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style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35118/unit-2111-market-power-theory-of-production-and-costs-hl.html" title="Unit 2.11(1) Market power - Theory of production and costs (HL)">Unit 2.11(1) Market power - Theory of production and costs (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35125/unit-2112-market-power-perfect-competitionhl.html" title="Unit 2.11(2) Market power - Perfect competition(HL)">Unit 2.11(2) Market power - Perfect competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35147/unit-2113-market-power-monopolyhl.html" title="Unit 2.11(3) Market power - Monopoly(HL)">Unit 2.11(3) Market power - Monopoly(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35151/unit-2114-market-power-monopolistic-competitionhl.html" title="Unit 2.11(4) Market power - Monopolistic competition(HL)">Unit 2.11(4) Market power - Monopolistic competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35153/unit-2115-market-power-oligopolyhl.html" title="Unit 2.11(5) Market power - Oligopoly(HL)">Unit 2.11(5) Market power - Oligopoly(HL)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41603/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43378/opportunity-cost-and-production-possibility-curves.html" title="Opportunity cost and production possibility curves">Opportunity cost and production possibility curves</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42559/demand-theory.html" title="Demand theory">Demand theory</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41886/the-price-mechanism.html" title="The price mechanism">The price mechanism</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43188/market-demand-and-supply.html" title="Market demand and supply">Market demand and supply</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41705/demerit-goods.html" title="Demerit goods">Demerit goods</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42275/market-failure-and-climate-change.html" title="Market failure and climate change">Market failure and climate change</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42925/market-power.html" title="Market power">Market power</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42099/applying-game-theory.html" title="Applying game theory">Applying game theory</a></li></ul></ul><li class="ancestor parent" style="padding-left: 14px"><i class="expander fa fa-caret-right fa-rotate-90"></i><a class="" href="../34407/chapter-3-macroeconomics.html" title="Chapter 3: Macroeconomics">Chapter 3: Macroeconomics</a></li><ul class="level-2 expanded"><li class="current" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="unit-311-measuring-the-level-of-economic-activity.html" title="Unit 3.1(1): Measuring the level of economic activity">Unit 3.1(1): Measuring the level of economic activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34432/unit-312-measuring-economic-development.html" title="Unit 3.1(2): Measuring Economic Development">Unit 3.1(2): Measuring Economic Development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34485/unit-321-variations-in-economic-activity-aggregate-demand-ad-.html" title="Unit 3.2(1): Variations in economic activity - aggregate demand (AD) ">Unit 3.2(1): Variations in economic activity - aggregate demand (AD) </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34487/unit-322-variations-in-economic-activity-aggregate-supplyas.html" title="Unit 3.2(2): Variations in economic activity - aggregate supply(AS)">Unit 3.2(2): Variations in economic activity - aggregate supply(AS)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34758/unit-331-macroeconomic-objectives-economic-growth.html" title="Unit 3.3(1) Macroeconomic objectives: economic growth">Unit 3.3(1) Macroeconomic objectives: economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34771/unit-332-macroeconomic-objectives-unemployment-.html" title="Unit 3.3(2) Macroeconomic objectives: unemployment ">Unit 3.3(2) Macroeconomic objectives: unemployment </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34778/unit-333-macroeconomic-objectives-inflation-and-deflation--1.html" title="Unit 3.3(3) Macroeconomic objectives: inflation and deflation ">Unit 3.3(3) Macroeconomic objectives: inflation and deflation </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34925/unit-341-economics-of-inequality-and-poverty-1.html" title="Unit 3.4(1) Economics of inequality and poverty">Unit 3.4(1) Economics of inequality and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34946/unit-342-policies-to-improve-equality-equity-and-poverty.html" title="Unit 3.4(2) Policies to improve equality, equity and poverty">Unit 3.4(2) Policies to improve equality, equity and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34993/unit-35-government-management-of-the-economy-monetary-policy-1.html" title="Unit 3.5 Government management of the economy – monetary policy">Unit 3.5 Government management of the economy – monetary policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34962/unit-36-government-management-of-the-economy-fiscal-policy-1.html" title="Unit 3.6 Government management of the economy – fiscal policy">Unit 3.6 Government management of the economy – fiscal policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35017/unit-371-market-based-supply-side-policies--1.html" title="Unit 3.7(1) Market based supply-side policies ">Unit 3.7(1) Market based supply-side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35018/unit-372-interventionist-supply-side-policies-.html" title="Unit 3.7(2) Interventionist supply-side policies ">Unit 3.7(2) Interventionist supply-side policies </a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45803/economics-real-world-examples-and-extension-material--1.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42639/measuring-economic-well-being-1.html" title="Measuring economic well-being">Measuring economic well-being</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43044/inflation.html" title="Inflation">Inflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42350/inequality.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41639/inequity-1.html" title="Inequity">Inequity</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../35414/chapter-4-the-global-economy.html" title="Chapter 4: The Global Economy">Chapter 4: The Global Economy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35346/unit-41-benefits-of-international-trade-1.html" title="Unit 4.1 Benefits of international trade">Unit 4.1 Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35348/unit-4243-trade-protectionism-1.html" title="Unit 4.2/4.3 Trade protectionism">Unit 4.2/4.3 Trade protectionism</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35407/unit-44-economic-integration-.html" title="Unit 4.4 Economic integration ">Unit 4.4 Economic integration </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35409/unit-45-exchange-rates-1.html" title="Unit 4.5 Exchange rates">Unit 4.5 Exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35413/unit-46-balance-of-payments--1.html" title="Unit 4.6 Balance of payments ">Unit 4.6 Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35675/unit-47-sustainable-development.html" title="Unit 4.7 Sustainable development">Unit 4.7 Sustainable development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35685/unit-48-measuring-development--1.html" title="Unit 4.8 Measuring development ">Unit 4.8 Measuring development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35687/unit-49-barriers-to-economic-development-1.html" title="Unit 4.9 Barriers to economic development">Unit 4.9 Barriers to economic development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35702/unit-410-economic-growth-and-economic-development-strategies.html" title="Unit 4.10: Economic growth and economic development strategies">Unit 4.10: Economic growth and economic development strategies</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45804/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41927/foreign-currency-1.html" title="Foreign currency">Foreign currency</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43532/exchange-rates-1.html" title="Exchange rates">Exchange rates</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43804/balance-of-payments.html" title="Balance of payments">Balance of payments</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41796/economic-development-1.html" title="Economic development">Economic development</a></li></ul></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../20132/units-1-2-microeconomics.html" title="Units 1-2: Microeconomics">Units 1-2: Microeconomics</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 1: Introduction to economics">Unit 1: Introduction to economics</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20091/introductory-activity-1.html" title="Introductory activity">Introductory activity</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20093/unit-11-scarcity-choice-and-opportunity-cost.html" title="Unit 1.1: Scarcity, choice and opportunity cost">Unit 1.1: Scarcity, choice and opportunity cost</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21647/factors-of-production-1.html" title="Factors of production">Factors of production</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20114/economic-systems.html" title="Economic systems">Economic systems</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20134/public-and-private-sectors-1.html" title="Public and private sectors">Public and private sectors</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28055/unit-12-economics-as-a-social-science-1.html" title="Unit 1.2: Economics as a social science">Unit 1.2: Economics as a social science</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29921/circular-flow-of-national-income.html" title="Circular flow of national income">Circular flow of national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29829/unit-1-review-terms-1.html" title="Unit 1: Review terms">Unit 1: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41600/introduction-to-economics-crossword-1.html" title="Introduction to economics crossword">Introduction to economics crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../4331/unit-1-multiple-choice-quiz.html" title="Unit 1: Multiple choice quiz">Unit 1: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20177/unit-21-23-competitive-markets-demand-and-supply-1.html" title="Unit 2.1-2.3: Competitive markets - demand and supply">Unit 2.1-2.3: Competitive markets - demand and supply</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28517/unit-21-demand-1.html" title="Unit 2.1: Demand">Unit 2.1: Demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22349/determinants-of-demand-1.html" title="Determinants of demand">Determinants of demand</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29949/unit-22-supply-.html" title="Unit 2.2: Supply ">Unit 2.2: Supply </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20184/changes-to-supply-and-demand-.html" title="Changes to supply and demand ">Changes to supply and demand </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21992/practise-exercises-1.html" title="Practise exercises">Practise exercises</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../26112/gold-exchange-game-demand-and-supply-1.html" title="Gold exchange game: Demand and supply">Gold exchange game: Demand and supply</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20194/unit-23-competitive-market-equilibrium-1.html" title="Unit 2.3: Competitive market equilibrium">Unit 2.3: Competitive market equilibrium</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20144/producer-and-consumer-surplus-1.html" title="Producer and consumer surplus">Producer and consumer surplus</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22351/veblen-goods-and-super-luxury-goods-1.html" title="Veblen goods and super luxury goods">Veblen goods and super luxury goods</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25677/are-cryptocurrencies-the-new-tulipmania.html" title="Are Cryptocurrencies the new Tulipmania?">Are Cryptocurrencies the new Tulipmania?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20472/unit-21-23-multiple-choice-quiz.html" title="Unit 2.1-2.3: Multiple choice quiz">Unit 2.1-2.3: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20113/unit-24-consumer-and-producer-behaviour-hl-only-1.html" title="Unit 2.4: Consumer and producer behaviour (HL only)">Unit 2.4: Consumer and producer behaviour (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../36073/behavioural-economics-consumer-biases-nudge-theory-hl-only-1.html" title="Behavioural economics: Consumer biases / nudge theory (HL only)">Behavioural economics: Consumer biases / nudge theory (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20378/business-objectives-hl-only.html" title="Business objectives (HL only)">Business objectives (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28741/unit-21-24-review-terms--1.html" title="Unit 2.1-2.4: Review terms ">Unit 2.1-2.4: Review terms </a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20195/unit-25-26-elasticity-1.html" title="Unit 2.5-2.6: Elasticity">Unit 2.5-2.6: Elasticity</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28713/unit-25-price-elasticity-of-demand-1.html" title="Unit 2.5: Price elasticity of demand">Unit 2.5: Price elasticity of demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21545/determinants-of-price-elasticity-.html" title="Determinants of price elasticity ">Determinants of price elasticity </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21532/ped-elasticity-and-sales-revenue.html" title="PED elasticity and sales revenue?">PED elasticity and sales revenue?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21259/unit-25-income-elasticity-of-demand-yed.html" title="Unit 2.5: Income elasticity of demand (YED)">Unit 2.5: Income elasticity of demand (YED)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21200/unit-26-price-elasticity-of-supply.html" title="Unit 2.6: Price elasticity of supply">Unit 2.6: Price elasticity of supply</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20207/perfectly-elastic-inelastic-supply-curves.html" title="Perfectly elastic / inelastic supply curves">Perfectly elastic / inelastic supply curves</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20230/a-mathematical-note-about-elasticity-.html" title="A mathematical note about elasticity ">A mathematical note about elasticity </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39037/demand-and-supply-crossword.html" title="Demand and supply crossword">Demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29021/unit-25-26-review-terms-1.html" title="Unit 2.5-2.6: Review terms">Unit 2.5-2.6: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20474/unit-25-26-multiple-choice-quiz--1.html" title="Unit 2.5-2.6: Multiple choice quiz ">Unit 2.5-2.6: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44474/unit-21-25-competitive-markets-quiz-1.html" title="Unit 2.1- 2.5: Competitive markets quiz">Unit 2.1- 2.5: Competitive markets quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20243/unit-27-the-role-of-government-in-microeconomics--1.html" title="Unit 2.7: The role of government in microeconomics ">Unit 2.7: The role of government in microeconomics </a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26590/indirect-taxation.html" title="Indirect taxation">Indirect taxation</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20246/ped-and-the-burden-of-tax-hl-only-.html" title="PED and the burden of tax (HL only) ">PED and the burden of tax (HL only) </a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20277/government-subsidies--1.html" title="Government subsidies ">Government subsidies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29117/unit-27-indirect-tax-and-subsidy-review-terms-1.html" title="Unit 2.7: Indirect tax and subsidy review terms">Unit 2.7: Indirect tax and subsidy review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20287/price-controls-maximum-price--1.html" title="Price controls − maximum price ">Price controls − maximum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20288/minimum-price-.html" title="Minimum price ">Minimum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21540/minimum-wage-.html" title="Minimum wage ">Minimum wage </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38849/labour-market-crossword-1.html" title="Labour market crossword">Labour market crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29260/unit-27-price-controls-review-terms-1.html" title="Unit 2.7: Price controls review terms">Unit 2.7: Price controls review terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20303/unit-28-210-market-failure--1.html" title="Unit 2.8-2.10: Market failure ">Unit 2.8-2.10: Market failure </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21543/unit-28-merit-goods--1.html" title="Unit 2.8: Merit goods ">Unit 2.8: Merit goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23123/unit-28-demerit-goods-negative-externalities-1.html" title="Unit 2.8: Demerit goods / negative externalities">Unit 2.8: Demerit goods / negative externalities</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38850/market-failure-crossword-1.html" title="Market failure crossword">Market failure crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29262/unit-29-economics-of-the-environment-and-public-goods--1.html" title="Unit 2.9: Economics of the environment and public goods ">Unit 2.9: Economics of the environment and public goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20332/unit-210-asymmetric-information-hl-only-1.html" title="Unit 2.10: Asymmetric information (HL only)">Unit 2.10: Asymmetric information (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29828/unit-28-210-market-failure-review-sheet.html" title="Unit 2.8-2.10: Market failure review sheet">Unit 2.8-2.10: Market failure review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29827/unit-28-210-market-failure-review-terms.html" title="Unit 2.8-2.10: Market failure review terms">Unit 2.8-2.10: Market failure review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20479/unit-27-210-multiple-choice-quiz--1.html" title="Unit 2.7-2.10: Multiple choice quiz ">Unit 2.7-2.10: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44501/unit-27-210-government-failure-revision-quiz-1.html" title="Unit 2.7-2.10 Government failure revision quiz">Unit 2.7-2.10 Government failure revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20330/unit-211-market-power-hl-only-1.html" title="Unit 2.11: Market power (HL only)">Unit 2.11: Market power (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29835/assessment-map.html" title="Assessment map">Assessment map</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21528/production-hl-only.html" title="Production (HL only)">Production (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29978/revenue-theory-hl-only.html" title="Revenue theory (HL only)">Revenue theory (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20357/costs-of-production-hl-only.html" title="Costs of production (HL only)">Costs of production (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21286/economies-and-diseconomies-of-scale-hl-only.html" title="Economies and diseconomies of scale (HL only)">Economies and diseconomies of scale (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22494/long-run-average-cost-curves-hl-only.html" title="Long run average cost curves (HL only)">Long run average cost curves (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../29838/breakeven-hl-only.html" title="Breakeven (HL only)">Breakeven (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20340/economic-profit-hl-only.html" title="Economic profit (HL only)">Economic profit (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39082/market-power-crossword.html" title="Market power crossword">Market power crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22495/revision-exercise-on-cost-and-revenue-hl-only.html" title="Revision exercise on cost and revenue (HL only)">Revision exercise on cost and revenue (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29845/unit-211-costs-revenue-and-profit-review-sheet-hl-only.html" title="Unit 2.11: Costs, revenue and profit review sheet (HL only)">Unit 2.11: Costs, revenue and profit review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44484/unit-211-multiple-choice-quiz-sl-units-1.html" title="Unit 2.11: Multiple choice quiz (SL units)">Unit 2.11: Multiple choice quiz (SL units)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29846/market-structures-hl-only-1.html" title="Market structures (HL only)">Market structures (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29981/perfect-competition-hl-only-1.html" title="Perfect competition (HL only)">Perfect competition (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24486/profit-in-perfect-competition-hl-only-1.html" title="Profit in perfect competition (HL only)">Profit in perfect competition (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21302/efficiency-in-perfect-competition-hl-only.html" title="Efficiency in perfect competition (HL only)">Efficiency in perfect competition (HL only)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20430/monopoly-hl-only-1.html" title="Monopoly (HL only)">Monopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24529/profit-and-revenue-maximisation-in-monopoly-hl-only-1.html" title="Profit and revenue maximisation in monopoly (HL only)">Profit and revenue maximisation in monopoly (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21306/a-comparison-of-monopoly-and-perfect-competition-hl-only-1.html" title="A comparison of monopoly and perfect competition? (HL only)">A comparison of monopoly and perfect competition? (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20435/monopolistic-competition-hl-only-1.html" title="Monopolistic competition (HL only)">Monopolistic competition (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20436/oligopoly-hl-only-1.html" title="Oligopoly (HL only)">Oligopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22310/game-theory-hl-only-1.html" title="Game theory (HL only)">Game theory (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29918/unit-211-market-structures-review-sheet-hl-only-1.html" title="Unit 2.11: Market structures review sheet (HL only)">Unit 2.11: Market structures review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32337/unit-211-diagram-revision-.html" title="Unit 2.11: Diagram revision ">Unit 2.11: Diagram revision </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20480/unit-211-multiple-choice-quiz-hl-only-1.html" title="Unit 2.11: Multiple choice quiz (HL only)">Unit 2.11: Multiple choice quiz (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32425/unit-212-the-markets-inability-to-achieve-equity-hl-only-1.html" title="Unit 2.12: The market’s inability to achieve equity (HL only)">Unit 2.12: The market’s inability to achieve equity (HL only)</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21842/unit-3-macroeconomics-.html" title="Unit 3: Macroeconomics ">Unit 3: Macroeconomics </a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../3942/unit-31-measuring-economic-activity-and-illustrating-its-variati-1.html" title="Unit 3.1: Measuring economic activity and illustrating its variations">Unit 3.1: Measuring economic activity and illustrating its variations</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20558/calculating-national-income-1.html" title="Calculating national income">Calculating national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21297/gdp-gni-as-a-measure-of-living-standards.html" title="GDP / GNI as a measure of living standards">GDP / GNI as a measure of living standards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20567/national-income-statistics-1.html" title="National income statistics">National income statistics</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21580/the-business-cycle-1.html" title="The business cycle">The business cycle</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29931/unit-31-economic-activity-review-sheet-1.html" title="Unit 3.1: Economic activity review sheet">Unit 3.1: Economic activity review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20592/unit-32-variations-in-economic-activityaggregate-demand-and-aggr-1.html" title="Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply">Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29933/aggregate-demand-and-supply.html" title="Aggregate demand and supply">Aggregate demand and supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21582/components-of-aggregate-demand-1.html" title="Components of aggregate demand">Components of aggregate demand</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20634/equilibrium-in-macroeconomics-neo-classical-perspective-1.html" title="Equilibrium in macroeconomics (neo-classical perspective)">Equilibrium in macroeconomics (neo-classical perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20439/equilibrium-in-macroeconomics-keynesian-perspective-1.html" title="Equilibrium in macroeconomics (keynesian perspective)">Equilibrium in macroeconomics (keynesian perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21349/john-maynard-keynes-1.html" title="John Maynard Keynes">John Maynard Keynes</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20650/keynesian-v-free-market-debate--1.html" title="Keynesian v free market debate ">Keynesian v free market debate </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21342/changes-in-the-long-run-aggregate-supply-1.html" title="Changes in the long run aggregate supply">Changes in the long run aggregate supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30055/unit-32-aggregate-demand-and-supply-review-sheet-1.html" title="Unit 3.2: Aggregate demand and supply review sheet">Unit 3.2: Aggregate demand and supply review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20610/unit-35-and-36-demand-management-fiscal-and-monetary-policy-1.html" title="Unit 3.5 and 3.6: Demand management - fiscal and monetary policy">Unit 3.5 and 3.6: Demand management - fiscal and monetary policy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30058/government-budget.html" title="Government budget">Government budget</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21585/fiscal-policy--1.html" title="Fiscal policy ">Fiscal policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21343/multiplier-hl-only.html" title="Multiplier (HL only)">Multiplier (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21795/monetary-policy--1.html" title="Monetary policy ">Monetary policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30071/independent-central-banks-1.html" title="Independent central banks">Independent central banks</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30083/unit-35-and-36-review-sheet.html" title="Unit 3.5 and 3.6 review sheet">Unit 3.5 and 3.6 review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20615/unit-37-supply-side-policies-1.html" title="Unit 3.7: Supply side policies">Unit 3.7: Supply side policies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20651/the-role-of-supply-side-policies-1.html" title="The role of supply side policies">The role of supply side policies</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20622/market-based-and-interventionist-supply-side-policies--1.html" title="Market based and interventionist supply side policies ">Market based and interventionist supply side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39129/aggregate-demand-and-supply-crossword-1.html" title="Aggregate demand and supply crossword">Aggregate demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30086/unit-37-review-sheet-1.html" title="Unit 3.7: Review sheet">Unit 3.7: Review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20755/unit-31-32-and-35-37-multiple-choice-quiz--1.html" title="Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz ">Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz </a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44522/unit-31-32-and-35-37-revision-quiz-1.html" title="Unit 3.1-3.2 and 3.5-3.7: Revision quiz">Unit 3.1-3.2 and 3.5-3.7: Revision quiz</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20686/unit-33-macroeconomic-objectives.html" title="Unit 3.3: Macroeconomic objectives">Unit 3.3: Macroeconomic objectives</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30118/unemployment.html" title="Unemployment">Unemployment</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21351/types-of-unemployment.html" title="Types of unemployment?">Types of unemployment?</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21593/equilibrium-unemployment-.html" title="Equilibrium unemployment ">Equilibrium unemployment </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21594/disequilibrium-unemployment-1.html" title="Disequilibrium unemployment">Disequilibrium unemployment</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30458/unemployment-review-sheet-1.html" title="Unemployment review sheet">Unemployment review sheet</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20713/inflation--1.html" title="Inflation ">Inflation </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20712/measuring-inflation-hl-only-1.html" title="Measuring inflation (HL only)">Measuring inflation (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20685/costs-of-inflation-and-deflation-1.html" title="Costs of inflation and deflation">Costs of inflation and deflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30465/inflation-review-sheet.html" title="Inflation review sheet">Inflation review sheet</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20716/unemployment-v-inflation-trade-off-hl-only-1.html" title="Unemployment v inflation trade off (HL only)">Unemployment v inflation trade off (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39133/macroeconomic-objectives-crossword-1.html" title="Macroeconomic objectives crossword">Macroeconomic objectives crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44511/unit-33-macroeconomic-indicators-revision-quiz-1.html" title="Unit 3.3: Macroeconomic indicators revision quiz">Unit 3.3: Macroeconomic indicators revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20741/unit-34-economics-of-inequality-and-poverty-1.html" title="Unit 3.4: Economics of inequality and poverty">Unit 3.4: Economics of inequality and poverty</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32398/inequality-1.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21356/the-role-of-spending-and-taxation-on-inequality--1.html" title="The role of spending and taxation on inequality ">The role of spending and taxation on inequality </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21313/consequences-of-economic-growth-1.html" title="Consequences of economic growth">Consequences of economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30257/economic-growth-and-inequality-review-sheet-1.html" title="Economic growth and inequality review sheet">Economic growth and inequality review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20756/unit-33-34-multiple-choice-.html" title="Unit 3.3-3.4: Multiple choice ">Unit 3.3-3.4: Multiple choice </a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21844/unit-4-global-economy.html" title="Unit 4: Global economy">Unit 4: Global economy</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21367/unit-41-benefits-of-international-trade.html" title="Unit 4.1: Benefits of international trade">Unit 4.1: Benefits of international trade</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30529/benefits-of-international-trade.html" title="Benefits of international trade">Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20823/absolute-and-comparative-advantage-hl-only-1.html" title="Absolute and comparative advantage (HL only)">Absolute and comparative advantage (HL only)</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20845/unit-42-43-trade-protection-1.html" title="Unit 4.2-4.3: Trade protection">Unit 4.2-4.3: Trade protection</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32419/barriers-to-trade-calculations-are-hl-only-1.html" title="Barriers to trade (calculations are HL only)">Barriers to trade (calculations are HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21610/case-study-on-tata-steel-1.html" title="Case study on Tata Steel">Case study on Tata Steel</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23455/the-defence-industry-1.html" title="The Defence industry">The Defence industry</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30610/unit-41-43-review-sheet-1.html" title="Unit 4.1-4.3: Review sheet">Unit 4.1-4.3: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20894/unit-44-economic-integration--1.html" title="Unit 4.4: Economic integration ">Unit 4.4: Economic integration </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30634/economic-integration-some-hl-tasks-1.html" title="Economic integration (some HL tasks)">Economic integration (some HL tasks)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20840/world-trade-organisation-wto-1.html" title="World trade organisation (WTO)">World trade organisation (WTO)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30635/unit-44-review-sheet-1.html" title="Unit 4.4: Review sheet">Unit 4.4: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20853/unit-45-exchange-rates-1.html" title="Unit 4.5: Exchange rates">Unit 4.5: Exchange rates</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30611/floating-exchange-rates-1.html" title="Floating exchange rates">Floating exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../31824/fixed-managed-exchange-rate-systems-some-hl-tasks-1.html" title="Fixed / managed exchange rate systems (some HL tasks)">Fixed / managed exchange rate systems (some HL tasks)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21624/the-market-for-foreign-exchange-1.html" title="The market for foreign exchange">The market for foreign exchange</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30614/unit-45-review-sheet-1.html" title="Unit 4.5: Review sheet">Unit 4.5: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20859/unit-46-balance-of-payments-1.html" title="Unit 4.6: Balance of payments">Unit 4.6: Balance of payments</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30624/balance-of-payments--1.html" title="Balance of payments ">Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21386/current-account-hl-only-1.html" title="Current account (HL only)">Current account (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20872/the-marshall-lerner-condition-j-curve-hl-only-1.html" title="The Marshall-Lerner condition / J curve (HL only)">The Marshall-Lerner condition / J curve (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20899/units-41-46-multiple-choice-quiz--1.html" title="Units 4.1-4.6: Multiple choice quiz ">Units 4.1-4.6: Multiple choice quiz </a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42989/unit-41-46-multiple-choice-quiz-ii-1.html" title="Unit 4.1-4.6: Multiple choice quiz II">Unit 4.1-4.6: Multiple choice quiz II</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../39438/unit-41-46-international-trade-crossword-1.html" title="Unit 4.1-4.6: International trade crossword">Unit 4.1-4.6: International trade crossword</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32423/unit-47-sustainable-development--1.html" title="Unit 4.7: Sustainable development ">Unit 4.7: Sustainable development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26092/water-scarcity-activity-1.html" title="Water scarcity activity">Water scarcity activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32426/sustainable-development.html" title="Sustainable development">Sustainable development</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20928/unit-48-measuring-development--1.html" title="Unit 4.8: Measuring development ">Unit 4.8: Measuring development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30686/measuring-development-1.html" title="Measuring development">Measuring development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21627/economic-development--1.html" title="Economic development ">Economic development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30679/unit-47-48-review-sheet.html" title="Unit 4.7-4.8: Review sheet">Unit 4.7-4.8: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 4.9: Barriers to development">Unit 4.9: Barriers to development</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30727/barriers-to-development-in-international-trade-1.html" title="Barriers to development in International trade">Barriers to development in International trade</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32430/unit-410-economic-growth-andor-economic-development-strategies-1.html" title="Unit 4.10: Economic growth and/or economic development strategies">Unit 4.10: Economic growth and/or economic development strategies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30687/the-role-of-domestic-factors-1.html" title="The role of domestic factors">The role of domestic factors</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30688/the-role-of-international-trade-and-development-1.html" title="The role of international trade and development">The role of international trade and development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30689/the-role-of-foreign-direct-investment-fdi-1.html" title="The role of foreign direct investment (FDI)">The role of foreign direct investment (FDI)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25240/the-role-of-foreign-aid--1.html" title="The role of foreign aid ">The role of foreign aid </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30819/multilateral-development-assistance-1.html" title="Multilateral development assistance">Multilateral development assistance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21632/the-role-of-international-debt-1.html" title="The role of international debt">The role of international debt</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25242/the-balance-between-markets-and-intervention-1.html" title="The balance between markets and intervention">The balance between markets and intervention</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30926/unit-49-410-review-sheet.html" title="Unit 4.9 - 4.10: Review sheet">Unit 4.9 - 4.10: Review sheet</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21380/assessment.html" title="Assessment">Assessment</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Internal assessment ">Internal assessment </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20608/how-to-write-your-ia-student-handout.html" title="How to write your IA? (student handout)">How to write your IA? (student handout)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21428/how-to-interpret-the-assessment-criteria-1.html" title="How to interpret the assessment criteria?">How to interpret the assessment criteria?</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Grading practise ">Grading practise </a></li><ul class="level-3 "><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Sample 3a">Sample 3a</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../32083/sample-3b-1.html" title="Sample 3b">Sample 3b</a></li></ul></ul></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32022/assessment-markbands-1.html" title="Assessment markbands">Assessment markbands</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../4332/exam-style-questions.html" title="Exam style questions">Exam style questions</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Paper 1 style examination questions">Paper 1 style examination questions</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../40100/unit-211-212-questions.html" title="Unit 2.11-2.12 questions">Unit 2.11-2.12 questions</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../45102/paper-1-guidance-on-essay-writing-1.html" title="Paper 1 guidance on essay writing">Paper 1 guidance on essay writing</a></li></ul></ul></nav> </div> </div> </div> </div><div style="margin-top: 20px;"><style type="text/css">
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<div id="main-column" class="span9"> <article id="unit-311-measuring-the-level-of-economic-activity" style="margin-top: 16px;">
<h1 class="section-title">Unit 3.1(1): Measuring the level of economic activity</h1>
<ul class="breadcrumb"><li><a title="Home" href="../../../economics.html"><i class="fa fa-home"></i></a><span class="divider">/</span></li><li><span class="gray">Textbook</span><span class="divider">/</span></li><li><span class="gray">Chapter 3: Macroeconomics</span><span class="divider">/</span></li><li><span class="active">Unit 3.1(1): Measuring the level of economic activity</span></li></ul>
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<div class="intro-card"><div class="bg-cover" style="background-image: url("/media/ib/economics/images/textbook/measuring-economic-activity/development-in-brazil.jpg");"></div><img src="../../../ib/economics/images/textbook/measuring-economic-activity/development-in-brazil.jpg" style="display: none"><div class="content"><p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;
line-height:normal;background:white"><span style="color:black;mso-color-alt:
windowtext">Economic activity is where scarce resources are allocated to produce goods and services to satisfy human wants. Macroeconomics is the study of economic activity from a whole economy perspective. This unit examines how economists measure the level of economic activity in a country and how this can be used to make judgements about a nation’s economy. The section focuses particularly on gross domestic product and gross national income and how they can be used to measure economic growth and economic development. </span><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-GB"></span></p><br><span style="color:black;mso-color-alt:
windowtext"></span><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-GB"></span></div></div><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h3><strong>What you should know by the end of this chapter:</strong></h3></div></div></div><ul><li>National income accounting as a measure of economic activity <img alt="" height="201" src="../../../ib/economics/images/textbook/measuring-economic-activity/intro-picture.jpg" style="float: right;" width="383"></li><li>Circular flow of income model</li><li>Income, output and expenditure approaches to national income</li><li>Gross domestic product (GDP)</li><li>Calculation of GDP (HL)</li><li>Gross national income (GNI)</li><li>Calculation of GNI (HL)</li><li>Real GDP and real GNI </li><li>Calculation of real GDP and real GNI (HL)</li><li>Real GDP/GNI per capita at purchasing power parity (PPP) </li><li>Business cycle</li></ul><div class="greyBg"><h3>Revision material</h3><p><img alt="" src="../../../ib/economics/images/textbook/revision-material/logo.jpg" style="width: 200px; height: 95px; float: left;">The link to the attached pdf is revision material from <strong>Unit 3.1: Measuring the level of economic activity. </strong>The revision material can be downloaded as a student handout.</p><p><a href="../../../media/ib/economics/images/textbook/measuring-economic-activity/measuring-gdp/circular-flow-of-income.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Revision notes</a></p></div><div class="blueBg"><h3><strong>National income as a measure of economic activity </strong></h3><p><img alt="" src="../../../ib/economics/images/textbook/measuring-economic-activity/german-car-makers.jpg" style="float: left; width: 311px; height: 192px;" title="https://www.newindianexpress.com/business/2019/oct/26/mercedes-benz-opens-booking-for-new-gle-suv-2053331.html">National income is the money value of a country's output of final goods and services produced in one year. Economic activity is where scarce resources are allocated to produce goods and services to satisfy human wants. Macroeconomics is the study of economic activity from a whole economy perspective.</p><hr class="hidden"><p>For example, the German economy is well known for its high-performing manufacturing sector with famous names like Volkswagen, Daimler AG, Allianz and BMW. Microeconomics allows us to examine these individual businesses and the industries they operate in. </p><p>Macroeconomics looks at Germany’s manufacturing sector in the context of the whole economy where it accounts for 47 per cent of the country’s GDP. So, any change in Germany's manufacturing sector has a significant impact on its national output.</p><h3><strong>The circular flow of income</strong></h3><h4><strong>An economic model</strong></h4><p>The circular flow of income is an economic model that illustrates the flow of money between firms and households at a macroeconomic level. It can be further developed to include foreign trade, government and banking sectors. Whilst the model has been around since the 17<sup>th</sup> century, its importance as an economic theory was developed by John Maynard Keynes in his book, General Theory of Employment, Interest and Money which was published in 1936. The circular flow model is a useful aid to economic forecasting and policymaking.</p><h4><strong>How the model works</strong></h4><p>The model we are going to use in our analysis of the macroeconomy is a simplified version of the model used by institutions such as banks, universities, hedge funds and governments, but it is still very useful as a method of understanding how the macroeconomy works.</p><p>The flow of income is illustrated in diagram 3.1. It can be explained by considering the followi<img alt="" height="322" src="../../../ib/economics/images/textbook/measuring-economic-activity/circular-flow.jpg" style="float: right;" width="467">ng principles:</p><ul><li>The economy can be divided into two sectors, firms and households. </li><li>Firms combine the factors of production to produce goods and services and households buy the goods and services and consume them. This is shown by the blue flows in the circular flow diagram 3.1.</li><li>To produce the goods and services firms need to employ people from the households which include labour and entrepreneurs and in return, the firms pay the households an income. This is shown by the red flows in diagram 3.1.<hr class="hidden"></li><li>Injections of funds come into the circular flow of an economy in the form of investment, government expenditure and exports.</li><li>Withdrawal or leakages of funds from the circular flow of income go out in the form of savings, tax and imports.</li></ul><h4><strong>Injections to the circular flow</strong></h4><p>Injections are the flow of funds into the circular flow that come from firms investing, government spending and exports resulting from foreign trade. The three injections are:</p><ul><li>Investment by businesses when they buy capital such as new buildings and machinery</li><li>Government expenditure on public services such as health and education</li><li>Exports of goods and services to other countries lead to an inflow of funds.</li></ul><h4><strong>Withdrawals from the circular flow</strong></h4><p>Withdrawals from the circular flow occur when money leaves the economy through household savings, taxation by the government and imports resulting from foreign trade. The three withdrawals are:</p><ul><li>Savings by households of income they do not spend on goods and services</li><li>Taxation by governments on household income, business profits and indirect tax on goods and services</li><li>Imports bought by firms and households lead to an outflow of funds.</li></ul><h4><strong>Application of the model</strong></h4><p>Like the other models we use in Economics, the circular flow model lets us analyse the causes and consequences of changes in economic variables. The demand and supply model helps us examine how, for example, changes in household income affect price and output in a market. Here are some examples of how the circular flow model can be used to analyse how a change in injections and withdrawals affect the macroeconomy. Consider the following examples:</p><ul><li>An increase in the value of exports by an economy increases the value of funds in the circular flow which leads to increases in household incomes and consumption, output by firms and employment.</li><li>An increase in taxation in the economy reduces the value of funds in the circular flow. This leads to a decrease in household incomes and consumption, output by firms and employment.</li></ul></div><div class="pinkBg"><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h4><strong>Inquiry case example - Impact of a pandemic on the circular flow of income</strong></h4></div></div></div><p>The European U<img alt="" height="306" src="../../../ib/economics/images/textbook/measuring-economic-activity/covid-19.jpg" style="float: left;" width="323">nion is on course for a significant macroeconomic contraction as a result of the Covid19 pandemic. Economies across Europe have experienced a ‘double hit’. Lockdowns across the continent have led to a huge fall in consumer spending on the one hand, with an equally steep fall in output because people cannot go to work. Add a huge decline in business investment and you can see the flow of income, output and expenditure is going to fall in all European nations. Christine Lagarde, the head of the ECB has said the eurozone will see a 15% collapse in output between April and June 2020. Governments have responded with massive increases in their spending to try and counter the economic crisis.</p><hr class="hidden"><h5><a href="../../../media/ib/economics/images/textbook/measuring-economic-activity/measuring-gdp/pandemic-.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Worksheet questions</a></h5><h5><strong>Questions</strong></h5><p><strong>a. Explain what the circular flow of income shows. [4]</strong></p><section class="tib-hiddenbox"><p>The circular flow of income is an economic model that illustrates the flow of money between firms, households, the government and the foreign sector of an economy. It shows the flow of income paid to households by firms in return for supplying the factors of production. It also shows the value of goods and services produced by the firms that are bought as part of consumption spending by households. In addition, the model sets out the injections into the economy (investment, government expenditure, exports) and withdrawals from the economy (savings, tax and imports).</p></section><p><strong>b. Explain two effects of the Covid19 pandemic that might reduce the value of output and expenditure in the circular flow of income of a country. [4]</strong></p><section class="tib-hiddenbox"><p>The Covid19 pandemic makes it difficult for households to work so the supply of labour to firms is reduced which decreases the value of the output of goods and services produced by firms in the circular flow of income.</p><p>Because households cannot go to shops to buy goods and services this reduces the value of consumption spending as part of the circular flow of income.</p></section><h5><strong>Investigation</strong></h5><p><strong>Research how the Covid19 crisis has affected the income, output and expenditure in other economies in the world.</strong></p></div><div class="blueBg"><h3><strong>Gross Domestic Product (GDP)</strong></h3><h4><strong>Defining GDP</strong></h4><p>A country’s GDP is the money value of all final goods and services produced by that country in one year. It is a statistic used to measure macroeconomic activity. The GDP of a country is normally considered an annual figure, but economists and governments also use quarterly figures to track economic growth over time so they can closely monitor what is happening to economic activity. The GDP is expressed in money terms using the country’s currency, although for international comparison the value in $US is used.</p><h5><strong>Using final goods and services</strong></h5><p>When the GDP of a country is being calculated only the value of final goods is used. The value of intermediate goods such as raw materials and components are not included because this would lead to ‘double counting’. If you included the value of a television produced when it is sold by the manufacturer to a retailer (an intermediate good) and then count it again when it is sold to the consumer as a final good then you would count the value of the television twice.</p><h4><strong>Using the circular of income to measure GDP</strong></h4><p>The circular flow of income gives us 3 ways of measuring the GDP.</p><h5><strong>Income method<img alt="" src="../../../ib/economics/images/textbook/measuring-economic-activity/pay-slip.jpg" style="float: right; width: 355px; height: 267px;" title="https://thegroomslist.co.uk/a-basic-guide-to-payslips/"></strong></h5><p>This is the total value of income earned by households in one year in the form of:</p><ul><li>Wages paid to labour</li><li>Interest paid to capital</li><li>Rent paid to land</li><li>Profits and dividends paid to entrepreneurs.</li></ul><p>It is important not to count income in the form of transfer payments where no economic activity has been engaged in to generate the income. Transfer payments include pensions, unemployment benefits and student grants, etc.</p><h5><strong>Output method</strong></h5><p>This is calculated by taking the value-added of firms in different sectors of the economy. The sectors are:</p><ul><li>Primary – commodities such as agricultural goods, mining, forestry and fishing, etc.</li><li>Secondary – manufacturing such as cars, mobile phones, pharmaceuticals and clothing, etc.</li><li>Tertiary – services such as education, restaurants, tourism and transport, etc.</li></ul><p>Value added is the method of calculating GDP to avoid ‘double counting’. Value added is the monetary difference between the purchase cost of the material inputs used to produce the good and its selling price. If a car manufacturer, for example, pays for the materials and components to produce a car valued at $4,000 and sells the car to a dealer for $10,000 then the value added is $6,000. If the dealer takes the car they have bought for $10,000 and sells it for $14,000 their value-added is $4,000. The value-added of each sector is used to calculate the GDP by the output approach.</p><h5><strong>Expenditure method</strong><img alt="" height="224" src="../../../ib/economics/images/textbook/measuring-economic-activity/gdp-data.jpg" style="float: right;" width="300"></h5><p>This is calculated by aggregating the total expenditure of different sectors of the economy. There are four types of expenditure:</p><ul><li>Consumption (C) spending by households on final goods and services</li><li>Investment (I) spending by firms on capital equipment</li><li>Government (G) spending on public services</li><li>Net Exports (X-M) The surplus of the value of exports over the value of imports</li></ul><p>The table sets out the GDP of the five largest economies in the world.</p><h3><strong>Gross national income (GNI)</strong></h3><h4><strong>Calculating GNI</strong></h4><p>The gross national income is the total income generated by a country and is calculated by adding net property income from abroad to the GDP.</p><p>GDP + net property income = GNI</p><h4><strong>Net property income from abroad</strong></h4><p>Property income is money earned by households on different assets. This income comes in the following forms:</p><ul><li>Interest on loans made</li><li>Profit from businesses owned</li><li>Rent on property owned.</li></ul><p>Net property income is income on domestic assets owned overseas that flow into the domestic income less income on foreign assets that flow out of the domestic economy.</p><p>Examples of <strong>property income inflows</strong> to the UK economy include income sent back to the UK in the form of:</p><ul><li>Interest on UK loans made to German companies</li><li>Profits made by a UK company in Russia</li><li>Rent paid to UK-owned commercial property in the US.</li></ul><p>Examples of <strong>property income outflows</strong> from the UK economy would include income sent to foreign countries in the form of:</p><ul><li>Profits made by a German car manufacturer in the UK</li><li>Interest paid on loans made by an Australian bank to UK businesses</li><li>Rent paid to Chinese owners of luxury property in London.</li></ul></div><div class="pinkBg"><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h4><strong>Inquiry case example - German profits in Oxford</strong></h4></div></div></div><p>This year sees the 10 millionth BM<strong><img alt="" src="../../../ib/economics/images/textbook/measuring-economic-activity/mini.jpg" style="float: left; width: 400px; height: 267px;" title="https://www.autocar.co.uk/car-news/features/how-minis-cowley-factory-came-existence"></strong>W Mini roll off the production line from BMW’s Cowley plant in Oxford. The mini is one of the UK’s most iconic car brands and has been a huge success for BMW. The company have invested £2 billion in the plant since the year 2000 and the Oxford factory produces 300 cars a day.</p><hr class="hidden"><p>Whilst much of the profit from the plant is reinvested in the Cowley plant some of the profit is repatriated to Germany to pay the company’s shareholders.</p><h5><a href="../../../media/ib/economics/images/textbook/measuring-economic-activity/measuring-gdp/mini-and-gdp.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Worksheet questions</a></h5><h5><strong>Question</strong></h5><p><strong>a. Define the term real GDP. [2]</strong></p><section class="tib-hiddenbox"><p>A country’s GDP is the money value of all final goods and services produced by that country in one year with an allowance made for inflation.</p></section><h5><strong>b. Using the circular flow of income diagram explain how real GDP is measured. [10]</strong></h5><section class="tib-hiddenbox"><p>Answers might include:</p><ul><li>Definitions of circular flow on income and real GDP.<img alt="" height="252" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/circular-flow.jpg" style="float: right;" width="363"></li><li>A diagram to show the circular flow of income.</li><li>An explanation using the circular flow diagram that shows how the nominal GDP can be measured by using the income (wages, interest, profits and rent), output (value added by the primary, secondary and tertiary sectors) and expenditure (C+I+G+X-M) methods.</li><li>An explanation that once a nominal GDP figure is determined the GDP deflator is used to calculate a real GDP figure.</li></ul></section><p><strong>c. Explain how net property income is calculated. [4]</strong></p><section class="tib-hiddenbox"><p>Net property income is income on domestic assets owned overseas (rent, profit and interest) that flow into the domestic income less income on foreign assets that flow out of the domestic economy (rent, profit and interest). For example, the profit earned by BMW in the UK and sent back to Germany is an outflow of funds and the profit earned by RBS bank in Germany and sent back to the UK is an inflow of funds.</p></section><h5>d. <strong>Explain the difference between GDP and GNI. [4]</strong></h5><section class="tib-hiddenbox"><p>GDP is the money value of all final goods and services produced by that country in one year. Gross national income is the total income generated by a country and is calculated by adding net property income from abroad to the GDP</p></section><h5><strong>Investigation</strong></h5><p><strong>Investigate another example of property income generated by foreign assets in your country. </strong></p></div><div class="blueBg"><h4><strong>GNI per capita</strong></h4><p>GNI per capita is measuring GNI per head of population. GNI per capita is calculated as:</p><p>GNI / population = GNI per capita</p><p>Last year the GNI for the US was $20.84 trillion and the population of the US was 328 million</p><p>20,840,000 million / 328 million = $63,537</p><p>Economists like to use GNI per capita when analysing national income data because it allows them to make inter-country comparisons. A per capita figure is much smaller than the total GNI so it is an easier number to interpret. GNI per capita is particularly useful when measuring a country’s economic development.</p><h4><strong>Adjusting for inflation</strong></h4><h5><strong>Importance of real terms</strong></h5><p>The value of a country’s GDP is adjusted for inflation to turn the GDP in nominal terms into GDP in real terms. Nominal GDP is expressing GDP with no allowance for inflation. Expressing economic values in real terms is important because inflation distorts data and makes it difficult to interpret. For example, if a country’s GDP rises by 3 per cent this would be an acceptable rate of economic growth. But if that country’s inflation is 3 per cent then the country would not have grown at all. </p><h4><strong>Calculating real GDP</strong></h4><p>Calculating real GDP is done by dividing the nominal GDP by the GDP deflator and multiplying by 100. The table below sets out the GDP data for a country. For 2014 the real GDP is:</p><p>1792/96 x 100 = 1867</p><p>The growth rate is calculated by working out the annual percentage change in real GDP. For 2015 this would be:</p><p>1870 – 1867 / 1867 x 100 = 0.16%</p><p><img alt="" src="../../../ib/economics/images/textbook/measuring-economic-activity/calculating-economic-growth.jpg" style="float: left; width: 600px; height: 250px;"></p><hr class="hidden"><h3><strong>Economic Growth</strong></h3><h4><strong>Measuring growth</strong></h4><p>Economic growth is the increase in a country’s real GDP over time. The economic growth rate of a country is the percentage increase in its real GDP over one year. GDP figures are released quarterly so a country’s economic activity can be continuously monitored. </p><p>The annual growth rate is calculated by:</p><p>GDP current year – GDP previous year / GDP previous x 100 = current year growth rate</p><p><strong>Business cycle (trade cycle)</strong><img alt="" height="323" src="../../../ib/economics/images/textbook/measuring-economic-activity/business-cycle(1).jpg" style="float: right;" width="492"></p><p>Economies do not grow at a constant rate because the rate of growth of a country rises and falls over time and this is called the business cycle. The average rate of growth over a number of years is called the trend rate of growth. Amongst more developed countries (MDCs) the trend rate of growth is normally around 2-3 per cent</p><p>Diagram 3.2 illustrates a conventional business cycle.</p><hr class="hidden"><h4><strong>Conventional business cycle</strong></h4><p>Business cycles are all slightly different, but the conventional cycle normally follows the changes set out below:</p><ul><li>The <strong>boom phase</strong> occurs when the rate of growth is above the trend rate. High rates of economic growth in a boom are normally associated with rising incomes, falling unemployment, and rising inflation.</li><li>The <strong>slowdown phase</strong> of the business cycle is when the economy goes past its peak rate of growth and the growth rate falls. Household incomes do not rise as fast, unemployment might start to rise and there is less pressure for inflation to increase.</li><li>The <strong>recession phase</strong> of the cycle is when real GDP falls. A recession is technically defined as a period of two consecutive quarters of negative growth in real GDP. Household incomes might fall, unemployment normally increases and inflation falls</li><li>The <strong>recovery phase</strong> of the business cycle is when the economy emerges from a recession and the real GDP starts to increase. The rate of economic growth is slow to start with and then it accelerates. Household incomes start to rise, unemployment starts to fall and there is upward pressure on inflation. </li></ul></div><div class="pinkBg"><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h4><strong>Inquiry case example - Economic boom in Africa</strong></h4></div></div></div><p><img alt="" height="261" src="../../../ib/economics/images/textbook/measuring-economic-activity/africa-growth.jpg" style="float: left;" title="https://www.weforum.org/agenda/2019/08/afcfta-proof-that-africa-heading-for-substantial-growth/" width="397">Africa’s rise has been remarkable in recent years. Its average annual GDP growth is consistently above the global average and is expected to remain around 6% until 2023. Six of the world’s 10 fastest-growing economies are in Africa. Eritrea, Rwanda, and Ethiopia all recorded growth rates above 7% last year. Africa's success has much to do with its working-age population and growing consumer markets.</p><hr class="hidden"><p>In demographic terms, it is the youngest region in the world and is the source of a vast labour supply. When this is combined with developments in technology there is huge potential for increased saving which will fund future investment to drive further growth. As the continent experiences rising incomes and employment, it will lift many of its poorest people out of poverty.</p><h5><a href="../../../media/ib/economics/images/textbook/measuring-economic-activity/measuring-gdp/growth-in-africa.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Worksheet questions</a></h5><h5><strong>Questions</strong></h5><p><strong>Define the term economic growth. [2]</strong></p><section class="tib-hiddenbox"><p>Economic growth is the increase in a country’s real GDP over time.</p></section><p><strong>Using a diagram explain the business cycle. [4]</strong></p><section class="tib-hiddenbox"><p><img alt="" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/business-cycle.jpg" style="float: right; width: 400px; height: 266px;">The business cycle sets out how the actual GDP of a country change over time as it moves through the different phases of economic growth. The phases are boom, slowdown, recession and recovery.</p></section><p><strong>c. Using a real-world example, evaluate the view that economic growth is always a good thing for a country. [15]</strong></p><section class="tib-hiddenbox"><p>Answers might include:<img alt="" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/circular-flow.jpg" style="float: right; width: 400px; height: 278px;"></p><p>A definition of economic growth.</p><p>A circular flow of income diagram to show how households and firms benefit from economic growth.</p><p>An explanation of the benefits of economic growth such as increased household incomes, more employment, less poverty, better public services and more business investment.</p><p>An example (African country in the case example) to illustrate the costs and benefits of economic growth.</p><hr class="hidden"><p>Evaluation of the benefits of economic growth for a country. This could include a discussion of the costs of economic growth to a country in terms of environmental issues, sustainability, income inequality and inflation.</p></section><h5><strong>Investigation</strong></h5><p><strong>Choose a country and investigate its economic growth performance over the last five years. </strong></p></div><div class="panel" style="box-shadow: rgba(38, 0, 0, 0.3) 0px 10px 30px -15px; border-color: rgb(124, 7, 21);"><div class="panel-heading" style="background-color: rgb(124, 7, 21);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p>Thinking about a key concept - Interdependence</p></div></div><div class="panel-body" style="background-color: inherit;"><div><p>The circular flow of income model developed by John Maynard Keynes shows the inter-relationships between firms, households, government and foreign sectors of the economy at a macroeconomic level. The theory that income = output = expenditure clearly shows the interdependence between the variables in the model. This can be illustrated by showing how changes in one variable affect the others. In the Covid19 pandemic 'lock-down' situations output was significantly reduced when certain sectors of the economy could not operate as normal such as tourism, hospitality and airlines. The decline in output directly led to falls in income and expenditure. </p><p><strong>Think about the way interdependence at a macroeconomic level affect the way economists model the economy.</strong></p></div></div><div class="panel-footer" style="background-color: rgba(124, 7, 21, 0.1);"><div><p>text</p></div></div></div><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p>Now test yourself</p></div></div></div><div class="tib-quiz" data-quiz-id="1115" data-structure="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" data-score-answers="6d4a526a457a48584f763758344a7649472f76324c53614b78524c393439595570496d5a5971374b38686f3d"><div class="exercise"><div class="q-question"><p> Which of the following is not an injection into the circular flow of income?</p></div><div class="q-answer"><p><label class="radio" data-answer="b7380bf31920c1bb03ff97198a95bde8"><input type="radio"><span> Investment</span></label></p><p><label class="radio" data-answer="66f453635e90471db1a336ccc17cc7de"><input type="radio"><span> Exports</span></label></p><p><label class="radio" data-answer="4b78ac8eb158840e9638a3aeb26c4a9d"><input type="radio"><span> Tax</span></label></p><p><label class="radio" data-answer="62288d4412c9159176bb97ac34cfba6b"><input type="radio"><span> Government expenditure</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following is not an effect of a rise in savings by households?</p></div><div class="q-answer"><p><label class="radio" data-answer="bcbba6dfb62084ba99a148857001b32f"><input type="radio"><span> Consumption expenditure falls</span></label></p><p><label class="radio" data-answer="a8d3a1ed1168b885436d63b3ba77ece0"><input type="radio"><span> Withdrawals from the circular flow of income increase</span></label></p><p><label class="radio" data-answer="1f586b1c089109b73016a5136b260cf2"><input type="radio"><span> Household incomes rise</span></label></p><p><label class="radio" data-answer="176b584f580d5cf72cec1042ddd539c1"><input type="radio"><span> Economic growth slows</span></label></p></div><div class="q-explanation"><p>Household incomes are likely to fall if more funds are withdrawn from the circular flow.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following is the best definition of GDP?</p></div><div class="q-answer"><p><label class="radio" data-answer="c00c18246159a0ee3634a5ffdbb60333"><input type="radio"><span> A country’s GDP is the money value of all final goods and services produced by that country in one year.</span></label></p><p><label class="radio" data-answer="ea6e778c8a4305491dac07864fa47bf0"><input type="radio"><span> A country’s GDP is the money value of all final goods and services produced by that country in one year less imports.</span></label></p><p><label class="radio" data-answer="44af593c652b158eb8c6a32f07055eeb"><input type="radio"><span> A country’s GDP is the total amount of all final goods and services produced by that country in one year.</span></label></p><p><label class="radio" data-answer="20c516068bf3afa68612c51d35003676"><input type="radio"><span> A country’s GDP is the money value of all goods and services produced by that country in one year</span></label></p><p> </p></div><div class="q-explanation"><p>The key points are the money value of output and final goods and services.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Using the following data of country A, which of the following values is the real GDP of country A?</p><p>Nominal GDP <dollar>$</dollar>1,200 billion</p><p>GDP deflator 98</p></div><div class="q-answer"><p><label class="radio" data-answer="a430af55fec353bee08b52e730f59ecf"><input type="radio"><span> <dollar>$</dollar>12.25 Billion</span></label></p><p><label class="radio" data-answer="42373e08a7c9c9479a3e84e13d0bce28"><input type="radio"><span> <dollar>$</dollar>1176 Billion</span></label></p><p><label class="radio" data-answer="a73a66dfb9a46a7f61634a42e42a5fc5"><input type="radio"><span> <dollar>$</dollar>1225 Billion</span></label></p><p><label class="radio" data-answer="9e2ae71ff6400f7bfb4cfdaaecb8f058"><input type="radio"><span> <dollar>$</dollar>1202 Billion</span></label></p></div><div class="q-explanation"><p><dollar>$</dollar>1,200 / 98 x 100 = <dollar>$</dollar>1225 Billion</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following best represents the changes in GDP during the business cycle?</p></div><div class="q-answer"><p><label class="radio" data-answer="5caced419bfc30c2b3aea2e356532fed"><input type="radio"><span> boom – recession – recovery – slowdown</span></label></p><p><label class="radio" data-answer="73b9cae1f8d3730f1c4d3198513003ba"><input type="radio"><span> boom – recovery – slowdown - recession </span></label></p><p><label class="radio" data-answer="f8b64539fa77571365acdc748856f65b"><input type="radio"><span> boom – recovery – slowdown – recession</span></label></p><p><label class="radio" data-answer="13797895cb711b2236cea1edc1a0cfcb"><input type="radio"><span> boom – slowdown – recession – recovery</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following is not a property outflow from Country X?</p></div><div class="q-answer"><p><label class="radio" data-answer="33aafcc49b2b372f1e3645523000624c"><input type="radio"><span> Rent on property paid to an overseas owner</span></label></p><p><label class="radio" data-answer="e829a8dbe18365d11618e67989c1a84a"><input type="radio"><span> Dividends paid to overseas shareholders</span></label></p><p><label class="radio" data-answer="d03c1f000ba013abf8934bbcc04be3c8"><input type="radio"><span> Funds paid on imported goods to a foreign business</span></label></p><p><label class="radio" data-answer="25ef86e01ad2cc1d003972b14001317e"><input type="radio"><span> Profits made by a foreign-owned business and sent back to its home country</span></label></p></div><div class="q-explanation"><p>Imports are not income generated from foreign assets owned in the domestic economy.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following is least likely to occur in the recession phase of the business cycle?</p></div><div class="q-answer"><p><label class="radio" data-answer="f693814cd42af495e80a719c003cdf55"><input type="radio"><span> Rising unemployment</span></label></p><p><label class="radio" data-answer="20542720ea6d585604d62dc479950c37"><input type="radio"><span> Falling inflation </span></label></p><p><label class="radio" data-answer="a55b41f5aaa1ccd859e8afebfbc36965"><input type="radio"><span> Rising levels of consumer spending</span></label></p><p><label class="radio" data-answer="c5995475000a1854346dcb420b2fff52"><input type="radio"><span> Falling incomes</span></label></p></div><div class="q-explanation"><p>Consumer spending is most likely to fall in a recession.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>This is the following data is for Country X:</p><p>Nominal GDP <dollar>$</dollar>3,000 million</p><p>GDP deflator 97</p><p>Which of the following is the real GDP for Country X?</p></div><div class="q-answer"><p><label class="radio" data-answer="92fa4091f956d540a0d70b677d09b8a6"><input type="radio"><span> <dollar>$</dollar>3,093 million</span></label></p><p><label class="radio" data-answer="1e743db63f8bf8a8b71e82ac73f4ab28"><input type="radio"><span> <dollar>$</dollar>3,000 million</span></label></p><p><label class="radio" data-answer="6c8211012e65e402819ee2dfc93ccf22"><input type="radio"><span> <dollar>$</dollar>2,093 million</span></label></p><p><label class="radio" data-answer="2cb791db511f3d56d0ac0b62cefb2361"><input type="radio"><span> <dollar>$</dollar>2,910 million</span></label></p></div><div class="q-explanation"><p><dollar>$</dollar>3,000 / 0.97 = <dollar>$</dollar>3,093 million</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>This is economic data for Country Y:</p><p>Real GDP 2021 <dollar>$</dollar>14,500 million</p><p>Real GDP 2020 <dollar>$</dollar>14,350 million</p><p>Which of the following is Country Y’s rate of economic growth for 2021?</p></div><div class="q-answer"><p><label class="radio" data-answer="25ddbb5253a4ea551f174b6b11950330"><input type="radio"><span> 5.00%</span></label></p><p><label class="radio" data-answer="120d3e93e4125082b48016475f99c881"><input type="radio"><span> 1.03%</span></label></p><p><label class="radio" data-answer="38844de418efe03160cd459db6e464fe"><input type="radio"><span> 3.00%</span></label></p><p><label class="radio" data-answer="9414446cd379d53120c61b59324a5f00"><input type="radio"><span> 1.05%</span></label></p></div><div class="q-explanation"><p><dollar>$</dollar>14,500 - <dollar>$</dollar>14,350 / 14,350 x 100 = 1.05%</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Using the following data of country B, which of the following values is the real GNI of country B?</p><p>Real GDP <dollar>$</dollar>780 Billion</p><p>Property inflow <dollar>$</dollar>18 Billion</p><p>Property outflow <dollar>$</dollar>21 Billion</p></div><div class="q-answer"><p><label class="radio" data-answer="fe31b8fb663c6bd69e43281df1173864"><input type="radio"><span> <dollar>$</dollar>783B</span></label></p><p><label class="radio" data-answer="1450fca89d8eaa7fc20150f233fadad8"><input type="radio"><span> <dollar>$</dollar>798B</span></label></p><p><label class="radio" data-answer="6d6779cca561ea5cab64c9c1d628d5fe"><input type="radio"><span> <dollar>$</dollar>780B</span></label></p><p><label class="radio" data-answer="88e3d2d567e59a09058a5b0da9c31644"><input type="radio"><span> <dollar>$</dollar>777B</span></label></p></div><div class="q-explanation"><p>$ 780 Billion + ( $ 18 Billion - $ 21 Billion) = $ 777 Billion</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> 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