Macroeconomics

Table of Contents

1. Topic pack - Macroeconomics - introduction
2. 2.1 The level of overall economic activity (notes)
3. 2.1 The level of overall economic activity (questions)
4. Section 2.2 Aggregate demand and supply (notes)
5. Section 2.2 Aggregate demand and supply (simulations and activities)
6. 2.2 Aggregate Demand and Aggregate Supply (questions)
7. 2.3 Macroeconomic objectives (notes)
8. Low Unemployment
   1. Low Unemployment
   2. What the data says
   3. The meaning of unemployment
   4. Case study - regional variation
   5. Consequences of unemployment
   6. Case study - tougher for men
   7. Types and causes of unemployment
   8. Disequilibrium unemployment
   9. Equilibrium unemployment
   10. Policies to reduce unemployment
   11. Low and stable inflation
   12. Low and stable inflation (notes)
   13. The meaning and measurement of inflation
   14. A consumer price index
   15. Finding out more about consumer price index weights
   16. Problems with measuring inflation
   17. Inflation - videos
   18. Consequences of inflation
   19. Hyperinflation
   20. The consequences of deflation
   21. Types and causes of inflation: demand-pull inflation
   22. Types and causes of inflation: cost-push inflation
   23. Case Study - car prices in Trinidad
   24. Possible relationships between unemployment and inflation
   25. PlotIT - Phillips curve
   26. Phillips curve - long-run
   27. Natural rate of unemployment
   28. NAIRU
   29. Economic growth
   30. Economic growth (notes)
   31. Causes of economic growth
   32. Economic growth and the PPF (1)
   33. Economic growth and the PPF (2)
   34. Economic growth and the business cycle
   35. Economic growth and the aggregate supply curve
   36. Consequences of economic growth
   37. Equity in the distribution of income
   38. Equity in the distribution of income (notes)
   39. Indicators of income equity
   40. Poverty
   41. The poverty line: An Indicator of Relative poverty
   42. The causes of poverty
   43. The role of taxation in promoting equity
   44. The role of taxation in promoting equity (notes)
   45. Other methods of promoting equity
9. 2.3 Macroeconomic objectives (questions)
10. 2.4 Fiscal policy (notes)
11. 2.4 Fiscal policy (questions)
12. 2.5 Monetary policy (notes)
13. 2.5 Monetary Policy (questions)
14. Section 2.6 Supply-side policies (notes)
15. 2.6 Supply-side policies (questions)
16. Print View

Low and stable inflation Contents

By the end of this section you should be able to:

• Distinguish between inflation, disinflation and deflation.
• Explain that inflation and deflation are typically measured by calculating a consumer price index (CPI), which measures the change in prices of a basket of goods and services consumed by the average household.
• Explain that different income earners may experience a different rate of inflation when their pattern of consumption is not accurately reflected by the CPI.
• Explain that inflation figures may not accurately reflect changes in consumption patterns and the quality of the products purchased.
• Explain that economists measure a core/underlying rate of inflation to eliminate the effect of sudden swings in the prices of food and oil, for example.
• Explain that a producer price index measuring changes in the prices of factors of production may be useful in predicting future inflation.
• Discuss the possible consequences of a high inflation rate, including greater uncertainty, redistributive effects, less saving, and the damage to export competitiveness.
• Discuss the possible consequences of deflation, including high levels of cyclical unemployment and bankruptcies.
• Types and causes of inflation
• Explain, using a diagram, that demand-pull inflation is caused by changes in the determinants of AD, resulting in an increase in AD.
• Explain, using a diagram, that cost-push inflation is caused by an increase in the costs of factors of production, resulting in a decrease in SRAS.
• Evaluate government policies to deal with the different types of inflation.

• Construct a weighted price index, using a set of data provided.
• Calculate the inflation rate from a set of data.
• Discuss, using a short-run Phillips curve diagram, the view that there is a possible trade-off between the unemployment rate and the inflation rate in the short run.
• Explain, using a diagram, that the short-run Phillips curve may shift outwards, resulting in stagflation (caused by a decrease in SRAS due to factors including supply shocks).
• Discuss, using a diagram, the view that there is a long-run Phillips curve that is vertical at the natural rate of unemployment and therefore there is no trade-off between the unemployment rate and the inflation rate in the long run.
• Explain that the natural rate of unemployment is the rate of unemployment that exists when the economy is producing at the full employment level of output.