UNIT 7

UNIT 7 Main economic indicators: recent changes and current trends in an economy and their consequences

Recommended Prior Knowledge This Unit can be studied without any prior knowledge but it does link very closely with the previous Unit, especially its second section on the aims of government policy. It also builds on the discussion of the mixed economy in Unit 1.

7 a

Context As already indicated, the Unit builds on the role of a government in a mixed economy and on the aims of government policy in an economy. It will also provide a link with the discussion of living standards in Unit 8 and the contrast between public and private expenditure in Unit 9.

Outline The Unit starts with the definition and calculation of a retail price index and then discusses the causes and consequences of inflation. It goes on to describe the changing patterns and levels of employment and to discuss the consequences of unemployment. It then defines Gross Domestic Product as a measure of economic output and goes on to describe the structure of the balance of payments and the effect of the changing patterns of exports and imports on it. Finally, it defines exchange rates and considers the reasons why exchange rates fluctuate. inflation.

Learning Outcomes

Students should be able to define a retail price index and its simple calculation and discuss the causes and consequences of

Suggested Teaching Activities

Students will need to be able to define a retail price index (now often referred to as an Index of Consumer Prices or Consumer

Price Index) and show how it is calculated.

They could try and find out how the one in their country is constructed; there is likely to be information on this on the government website. Alternatively, the resources have information on the one used in the UK.

They need to think about the potential problems of drawing up an index, such as the weightings to be given to expenditure on particular items, and to consider how useful such an index might be for measuring the rate of inflation in a country.

Anderton (pages 152-153) is very good on the measurement of inflation through a retail price index. Moynihan and Titley

(pages 269-271) are also thorough and are particularly good on the weightings.

Harrison and Nutter (pages 163-169) are good on the construction of the index and

Online Resources neral.htm

URL –

URL – http://www.bized.ac.uk/virtual

/economy/policy/advisors/ge


/economy/policy/advisors/ge neral4.htm

http://www.bized.ac.uk/virtual

/economy/policy/outcomes/in flation/inflex.htm


/dc/copper/theory/th17.htm


/dc/copper/theory/th20.htm

Other Resources

Anderton, Units 60-63, pages

152-159

Anderton, page 164

Harrison and Nutter, Chapter

15, pages 164-166

Moynihan and Titley, Chapter

13, pages 266-279

Paisley and Quillfeldt, Part 7,

Unit 7.6, pages 242-247 www.xtremepapers.net

they have an exam question and answer on the topic which includes a consideration of the problems of using such an index to measure the rate of inflation. Paisley and

Quillfeldt (pages 61-65) are particularly good on the problems of constructing an index and they have a useful data response question.

Students also need to be able to define the concept of inflation and to consider its causes and, in particular, they need to be able to clearly distinguish between demand pull and cost push factors. They could work in groups to evaluate these two approaches and report their ideas back to the whole class.

Anderton (pages 156-159) is very thorough on the causes of inflation. Moynihan and

Titley (pages 272-276) are also good and exercise 4, pushing or pulling?, is very helpful.

Students should also consider the consequences of inflation. They need to think about the people who are likely to suffer most at a time of inflation, such as those on fixed incomes.

Anderton (pages 154-155) discusses a number of these costs of inflation and he has some helpful study points and check points; there is also a data response question which focuses on the problems of pensioners (page 164). Moynihan and

Titley (pages 277-279) also discuss the costs of inflation.

Students need to be very careful in the examination to distinguish between the causes and consequences of inflation as these terms sometimes get confused.


/economy/policy/outcomes/in flation/inflth1.htm





URL – http://www.tutor2u.net/econo mics/content/topics/inflation/c ontrolling.inflation.htm

URL – http://www.tutor2u.net/econo mics/content/topics/inflation/c osts_of_inflation.htm

URL – http://www.tutor2u.net/econo mics/content/topics/inflation/d emand_pull_inflation.htm

URL – http://www.tutor2u.net/econo mics/content/topics/inflation/c ost_push_inflation.htm

URL – http://www.tutor2u.net/econo mics/content/topics/inflation/r www.xtremepapers.net

b Students should be able to describe the changing patterns and levels of employment and discuss the consequences of unemployment.

Students need to find out information about the changing patterns and levels of employment, either in their own country or in a country of their choice. The government of the country should have a website with this information on; in the UK, the government statistics website is very useful. Paisley and Quillfeldt have a useful database (page 239) which has information etail_price_index.htm

URL – http://www.tutor2u.net/econo mics/content/topics/inflation/ what_is_inflation.htm

URL – http://www.bbc.co.uk/schools

/bitesize/business/environme nt/stateofeconomyrev4.shtml

URL – http://www.scool.co.uk/quicklearn

Inflation and Monetary

Policy: Inflation – the basics

URL http://www.s.cool.co.uk/quickl earn


Policy: Inflation – the details

URL – http://www.s.cool.co.uk/quickl earn


Policy: What are the causes of inflation?


/economy/policy/outcomes/u nemployment/unempex.htm


/economy/policy/outcomes/u nemployment1.htm


142-151


13, pages 138-140


13, pages 279-287 www.xtremepapers.net

c Students should be able to define Gross

Domestic Product as a measure of on changing levels of employment.

Students also need to think about the possible consequences of unemployment; they should work in groups and consider these, reporting back on their findings to the rest of the group. They need to take into account not only the costs to individuals but to the economy as a whole.

Anderton (pages 144-145) is good on this and he has some interesting study points and check points on the costs, not just to individuals, but to the wider economy.

There is also a good data response question (page 150) on the topic. Moynihan and Titley (pages 279-287) are also good on this and exercise 8 would be worth doing.

Students need to be aware that if they are going to discuss the concept of economic


/economy/policy/outcomes/u nemployment/unempth2.htm


/economy/policy/outcomes/u nemployment/unempth3.htm

URL – http://www.bbc.co.uk/schools

/gcsebitesize/business/enviro nment/stateofeconomyrev2.s

html

URL – http://www.tutor2u.net/econo mics/content/topics/unemp/c osts_of_unemp.htm


Unemployment and the

Phillips Curve:

Unemployment – the basics

URL – http://www.s.cool.co.uk/quickl earn

Unemployment and the

Phillips Curve:

Unemployment – the details

URL – http://www.statistics.gov.uk

URL – http://www.tutor2u.net/econo


Unit 7.5, pages 234-241

Anderton, Unit 47, pages

120-121 www.xtremepapers.net

economic output. growth, they need to be able to measure economic output and then examine how that output has changed over a period of time. The syllabus requires students to have a good understanding of Gross

Domestic Product and they need to know how it is arrived at.

Anderton explains the term clearly and has some useful study points and check points

(pages 120-121 and 160-163); there are also two useful data response questions

(pages 130 and 165). Moynihan and Titley are (pages 288-294) also good. mics/content/topics/macroec onomy/national_income.htm

d Students should be able to describe the structure of the Balance of Payments, the changing patterns of exports and imports and the effects of these on the Balance of

Payments. They should also be able to define exchange rates and to give reasons why exchange rates fluctuate.

Students need to have an understanding of the structure of the Balance of Payments and of the changing patterns of exports and imports. They should find out information about the exports into and imports out of a particular country over a period of time and then evaluate the effects of this on a country`s Balance of Payments.

Governments are likely to have this information on their website. The World

Trade Organisation will also be an excellent source of information.

Anderton (pages 188-191) is good on exports and imports and the balance of payments and he has a number of helpful study points and check points. Moynihan and Titley (pages 300-310) are also thorough.

Students also need to have an understanding of exchange rates and, in


/dc/trade/theory/th1.htm








/dc/trade/theory,th10.htm

Anderton, page 130


160-163

Anderton, page 165


13, pages 135-137


13, pages 288-294


Unit 7.3, pages 214-218

Paisley and Quillfeldt, Unit 7,

Part 7.7, pages 248-255


188-195

Anderton, page 199


14, pages 150-157


14, pages 300-310 and 313-

322


Unit 8.2, pages 273-281


Unit 8.3, pages 283-289 www.xtremepapers.net

particular, the reasons why they fluctuate.

Students should work in groups with each group studying a particular rate of exchange between two currencies over a period of time, such as two or three weeks.

The rate of exchange between different currencies is published daily in the newspapers. They need to be able to describe the pattern of change over this period and to evaluate the possible reasons for the fluctuations.

Anderton (pages 192-195) covers exchange rates well and there is a useful data response question (page 199).

Moynihan and Titley (pages 313-322) are thorough and exercise 7 would help students understand why exchange rates can be so volatile.









URL – http://tutor2u.net/economics/ content/topics/trade/balance_ of_payments.htm

URL – http://www.tutor2u.net/econo mics/content/topics/trade/bop pol.htm

URL – http://www.tutor2u.net/econo mics/content/topics/trade/bop

_accounts.htm

URL – http://www.tutor2u.net/econo mics/content/topics/trade/curr ent_account.htm

URL – http://www.tutor2u.net/econo www.xtremepapers.net

mics/content/topics/exchang erates/forex_markets.htm

URL – http://www.tutor2u.net/econo mics/content/topics/exchang erates/fixed_floating.htm


Exchange Rates: What is an exchange rate?


Exchange Rates: How is the exchange rate determined?


Exchange Rates: The exchange rate and the balance of payments


Exchange Rates: Exchange rate systems


The Balance of Payments:

The structure of the balance of payments

URL – http://www.scool.co.uk/quicklearm

The Balance of Payments: www.xtremepapers.net

The UK balance of payments



Commonly asked questions about the balance of payments


The Balance of Payments :

Problems of balance of payments disequilibria



How does a government reduce a current account deficit?

URL – http://www.wto.org www.xtremepapers.net

UNIT 7

UNIT 7 Main economic indicators: recent changes and current trends in an economy and their consequences

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