IB Economics SL Syllabus Content Review Section 3: Macroeconomics

 3.1 Measuring national income Circular flow of income Methods of measurement - income, expenditure and output Distinction between  gross and net  national and domestic  nominal and real  total and per capita  3.2 Introduction to development Definitions of economic growth and economic development Differences in the definitions of the two concepts Gross Domestic Product (GDP) vs. Gross National Product (GNP) as measures of growth Limitations of using GDP as a measure to compare welfare between countries Allowance for differences in purchasing power when comparing welfare between countries Alternative methods of measurement Problems of measuring development

Introductory Macroeconomics:  IB Review Questions:  Macroeconomic policy objectives GDP growth  Review Quiz: rowth_1.htm rowth_1.htm Unemployment Inflation Balanced budget Positive balance of trade

Circular flow diagram  Injections Exports Consumption Government savings Investment (capital)  Leakages Savings Taxes imports  Equilibrium

National income  Review Quiz: _output.htm _output.htm  National income accounting  IB Review Questions: m m  IB Review Questions:  age22.htm age22.htm

3.3 Macroeconomic models Aggregate demand - components Aggregate supply  short-run  long-run (Keynesian vs. neo-classical approach)  Full employment level of national income  Equilibrium level of national income  Inflationary gap  Deflationary gap Diagram illustrating trade/business cycle

AS/AD  IB Review Questions: Keynes and Classics:  Review Quiz: tm tm  Review Quiz:

AS/AD Derivation  AD Shifts due to monetary policy Shifts due to fiscal policy  Contractionary and expansionary  AS Shifts in AS  investment, supply side policy, etc Shape of AS curve; effects of shifts  GDP = C + I + G + (x-m)

Monetary policy Fiscal policy  Review Quiz: htm htm  Monetary Policy Role of FED MV = PQ  Fiscal Policy G: government spending  The ‘budget’; it is not necessarily excess, but rather it is ALL government spending Tax policy  Can encourage or discourage behavior

Unemployment  Review Quiz: oyment_1.htm oyment_1.htm  IB Review Questions:  Definitions Cyclical, structural, seasonal, frictional  Costs  Causes  Policies and tools available

Inflation  Review Quiz:  IB Review Questions:  Definition  Index  Costs  Causes  Policies and tools available

Unemployment – inflation trade off  Phillips curve  Online review presentation:  IB Review Questions:

Supply side vs. demand management  Online presentation: Supply side economics:  Government policy and regulation  IB Review Questions:  Multiplier vs crowding out

General Review:  Macro economics Review Quiz:  2.htm 2.htm  macro_2.htm macro_2.htm