AS Macro Revision: Macro Objectives and Circular Flow
Transcript of AS Macro Revision: Macro Objectives and Circular Flow
AS Macro Revision
Macroeconomics, Macro Objectives and the Circular Flow of Income
Spring 2014
www.tutor2u.net/blog/index.php/economics/categories/C59
We add new resources / links / articles every day to our Economics blogs
Follow this link for the AS Macro Blog on Tutor2u
What is Macroeconomics?•M
acroeconomics considers the behaviour of the economy as a whole
National Economy
•Macroeconomics studies connections between different countries in the world economic and financial system
External factors
•Macroeconomics includes looking at the effects of policies such as a change in taxation or a change in interest rates
Macro policies
•Macroeconomics involves studying inflation, economic growth, human development, trade and globalisation
Key topics
The Four Key Parts of the Circular Flow Model
External Sector
HouseholdsHouseholds receive income through wages and salaries from their jobs and from their investments and buy the output of firms (this is known as consumer spending)
BusinessesBusinesses hire land, labour & capital inputs when making products for which they pay wages and rent. Firms receive payment from consumers (creating revenue and profit)
GovernmentGovernment collects taxes (T) to fund spending on public services such as education, healthcare and defence. Government spending is labelled (G)
The UK buys imports from other countries, (M) and overseas businesses and consumers buy UK products – known as exports (X)
Households Government Firms
Purchases of goods and services
£Demand
Wages, dividends, interest, profits and rent
£Incomes
Taxes
Social Transfers
Govt Purchases
Taxes
The Domestic Circular Flow of Income & Spending
The Domestic Circular
Flow
HouseholdsGovernment
Firms
Households Government Firms
Purchases of goods and services
£Demand
Wages, dividends, interest, profits and rent
£Incomes
Taxes
Social Transfers
Govt Purchases
Taxes
Rest of the World
Imports ExportsThe External Trade Sector
of the Economy
What are the key objectives of macroeconomic policy?
Price Stability – i.e. Low Positive Inflation
A Sustainable Growth of Real GDP (National
Output)
Falling Unemployment / More Jobs
Higher Average Living Standards (Income per
capita)
Improved Global Competitiveness / Trade
Balance
A More Equitable Distribution of Income and
Wealth
The State of the UK Economy 2009-2014
2014 data is a forecast (Jan 2014) 2009 2010 2011 2012 2013 2014
Real GDP - % change -5.2 1.7 1.1 0.1 1.4 2.4
Unemployment rate - % of labour force 7.6 7.9 8.1 7.9 7.8 7.5
Fiscal balance - %of GDP -11 -10 -8.0 -6.2 -6.9 -5.9
Consumer price inflation – per cent 2.2 3.3 4.5 2.8 2.6 2.4
Current account balance (BoP) - % of GDP -1.4 -2.7 -1.5 -3.8 -3.4 -2.5
Get help on the AS macroeconomics course using twitter
#econ2
@tutor2u_econ
www.tutor2u.net