51ºÚÁÏ

PPT with worked examples to follow

Candidates will develop their understanding of macroeconomic intervention by considering the challengesencountered by a government when trying to manage the macroeconomy to achieve its chosenmacroeconomic objectives. Important trade-offs like the Phillips curve will be analysed along with otherpolicy conflicts, and candidates will evaluate the effectiveness of different macroeconomic policies withregard to different macroeconomic objectives. The possibility of macroeconomic government failure will alsobe considered. These issues encompass the key concepts: scarcity and choice; the margin and decision-making; equilibrium and disequilibrium; efficiency and inefficiency; time; progress and development.

10.1 Government macroeconomic policy objectives
10.1.1 objectives in terms of inflation, balance of payments, unemployment, growth, development,sustainability and redistribution of income and wealth
10.2 Links between macroeconomic problems and their interrelatedness
10.2.1 relationship between the internal value of money and the external value of money
10.2.2 relationship between the balance of payments and inflation
10.2.3 relationship between growth and inflation
10.2.4 relationship between growth and the balance of payments
10.2.5 relationship between inflation and unemployment:• traditional Phillips curve• expectations-augmented Phillips curve (short- and long-run Phillips curve)
10.3 Effectiveness of policy options to meet all macroeconomic objectives
10.3.1 effectiveness of different policies in relation to different macroeconomic objectives:• fiscal policy including Laffer curve analysis• monetary policy• supply-side policy including market-based and interventionist policies• exchange rate policy• international trade policy
10.3.2 problems and conflicts arising from the outcome of these policies
10.3.3 existence of government failure in macroeconomic policies