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4. The Macroeconomy

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  1. 4.1 National income statistics

    1. • Meaning of national income

    2. • Measurement of national income: - Gross Domestic Product (GDP) - Gross National Income (GNI) - Net National Income (NNI)

    3. • Adjustment of measures from market prices to basic prices

    4. • Adjustment of measures from gross values to net values

  2. 4.2 Introduction to the circular flow of income

    1. • Circular flow of income in a closed economy and an open economy: the flow of income between households, firms and government and the international economy

    2. • Injections and leakages (multiplier not required)

    3. • Equilibrium and disequilibrium (marginal and average propensities not required)

  3. 4.3 Aggregate Demand and Aggregate Supply analysis

    1. 4.3.1Aggregate Demand

      • Definition of Aggregate Demand (AD)

    2. 4.3.2AD components

      • Components of AD and their meanings: AD = C + I + G + (X - M)

    3. 4.3.3AD determinants

      • Determinants of AD (detailed knowledge of the components of AD is not required)

    4. 4.3.4AD curve shape

      • Shape of the AD curve (downward sloping)

    5. 4.3.5AD shifts

      • Causes of a shift in the AD curve

    6. 4.3.6Aggregate Supply

      • Definition of Aggregate Supply (AS)

    7. 4.3.7AS determinants

      • Determinants of AS

    8. 4.3.8SRAS and LRAS shape

      • Shape of the AS curve in the short run (SRAS, upward sloping line or sweeping curve) and the long

    9. 4.3.9AS shifts

      • Causes of a shift in the AS curve in the short run (SRAS) and in the long run (LRAS)

    10. 4.3.10AD/AS shifts vs movements

      • Distinction between a movement along and a shift in AD and AS

    11. 4.3.11AD/AS equilibrium

      • Establishment of equilibrium in the AD/AS model and the determination of the level of real output, the price level and employment

    12. 4.3.12AD/AS shift effects

      • Effects of shifts in the AD curve and the AS curve on the level of real output, the price level and employment

  4. 4.4 Economic growth

    1. • Meaning of economic growth

    2. • Measurement of economic growth

    3. • Distinction between growth in nominal GDP and real GDP

    4. • Causes of economic growth

    5. • Consequences of economic growth

  5. 4.5 Unemployment

    1. • Meaning of unemployment

    2. • Measures of unemployment, with reference to possible difficulties in measurement

    3. • Causes and types of unemployment: frictional, structural, cyclical, seasonal and technological

    4. • Consequences of unemployment

  6. 4.6 Price stability

    1. • Definition of inflation, deflation and disinflation

    2. • Measurement of changes in the price level: - consumer price index (CPI) - possible difficulties in measurement

    3. • Distinction between money values (nominal) and real data

    4. • Causes of inflation: cost-push and demand-pull inflation

    5. • Consequences of inflation