RI H1 Economics Lecture Notes 6 Factors Affecting Standard of Living

2019 Y6 H1 Economics Macroeconomics 16 RAFFLES INSTITUTION Year 6 H1 Economics 2019 Factors Affecting Standard Of Living Outline of Contents 1 Economic growth 1.1 Definition & types of economic growth 1.2 Benefits from economic growth 1.3 Costs of economic growth 1.4 Causes of weak/ negative economic growth 1.5 Consequences of weak/ negative economic growth 2 Inflation 2.1 Definition 2.2 Terms associated with inflation 2.3 Causes of inflation 2.3.1 Demand-pull inflation 2.3.2 Cost-push inflation 2.4 Benefits of Low inflation 2.5 Consequences of inflation 3 Unemployment 3.1 Definition 3.2 Unemployment rate 3.3 Causes (types) of unemployment 3.3.1 Frictional unemployment 3.3.2 Structural unemployment 3.3.3 Cyclical unemployment 3.3.4 Technological unemployment 3.3.5 Seasonal unemployment 3.4 Natural rate of unemployment 3.5 Consequences of unemployment Appendix: Lorenz Curve Reference Mankiw, Gregory N., Quah, Euston, & Wilson, Peter, Principles of Economics: An Asian Edition, Cengage Learning. Lecture Objectives At the end of the lecture series, you should be able to: Explain the meaning of undesirable rates of economic growth, high inflation, high unemployment and persistent or large balance of payments deficits. Analyse the causes and consequences of the macroeconomic problems. @dream

2019 Y6 H1 Economics Macroeconomics 17 OVERVIEW Key Economic Goals Economists identify the key goals that an economy or a government should seek to achieve under two major categories: Microeconomic Goals 1. Efficiency in resource allocation Scarce resources should be allocated with a view to attain economic efficiency in the country where the right mix of goods and services (allocative efficiency) are produced at the lowest possible average cost of production (productive efficiency). 2. Equitable income distribution Income distribution among the people should not be so unequal that many people cannot afford basic needs of shelter, food education and health care. Macroeconomic Goal: a high standard of living from 1. Economic growth This aims to achieve real increases in the output of goods and services. Ceteris paribus, economic growth ensures that on average, a resident can enjoy a higher standard of living, enjoy more choices and improve its well-being. 2. Full employment of resources The economy should aim to achieve full employment to ensure that scarce resources are fully utilized. 3. Low inflation Economic growth should be coupled with low inflation to ensure economic competitiveness, sustained economic growth and a higher quality of life. @dream

2019 Y6 H1 Economics Macroeconomics 18 1 ECONOMIC GROWTH 1.1 Definition AND TYPES OF ECONOMIC GROWTH Economic growth is defined as an increase in Gross Domestic Product. In order to achieve sustained economic growth, both actual and potential growth are req