1. Introduction to Macroeconomics
SBC Economics
Introduction to Macroeconomics
Learning outcome U
Identify the main objectives of government economic policy
Describe the main indicators of economic performance
Explain the pattern of the UK economy over recent years
Describe the main economic policy instruments
Know the main schools of economic thought
Explain the Keynesian model of the circular flow of income and expenditure
Explain the workings of the circular flow model
Explain what is meant by the national income equilibrium
Explain the paradox of thrift
Explain the importance of the multiplier
Explain the limitations in the use of national income statistics
Reading: Units 24 & 25

2. Concerned with the study of the economy as a whole
Macroeconomics
Concerned with the study of the economy as a whole

3. National economic performance
Macroeconomics tells us about the performance of an economy
Government economic policy focuses on:
Economic growth
Unemployment
Inflation
The trade balance

4. Economic growth
One key measure of economic performance is the rate of change of output (measured as a % change)
When output is increasing it is known as economic growth
When output is decreasing it is known as a recession, if this continues for a long period it is known as a depression

5. Unemployment
Another measure of economic performance is the number of people out of work (unemployed)
Unemployment is usually measured as a percentage of the labour force
Unemployment wastes resources as those that are out of work are not contributing to output of the economy
Unemployment leads to poverty for those without a job

6. Inflation
Another measure of economic performance is the rate of change of prices in an economy, this is known as inflation
Inflation is generally accepted as being harmful for an economy
A small amount of inflation (2% or 3%) however is considered acceptable

7. The trade balance
Another measure of economic performance is the balance between imports and exports
If the value of exports is greater than the value of imports the economy has a surplus
If the value of imports is greater than the value of exports the economy has a deficit

8. Measures of economic performance

9. Describe the pattern of the UK economy (use pages 521 to 523)
1950’s to early 1970’s
1974 to 1979

10. Describe the pattern of the UK economy (use pages 521 to 523)
The 1980’s

11. Describe the pattern of the UK economy (use pages 521 to 523)
1992 onwards