ib macroeconomics eq: what is the macroeconomic environment and how can we measure it?
TRANSCRIPT
IB Macroeconomics
EQ: What is the macroeconomic environment and how can we
measure it?
DEFINITION: Macro economics is the branch of economics that studies economic aggregates (grand totals): e.g. the overall level of prices, output and employment in the economy
Source: ECONandBIZ.com
Macroeconomics is concerned with the economy as a whole, we measure the performance of the macro economy by looking at both quantitative and qualitative variables e.g. totals, trends, attitudes etc.
The FOUR main macro economic targets that a government usually has are;
GROWTH PRICE STABILITY
EMPLOYMENT TRADE BALANCEGDP / GNP CPI / RPI / RPIX
Claimant Count / ILO Measure
Balance of Payments
What is the circular flow of income?
Factorpayments
Factorpayments
Consumption ofdomestically
produced goodsand services (Cd)
Consumption ofdomestically
produced goodsand services (Cd)
Firms
Households
Factorpayments
Consumption ofdomestically
produced goodsand services (Cd)
Investment (Investment (II))Investment (Investment (II))
GovernmentGovernmentexpenditure (expenditure (GG))
GovernmentGovernmentexpenditure (expenditure (GG))
ExportExportexpenditure (expenditure (XX))
ExportExportexpenditure (expenditure (XX))
BANKS, etcBANKS, etc
Netsaving (S)
Netsaving (S)
GOV.GOV.
NetNettaxes (taxes (TT))
NetNettaxes (taxes (TT))
ABROAD
ImportImportexpenditure (expenditure (MM))
ImportImportexpenditure (expenditure (MM))
WITHDRAWALS
INJECTIONS
What is the circular flow
of income?
How do economists measure national income?
• The OUTPUT method Gross Domestic Product (GDP)
• The INCOME method Gross National Income (GNY)
• The EXPENDITURE method AD = C + I + G + (X-M)
NATIONAL OUTPUT =
NATIONAL INCOME =
NATIONAL EXPENDITURE
How do we measure and compare growth?
• Gross Domestic Product (GDP)• Gross National Product (GNP)• Net National Product (NNP)• Nominal and Real GDP• GDP per capita (person)
Why Gather Data?
• A report card or barometer for the economy• Policy development• Forecasting• Businesses use data to forecast demand• Trends• Evaluating standards of living• Comparisons between countries
Data Limitations• Inaccuracies• Unrecorded or under-recorded activity
Do higher levels of GDP mean that people are better of?
• External costs of growth
• Other quality of life concerns
• Composition of output
Activities
1) Complete ‘The CIRCULAR Flow of Income - Managing the Economy’ worksheet
2) Complete Question 1 page 157 IB text
3) Complete a detailed essay plan for Essay Question 1 page 157 IB text
4) Homework – complete ‘Unit 3 - Introduction Internet Research Task’
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