IGCSE Economics (0455) Detailed Revision Notes
4. Government and the Macroeconomy
- Role of Government: Acts at local, national, and international levels to manage the economy.
- Macroeconomic Aims: Economic growth, full employment, stable prices, balance of payments stability,
income redistribution.
- Fiscal Policy:
- Government revenue (taxation) and spending to influence economic activity.
- Types of taxes: direct/indirect, progressive/regressive/proportional.
- Budget: Surplus (revenue > spending), deficit (spending > revenue).
- Monetary Policy:
- Control of money supply and interest rates to influence demand and inflation.
- Supply-Side Policies:
- Aimed at increasing productivity and potential output.
- Includes education/training, deregulation, privatisation.
- Economic Growth:
- Measured by real GDP and GDP per capita.
- Caused by increased investment, technology, resources.
- Consequences: Higher income, possible inflation, environmental impact.
- Unemployment:
- Types: Frictional, structural, cyclical.
- Measured via claimant count or labour force survey.
- Policies: Training, subsidies, job creation.
- Inflation & Deflation:
- Inflation: General price level rise; Deflation: General price fall.
- Measured by CPI.
- Causes: Demand-pull, cost-push (for inflation); weak demand, oversupply (for deflation).
- Policies: Interest rate changes, fiscal restraint.
5. Economic Development
IGCSE Economics (0455) Detailed Revision Notes
- Living Standards:
- Indicators: GDP per capita, Human Development Index (HDI).
- HDI includes education, life expectancy, and income.
- Real GDP shows average income but ignores quality of life.
- Poverty:
- Absolute: Not meeting basic needs. Relative: Below average standard in society.
- Causes: Unemployment, low wages, poor health, education access.
- Policies: Economic growth, education, welfare benefits, minimum wage, taxation.
- Population:
- Affected by birth rate, death rate, net migration.
- Population structure impacts supply of labour, dependency ratio.
- Optimum population: Ideal number of people for available resources.
- Differences in Development:
- Causes: Investment, education, healthcare, industrial structure.
- Impacts: Income inequality, varied living standards and economic opportunities.
6. International Trade and Globalisation
- Specialisation:
- Countries focus on producing goods they are efficient at.
- Pros: Efficiency, lower prices, variety. Cons: Dependency, structural unemployment.
- Globalisation:
- Increased global interdependence, led by MNCs.
- MNCs bring investment, jobs, but may exploit workers/resources.
- Free Trade & Protection:
- Free trade: No barriers; encourages competition.
- Protection: Tariffs, quotas, subsidies, embargoes to protect domestic industries.
- Justified for infant/declining/strategic industries.
- Foreign Exchange Rates:
- Determined by supply and demand for currency.
IGCSE Economics (0455) Detailed Revision Notes
- Affected by trade, interest rates, speculation.
- Floating vs. Fixed exchange rate systems.
- Impacts import/export prices and trade balance.
- Balance of Payments:
- Current Account: Trade in goods/services, income, transfers.
- Deficit: Imports > exports. Surplus: Exports > imports.
- Policies: Currency depreciation, trade promotion, import controls.