Notes for the IB course in the subject of Economics HL for Microeconomics and Macroeconomics
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Course
International Baccalaureate
Institution
International Baccalaureate
Book
IB Business Management Course Book
Se trata de resúmenes realizados durante el curso con la ayuda del profesor que cubre dos de los tres bloques a estudiar en Economics HL en el IB. Todos los puntos están bien redactados con ejemplos y imágenes que ayudan a la comprensión y a hacer el estudio más ameno.
Complete notes for the 2022 IB Business Management course
IB BUSINESS MANAGEMENT unidad 1
IB BUSINESS MANAGEMENT Unidad 3 y 4 (finanzas y marketing)
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3.1 Measuring economic activity and variations
Macro is concerned with 6 key variables
1. Economic growth
★ Increase in national output
2. Employment
★ A low level of unemployment
3. Price stability
★ A low and stable rate of inflation
4. External stability
★ Favourable balance of payments
5. Income distribution and levels of poverty - Equity in the distribution of income
6. Sustainable level of govt debt
Total economic output = national income = GDP (gross domestic product)
Factors of production and the payment for each one:
1. Labour = wages
2. Land = rent
3. Capital = interest
4. Management/Entrepreneurship = profits
2 sector circular flow of income model
Measure national income
,The most common method is Gross Domestic Product (GDP)
3 methods can be used to calculate it:
1. Output method - the actual value of goods and services produced
➔ Grouped according to the different production sectors
2. Income method - the value of all incomes earned in the economy
3. Expenditure method - the value of spending on goods and services in the economy.
C + I + G + (X-M)
C = Consumption = spending by households on final goods and services
I = Investment = spending by firms on capital goods and new construction
G = Government = spending by governments and includes govt investment
X = Net exports = income earned by selling exports minus income spent on imports
GDP: the total value of all final goods and services produced in an economy in a year.
4 sector circular flow of income model
Leakages and injections
, ➔ Saving: foregoing current consumption to allow for consumption in the future.
➔ Saving is a leakage as it is income received that is not spent on goods/services.
➔ Leakages reduce the size of income in the circular flow
➔ Firms have access to savings of households by borrowing money from banks.
➔ This money can be spent on increasing stock of capital and therefore output.
➔ This is investment and is an injection into the circular flow.
➔ Injections increase the size of income in the circular flow.
Difference between GDP and GNP/GNI
GDP: the total of all economic activity in a country (irrespective of who owns the productive
assets)
GNP/GNI: the total of all income that is earned by a country’s factors of production (regardless
of where the assets are located)
Net property income from abroad
Property income from abroad (Income from assets held in foreign countries)
-
Income paid to foreign assets
=
Net Property Income from abroad
GNP/GNI
➔ GNI = GDP + net property income from abroad
NNI: Net national income
➔ A country’s capital stock (infrastructure and machinery) loses some of its value over a
year.
◆ depreciation
➔ GDP does not take account of depreciation but NNI does
◆ NNI = GNI - depreciation
Difficult to estimate depreciation of a country’s assets, typically estimated at 10%
Nominal and Real GDP
, What is the percentage growth in GDP between the 2 years?
But we haven’t taken account of inflation.
If inflation is 5%, what happens?
$110 bn x 100/105 -> Real GDP = $104.76bn
Year Nominal GDP
2018 100$ billion
2019 110$ billion
Why is this data collected?
➔ To assess the level of economic growth. Acts as a report card.
➔ Helps in developing and applying policies
➔ Economists make predictions about the future
➔ Businesses can forecast future demand
➔ Analyse performance over time
➔ Can be used to evaluate the quality of life in a country
➔ Comparing different countries
Limitations of the data
Inaccuracies:
- huge range of sources are used
- Time lag
- Developed countries have pretty reliable systems
Unrecorded activity:
- Not all activity is recorded. Doing DIY at home
- Not a factor in developed countries.
Hidden economy:
- Income from illegal sources e.g. drug trafficking
- Illegal immigrants working in the black economy
- Tax evasion and the role of high taxes
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