158 Macro Economics Book 2 A Level (Revision Notes)

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158 Macro Economics Book 2 A Level (Revision Notes) by Imran Latif

The idea of writing notes for Cambridge A-level Micro Economics Notes came to me in 2003, when, having already taught for a year, I realized that no single economics book available in the local and international markets covered all the topics with the depth and perspective required by the CIE syllabus.

Both students and teachers had to consult 3 to 4 different books to find all the material that they needed—private candidates and 00 teachers had it even worse. Furthermore, it was really difficult for students to keep having to refer through different books when the exams were close and they were starved for time.

I took on the challenge and decided to write a comprehensive text that explicitly followed the syllabus and exam pattern of the CIE.

Micro Economics Notes

A year and a half later, in the middle of 2004, I had finally written and published four entire volumes of A level economics notes. Part of them had been hand-written, and part of them had been typed. Soon, word of their usefulness spread, and they were bought all over Pakistan.

The notes had served their purpose well till the end of 2014. Till that point, there had only been minor changes in the syllabus. But now, there was a dire need to update them, for the new syllabus for the 2019 examination introduced some significant changes in course content.

In this new and improved edition, old topics have been revised and new topics have been added. At the end of each topic there is a relevant list of essay questions spanning from 1990 to 2019.

These questions provide a clear guideline regarding how the examiners assess students’ knowledge on the topics for Paper 2 and Paper 4, allowing the student to practice effectively.

While writing these notes I kept in mind the way in which the examiner tests MCQs as well. The notes have been divided into four volumes to make it easier for those who are following the AS and A2 track separately and for those who are taking the composite exam; the syllabus division in the following pages has been provided for this express purpose. I hope my efforts will help to contribute both to the learning of the student, as well as to the inquisitiveness of any teachers of A-level economics. Your suggestions will help me improve the quality of the content for later editions and will be highly appreciated.

– Imran Latif

Table of Contents

1. Unit 1 Aggregate Demand (AD) and Aggregate Supply (AS)
   1. Concepts of National Income
   2. Sectors and Types of Economies
   3. Aggregate Demand (AD)
   4. Why Does the Ad Curve Slope Downward?
   5. Changes in Aggregate Demand
   6. Aggregate Supply (AS)
   7. The Short-Run Aggregate Supply Curve
   8. The Shape of the Long-Run Aggregate Supply Curve
   9. Interaction of Aggregate Demand and Aggregate Supply and National Income Equilibrium
   10. Changes in National Income Equilibrium
   11. Business (TRADE) Cycle
2. Unit 2 Money and Inflation
   1. Money
   2. History of Specialization, Trade, and Money
   3. Concepts
   4. Features of Money
   5. Functions of Money
   6. Inflation
   7. Measurement of Inflation / Value of Money / Cost of Living
   8. The Causes of Inflation
   9. Demand-Pull Inflation
   10. Cost-Push Inflation
   11. The Consequences of Inflation
   12. Costs
   13. Benefits
   14. Causes and Consequences of Deflation
   15. Past Paper Questions
3. Unit 3 International Trade
   1. Domestic and International Trade
   2. Theories of International Trade
   3. Theory of Absolute Advantage
   4. Theory of Comparative Advantage
   5. Mutually Beneficial Rate of Exchange
   6. Trading Possibility Curve (TPC)
   7. Limitations of Absolute and Comparative Advantage Theory
   8. Protectionism
   9. Methods of Protection and Their Impact
   10. Effectiveness of Protectionism
   11. The Arguments in Favor of Free Trade and Against Protectionism
   12. The Arguments in Favor of Protectionism and Against Free Trade
   13. Trade Blocs or International Economic Integration
   14. Consequences of Formation of Trading Blocs
       1. Creation (Micro Economics Notes)
       2. Diversion
   15. Past Papers Question
   16. Micro Economics Notes
4. Unit 4 Exchange Rate
   1. Definitions and Measurement of Exchange Rates
   2. Exchange Rate Systems
   3. Free Floating Exchange Rate System
   4. Fixed Exchange Rate System
   5. Causes of Exchange Rate Depreciation
   6. Causes of Exchange Rate Appreciation
   7. Effects of Depreciation/Devaluation
   8. Effects of Appreciation/Revaluation
   9. Advantages and Disadvantages of Exchange Rate Systems:
   10. Managed Floating System
   11. The Terms of Trade
   12. Movements in Terms of Trade
   13. The Impact of Changes in the Terms of Trade
   14. Past Paper Questions
5. Unit 5 Balance of Payments
   1. Components of the Balance of Payments
   2. Balance of Payment Disequilibrium
   3. Causes of Balance of Payment Disequilibrium
   4. Consequences of a Current Account Deficit and a Current Account Surplus
   5. Consequences of Current Account Deficit
   6. Consequences of Current Account Surplus
   7. Past Paper Questions
6. Unit 6 Government Intervention in a Macro-Economy
   1. Macroeconomic Policies
      1. Policy
      2. Side Policy
   2. Policies to Correct Current Account Deficit
      1. Switching Policies
      2. Dampening Policies
   3. Policies to Reduce Current Account Surplus
   4. Policies to Correct Demand-Pull Inflation
   5. Policies to Correct Cost-Push Inflation
   6. Policies to Correct Deflation and Their Effectiveness