Unit 5 - Theory and measurement in the macroeconomy
Summary
Summary CIE AS Level Economics C4 The Macroeconomy (AS)
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Course
Unit 5 - Theory and measurement in the macroeconomy
Institution
CIE
Book
Cambridge International AS and A Level Economics Coursebook with CD-ROM
Summary notes derived from the Cambridge International AS & A Level Economics coursebook for revision and exam preparation. Some examples are provided through relevant search results and lecture notes.
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{
embodies
baking . . .
value of
> intermediate
goods
$10.00 $15.00
③ within a country
-
production which occurs within a country 's borders
I can be done by citizens / foreign workers )
④ given period of time
-
currently produced goods ( not in the past )
- v 3- 12 months > house I built 2018 ) bought in 2021
,
:> ✗ counted in 2021 GDP
= components OF GDP =
① consumption ( C )
-
total spending by households on Gbs
↳ housing costs
t >
landlords ( imputed rental value ONLY )
tenants
①
trent payment )
✗ purchase price / mortgage payments
② investment III
-
total spending on goods that will be used to produce other goods in
the future
↳ capital equipment ( machinery ) ,
infrastructure ,
inventories
( produced but not sold yet ]
,③ government spending (G)
-
total spending on Gbs purchased by government
↳ transfer payments e. g. unemployment insurance benefits ,
pensions
↳ public goods & merit goods
④ net exports ( NX )
-
total foreign spending on economy 's GIs [ exports ]
-
portion of C , I & G spent on G&S produced abroad [ imports ]
MX =
exports -
imports
: .
GDP calculation : GDP = C + I t G + NX
=
WHAT IS GDP USED FOR ? =
o real GDP per capita → main indicator of average person 's standard
of living
BUT ! ! does not value : childcare etc
_
,
-
quality of environment -
non -
market activity
-
leisure time -
equitable income distribution
o
large GDP allows countries to afford :
L cases where people may be
-
better schools poorer / richer than depicted
-
cleaner environment
-
quality healthcare
* Hbl positively correlated WI GDP
specific to each Gbs ( Mb )
4. 3 AGGREGATE DEMAND ( Ab )
aggregate demands > total spending on an economy 's Gas @ given
N v r - revert
price level in a given time period
price level
.
n > shows quantity of GIS that households ,
firms & governments want to buy @ each
nationwide basis ; level
price
all Gds
o
negative relationship 1 inverse ) with
A
price level : . downward sloping
AD
0
Consists of 4 components
0 >
real GDP
, =
WHY IS AD DOWNWARD SLOPING ? =
① wealth effect 1 price level
G consumption )
price level tr ; real value of money 4 .
I higher spending power )
"
wealthier spend more
"
i. consumers are =
↳ consumer spending 4 ; demand for GIS 4 .
}
$5 $20 Purchasing
⇒ power
T
4 cones 10 cones
$2 : feels richer
/ THEN , ( now , .
,
③ exchange rate / international effect 1 price level & net exports )
price level to ; interest rates to ; real exchange rate
HOWEVER ,
net exports 1^1 export price 4 : . more countries
i. Ab R purchase ( exports > imports )
summary ⇒ price level tr ,
Ab tr .
= components OF AGGREGATE Demand =
C-
consumption
}
↳ consumer confidence 9 income tax tr ,
,
wealth R money supply 9 , population A
,
G government spending
-
↳ desire to stimulate economic activity I
win political support 4 curve
I -
investment shifts
right
↳ business confidence 4 , corporate tax T ,
technological advances .
NX -
net exports
↳ man , ,, , , .mn, , , .mg, , .mu, ,
incomes in foreign countries 4 .
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