Economics AS2

• Macroeconomics


  Considers the economy as a whole
• Macroeconomics


  • Studies relationships and connections between one country and another
  • Looks at the success or failure of government policies
  • Involves looking at big numbers like GDP and balance of payments
• Macroeconomic relationships


  • How a slowdown in the Chinese or Brazilian economy can affect UK businesses
  • How a change in the exchange rate affects British firms exporting to countries around the world
• Macroeconomic scope


  • Looking at the success or failure of government policies for cutting unemployment
  • Whether the government has succeeded in creating the conditions for a durable and balanced recovery
• Households


  Receive income through wages, salaries and investments, and buy the output of firms (consumer spending)
• Firms


  Hire land, labour and capital inputs, pay wages and rent, receive payment from consumers, and may invest a percentage of profits in new producer goods
• Government


  Collects taxes to fund spending on public services such as education, healthcare and defence
• International sector


  The UK buys imports from other countries and overseas businesses and consumers buy UK products (exports)
• Macroeconomic framework


  • 4 objectives: growth, inflation, unemployment, balance of payments
  • 1 model: aggregate demand/aggregate supply and accompanying diagrams
  • 4 policies: fiscal, monetary, supply-side, exchange rates