Cambridge International as and a level Economics Ebook

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The macroeconomy
Th
e output of an economy changes over time and such 
changes can have an impact on the development of the 
country and the living standards of its inhabitants. 
Another key measure of living standards is the Human 
Development Index (HDI), which is discussed below. Th
e 
issue of what infl uences living standards and the quality of 
people’s lives is currently receiving considerable attention 
from economists.
Developed, emerging and developing economies have 
a number of diff erences including diff erences in GDP 
(income) per head. Economic growth can increase GDP 
per head and is, in turn, infl uenced by changes in the 
quantity and quality of the labour force. Unemployment is 
likely to reduce a country’s economic prospects.
Whether an economy achieves full employment will be 
infl uenced by the level of aggregate expenditure. A rise in 
investment would increase aggregate expenditure. Firms 
may fi nance such spending on capital goods by borrowing 
from banks.
Banks are one source of an increase in the money 
supply in an economy. Changes in the money supply can 
alter interest rates. Th
ere are diff erences between the 
Keynesian and monetarist views of how changes in the 
money supply aff ect an economy. Th
ese are discussed in 
this chapter.
An economy’s economic performance is also infl uenced 
by international trade and the role of international 
organisations such as the International Monetary Fund 
(IMF) and the World Bank, which are described below.
In this chapter the key concepts of progress and 
development fi gure prominently. Th
e concepts of scarcity 
and choice, effi
ciency and equity and the margin and 
change also appear.