JC 2 H1 ECONOMICS 2025: Standard of Living & Macroeconomic Indicators

Overview

Theme 3 examines the national and international economy to address scarcity and trade-offs at the national level, focusing on improving living standards through governmental policies. Key concepts include the circular flow of income model and AD-AS framework.

Important Concepts and Tools

• Macroeconomic Objectives
• Standard of Living
  • Material and non-material well-being
  • GDP, GNI, HDI, and Income Inequality
  • Gini Coefficient
• Nominal and Real Concepts
• Macroeconomic Indicators

Key Questions

1. What are the macroeconomic objectives of the government?
2. What is standard of living?
3. What are the different types of macroeconomic indicators?
4. How are these macroeconomic indicators useful in measuring economic performance and standard of living across time and space?
5. What are the limitations of using these macroeconomic indicators?

Content Overview

1. Introduction to Macroeconomics

• Macroeconomics vs Microeconomics
  • Focus on national economy using aggregate demand/supply vs individual markets.
  • AD/AS model determines general price level and national output.

2. Economic Goals

• Microeconomic Goals: Efficiency in resource allocation, equitable income distribution.
• Macroeconomic Goals: Sustainable and inclusive economic growth, price stability, full employment, favorable balance of trade.

3. Standard of Living and Macroeconomic Goals

• Material SOL: Measured by real GDP/GNI per capita.
• Non-material SOL: Quality of life indicators like leisure, environment quality, etc.
• Sustainable Growth: Combination of actual and potential growth.
• Inclusive Growth: Growth considering income distribution.

4. Key Macroeconomic Indicators

• Indicators for economic health assessment:
  1. Economic Growth: Measured by GDP/GNI
  2. Price Stability: Inflation rate, CPI
  3. Unemployment
  4. Balance of Trade
• Application: Useful to government, firms, households for economic planning and policy making.

5. Indicator of Economic Growth

• National Income: Total market value of all final goods and services produced.
• Methods: Product, income, expenditure approach.
• Real vs Nominal GDP: Real GDP adjusted for inflation.

6. Limitations of National Income Statistics

• Non-inclusion of non-market activities and underground economy.
• Over time issues like changes in price levels, population growth, income distribution.
• Alternative Measures: HDI, MEW, ISEW

7. Indicator of Price Stability

• Inflation Rate: Measured by CPI.
• CPI Calculation: Uses a fixed basket of goods.
• Impact: Affects purchasing power, cost of living.

8. Indicator of Unemployment

• Unemployment Rate: Percentage of unemployed persons in the labor force.
• A high rate indicates poor economic performance.

Conclusion

• Economic indicators provide insights into the country's economic health and guide policy decisions.
• Case Studies: Discussion on using indicators to assess economic situations and compare countries.

Appendices

• GDP vs GNP: Differences in measuring economic activity by location vs ownership.
• Uses of National Income Statistics: For policy formulation, sector contribution analysis.
• Growth, Development, Misery, Happiness: Alternative indices and their uses.
• Balance of Trade: Importance and its effects on national income and living standards.