Specification Reference - Macro

This uses the AQA specification from here. You should read through it and then come to here to discover the topics you want more information on.

The measurement of macroeconomic performance

How the macroeconomy works, circular flow of income, AD, AS

Economic performance

  • Economic growth and the economic cycle
    • LR vs SR growth
    • Long run trend rate of economic growth
    • Costs / Benefits of economic growth
    • Concepts of the economic cycle, identifying current phase of economic cycle
    • Positive and negative output gaps
    • Causes of changes in economic phase
  • Employment and unemployment

Inflation and deflation

  • Inflation and deflation
    • Inflation, deflation and disinflation
    • Demand pull and cost push
    • Fisher's equation MV=PQ
    • The effect of expectations
    • Consequences for individuals and the economy
  • Conflicts between macro objectives
    • Negative and positive output gaps relate to unemployment and inflationary pressures
    • SR and LR Philip's Curve
    • How economic policies may be used to reconcile the policy conflicts in SR & LR

Financial markets and Monetary Policy

  • The structure of financial markets and financial assets
    • Characteristics and functions of money
    • Narrow and broad money
    • Types of markets
      • Money market
      • Capital market
      • FOREX
    • The role of financial markets in the wider economy - TODO
    • Debt vs. equity - TODO
    • Bonds
      • The reason for the inverse relationship between IR and bond prices
  • Commerical banks and investment banks
    • Different types of banks
    • Main functions of a commercial bank
    • Structure of a commericial bank's balance sheet
    • Objectives of a commerical bank - here
      • Liquidity
      • Profitability
      • Security
      • Potential conflicts between these objectives
    • How banks create credit
  • Central banks and monetary policy
    • The main functions of the central bank
    • Monetary policy
      • That monetary policy involves the central bank taking action i.e IR, money supply, ER
      • The current objectives of monetary policy set by the government
      • The role of the Monetary policy committee
      • How changes in ER affect AD and various macro objectives - TODO
      • The transmission mechanism
      • How the BoE can influence growth of money supply (Quantative easing)
  • Regulation of the financial system

Fiscal Policy and supply-side policies

  • Fiscal Policy
    • Involves government spending, taxation and budget balance
    • Fiscal policy for can be usedful for both micro and macro
    • How fiscal policy can influence AD
    • How fiscal policy can influence AS
    • How government spending and taxation can affect the pattern of economic activity
    • Types and reasons for government expenditure
    • Why governments impose taxes
    • Direct vs indirect taxes
    • Progressive, proportional and regressive taxes
    • Principles of taxation, such that taxes should be equitable
    • The role and relative merits of different UK taxes
    • Relationship between budget balance and national debt - TODO
    • Cyclical and structural budget deficits / surpluses
    • Consequences of budget deficits and surplus
    • That we have lots of debt
    • The role of the Office for Budget Responsibility
  • Supply-side policies
    • The difference between supply side policies and supply side improvements
      • Supply side changes often come from the private sector, i.e technology improvements, investment
    • How supply side policies such as tax changes designed to change personal incentives, may increase potential output of economy and increase growth
    • The role of supply side policies in reducing the natural rate of unemployment
    • Free market supply side policies
      • Tax cuts
      • Privatisation
      • Deregulation
      • Labour market reforms
    • Interventionist policies include
      • Spending on education & training
      • Investment in research and development
      • Supply side policies can have micro and macro effects

The international economy

  • Globalisation - TODO?
    • The causes of globalisation
    • The consequences of globalisation for less-developed and more developed countries
    • The role of multinational corporations in globalisation
  • Trade
    • Comparative and Absolute Advantage
      • This shows specialisation can increase total output
    • Other benefits of trade, such as economies of scale
    • The reasons for changing patterns of trade between the UK and the rest of the world
    • The nature of protectionist
      • Tariffs, quotas, export subsidies
      • Causes and consequences of countries adopting protectinist policies
    • The main features of a customs union
    • The main characteristics of the Single European Market (SEM)?
    • The role of the WTO - TODO
  • The balance of payments
    • Components of the balance of payments
    • The meaning of a deficit and surplus on the current account
    • Factors that influence a country's C/A
      • Productivity
      • Inflation
      • Exchange Rate
    • Consequences of investment flows between countries
    • Policies that could be used to correct a balance of payments deficit / surplus
    • Expenditure switching / expenditure reducing policies?
    • The conflicts that these policies could have on other macro objectives
    • Significance of a deficit / surplus for an individual economy
    • The implications for the global economy of a major economy or economies with imbalances deciding to take corrective action. ?
  • Exchange rate systems
    • Freely floating
    • How governments can intervene the exchange rate
    • Advantages of fixed / floating ER systems.
    • Advantages / disadvantages for a country joining a currency union such as the eurozone
  • Economic growth and development
    • The difference between growth and development
    • The main characteristics of less developed countries
    • Main indicators of development including the Human Development Index (HDI)
    • Factors that affect growth and development, such as investment, education, training
    • Barriers to growth and development
    • Policies tht might be adopted to promote growth and development
    • The role of aid and trade in promoting growth and development