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.
7
a
Learning Outcomes
Students should be able to define a retail
price index and its simple calculation and
discuss the causes and consequences of
inflation.
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
URL –
http://www.bized.ac.uk/virtual
/economy/policy/advisors/ge
neral.htm
Other Resources
Anderton, Units 60-63, pages
152-159
URL –
http://www.bized.ac.uk/virtual
/economy/policy/advisors/ge
neral4.htm
Harrison and Nutter, Chapter
15, pages 164-166
URL –
http://www.bized.ac.uk/virtual
/economy/policy/outcomes/in
flation/inflex.htm
URL –
http://www.bized.ac.uk/virtual
/dc/copper/theory/th17.htm
URL –
http://www.bized.ac.uk/virtual
/dc/copper/theory/th20.htm
Anderton, page 164
Moynihan and Titley, Chapter
13, pages 266-279
Paisley and Quillfeldt, Part 7,
Unit 7.6, pages 242-247
om
.c
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.
s
er
ap
eP
m
e
tr
.X
w
w
w
UNIT 7 Main economic indicators: recent changes and current trends in an economy and their consequences
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.
URL –
http://www.bized.ac.uk/virtual
/economy/policy/outcomes/in
flation/inflth1.htm
URL –
http://www.bized.ac.uk/virtual
/economy/policy/outcomes/in
flation/inflth2.htm
URL –
http://www.bized.ac.uk/virtual
/economy/policy/outcomes/in
flation/inflth3.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
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
Inflation and Monetary
Policy: Inflation – the details
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
URL –
http://www.s.cool.co.uk/quickl
earn
Inflation and Monetary
Policy: What are the causes
of inflation?
URL –
http://www.bized.ac.uk/virtual
/economy/policy/outcomes/u
nemployment/unempex.htm
URL –
http://www.bized.ac.uk/virtual
/economy/policy/outcomes/u
nemployment1.htm
Anderton, Units 56-59, pages
142-151
Harrison and Nutter, Chapter
13, pages 138-140
Moynihan and Titley, Chapter
13, pages 279-287
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.
URL –
http://www.bized.ac.uk/virtual
/economy/policy/outcomes/u
nemployment/unempth2.htm
Paisley and Quillfeldt, Part 7,
Unit 7.5, pages 234-241
URL –
http://www.bized.ac.uk/virtual
/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
URL – http://www.scool.co.uk/quicklearn
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
c
Students should be able to define Gross
Domestic Product as a measure of
Students need to be aware that if they are
going to discuss the concept of economic
URL –
http://www.statistics.gov.uk
URL –
http://www.tutor2u.net/econo
Anderton, Unit 47, pages
120-121
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
Anderton, page 130
Anderton, Units 64-65, pages
160-163
Anderton, page 165
Harrison and Nutter, Chapter
13, pages 135-137
Moynihan and Titley, Chapter
13, pages 288-294
Paisley and Quillfeldt, Part 7,
Unit 7.3, pages 214-218
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
URL –
http://www.bized.ac.uk/virtual
/dc/trade/theory/th1.htm
Paisley and Quillfeldt, Unit 7,
Part 7.7, pages 248-255
Anderton, Units 75-78, pages
188-195
Anderton, page 199
URL –
http://www.bized.ac.uk/virtual
/dc/trade/theory/th7.htm
Harrison and Nutter, Chapter
14, pages 150-157
URL –
http://www.bized.ac.uk/virtual
/dc/trade/theory/th8.htm
Moynihan and Titley, Chapter
14, pages 300-310 and 313322
URL –
http://www.bized.ac.uk/virtual
/dc/trade/theory/th9.htm
Paisley and Quillfeldt, Part 8,
Unit 8.2, pages 273-281
URL –
http://www.bized.ac.uk/virtual
/dc/trade/theory,th10.htm
Paisley and Quillfeldt, Part 8,
Unit 8.3, pages 283-289
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://www.bized.ac.uk/virtual
/dc/trade/theory/th11.htm
URL –
http://www.bized.ac.uk/virtual
/dc/trade/theory/th13.htm
URL –
http://www.bized.ac.uk/virtual
/dc/trade/theory/th14.htm
URL –
http://www.bized.ac.uk/virtual
/dc/trade/theory/th15.htm
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
mics/content/topics/exchang
erates/forex_markets.htm
URL –
http://www.tutor2u.net/econo
mics/content/topics/exchang
erates/fixed_floating.htm
URL – http://www.scool.co.uk/quicklearn
Exchange Rates: What is an
exchange rate?
URL – http://www.scool.co.uk/quicklearn
Exchange Rates: How is the
exchange rate determined?
URL – http://www.scool.co.uk/quicklearn
Exchange Rates: The
exchange rate and the
balance of payments
URL – http://www.scool.co.uk/quicklearn
Exchange Rates: Exchange
rate systems
URL – http://www.scool.co.uk/quicklearn
The Balance of Payments:
The structure of the balance
of payments
URL – http://www.scool.co.uk/quicklearm
The Balance of Payments:
The UK balance of payments
URL – http://www.scool.co.uk/quicklearn
The Balance of Payments:
Commonly asked questions
about the balance of
payments
URL – http://www.scool.co.uk/quicklearn
The Balance of Payments :
Problems of balance of
payments disequilibria
URL – http://www.scool.co.uk/quicklearn
The Balance of Payments:
How does a government
reduce a current account
deficit?
URL – http://www.wto.org