AS Economics. Introductory Macroeconomics. Sixth Form pre-reading

Size: px
Start display at page:

Download "AS Economics. Introductory Macroeconomics. Sixth Form pre-reading"

Transcription

1 AS Economics Introductory Macroeconomics Sixth Form pre-reading

2 National income National income (Y) = money value of goods and services produced in an economy over a period of time, usually one year. National income is the main measure of macroeconomic performance the goods and services produced provide economic welfare/satisfy wants, thus dealing with the economic problem of scarcity. Measuring national income in reality is quite difficult so the government uses a series of approximations, the most common of which is: Gross Domestic Product (GDP) = money value of total output produced by factors of production based in the UK over a period of time, usually a year. You will learn other measures of National Income in your classes, but for now learn the definition of GDP. Circular flow of income A simple model of the macroeconomy designed to help economists understand how the level of national income is determined. In its simplest form, there are two groups active in the economy Households = owners of factors of production who supply these factors to the firms so that the firms can produce goods and services. The factors are paid (rent, wages, interest & profit) for their work providing income to the households, which they use to buy goods and services from the firms to satisfy their wants. Firms = organisations (companies, partnerships, etc) that hire the services of factors of production to produce goods and services for sale to the households. The two groups are linked to create a production line of factor inputs and product outputs (dotted lines on diagram). The flow of money that accompanies this production is comprised of household income and expenditure (solid lines on diagram).

3 rent, wages, interest & profit (Y) (2) land, labour, capital & enterprise HOUSEHOLDS FIRMS goods & services (1) (3) expenditure on goods & services (C) The value of output produced in this economy can be measured in three ways National output = value of goods and services flowing from the firms (measure at point 1) National income = value of rent, wages, interest and profit paid to households (measure at point 2) National expenditure = value of spending by households on goods and services (measure at point 3) The value obtained should be the same for each method so national output = national income = national expenditure This very simple model of the economy will always be in equilibrium with a constant level of national income circulating between the households and firms. To make the model more realistic and useful, it is necessary to introduce injections and leakages, which are accompanied by an increase in the number of active groups in the economy. This will be covered in your classes.

4 The objectives of macroeconomic policy There are four main objectives of macroeconomic policy Full employment/low unemployment unemployment is a waste of scarce resources so the more people working, the higher the economy s output and the better living standards will be. Stable prices/low inflation inflation generates undesirable effects like a loss of international competitiveness, income redistribution, etc. Low inflation (eg 2.0% pa) is generally felt to be desirable as it promotes economic confidence, without producing the damage associated with high inflation. Economic growth growth generates more output to satisfy more wants to boost welfare, but rapid growth carries possible problems like resource depletion and resource degradation. Balance of payments equilibrium the government aims for the total value of money coming into the economy from things like exports to be at or around the total value of money leaving the economy to pay for imports. A sustained balance of payments deficits (where the cost of imports exceeds the income from exports) need to be avoided to prevent the accumulation of debt to other nations. The country needs to live within its means internationally. Governments have placed different emphasis on these objectives. Keynesians (1950 s and 1960 s) full employment was main objective. Monetarists ( ) stable prices were the main focus. Since 2010 the coalition government has prioritised the reduction in government debt over the four main macroeconomic policy objectives. In addition, because the economy has been in a period of low growth since 2008, most economists would argue that the government is now more concerned about growth than stable prices / inflation. In addition to the above four objectives, governments also strive to improve aspects of the domestic economy, such as labour productivity. Conflicts of policy Policy conflict = when two or more objectives are mutually exclusive. Common policy conflicts Growth and stable prices. When the economy is growing strongly, it is likely that prices will rise.

5 Full employment and stable prices increasing aggregate demand (the total level of demand for goods and services) in the economy is likely to raise employment, but also prices Balance of payments equilibrium and stable prices reducing the value of our currency will make exports cheaper and therefore raise the level of exports. However, it will also increase import prices, putting pressures on inflation to rise. Policy trade-offs are necessary the government may have to compromise and seek satisfactory performances in the conflicting policy objectives rather than setting out to attain the best possible outcome for one objective. The environment is an additional source of policy conflict eg measures to protect the environment (taxes on fuel, pollution permits, etc) could clash with stable prices and economic growth. Policies to create more fuel efficiency could lead to job losses. Objectives can be complementary eg promoting economic growth should help achieve full employment. Constraints on policy In seeking to achieve its objectives, the government faces various constraints that limit its freedom. They include Limited number of policy instruments there are four main objectives, but only three main policy areas o fiscal policy = the manipulation of government spending and taxes in the budget o monetary policy = setting the base interest rate, and control of the money supply such as through Quantitative Easing o supply side policy = measures to increase efficiency of companies in the economy, by encouraging competitiveness through incentives and de-regulation.

2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E. The College Board. College Level Examination Program

2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E. The College Board. College Level Examination Program 2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E College Level Examination Program The College Board Principles of Macroeconomics Description of the Examination The Subject Examination in

More information

CONCEPT OF MACROECONOMICS

CONCEPT OF MACROECONOMICS CONCEPT OF MACROECONOMICS Macroeconomics is the branch of economics that studies economic aggregates (grand totals):e.g. the overall level of prices, output and employment in the economy. If you want to

More information

Economics Revision: Conflicts between Macro Objectives

Economics Revision: Conflicts between Macro Objectives Economics Revision: Conflicts between Macro Objectives This revision note looks at possible conflicts between macroeconomic objectives and some of the policy prescriptions for over- coming them. hen conflicts

More information

The Circular Flow of Income and Expenditure

The Circular Flow of Income and Expenditure The Circular Flow of Income and Expenditure Imports HOUSEHOLDS Savings Taxation Govt Exp OTHER ECONOMIES GOVERNMENT FINANCIAL INSTITUTIONS Factor Incomes Taxation Govt Exp Consumer Exp Exports FIRMS Capital

More information

EC2105, Professor Laury EXAM 2, FORM A (3/13/02)

EC2105, Professor Laury EXAM 2, FORM A (3/13/02) EC2105, Professor Laury EXAM 2, FORM A (3/13/02) Print Your Name: ID Number: Multiple Choice (32 questions, 2.5 points each; 80 points total). Clearly indicate (by circling) the ONE BEST response to each

More information

CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY

CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY Learning goals of this chapter: What forces bring persistent and rapid expansion of real GDP? What causes inflation? Why do we have business cycles? How

More information

What is fiscal policy? Fiscal policy is the use of government spending and taxation to influence the level of aggregate demand and economic activity

What is fiscal policy? Fiscal policy is the use of government spending and taxation to influence the level of aggregate demand and economic activity Macroeconomic policy Fiscal Policy What is fiscal policy? Fiscal policy is the use of government spending and taxation to influence the level of aggregate demand and economic activity List the main types

More information

1. Circular flow of income

1. Circular flow of income 1. Circular flow of income The circular flow of income Firms and households interact and exchange resources in an economy. Households supply firms with the factors of production, such as labour and capital,

More information

Aggregate Supply and Aggregate Demand

Aggregate Supply and Aggregate Demand Aggregate Supply and Aggregate Demand Econ 120: Global Macroeconomics 1 1.1 Goals Goals Specific Goals Be able to explain GDP fluctuations when the price level is also flexible. Explain how real GDP and

More information

Economics. Total marks 100. Section I Pages marks Attempt Questions 1 20 Allow about 35 minutes for this section

Economics. Total marks 100. Section I Pages marks Attempt Questions 1 20 Allow about 35 minutes for this section 2011 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Total marks 100 Section I Pages 2 8 General Instructions Reading time 5 minutes Working time 3 hours Write using black or blue pen Black pen is preferred

More information

Rising Foreign Debt, Slow Economic Growth and High Unemployment: A brief explanation of their cause in Australia and how to overcome them

Rising Foreign Debt, Slow Economic Growth and High Unemployment: A brief explanation of their cause in Australia and how to overcome them Rising Foreign Debt, Slow Economic Growth and High Unemployment: A brief explanation of their cause in Australia and how to overcome them by Leigh Harkness Economic theories may appear rational when explained

More information

CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH

CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH Learning Goals for this Chapter: To know what we mean by GDP and to use the circular flow model to explain why GDP equals aggregate expenditure and aggregate

More information

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Aggregate Supply

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Aggregate Supply Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Aggregate Supply Topic: Aggregate Supply/Aggregate Demand Model 1) The aggregate supply/aggregate demand model is used to help understand all of the following

More information

CHAPTER 5. CIRCULAR FLOW MODELS

CHAPTER 5. CIRCULAR FLOW MODELS HAPTER 5. RULAR FLOW MODEL The behavior of a macroeconomic system is determined by the interactions of a great many actors and institutions. The first step in studying an economy is to simplify the picture

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Suvey of Macroeconomics, MBA 641 Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Modern macroeconomics emerged from

More information

2009 CHAPTER 11 Self Study Questions

2009 CHAPTER 11 Self Study Questions CHAPTER 11 Self Study Questions 1) The aggregate supply/aggregate demand model is used to help understand all of the following except A) inflation. B) business cycle fluctuations. C) the aggregate value

More information

The Full-Employment Model. Stiglitz, Walsh (2006) Economics Chapter 24 (MA6)

The Full-Employment Model. Stiglitz, Walsh (2006) Economics Chapter 24 (MA6) The Full-Employment Model Stiglitz, Walsh (2006) Economics Chapter 24 (MA6) Macroeconomic Equilibrium all markets are interrelated what happens in one market will have impact on other markets wages, interest

More information

Rutgers University School of Business Aggregate Economics Fall 2010

Rutgers University School of Business Aggregate Economics Fall 2010 Rutgers University School of Business Aggregate Economics Fall 2010 Professor: Dr. Davood Taree Email: dtaree@rbs.rutgers.edu Office hours: Thursday: By appointment Course Information: Course Number: 591:41

More information

Review for the Midterm Exam.

Review for the Midterm Exam. Review for the Midterm Exam. 1. Chapter 1 The principles of decision making are: o People face tradeoffs. o The cost of any action is measured in terms of foregone opportunities. o Rational people make

More information

Economic Policy. Economic policy has 3 main goals

Economic Policy. Economic policy has 3 main goals MACROECONOMIC POLICY Functions of State Economic Policy (Policy Goals) Instruments of Economic Policy (Policy Tools) Types of Economic Policy Efficiency of Economic Policy Economic Policy Economic policy

More information

a) Types of policy: fiscal policy, monetary policy and supplyside

a) Types of policy: fiscal policy, monetary policy and supplyside a) Types of policy: fiscal policy, monetary policy and supplyside policy Fiscal policy Fiscal policy uses government spending and revenues from taxation to influence AD. This is conducted by the government.

More information

PBL: Macroeconomics. Competency: Aggregate Demand and Supply. Competency: Consumption and Saving

PBL: Macroeconomics. Competency: Aggregate Demand and Supply. Competency: Consumption and Saving Competency: Aggregate Demand and Supply 1. Define aggregate demand and aggregate supply. 2. Describe the individual components of aggregate demand and aggregate supply. 3. Describe the problem that leakages

More information

COVENANT UNIVERSITY NIGERIA TUTORIAL KIT OMEGA SEMESTER PROGRAMME: ECONOMICS

COVENANT UNIVERSITY NIGERIA TUTORIAL KIT OMEGA SEMESTER PROGRAMME: ECONOMICS COVENANT UNIVERSITY NIGERIA TUTORIAL KIT OMEGA SEMESTER PROGRAMME: ECONOMICS COURSE: ECN 121 DISCLAIMER The contents of this document are intended for practice and leaning purposes at the undergraduate

More information

NAEP released item, Grade 12

NAEP released item, Grade 12 Scoring Guide Score & Description Superior The response states the following information: (A) Spending would decrease because income is falling; (B) Because spending is decreasing businesses will cut output;

More information

DRAFT SOCIAL STUDIES Georgia Standards of Excellence (GSE) Economics

DRAFT SOCIAL STUDIES Georgia Standards of Excellence (GSE) Economics DRAFT SOCIAL STUDIES Economics Economics Economics is the study of how individuals, businesses, and governments make decisions about the allocation of scarce resources. The economics course provides students

More information

GOVERNMENT ECONOMIC OBJECTIVES AND POLICIES. Textbook, Chapter 26 [pg 317-328]

GOVERNMENT ECONOMIC OBJECTIVES AND POLICIES. Textbook, Chapter 26 [pg 317-328] GOVERNMENT ECONOMIC OBJECTIVES AND POLICIES Textbook, Chapter 26 [pg 317-328] Name: Class: Learning outcomes: Identify government economic objectives. Explain the main stages of the business cycle. Explain

More information

a) Aggregate Demand (AD) and Aggregate Supply (AS) analysis

a) Aggregate Demand (AD) and Aggregate Supply (AS) analysis a) Aggregate Demand (AD) and Aggregate Supply (AS) analysis Determinants of AD: Aggregate demand is the total demand in the economy. It measures spending on goods and services by consumers, firms, the

More information

DO NOT WRITE ANY ANSWERS IN THIS SOURCE BOOKLET. YOU MUST ANSWER THE QUESTIONS IN THE PROVIDED ANSWER BOOKLET.

DO NOT WRITE ANY ANSWERS IN THIS SOURCE BOOKLET. YOU MUST ANSWER THE QUESTIONS IN THE PROVIDED ANSWER BOOKLET. SPECIMEN MATERIAL AS ECONOMICS 713/2 Paper 2 The national economy in a global context Source booklet DO NOT WRITE ANY ANSWERS IN THIS SOURCE BOOKLET. YOU MUST ANSWER THE QUESTIONS IN THE PROVIDED ANSWER

More information

Chapter 08 Aggregate Demand and Aggregate Supply

Chapter 08 Aggregate Demand and Aggregate Supply Chapter 08 Aggregate Demand and Aggregate Supply Multiple Choice Questions 1. The interest rate effect, the real balance effect and the foreign purchases effect suggests that the aggregate demand curve

More information

FBLA: ECONOMICS. Competency: Basic Economic Concepts and Principles

FBLA: ECONOMICS. Competency: Basic Economic Concepts and Principles Competency: Basic Economic Concepts and Principles 1. Define money (characteristics, role, and forms) and trace how money and resources flow through the American economic system. 2. Utilize decision-making

More information

Summary of IS-LM and AS-AD. Karl Whelan September 19, 2014

Summary of IS-LM and AS-AD. Karl Whelan September 19, 2014 Summary of IS-LM and AS-AD Karl Whelan September 19, 2014 The Goods Market This is in equilibrium when the demand for goods equals the supply of goods. Higher real interest rates mean there is less demand

More information

* * * 8 NATIONAL INCOME. Unit 1 : National Income Analysis

* * * 8 NATIONAL INCOME. Unit 1 : National Income Analysis 8 NATIONAL INCOME Macro / Topic 8-1 / P. 1 Unit 1 : National Income Analysis I Concepts and Meaning ( Definition ) II Approaches and Formulae III Measurement of GNP IV Economic Analysis of GNP National

More information

The Economic Environment for Business

The Economic Environment for Business B. FINANCIAL MANAGEMENT ENVIRONMENT 1. The economic environment for business 2. The nature and role of financial markets and institutions The Economic Environment for Business What are the targets of macroeconomic

More information

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),

More information

Questions. True/False and Explain

Questions. True/False and Explain 166 CHAPTER 11 (27) Questions True/False and Explain Aggregate Supply 11. At full employment, there is no unemployment. 12. Along the LAS curve, a rise in the price level and all resource prices increase

More information

Gross Domestic Product. Will the Canadian economy weaken through the next year and shrink, or will it remain strong and expand?

Gross Domestic Product. Will the Canadian economy weaken through the next year and shrink, or will it remain strong and expand? Will the Canadian economy weaken through the next year and shrink, or will it remain strong and expand? To assess the state of the economy and to make big decisions about business expansion, firms use

More information

Opportunity Cost the next best alternative given up when a choice is made Incentive- a reason for doing something.

Opportunity Cost the next best alternative given up when a choice is made Incentive- a reason for doing something. AP Macroeconomics Unit 2 Lesson 1: Key Idea: The study of economics exists because of scarcity. Scarcity forces us to choose between various alternatives (trade-offs). All choices have costs (opportunity

More information

Chapter 13. Aggregate Demand and Aggregate Supply Analysis

Chapter 13. Aggregate Demand and Aggregate Supply Analysis Chapter 13. Aggregate Demand and Aggregate Supply Analysis Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics In the short run, real GDP and

More information

General Certificate of Education Advanced Subsidiary Examination January 2013

General Certificate of Education Advanced Subsidiary Examination January 2013 General ertificate of Education dvanced Subsidiary Examination January 2013 Economics EON2 Unit 2 The National Economy Monday 28 January 2013 1.30 pm to 2.45 pm For this paper you must have: an objective

More information

2013 Economics. Intermediate 2. Finalised Marking Instructions

2013 Economics. Intermediate 2. Finalised Marking Instructions 2013 Economics Intermediate 2 Finalised ing Instructions Scottish Qualifications Authority 2013 The information in this publication may be reproduced to support SQA qualifications only on a non-commercial

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Inflation can be started by 1) A) an increase in aggregate supply or a decrease in aggregate

More information

STRONG AND SUSTAINABLE ECONOMIC GROWTH

STRONG AND SUSTAINABLE ECONOMIC GROWTH STRONG AND SUSTAINABLE ECONOMIC GROWTH DEFINITION OF ECONOMIC GROWTH The government aims for a rapid but steady rise in the volume of goods and services produced from year to year. The aim is to achieve

More information

Tutor2u Economics Essay Plans Summer 2002

Tutor2u Economics Essay Plans Summer 2002 Macroeconomics Revision Essay Plan (2): Inflation and Unemployment and Economic Policy (a) Explain why it is considered important to control inflation (20 marks) (b) Discuss how a government s commitment

More information

ECONOMICS & THE BUSINESS ENVIRONMENT

ECONOMICS & THE BUSINESS ENVIRONMENT ECONOMICS & THE BUSINESS ENVIRONMENT FORMATION 1 EXAMINATION - AUGUST 2011 NOTES: You are required to answer Question 1. You are also required to answer any three out of Questions 2 to 5. (If you provide

More information

Chapter 22. The Classical Foundations. Learning Objectives. Introduction

Chapter 22. The Classical Foundations. Learning Objectives. Introduction Chapter 22 The Classical Foundations Learning Objectives Define Say s law and the classical understanding of aggregate supply Understand the supply of saving and demand for investment that leads to the

More information

With lectures 1-8 behind us, we now have the tools to support the discussion and implementation of economic policy.

With lectures 1-8 behind us, we now have the tools to support the discussion and implementation of economic policy. The Digital Economist Lecture 9 -- Economic Policy With lectures 1-8 behind us, we now have the tools to support the discussion and implementation of economic policy. There is still great debate about

More information

Macroeconomics: Aggregate Demand & Aggregate Supply

Macroeconomics: Aggregate Demand & Aggregate Supply RGDP HOSP 2207 (Economics) Learning Centre Macroeconomics: Aggregate Demand & Aggregate Supply The level of real GDP attained when an economy is at full capacity is called the full capacity GDP or potential

More information

MEASURING GDP AND ECONOMIC GROWTH CHAPTER

MEASURING GDP AND ECONOMIC GROWTH CHAPTER MEASURING GDP AND ECONOMIC GROWTH CHAPTER Objectives After studying this chapter, you will able to Define GDP and use the circular flow model to explain why GDP equals aggregate expenditure and aggregate

More information

REVISING Macroeconomics (LIVE) 2 JULY 2015 EXAM QUESTIONS

REVISING Macroeconomics (LIVE) 2 JULY 2015 EXAM QUESTIONS REVISING Macroeconomics (LIVE) 2 JULY 2015 EXAM QUESTIONS Question 1 (Adapted from DBE November 2014, Question 2.1) Answer the following questions. 1.1 State TWO methods that are used to calculate national

More information

CHAPTER 2: THE MARKET SYSTEM AND THE CIRCULAR FLOW

CHAPTER 2: THE MARKET SYSTEM AND THE CIRCULAR FLOW CHAPTER 2: THE MARKET SYSTEM AND THE CIRCULAR FLOW Introduction The problem of scarcity forces societies to make choices about what to produce, how to produce those goods, and who will receive the goods

More information

Chapter 11: Activity

Chapter 11: Activity Economics for Managers by Paul Farnham Chapter 11: Measuring Macroeconomic Activity 11.1 Measuring Gross Domestic Product (GDP) GDP: the market value of all currently yproduced final goods and services

More information

Economics. Total marks 100

Economics. Total marks 100 2012 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Total marks 100 Section I Pages 2 8 20 marks Attempt Questions 1 20 Allow about 35 minutes for this section General Instructions Reading time 5 minutes

More information

Answer: C Learning Objective: Money supply Level of Learning: Knowledge Type: Word Problem Source: Unique

Answer: C Learning Objective: Money supply Level of Learning: Knowledge Type: Word Problem Source: Unique 1.The aggregate demand curve shows the relationship between inflation and: A) the nominal interest rate. D) the exchange rate. B) the real interest rate. E) short-run equilibrium output. C) the unemployment

More information

Agenda. Introduction to Macroeconomics. What Macroeconomics Is About. What Macroeconomics Is About. What Macroeconomics Is About.

Agenda. Introduction to Macroeconomics. What Macroeconomics Is About. What Macroeconomics Is About. What Macroeconomics Is About. Agenda. Introduction to Macroeconomics What Macroeconomists Do.. 1-1 1-2 Macroeconomics is the study of: 1. The structure, dynamic adjustment, and performance of national economies, and 2. The government

More information

The Aggregate Demand- Aggregate Supply (AD-AS) Model

The Aggregate Demand- Aggregate Supply (AD-AS) Model The AD-AS Model The Aggregate Demand- Aggregate Supply (AD-AS) Model Chapter 9 The AD-AS Model addresses two deficiencies of the AE Model: No explicit modeling of aggregate supply. Fixed price level. 2

More information

2010 Alabama Course of Study for Social Studies - Economics & Common Core Standards for Literacy in History/Social Studies

2010 Alabama Course of Study for Social Studies - Economics & Common Core Standards for Literacy in History/Social Studies Two Correlations Economics Alabama Edition 2015 To the 2010 Alabama Course of Study for Social Studies - Economics & Common Core Standards for Literacy in History/Social Studies Table of Contents Alabama

More information

Measuring GDP and Economic Growth

Measuring GDP and Economic Growth 20 Measuring GDP and Economic Growth After studying this chapter you will be able to Define GDP and explain why GDP equals aggregate expenditure and aggregate income Explain how Statistics Canada measures

More information

INFLATION. Measures Types Causes Effects

INFLATION. Measures Types Causes Effects INFLATION Measures Types Causes Effects What is inflation? Inflation measures how much more expensive a set of goods and services has become over a certain period, usually a year Prices of goods and services

More information

Content Descriptions Economics/Business/Free Enterprise

Content Descriptions Economics/Business/Free Enterprise Content Descriptions Economics/Business/Free Enterprise The State Board of Education is required by Georgia law (A+ Educational Reform Act of 2000, O.C.G.A. 20-2-281) to adopt End-of-Course Tests (EOCT)

More information

Keynes and IS-LM analysis. (Chapter 33 in Mankiw and Taylor)

Keynes and IS-LM analysis. (Chapter 33 in Mankiw and Taylor) Keynes and IS-LM analysis (Chapter 33 in Mankiw and Taylor) Short-run fluctuations The next four lectures will cover different aspects of macroeconomic policy, in particular, the role of fiscal and monetary

More information

A-level ECONOMICS Paper 2 Specimen Assessment Material. Mark scheme

A-level ECONOMICS Paper 2 Specimen Assessment Material. Mark scheme A-level ECONOMICS Paper 2 Specimen Assessment Material Mark scheme Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant questions, by a panel of subject teachers.

More information

2.5 Monetary policy: Interest rates

2.5 Monetary policy: Interest rates 2.5 Monetary policy: Interest rates Learning Outcomes Describe the role of central banks as regulators of commercial banks and bankers to governments. Explain that central banks are usually made responsible

More information

An Introduction to Macromeasurement

An Introduction to Macromeasurement An Introduction to Macromeasurement There are three kinds of economics: Greek-letter, up-and-down, and airport." Paul Krugman, The Age of Diminished Expectations Circular flow model The economy is an incredibly

More information

A2 Economics. Exchange Rates. tutor2u Supporting Teachers: Inspiring Students. Economics Revision Focus: 2004

A2 Economics. Exchange Rates. tutor2u Supporting Teachers: Inspiring Students. Economics Revision Focus: 2004 Supporting Teachers: Inspiring Students Economics Revision Focus: 2004 A2 Economics tutor2u (www.tutor2u.net) is the leading free online resource for Economics, Business Studies, ICT and Politics. Don

More information

Chapter 10 Fiscal Policy Macroeconomics In Context (Goodwin, et al.)

Chapter 10 Fiscal Policy Macroeconomics In Context (Goodwin, et al.) Chapter 10 Fiscal Policy Macroeconomics In Context (Goodwin, et al.) Chapter Overview This chapter introduces you to a formal analysis of fiscal policy, and puts it in context with real-world data and

More information

Coimisiún na Scrúduithe Stáit State Examinations Commission. ECONOMICS - HIGHER LEVEL (400 marks)

Coimisiún na Scrúduithe Stáit State Examinations Commission. ECONOMICS - HIGHER LEVEL (400 marks) WARNING 2008. M59 This Question Paper MUST be returned with your answer book(s) at the end of the Examination, otherwise marks will be lost. Write your Examination Number here Coimisiún na Scrúduithe Stáit

More information

Potential GDP and Economic Growth

Potential GDP and Economic Growth Potential GDP and Economic Growth CHAPTER17 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Explain the forces that determine potential GDP and

More information

Total Test Questions: 80 Levels: Grades Units of Credit:.50

Total Test Questions: 80 Levels: Grades Units of Credit:.50 DESCRIPTION This course focuses on the study of economic problems and the methods by which societies solve them. Characteristics of the market economy of the United States and its function in the world

More information

Economics What You Need to Know. Chapter 17. Circular Flow

Economics What You Need to Know. Chapter 17. Circular Flow Chapter 17 Circular Flow 17.1 WHY AGGREGATE? My boss, not an economist, was sometimes confused about the macroeconomic interrelationships and connections of sectors within the economy. It seemed like he

More information

Assessment Schedule 2014 Economics: Demonstrate understanding of macro-economic influences on the New Zealand economy (91403)

Assessment Schedule 2014 Economics: Demonstrate understanding of macro-economic influences on the New Zealand economy (91403) NCEA Level 3 Economics (91403) 2014 page 1 of 10 Assessment Schedule 2014 Economics: Demonstrate understanding of macro-economic influences on the New Zealand economy (91403) Assessment criteria with Merit

More information

AGGREGATE SUPPLY SUPPLY-SIDE POLICY: SHORT-RUN OPTIONS AGGREGATE SUPPLY THREE VIEWS OF AS THE MONETARIST VIEW THE KEYNESIAN VIEW

AGGREGATE SUPPLY SUPPLY-SIDE POLICY: SHORT-RUN OPTIONS AGGREGATE SUPPLY THREE VIEWS OF AS THE MONETARIST VIEW THE KEYNESIAN VIEW Chapter 16 SUPPLY-SIDE POLICY: SHORT-RUN OPTIONS AGGREGATE SUPPLY The impetus for examining the supply side of the macro economy sprung up in the stagflation of the 1970s. Stagflation is the simultaneous

More information

Macroeconomics Machine-graded Assessment Items Module: Fiscal Policy

Macroeconomics Machine-graded Assessment Items Module: Fiscal Policy Macroeconomics Machine-graded Assessment Items Module: Fiscal Policy Machine-graded assessment question pools are provided for your reference and are organized by learning outcome. It is your responsibility

More information

Chapter 12. Aggregate Expenditure and Output in the Short Run

Chapter 12. Aggregate Expenditure and Output in the Short Run Chapter 12. Aggregate Expenditure and Output in the Short Run Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics Aggregate Expenditure (AE)

More information

ASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2. DUE DATE : 3:00 p.m.

ASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2. DUE DATE : 3:00 p.m. Page 1 of 13 ASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2 DUE DATE : 3:00 p.m. 19 MARCH 2013 TOTAL MARKS : 100 INSTRUCTIONS TO CANDIDATES

More information

AS ECONOMICS Paper 2 Specimen Assessment Material. Mark scheme

AS ECONOMICS Paper 2 Specimen Assessment Material. Mark scheme AS ECONOMICS Paper 2 Specimen Assessment Material Mark scheme Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant questions, by a panel of subject teachers.

More information

CLASSICAL THEORY THE ECONOMY IN THE LONG RUN Main reference: N. Gregory Mankiw, Macroeconomics 5/e, Worth Publishers,

CLASSICAL THEORY THE ECONOMY IN THE LONG RUN Main reference: N. Gregory Mankiw, Macroeconomics 5/e, Worth Publishers, University of East London ELBS Economics EC201 MACROECONOMICS CLASSICAL THEORY THE ECONOMY IN THE LONG RUN Main reference: N. Gregory Mankiw, Macroeconomics 5/e, Worth Publishers, Chapter 3, National Income:

More information

Solution to Unsolved Numericals in the Textbook

Solution to Unsolved Numericals in the Textbook Solution to Unsolved Numericals in the Textbook National Income and Related Aggregates. Calculate Gross National Disposable Income from the following data: (i) National income 2,000 (ii) Net factor income

More information

Government s Role in Influencing Economic Growth and Productivity

Government s Role in Influencing Economic Growth and Productivity Government s Role in Influencing Economic Growth and Productivity PSMW 2015 8:50 AM, May 26, 2014 Stuart Newton Comptroller General of BC What is Economic Growth and Productivity? Economic Growth: - Gross

More information

Economics Proposal for CORE 2014 due by February 1, 2013

Economics Proposal for CORE 2014 due by February 1, 2013 Economics Proposal for CORE 2014 due by February 1, 2013 ------------------------------------------------------------------------------------------------------ Executive Summary: The Economics Curriculum

More information

A country s economy is in a short-run equilibrium with an output level less than the full-employment output level. Assume an upwardsloping aggregate

A country s economy is in a short-run equilibrium with an output level less than the full-employment output level. Assume an upwardsloping aggregate ADAS Practice A country s economy is in a short-run equilibrium with an output level less than the full-employment output level. Assume an upwardsloping aggregate supply curve. (a) Using a correctly labeled

More information

Each correct answer will score one mark. A mark will not be deducted for a wrong answer. Any rough working should be done in this booklet.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer. Any rough working should be done in this booklet. *0299776260* ambridge International Examinations ambridge International dvanced Level ENMIS 9708/33 Paper 3 Multiple hoice (Supplement) May/June 2014 dditional Materials: Multiple hoice nswer Sheet Soft

More information

WHAT IS ECONOMICS. MODULE - 1 Understanding Economics OBJECTIVES 1.1 MEANING OF ECONOMICS. Notes

WHAT IS ECONOMICS. MODULE - 1 Understanding Economics OBJECTIVES 1.1 MEANING OF ECONOMICS. Notes 1 WHAT IS Economics as a subject has assumed great importance in the field of social science. In our day to day life we use a lot of economic concepts such as goods, market, demand, supply, price, inflation,

More information

The course is very similar to the microeconomics and macroeconomics principles courses offered at the college level.

The course is very similar to the microeconomics and macroeconomics principles courses offered at the college level. Macroeconomics SYLLABUS Jason Farone Blackhawk High School Beaver Falls, PA School Profile School Location and Environment: Blackhawk High School is a public school in Beaver Falls, PA, located 50 miles

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Econ 111 Summer 2007 Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The classical dichotomy allows us to explore economic growth

More information

0 100 200 300 Real income (Y)

0 100 200 300 Real income (Y) Lecture 11-1 6.1 The open economy, the multiplier, and the IS curve Assume that the economy is either closed (no foreign trade) or open. Assume that the exchange rates are either fixed or flexible. Assume

More information

VII. ECONOMIC FLUCTUATIONS AND MACROECONOMIC POLICY

VII. ECONOMIC FLUCTUATIONS AND MACROECONOMIC POLICY VII. ECONOMIC FLUCTUATIONS AND MACROECONOMIC POLICY A. Aggregate Demand and Prices 1. The aggregate demand/inflation (ADI) curve -- graphical representation of the negative relationship (downward sloping

More information

3 Macroeconomics LESSON 8

3 Macroeconomics LESSON 8 3 Macroeconomics LESSON 8 Fiscal Policy Introduction and Description Fiscal policy is one of the two demand management policies available to policy makers. Government expenditures and the level and type

More information

Economic Systems. 1. MARKET ECONOMY in comparison to 2. PLANNED ECONOMY

Economic Systems. 1. MARKET ECONOMY in comparison to 2. PLANNED ECONOMY Economic Systems The way a country s resources are owned and the way that country takes decisions as to what to produce, how much to produce and how to distribute what has been produced determine the type

More information

S.Y.B.COM. (SEM-III) ECONOMICS

S.Y.B.COM. (SEM-III) ECONOMICS Fill in the Blanks. Module 1 S.Y.B.COM. (SEM-III) ECONOMICS 1. The continuous flow of money and goods and services between firms and households is called the Circular Flow. 2. Saving constitute a leakage

More information

The Keynesian Cross. A Fixed Price Level. The Simplest Keynesian-Cross Model: Autonomous Consumption Only

The Keynesian Cross. A Fixed Price Level. The Simplest Keynesian-Cross Model: Autonomous Consumption Only The Keynesian Cross Some instructors like to develop a more detailed macroeconomic model than is presented in the textbook. This supplemental material provides a concise description of the Keynesian-cross

More information

Government Budget and Fiscal Policy CHAPTER

Government Budget and Fiscal Policy CHAPTER Government Budget and Fiscal Policy 11 CHAPTER The National Budget The national budget is the annual statement of the government s expenditures and tax revenues. Fiscal policy is the use of the federal

More information

Ec1 ECONOMICS PAPER 1. INSTRUCTIONS TO CANDIDATES: (To be read out by the external invigilator before the start of the examination)

Ec1 ECONOMICS PAPER 1. INSTRUCTIONS TO CANDIDATES: (To be read out by the external invigilator before the start of the examination) INSTRUCTIONS TO CANDIDATES: (To be read out by the external invigilator before the start of the examination) DEPARTMENT OF EDUCATION HIGHER SCHOOL CERTIFICATE EXAMINATIONS ECONOMICS PAPER 1 Monday 23 October

More information

Learning Objectives. 1 Desired Aggregate Expenditure

Learning Objectives. 1 Desired Aggregate Expenditure Learning Objectives 1of 30 1. Differentiate between desired expenditure and actual expenditure. 2. Explain the determinants of desired consumption and desired investment expenditures. 3. Define equilibrium

More information

CHAPTER 11. AN OVEVIEW OF THE BANK OF ENGLAND QUARTERLY MODEL OF THE (BEQM)

CHAPTER 11. AN OVEVIEW OF THE BANK OF ENGLAND QUARTERLY MODEL OF THE (BEQM) 1 CHAPTER 11. AN OVEVIEW OF THE BANK OF ENGLAND QUARTERLY MODEL OF THE (BEQM) This model is the main tool in the suite of models employed by the staff and the Monetary Policy Committee (MPC) in the construction

More information

AFRICAN STATISTICS DAY KEEPING ACCOUNTS TO IMPROVE AFRICA S PRESENT FOR A BRIGHTER FUTURE

AFRICAN STATISTICS DAY KEEPING ACCOUNTS TO IMPROVE AFRICA S PRESENT FOR A BRIGHTER FUTURE AFRICAN STATISTICS DAY 18 TH NOVEMBER 2011 KEEPING ACCOUNTS TO IMPROVE AFRICA S PRESENT FOR A BRIGHTER FUTURE Prepared by National Bureau of Statistics Compilation of National Accounts Statistics Outline:

More information

National Income Accounting. Courtesy : www. carlprosper4nugs.yolasite.com

National Income Accounting. Courtesy : www. carlprosper4nugs.yolasite.com National Income Accounting Courtesy : www. Introduction to Economy of Ghana Measuring the Economy - National Income Accounting Structure of the Economy and Sectoral Outlook Economic History of Ghana: preindependence,

More information

Chapter 1 Introduction to Macroeconomics

Chapter 1 Introduction to Macroeconomics Chapter 1 Introduction to Macroeconomics Multiple Choice Questions 1. The two major reasons for the tremendous growth in output in the U.S. economy over the last 125 years are (a) population growth and

More information

Unit 3 MACROECONOMICS THE AGGREGATE ECONOMY

Unit 3 MACROECONOMICS THE AGGREGATE ECONOMY Unit 3 MACROECONOMICS THE AGGREGATE ECONOMY SSEMA1 (cont) Illustrate the means by which economic activity is measured Macroeconomics Economic growth Gross Domestic Product Net exports Current (Nominal)

More information

AS Economics. Unemployment. tutor2u Supporting Teachers: Inspiring Students. Economics Revision Focus: 2004

AS Economics. Unemployment. tutor2u Supporting Teachers: Inspiring Students. Economics Revision Focus: 2004 Supporting Teachers: Inspiring Students Economics Revision Focus: 2004 AS Economics tutor2u (www.tutor2u.net) is the leading free online resource for Economics, Business Studies, ICT and Politics. Don

More information

Chapter 3 AGGREGATE DEMAND AND

Chapter 3 AGGREGATE DEMAND AND Chapter 3 AGGREGATE DEMAND AND AGGREGATE G SULY Dr. Mohammed Alwosabi The aggregate demand and aggregate supply (-AS) model determines RGD and GD Deflator and helps us understand the performance of three

More information