national) debt
- Costs of a high government (national) debt—debt servicing costs, credit ratings, impacts on future taxation and government spending
- Potential conflict between macroeconomic objectives
- Low unemployment and low inflation
- Trade-off between unemployment and inflation (HL only)
- Short-run and long-run Phillips curve
- High economic growth and low inflation
- High economic growth and environmental sustainability
- High economic growth and equity in income distribution
Key concepts:
- Scarcity
- Choice
- Efficiency
- Equity
- Economic well-being
- Sustainability
- Change
- Interdependence
- Intervention
Concepts to understand:
- Change in the conditions of the demand and supply sides of the economy cause economic activity to vary over time.
- Fluctuations in economic activity impact the economic well-being of individuals and societies.
- Different schools of macroeconomic thought identify different causes and offer different solutions for macroeconomic problems.
TEXTBOOK unit 3.3 - Low Unemployment
TEXTBOOK unit 3.3 - Low & Stable Inflation
TEXTBOOK unit 3.3 - Economic Growth
Macroeconomic objective: Full Employment
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Macroeconomic objective: Low Inflation
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Macroeconomic objective: Economic Growth
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Macroeconomic objective: Income Distribution
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