Economic Schock
unexpectable event that affects the economy ex coronavirus
ex rise in oil prices increase costs of firms
contain two type of shocks
Demand side shocks supply side shocks
affect components affect short run aggregate
of aggregate demand supply and countries long
ex financial crisis term productive potential
ex disaster
Policy Mix
combination of a country's monetary policy and fiscal policy
to influence growth and employment
Hysterises
when the economy experiences a recessionIdepression lowering the
long term trend rate of growth Lowers economic growth and doesn't bouncebo
recovery
Real
GDP
n Boom
j oldlongtermtrend ofgrowth
rt
slowdown
Slump
1 Newlongtermtrendof growth
I
Time
conflict between policies
one policy
may achieve one objective but could have undesirable
effects on another policy
ex environmental taxes used to reduce pollution
may lead to inflation
ex 9 spending on education will
TAD inthe short run TAS in the long run
due to improved dueto increase in
qualityof education labour productivity
9in prices tin prices
ex Inverse relationship between inflation and unemployment
, Phillip's curve
inflation
High inflation Low unemployment
Low inflation High unemployment
µqyµmen
ex Economic growth can lead to greater inequality
high increases in pay of people in top paying jobs
Increase in wealth as property prices rise
Greater pay increase in high income workers than
in low income earners
Sustainable Economic Growth
rate of growth which can be maintained without creating other
significant economic problems especially for future generation
ex preventing depletion of resources
ex preventing pollution
sustained growth involves increase in output LRAS will shift to the right
Priffevel n IRAS 52
LRA
P
l l
l l AD2
I Adn
t y
Ye Th Real
GDP
Note Workers in Gig Economy
Deliveroo are not employees
but are agents
Don't relieve sick pay maternal
paternal leave
Get payed for the amount
of deliveries made don't
get paid when doingnothing
unexpectable event that affects the economy ex coronavirus
ex rise in oil prices increase costs of firms
contain two type of shocks
Demand side shocks supply side shocks
affect components affect short run aggregate
of aggregate demand supply and countries long
ex financial crisis term productive potential
ex disaster
Policy Mix
combination of a country's monetary policy and fiscal policy
to influence growth and employment
Hysterises
when the economy experiences a recessionIdepression lowering the
long term trend rate of growth Lowers economic growth and doesn't bouncebo
recovery
Real
GDP
n Boom
j oldlongtermtrend ofgrowth
rt
slowdown
Slump
1 Newlongtermtrendof growth
I
Time
conflict between policies
one policy
may achieve one objective but could have undesirable
effects on another policy
ex environmental taxes used to reduce pollution
may lead to inflation
ex 9 spending on education will
TAD inthe short run TAS in the long run
due to improved dueto increase in
qualityof education labour productivity
9in prices tin prices
ex Inverse relationship between inflation and unemployment
, Phillip's curve
inflation
High inflation Low unemployment
Low inflation High unemployment
µqyµmen
ex Economic growth can lead to greater inequality
high increases in pay of people in top paying jobs
Increase in wealth as property prices rise
Greater pay increase in high income workers than
in low income earners
Sustainable Economic Growth
rate of growth which can be maintained without creating other
significant economic problems especially for future generation
ex preventing depletion of resources
ex preventing pollution
sustained growth involves increase in output LRAS will shift to the right
Priffevel n IRAS 52
LRA
P
l l
l l AD2
I Adn
t y
Ye Th Real
GDP
Note Workers in Gig Economy
Deliveroo are not employees
but are agents
Don't relieve sick pay maternal
paternal leave
Get payed for the amount
of deliveries made don't
get paid when doingnothing
