Macroeconomics: notes and practice questions
Measuring national income, the business cycle, AD and AS, the four macroeconomic objectives, inequality and poverty, then the three policy families: monetary, fiscal and supply-side. This is the unit with the most calculations that are common to both levels, which makes it the reliable source of Paper 2 part (b) work. The hard parts are the two schools of thought, because students learn one AD/AS diagram and then meet a question that names the other; and the objective conflicts, which are the AO3 rows and therefore where the 15-mark questions live. HL adds the multiplier, crowding out, automatic stabilisers, the Phillips curve, the money market and national debt, and those five together are what Paper 3 question two was built from in May 2025.
Subtopics
- Practice questionsMeasuring economic activity and illustrating its variations
This topic covers how economic activity is measured and its variations illustrated, focusing on national income accounting and well-being indicators. The circular flow of income model shows interactions between households, firms, government, banks, and foreign sectors, including leakages and injections.
- Practice questionsVariations in economic activity: aggregate demand and aggregate supply
This topic explains how aggregate demand (AD) and aggregate supply (AS) interact to determine macroeconomic equilibrium and variations in economic activity. Aggregate demand is the total spending in an economy: .
- Practice questionsMacroeconomic objectives
This topic covers the main macroeconomic objectives of governments: economic growth, low unemployment, and low and stable inflation. Economic growth is measured by the percentage change in real gross domestic product (GDP) or gross national income (GNI).
- Practice questionsEconomics of inequality and poverty
This topic examines economic inequality and poverty, including their definitions, measurement, causes, and impacts. Economic inequality refers to the unequal distribution of income and wealth within a society.
- Practice questionsDemand management (demand-side policies): monetary policy
This topic covers the use of monetary policy by central banks to manage an economy. Monetary policy involves controlling the money supply and interest rates.
- Practice questionsDemand management: fiscal policy
This topic covers the use of government revenue and expenditure to influence macroeconomic objectives. Fiscal policy involves government revenue from direct and indirect taxation, and government expenditures like current, capital, and transfer payments.
- Practice questionsSupply-side policies
This topic covers government policies aimed at increasing the productive capacity of the economy and improving efficiency. Goals include long-term growth, improved competition, reduced labour costs, lower inflation, and increased investment incentives.
