IB-Batory

  • Class 1 – Introduction
  • Class 2 – Where does economics come from – slides
  • Class 3 – How does the economy work – slides
    • Explain, using a diagram, the circular flow of income between households and firms in a closed economy with no government. Identify the four factors of production and their respective payments (rent, wages, interest and profit) and explain that these constitute the income flow in the model. / JT: I am not sure why they say there is four factors of production, profits are not factors (inputs), they are outcomes. Indeed, retained profits (i.e. firm profits that were not paid to the owner in the form of his/her dividend, rather stayed within firm) could be used for investment, but it still does not make them inputs. Rather, this is household saving that without the intermediation of the financial markets came to be in the firms. /
    • Outline that the income flow is numerically equivalent to the expenditure flow and the value of output flow.
    • Explain, using a diagram, the circular flow of income in an open economy with government and financial markets, referring to leakages/withdrawals (savings, taxes and import expenditure) and injections (investment, government expenditure and export revenue). Explain how the size of the circular flow will change depending on the relative size of injections and leakages.
  • Class 4 – Measures of economic activity: GDP, GNI and welfare – slides + OECD “Understanding National Accounts” + talk by Hans Rosling + Green GDP and a talk
    • Distinguish between GDP and GNP/GNI as measures of economic activity. Distinguish between the nominal value of GDP and GNP/GNI and the real value of GDP and GNP/GNI. Distinguish between total GDP and GNP/GNI and per capita GDP and GNP/GNI [HL also Calculate nominal GDP from sets of national income data, using the expenditure approach. Calculate GNP/GNI from data. Calculate real GDP, using a price deflator].
    • Examine the output approach, the income approach and the expenditure approach when measuring national income. Evaluate the use of national income statistics, including their use for making comparisons over time, their use for making comparisons between countries and their use for making conclusions about standards of living.
    • Explain the meaning and significance of “green GDP”, a measure of GDP that accounts for environmental destruction.
  • Class 5 – Is GDP all we’ve got? – slides
  • Class 6 – GDP growth and business cycle fluctuations – slides
    • The business cycle. Explain, using a business cycle diagram, that economies typically tend to go through a cyclical pattern characterized by the phases of the business cycle. Explain the long-term growth trend in the business cycle diagram as the potential output of the economy. Distinguish between a decrease in GDP and a decrease in GDP growth.
    • The meaning of economic growth. Define economic growth as an increase in real GDP [HL also: calculate the rate of economic growth from a set of data]. Explain, using a production
      possibilities curve (PPC) diagram, economic growth as an increase in actual output resulting from factors such as the utilization of unemployed resources and increases in productive
      efficiency, leading to a movement of a point inside the PPC to a point closer to the PPC. Explain, using a PPC diagram, economic growth as an increase in production possibilities
      caused by factors including increases in the quantity and quality of resources, leading to outward PPC shifts. Evaluate the view that increased investment is essential to achieve economic growth. Evaluate the view that improved productivity is essential to achieve economic growth.
    • Clocking the US business cycles (and related FAQs).
    • Where in the business cycle are we now? CNBC coverage of Goldman Sachs forecast and Alpha comment
  • Class 7 – Aggregate demand – slides
    • Distinguish between the microeconomic concept of demand for a product and the macroeconomic concept of aggregate demand. Construct an aggregate demand curve. Explain why the AD curve has a negative slope. Describe consumption, investment, government spending and net exports as the components of aggregate demand.
    • Explain how the AD curve can be shifted by changes in consumption due to factors including changes in consumer confidence, interest rates, wealth, personal income taxes (and hence disposable income) and level of household indebtedness. Explain how the AD curve can be shifted by changes in investment due to factors including interest rates, business confidence, technology, business taxes and the level of corporate indebtedness. Explain how the AD curve can be shifted by changes in government spending due to factors including political and economic priorities. Explain how the AD curve can be shifted by changes in net exports due to factors including the income of trading partners, exchange rates and changes in the level of protectionism.
  • Class 8 – Aggregate supply – slides
    • Define the term aggregate supply. Explain, using a diagram, why the short-run aggregate supply curve (SRAS curve) is upward sloping. Explain, using a diagram, how the AS curve in the short run (SRAS) can shift due to factors including changes in resource prices, changes in business taxes and subsidies and supply shocks.
    • Explain, using a diagram, that the monetarist/new classical model of the longrun aggregate supply curve (LRAS) is vertical at the level of potential output (full employment output) because aggregate supply in the long run is independent of the price level. Explain, using a diagram, that the Keynesian model of the aggregate supply curve has three sections because of “wage/price” downward inflexibility and different levels of spare capacity in the economy. Compare and contrast, using the two models above, the ways that factors leading to changes in the quantity and/or quality of factors of production (including improvements in efficiency, new technology, reductions in unemployment, and institutional changes) can shift the aggregate supply curve over the long term.
    • Great graphs explaining the shifts in AD and AS.
  • Class 9 – Economic equilibrium – slides 1 and slides 2
    • Great slides explaining the equilibrium in Keynesian way, a very useful tool for very cool presentations as well, called Prezi
    • Explain, using a diagram, that the monetarist/new classical model of the longrun aggregate supply curve (LRAS) is vertical at the level of potential output (full employment output) because aggregate supply in the long run is independent of the price level. Explain, using a diagram, that the Keynesian model of the aggregate supply curve has three sections because of “wage/price” downward inflexibility and different levels of spare capacity in the economy.
    • Compare and contrast, using the two models above, the ways that factors leading to changes in the quantity and/or quality of factors of production (including improvements in efficiency, new technology, reductions in unemployment, and institutional changes) can shift the aggregate supply curve over the long term.
    • Explain, using a diagram, the determination of long-run equilibrium, indicating that long-run equilibrium occurs at the full employment level of output. Examine why, in the monetarist/new classical approach, while there may be short-term fluctuations in output, the economy will always return to the full employment level of output in the long run. Examine, using diagrams, the impacts of changes in the long-run equilibrium.
    • Explain, using the Keynesian AD/AS diagram, that the economy may be in equilibrium at any level of real output where AD intersects AS. Explain, using a diagram, that if the economy is in equilibrium at a level of real output below the full employment level of output, then there is a deflationary (recessionary) gap. Discuss why, in contrast to the monetarist/new classical model, the economy can remain stuck in a deflationary (recessionary) gap in the Keynesian model. Explain, using a diagram, that if AD increases in the vertical section of the AS curve, then there is an inflationary gap. Discuss why, in contrast to the monetarist/new classical model, increases in aggregate demand in the Keynesian
      AD/AS model need not be inflationary, unless the economy is operating close to, or at, the level of full employment. / JT: we will discuss the notion of full employment somewhat later. / [HL: also explain, with reference to the concepts of leakages (withdrawals) and injections, the nature and importance of the Keynesian multiplier. Calculate the multiplier. Use the multiplier to calculate the effect on GDP of a change in an injection in investment, government spending or exports. Draw a Keynesian AD/AS diagram to show the impact of the multiplier.]
  • Class 11 – Inflation – slides
    • 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. [HL: Construct a weighted price index, using a set of data provided. Calculate the inflation rate from a set of data.]
    • 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.
    • 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. [HL: 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 longrun 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.]
  • Class 12 – Unemployment – slides
    • Define the term unemployment. Explain how the unemployment rate is calculated. Explain the difficulties in measuring unemployment, including the existence of hidden unemployment, the existence of underemployment, and the fact that it is an average and therefore ignores regional, ethnic, age and gender disparities. [HL: Calculate the unemployment rate from a set of data.]
    • Discuss possible economic consequences of unemployment, including a loss of GDP, loss of tax revenue, increased cost of unemployment benefits, loss of income for individuals, and greater disparities in the distribution of income. Discuss possible personal and social consequences of unemployment, including increased crime rates, increased stress levels, increased indebtedness, homelessness and family breakdown.
    • Describe, using examples, the meaning of frictional, structural, seasonal and cyclical (demand-deficient) unemployment. Distinguish between the causes of frictional, structural, seasonal and cyclical (demand-deficient) unemployment. Explain, using a diagram, that cyclical unemployment is caused by a fall in aggregate demand. Explain, using a diagram, that structural unemployment is caused by changes in the demand for particular labour skills, changes in the geographical location of industries, and labour market rigidities. Evaluate government policies to deal with the different types of unemployment.
  • Class 13 – Fiscal policy – slides
    • Very useful slides here and here.
    • Explain how changes in the level of government expenditure and/or taxes can influence the level of aggregate demand in an economy. Explain the mechanism through which expansionary fiscal policy can help an economy close a deflationary (recessionary) gap. Construct a diagram to show the potential effects of expansionary fiscal policy, outlining the importance of the shape of the aggregate supply curve. Explain the mechanism through which contractionary fiscal policy can help an economy close an inflationary gap. Construct a diagram to show the potential effects of contractionary fiscal policy, outlining the importance of the shape of the aggregate supply curve.
    • Explain how factors including the progressive tax system and unemployment benefits, which are influenced by the level of economic activity and national income, automatically help stabilize short-term fluctuations.
    • Evaluate the view that fiscal policy can be used to promote long-term economic growth (increases in potential output) indirectly by creating an economic environment that is favorable to private investment, and directly through government spending on physical capital goods and human capital formation, as well as provision of incentives for firms to invest.
    • Evaluate the effectiveness of fiscal policy through consideration of factors including the ability to target sectors of the economy, the direct impact on aggregate demand, the effectiveness of promoting economic activity in a recession, time lags, political constraints, crowding out, and the inability to deal with supply side causes of instability.
  • Class 14 – Monetary policy – slides
  • Class 15 – Demand, supply and economic equilibrium – slides | + elasticities
  • Class 16 – Market, price mechanism and efficiency – slides
  • Class 17 – Welfare accounting of taxes, tariffs, etc – slides and slides
  • Class 18 – Firm decision and efficiency – slides
  • Class 19 – Market design and different forms of market organization – slides
  • Class 20 – Public goods – slides
  • Class 21 – Recap of microeconomics
  • Class 21 – International trade – slides and a nice Prezi about trade & protectionism
  • Class 22 – WTO – slides
  • Class 23 – Exchange rates – slides
  • Class 24 – Balance of payments – slides
  • Class 25 - Economic integration - slides
  • Class 25 - Economic development - slides
  • Class 26 - Measuring development - slides
  • Class 27 - Internal factors of development - slides
  • Class 28 - External factors of development - slides
  • Class 29 - Inequality and development - slides