AS Economics PowerPoint Briefings Introduction to Macroeconomics AS Economics

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics What is macroeconomics?

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics What is macroeconomics? Macroeconomics considers the performance of the economy as a whole. We try to understand changes in –The rate of economic growth –The rate of inflation –Unemployment –Our trade performance with other countries Macroeconomics also includes an evaluation of the relative success or failure of government economic policies

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics So what is ‘the economy’? The economy is made up of four sectors sometimes called economic agents: Households who receive payments (income) for their services (eg labour and land) and use this money to buy the output of firms (ie consumption or household spending). Firms who use land labour and capital to produce goods and services for which they pay wages rent etc (income) and receive payment (expenditure) Government (also known as the public or state sector) and International eg consumers buying overseas products (M) and Foreigners buying UK products (X) Vital knowledge

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Key Concepts Gross Domestic Product (GDP) –The monetary value of all goods and services produced within the UK in a given time period Real GDP –The volume of goods and services produced within the UK (i.e. GDP adjusted for changes in the price level) Economic Growth –The percentage rate of increase of real GDP Inflation –The annual percentage rate of change of the general price level You will learn all about this !

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Difference between micro & macro Microeconomics Recession in the tourist industry due to the global downturn A government subsidy to steel producers A recession in the textiles industry Increased spending on the National Health Service

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Microeconomics

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Difference between micro & macro Macroeconomics Strong economic growth arising from high levels of consumer spending A fall in exports because of a recession in leading European markets Higher interest rates to curb inflationary pressure

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics The ever changing economy

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Manufacturing industry in the UK Manufacturing industry in the UK has been in long term decline –It now contributes less than 18% of national output –It employs just over 3.3 million people (over 7 million in 1979) –We have a very large trade deficit with other countries in manufactured products The service sector is now the dominant sector of the UK economy

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Index of Production October shows 8.4% annual fall Can you spot the recessions?

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Manufacturing What are the main manufacturing industries in the economy?

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Objectives of economic policy What are the government’s main economic objectives?

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics The main objectives of government economic policy The key elements of the Government's strategy are: 1. Delivering macroeconomic stability (a very broad macroeconomic aim) 2. Meeting the productivity challenge (an important supply-side target) 3. Increasing employment opportunity for all (a labour market objective) 4. Ensuring fairness for families and communities (commitment to equity) 5. Protecting the environment (green economics has a macroeconomic dimension) Vital knowledge

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Macro stability… What are the government’s main economic objectives? Low inflation Steady and sustained growth High levels of employment Improvements in living standards

AS Economics PowerPoint Briefings So now you are going to look at some current economic data

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Meeting the Inflation Target What trends can you see? Are there any falls in Inflation? When?

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Achieving sustained growth BOOM RECESSION RECOVERY SLUMP Can you identify the 4 stages of the economic cycle???

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Maintaining low unemployment? What’s the relationship between GDP and unemployment

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Maintaining low unemployment?

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics How’s consumer confidence?

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics This diagram uses INDEX numbers …. Standard of Living. But what are ‘standards of living’? Other than ‘money’ how else can you judge quality of life?

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Unit 2 key theory – we will look at Macro stability can be measured by the volatility of key indicators: 1. Consumer price inflation (annual % change in prices) 2. Real GDP growth over one or more business cycles 3. Changes in measured unemployment / employment 4. Fluctuations in the current account of the balance of payments 5. Changes in government finances (i.e. the size of the fiscal deficit or surplus) 6. Volatility of short term policy interest rates and long term interest rates such as the yield on government bonds 7. Stability of the exchange rate in currency markets You will learn all about this !

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Your task To find out the current economic figures for –GDP –Inflation –Employment/unemployment –BoP –Values of sterling against euro & $ –Look up these figures for Germany, Italy, Japan, Eurozone, USA and UK.

Tutor2u & Mrs G Tutor2u & Mrs G AS Economics AS Economics Current Economic Data GDPInflationUnemploymentBalance of Payments UK USA Japan Germany Italy Eurozone