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Introduction to Macroeconomics. Learning outcome U Identify the main objectives of government economic policy Describe the main indicators of economic performance Explain the pattern of the UK economy over recent years Describe the main economic policy instruments

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introduction to macroeconomics
Introduction to Macroeconomics

Learning outcome U

  • Identify the main objectives of government economic policy
  • Describe the main indicators of economic performance
  • Explain the pattern of the UK economy over recent years
  • Describe the main economic policy instruments
  • Know the main schools of economic thought
  • Explain the Keynesian model of the circular flow of income and expenditure
  • Explain the workings of the circular flow model
  • Explain what is meant by the national income equilibrium
  • Explain the paradox of thrift
  • Explain the importance of the multiplier
  • Explain the limitations in the use of national income statistics

Reading: Units 24 & 25

macroeconomics

Macroeconomics

Concerned with the study of the economy as a whole

national economic performance
National economic performance
  • Macroeconomics tells us about the performance of an economy
  • Government economic policy focuses on:
  • Economic growth
  • Unemployment
  • Inflation
  • The trade balance
economic growth
Economic growth
  • One key measure of economic performance is the rate of change of output (measured as a % change)
  • When output is increasing it is known as economic growth
  • When output is decreasing it is known as a recession, if this continues for a long period it is known as a depression
unemployment
Unemployment
  • Another measure of economic performance is the number of people out of work (unemployed)
  • Unemployment is usually measured as a percentage of the labour force
  • Unemployment wastes resources as those that are out of work are not contributing to output of the economy
  • Unemployment leads to poverty for those without a job
inflation
Inflation
  • Another measure of economic performance is the rate of change of prices in an economy, this is known as inflation
  • Inflation is generally accepted as being harmful for an economy
  • A small amount of inflation (2% or 3%) however is considered acceptable
the trade balance
The trade balance
  • Another measure of economic performance is the balance between imports and exports
  • If the value of exports is greater than the value of imports the economy has a surplus
  • If the value of imports is greater than the value of exports the economy has a deficit
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