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Measures of the economic performance of countries
The Retail Price Index
Understand how the rate of inflation is measured by the Retail Price Index
and consider its limitations.
The Level of Unemployment
Understand alternative methods of measuring unemployment and consider
their limitations.
The Balance of Payments
Understand the main components of the Balance of Payments with special
reference to the current account (trade in goods, trade in services, investment
income).
Gross Domestic Product
Understand the meaning of GDP and be able to distinguish between nominal
and real GDP. (Detailed knowledge of the measurement of GDP is NOT required.)
Understand the limitations of GDP as an indicator of comparative living
standards between countries and over time.
Economic growth.
Causes of differences of growth rates between countries,
The desirability and costs of economic growth.
Understand the limitations of GDP as an indicator of comparative living
standards between countries and over time. Contrast growth rates between
the rich and poor countries.
Aggregate demand.
Components of aggregate demand - consumption, investment, government expenditure,
exports/ imports.
Understand the meaning of each of these components of aggregate demand
and of the factors influencing their size. (The income/ expenditure approach
of the basic Keynesian model is NOT required.) The multiplier effect should
also be understood using a descriptive approach.
Aggregate supply.
The short run and long run aggregate supply curves.
Explain the factors influencing aggregate supply, such as technological
advances, improvement in skills of the workforce.
The relationship between aggregate demand and the price level and between
aggregate supply and the price level.
Understand the distinction between shifts of, and movements along, the
aggregate demand curve and between shifts of, and movements along, the
aggregate supply curve.
The equilibrium level of real output.
Illustrate and explain the interaction of aggregate demand and aggregate
supply. Analyse causes of changes in the equilibrium level of real output,
e.g. changes in world oil prices, financial crises within the global economy.
Macroeconomic policy objectives in an EU context: Full employment, price stability, economic growth,
Balance of Payments equilibrium, income redistribution and concern for
the environment. Reasons why these objectives might not be achieved.
Understand the causes, costs and effects of unemployment, inflation,
Balance of Payments disequilibrium and inequality in income distribution.
The relative merits of supply side and/or demand side policies as means
of realising policy objectives:
Supply side policies to include reference to education and training,
reduction in trade union power, reduction in unemployment benefits.
Analyse the short-run and long-run effects of supply side and demand
side policies on the rate of inflation, the level of unemployment, the
rate of growth and on the Balance of Payments.
Use the aggregate demand/aggregate supply model in analysis.
Demand side policies to include reference to fiscal policy, monetary
policy (use of interest rates), and exchange rates.