A-Level Economics | Year 12 Macroeconomics Summary
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- what is the difference between macro and micro?
- the diagrams for macroeconomics
- AD = C + I + G + (X-M)
- C: consumer confidence, interest rates, disposable incomes
- I: interest rates, business confidence
- G: state of the economy
- X-M: exchange rates
- SRAS = costs of production (wages, raw material prices, exchange rates)
- LRAS = supply side policies
- Keynesian LRAS curve
- The 4 macroeconomic objectives
- 2% inflation (rise in average price level)
- Low unemployment
- Economic growth: increase in real GDP
- what are the stages of the economic cycle: boom, downturn, recession, recovery
- what are output gaps: when actual growth rate is higher/ lower than trend growth rate
- short run (actual) economic growth vs long run economic growth
- actual: real GDP increases e.g. AD shifts to the right
- long run: LRAS (productive potential) increases
- impact of economic growth: low UE, high inflation
- Policies to achieve the four macroeconomic objectives
- fiscal policy: the use of G&T to shift AD and control inflation
- GOVERNMENT EVERY APRIL
- monetary policy: the use of interest rates to shift AD and control inflation
- (MPC) BANK OF ENGLAND EVERY MONTH
- expansionary fiscal policy
- evaluation: multiplier and accelerator effect, national debt increases
- contractionary fiscal policy
- evaluation: inequality, lower quality of public goods and services
- expansionary monetary policy
- evaluation: value of the pound decreases, low confidence and difficult to borrow
- contractionary monetary policy
- evaluation: value of the pound increases
- supply side policy
- evaluation: opportunity cost and time lag