Macroeconomics Diagrams/Calculations

3.1 Measuring Economic Activity

• Diagram: The circular flow of income model, showing the interactions between decision makers, leakages, and injections:

• Calculation: Nominal GDP from national income data using the expenditure approach:

• Calculation: Nominal GNI from data:

• Calculation: Real GDP and real GNI using a price deflator:

• Calculation: Real GDP per capita and real GNI per capita:

• Diagram: The business cycle, showing short-term fluctuations and the long-term growth trend:

3.2 Aggregate Demand and Aggregate Supply

• Diagram: The AD curve and shifts on the model:

• Diagram: The SRAS surve and shifts on the model:

• Diagram: Alternate views of the AS curve:

• Diagram: Shifts of the LRAS and Keynesian AS:

• Diagram: Macroeconomic equilibrium in the short and long term:

• Diagram: Inflationary & recessionary gaps in the neoclassical/monetarist view:

3.3 Macroeconomic Objectives

• Diagram: PPC model showing actual growth and growth in production possibilities:

• Diagram: Short and long-run economic growth on AD/AS models:

• Calculation: The rate of economic growth from a set of data:

• Calculation: The unemployment rate from a set of data:

• Diagram: Unemployment created by a minimum wage:

• Diagram: Changes in demand for labor:

• Diagram: Deflationary gap showing cyclical unemployment:

• Calculation (HL ONLY): The weighted price index, using provided data:

• Calculation: The inflation rate from a set of data, using quantities purchased as weights in the CPI:

• Diagram: Demand-pull and cost-push inflation:

• Diagram: Benign and malign deflation:

• Diagram (HL ONLY): AD/AS curves showing the trade-off between inflation and unemployment:

• Diagram (HL ONLY): The Phillips curve, showing the short-run and long-run relationship between inflation and unemployment:

3.4 Inequality and Poverty

• Diagram: The Lorenz curve, showing the distribution of income and possible changes in the distribution of income:

• Construction: A Lorenz curve from income quintile data:

• Calculation (HL ONLY): Given the indirect tax rate, the amount of indirect tax paid from a given level/amount of expenditure:

• Calculation (HL ONLY): Total tax and average tax rates from a set of data:
  This operation is more easily demonstrated with real values rather than letters:

3.5 Monetary Policy

• Diagram: The determination of equilibrium interest rates:

• Calculation: Real interest rates from given data:

• Diagram: AD/AS curves showing contractionary and expansionary monetary policy:

3.6 Fiscal Policy

• Diagram: AD/AS curves showing contractionary and expansionary fiscal policy, for both the neoclassical and Keynesian schools of thought:

• Calculation (HL ONLY): The Keynesian Multiplier:

Where:
MPS is the marginal propensity to save (for each $ you earn, how much will you save)
MPM is the marginal propensity to import (for each $ you earn, how much goes to imports)
MPT is the marginal propensity to tax (for each $ you earn, how much goes to tax)
MPC is the marginal propensity to consume (for each $ you earn, how much do you spend)

• Calculation (HL ONLY): The effect on GDP of a change in an injection in investment, government spending or exports, using the Keynesian multiplier:

• Diagram (HL ONLY): The crowding-out effect:

3.7 Supply-Side Policy

• Diagram: AD/AS model with the LRAS curve to show the effect of supply-side policies: