IGCSE Economics Topics by Exam Board: Full List

As an IGCSE Economics student, finding the information you need about the exam board you’re studying can be difficult. This article gives you a detailed breakdown of all the IGCSE Economics topics covered by the main exam boards: CIE and Edexcel. As a result, you’ll know exactly what topics you need to study and where to find the best revision resources for your exam board.

CIE IGCSE Economics Topics

1. The basic economic problem

In this topic, you will explore the fundamental challenge of economics - how to use limited resources to satisfy unlimited wants. You will also discover how individuals, businesses, and governments make choices about what to produce and consume.

1.1 The Nature of the Economic Problem

In this section, you will learn about the economic problem, which occurs because human wants are unlimited, but the resources available to meet them are limited. This means people, businesses, and governments must make choices about how to use their resources efficiently. 

You will also explore the difference between economic goods and free goods. Economic goods are scarce and have a price, while free goods are available without cost, such as air or sunlight.

1.2 The Factors of Production

The four factors of production (land, labour, capital, and enterprise) - are the resources used to produce goods and services. Each factor has a reward: land earns rent, labour earns wages, capital earns interest, and enterprise earns profit. 

You will explore what affects the mobility of these factors, which determines how easily they can be moved from one use to another. 

Additionally, you will examine how changes in the quantity and quality of these resources affect economic growth and production.

1.3 Opportunity Cost

You will understand the concept of opportunity cost, which is the next best alternative that is given up when a choice is made. 

A key focus in this section is how consumers, workers, producers, and governments consider opportunity cost when deciding how to allocate their resources.

1.4 Production Possibility Curve (PPC) Diagrams

In this secytion, you will learn how to define, draw, and interpret a Production Possibility Curve (PPC) diagram, which shows different ways an economy can use its resources. 

You will explore what happens when resources are used efficiently or inefficiently, as well as how economic growth or resource scarcity can shift the PPC. 

Additionally, you will understand how movements along the PPC illustrate opportunity cost and the choices that economies must make.

2. The allocation of resources

This topic introduces you to how markets work, how prices are determined, and how resources are allocated in an economy. You will explore how demand and supply interact to set prices and how the government can intervene in markets when needed.

2.1 Microeconomics and Macroeconomics

You will understand the difference between microeconomics and macroeconomics. 

Microeconomics looks at individuals and businesses, examining how they make decisions about what to buy or produce. 

Macroeconomics focuses on the economy as a whole, studying topics such as inflation, economic growth, and government policies. You will also learn about the key decision-makers in each area, including consumers, firms, and governments.

2.2 The Role of Markets in Allocating Resources

You will explore how a market system works by bringing together buyers and sellers to exchange goods and services. A key part of this is the price mechanism, which helps decide what to produce, how to produce, and for whom to produce. 

Central to this, you will learn how supply and demand determine prices and how markets allocate resources to meet the needs of consumers and businesses.

2.3 Demand

You will learn what demand is and how the price of a product affects the quantity demanded.

Understanding how a demand curve works and how it shows the relationship between price and demand is a key focus of this section.

You will also explore the difference between individual and market demand and examine the factors that shift the demand curve, causing demand to increase or decrease.

2.4 Supply

You will explore what supply is and how businesses decide how much to produce based on price. 

Additionally, you will learn how to draw and interpret a supply curve, which shows the relationship between price and quantity supplied. 

Further, you will study the factors that shift the supply curve, leading to increases or decreases in supply.

2.5 Price Determination

You will learn how demand and supply interact to set the equilibrium price, which is the price where the quantity demanded equals the quantity supplied. 

In this section, you will also explore what happens when markets experience disequilibrium, leading to shortages (where demand exceeds supply) or surpluses (where supply exceeds demand).

2.6 Price Changes

You will understand why prices rise and fall based on changes in market conditions. 

As well as this, you will explore how events such as an increase in demand, a decrease in supply, or changes in production costs affect prices. 

This will allow you to use demand and supply diagrams to explain these price changes.

2.7 Price Elasticity of Demand (PED)

You will learn how to calculate and interpret Price Elasticity of Demand (PED), which measures how responsive demand is to a change in price. 

In addition, you will explore the factors that make demand elastic or inelastic, such as the availability of substitutes or whether the product is a necessity. 

You will also examine how PED affects total revenue, which is important for businesses and governments when setting prices or taxes.

2.8 Price Elasticity of Supply (PES)

You will learn how to calculate and interpret Price Elasticity of Supply (PES), which measures how responsive supply is to a change in price. 

In addition, you will explore the factors that determine whether supply is elastic or inelastic, such as production time and the availability of resources. 

You will also examine why PES is important for businesses and policymakers when making decisions about production and pricing.

2.9 Market Economic System

You will learn what a market economy is and how it works without government intervention. In a market economy, businesses and individuals make decisions based on supply, demand, and price signals. 

Additionally, you will explore the advantages and disadvantages of this system, including greater efficiency and choice but also potential problems such as inequality and market failures.

2.10 Market Failure

A key element of this section is understanding what market failure is and why some markets fail to allocate resources efficiently. 

You will learn about key causes of market failure, including public goods, merit goods, demerit goods, externalities, abuse of monopoly power, and factor immobility. 

Additionally, you will explore how market failure can lead to the misallocation of resources, causing problems such as pollution, overuse of harmful goods, and under-provision of essential services.

2.11 Mixed Economic System

You will learn how a mixed economy combines elements of both market and government intervention. 

This will allow you to explore how governments try to fix market failures through policies such as taxes, subsidies, regulations, privatisation, and nationalisation. 

Additionally, you will evaluate whether government intervention is effective in improving economic outcomes or whether it sometimes creates unintended consequences.

3. Microeconomic decision makers

This topic explores the role of households, workers, businesses, and banks in an economy. You will understand how these different groups make economic decisions and how their choices impact the economy as a whole.

3.1 Money and Banking

You will learn about the functions, forms, and characteristics of money and why money plays such an important role in the economy. 

Additionally, you will explore how central banks control the supply of money, regulate commercial banks, and help to stabilise the economy. 

Finally, you will examine the role of commercial banks, which provide services such as savings accounts, loans, and payment systems. This will help you to understand why banks are important for governments, businesses, and consumers and how they help individuals and firms manage their finances.

3.2 Households

Firtsly, you will explore how individuals and families make financial decisions about spending, saving, and borrowing money. 

You will learn how factors such as income levels, interest rates, and consumer confidence influence these choices. 

This will help you to understand why spending patterns change over time and why different households make different financial decisions.

3.3 Workers

This section will introduce you to what influences an individual's choice of occupation, including factors such as wages, working conditions, career opportunities, and job security. 

You will explore how wages are determined by demand and supply in the labour market, as well as how the bargaining power of workers and government policies, such as the minimum wage, influence pay levels.

This will help you to understand the reasons for differences in earnings, including how wages vary between skilled and unskilled jobs, between the public and private sectors, and between different industries. 

You will then go on to explore why earnings can be affected by gender, discrimination, and the relative power of employers and employees.

Additionally, you will study the concept of division of labour and specialisation, where workers focus on specific tasks to increase efficiency. 

Finally, you will examine the advantages of specialisation, such as higher productivity and better-quality products, as well as the disadvantages, such as repetitive work and job dependency.

3.4 Trade Unions

You will learn what a trade union is and how it helps workers by negotiating for better wages, working conditions, and job security. 

This will lead to an exploration of how trade unions can engage in collective bargaining, where workers negotiate with employers as a group rather than individually. 

You will examine the role of trade unions in protecting employment rights and influencing government policies.

Additionally, you will learn about the factors that determine how strong a trade union is, including the number of members, the level of government support, and the willingness of workers to take industrial action. 

Finally, you will also study the advantages and disadvantages of trade union activity, considering how they can benefit workers while also potentially increasing business costs.

3.5 Firms

In this section, you will learn how firms are classified, based on factors such as their size, industry sector, and whether they are privately or publicly owned. 

You will explore why some businesses remain small and the benefits they may have, such as being more flexible and able to provide personalised services. 

However, you will also examine the challenges small firms face, such as limited access to finance and competition from larger businesses.

You will study how firms grow in size, either by expanding their own operations (internal growth) or by merging with other firms. 

You will learn about the different types of mergers, including horizontal mergers, where two firms in the same industry join together, vertical mergers, where firms at different stages of production combine, and conglomerate mergers, where firms from different industries merge. 

This leads to an exploration of the advantages and disadvantages of each type of merger.

Additionally, you will learn about economies of scale, which occur when firms grow and their costs per unit decrease. You will also examine diseconomies of scale, which happen when a business becomes too large and inefficient.

3.6 Firms and Production

You will explore how firms demand factors of production, such as land, labour, and capital, in order to produce goods and services. 

Additionally, you will study the reasons why some industries rely more on labour-intensive production, which requires a large workforce, while others focus on capital-intensive production, which depends on machinery and technology. 

You will also learn the difference between production (the process of creating goods and services) and productivity (the efficiency of production).

This will allow you to examine the factors that influence productivity, including investment in better technology, improvements in worker skills, and the efficiency of management. 

Finally, you will understand why higher productivity is beneficial to firms, as it can lead to lower costs and increased profitability.

3.7 Firms’ Costs, Revenue, and Objectives

You will learn how businesses calculate their costs of production, including fixed costs, which stay the same regardless of output, and variable costs, which change with production levels. 

Specifically, you will understand how to calculate total costs, average costs, and total revenue, and you will learn why keeping costs low is important for businesses to remain competitive.

Additionally, you will study how firms set business objectives, which can include profit maximisation, growth, survival, or social responsibility and will explore why firms may have different objectives at different stages of their development.

3.8 Market Structure

Firstly, you will learn about different market structures, which determine how much competition exists in an industry. 

You will explore competitive markets, where many businesses compete to sell similar products, and you will understand how competition affects prices, quality, consumer choice, and business profits.

Monopoly markets, where a single firm dominates an industry, are also considered in this section. You will learn about the advantages of monopolies, such as their ability to invest in research and development, as well as the disadvantages, such as higher prices and reduced choice for consumers.

By studying these different market structures, you will develop an understanding of how businesses compete, how prices are set, and how governments regulate industries to promote fair competition.

4. Government and the macroeconomy

This topic focuses on how governments influence the economy through policies that aim to promote economic growth, low unemployment, stable prices, and fair income distribution. You will learn how governments use taxation, spending, and other policies to achieve their goals, as well as the challenges they face in managing an economy effectively.

4.1 The Role of Government

You will explore the role of the government in the economy, understanding how it operates at local, national, and international levels. 

Additionally, you will learn about the different responsibilities governments have, including providing public services, regulating businesses, and managing the overall economy.

4.2 The Macroeconomic Aims of Government

You will learn about the five main economic aims that governments try to achieve. These include economic growth, where a country produces more goods and services over time; full employment and low unemployment, ensuring as many people as possible have jobs; stable prices and low inflation, preventing rapid increases in the cost of living; balance of payments stability, where a country’s earnings from exports match its spending on imports; and redistribution of income, where governments try to reduce income inequality by supporting lower-income households.

This will allow you to explore how these aims can sometimes conflict with each other. For example, achieving full employment might lead to higher inflation, or promoting economic growth could cause problems with a country’s balance of payments.

4.3 Fiscal Policy

You will learn about fiscal policy, which involves the government’s use of taxation and spending to influence the economy. 

Subsequently, you will explore what the government budget is and how it is divided between tax revenue and government spending.

You will then study the different types of taxation, including direct taxes and indirect taxes, and their classification into progressive taxes, regressive taxes and proportional taxes.

This will lead to a consideration of the principles of taxation, which determine what makes a tax system fair and effective, and explore how taxation affects consumers, businesses, the government, and the economy as a whole.

You will examine how the government uses fiscal policy measures to stimulate or slow down the economy, including adjusting tax rates and increasing or decreasing public spending. 

Finally, you will learn how to calculate a budget deficit or surplus, which happens when the government spends more or less than it earns.

4.4 Monetary Policy

Firstly, you will learn about monetary policy, which is the government’s strategy for controlling the money supply, interest rates, and exchange rates. 

You will go on to explore how changes in interest rates influence economic activity by affecting borrowing, saving, and investment. 

This will help you to understand how the government uses monetary policy measures to manage inflation, encourage economic growth, and influence consumer and business behaviour.

You will study how changes in monetary policy can impact the economy, including effects on employment, inflation, and exchange rates. 

Finally, you will explore how governments and central banks work together to ensure economic stability.

4.5 Supply-Side Policy

You will explore supply-side policies, which are government strategies designed to increase the economy’s ability to produce goods and services efficiently. 

Additionally, you will study different types of supply-side policies, including investment in education and training, which improves workers’ skills, and labour market reforms, which make it easier for businesses to hire and fire employees.

You will go on to examine other supply-side measures, such as reducing direct taxes to encourage people to work and invest, deregulating industries to remove unnecessary restrictions, and privatising state-owned businesses to improve efficiency. 

Finally, you will learn how these policies help increase productivity and economic growth, while also considering the potential downsides of supply-side measures.

4.6 Economic Growth

You will learn what economic growth is and how it is measured using Gross Domestic Product (GDP). 

You will then explore how GDP per capita is used to compare the economic performance of different countries.

This will help you to understand the causes of economic growth, including investment in new technology, improvements in education, and increased production capacity. 

You will also examine how changes in total demand can increase resource use and shift the Production Possibility Curve (PPC) outward, allowing the economy to produce more goods and services.

What happens during a recession is considered, allowing you to understand the causes and consequences of recessions for businesses, workers, and governments. 

You will learn about the costs and benefits of economic growth, considering both the positive and negative effects.

Finally, you will examine the policies governments use to encourage economic growth.

4.7 Employment and Unemployment

In this section, you will learn about employment, unemployment, and full employment, exploring how these terms are defined and measured. 

You will study how employment patterns change over time, such as shifts from agricultural to service-sector jobs and increases in female participation in the workforce.

You will examine the methods used to measure unemployment, including the claimant count and the labour force survey, as well as how different types of unemployment arise.

The consequences of unemployment for individuals, businesses, and the overall economy are considered, including reduced incomes, lower business profits, and increased government spending on welfare programs. 

Finally, you will learn about the policies used to reduce unemployment, including education and training programs, investment in job creation, and support for businesses.

4.8 Inflation and Deflation

You will learn about inflation, which occurs when the prices of goods and services rise, and deflation, which happens when prices fall. 

Measurement of inflation and deflation using the Consumer Prices Index (CPI) is considered, helping you understand why price stability is important for economic growth.

You will explore the causes of inflation, including demand-pull inflation, which occurs when demand for goods and services rises faster than supply, and cost-push inflation, which happens when production costs increase. 

Additionally, you will learn about the causes of deflation, including falling demand for goods and services and improvements in technology that reduce production costs.

You will examine the consequences of inflation and deflation for consumers, workers, businesses, and governments, understanding how both can create economic uncertainty. 

Finally, you will study the policies governments use to control inflation and deflation, such as adjusting interest rates or managing the money supply.

5. Economic development

In this topic, you will explore what makes a country develop economically and how differences in resources, policies, and other factors lead to varying living standards around the world. You will understand how economic development is measured, what causes poverty, how population changes affect development, and why some countries are more advanced than others.

5.1 Living Standards

You will learn how to measure living standards using both GDP per capita and the Human Development Index (HDI). 

This will help you explore what these measures tell you about the well-being of people in a country and understand the components that make up GDP and HDI. 

Additionally, you will examine the advantages and disadvantages of using these indicators and understand why living standards and income distribution can differ both within a country and between different countries.

5.2 Poverty

In this section, you will learn about the concept of poverty by understanding the difference between absolute poverty, where people do not have enough resources to meet basic needs like food, shelter, and healthcare, and relative poverty, where individuals are poorer compared to others in their society. 

You will explore the various causes of poverty, such as unemployment, low wages, illness, and old age, and understand how these factors affect people's lives. 

Finally, you will study the policies that governments use to alleviate poverty and redistribute income, including efforts to promote economic growth, improve education, provide more generous state benefits, implement progressive taxation, and introduce a national minimum wage.

5.3 Population

In this section, you will learn about the factors that affect population growth, including the birth rate, death rate, and net migration. 

You will explore why different countries have different rates of population growth by considering factors such as healthcare, education, and economic opportunities. 

The idea of an optimum population, which refers to the ideal number of people a country’s resources can support, is considered.

Additionally, you will understand the effects of changes in population size and structure on a country’s economy, including how an aging population or shifts in gender distribution can influence economic development. 

Finally, you will learn how to interpret a population pyramid, which shows the age and gender composition of a population, even though you are not required to draw one.

5.4 Differences in Economic Development Between Countries

In this section, you will explore why some countries are more economically developed than others by examining the key factors that influence development. 

You will learn how differences in income levels, productivity, population growth, the size of primary, secondary, and tertiary sectors, saving and investment, education, and healthcare contribute to the disparities in economic development. 

Finally, you will understand how these factors interact to affect a country’s overall level of development and the quality of life for its citizens, allowing you to compare and contrast economic progress between nations.

6. International trade and globalisation

In this topic, you will explore how countries trade with one another and how globalisation connects economies worldwide. You will learn about the benefits and challenges of international trade, how exchange rates affect imports and exports, and how governments manage their trade relationships with other countries.

6.1 International Specialisation

In this section, you will learn about the concept of specialisation at a national level, when countries focus on producing goods and services that they can produce efficiently. 

You will explore the reasons why some countries specialise in certain industries, such as having better access to natural resources, skilled labour, or advanced technology. 

This will help you to examine the advantages of specialisation, such as increased productivity, lower production costs, and greater efficiency in resource use. 

Finally, you will understand the disadvantages, including the risk of over-dependence on a single industry, vulnerability to global market changes, and potential job losses if demand for specialised goods declines.

6.2 Globalisation, Free Trade, and Protection

In this section, you will learn about globalisation, the increasing connection and interdependence of economies around the world. 

You will explore how improvements in technology, transport, and communication have made it easier for goods, services, money, and ideas to move between countries.

Additionally, you will study the role of multinational companies (MNCs) and examine the benefits and challenges they bring to both their home countries and the countries in which they operate.

You will explore the benefits of free trade, which allows countries to trade without restrictions.You will also study why some governments choose to protect their domestic industries using different methods of protectionism. 

Finally, you will understand the reasons why governments use protectionist policies and the consequences of protectionism, such as higher prices for consumers, reduced trade opportunities, and possible retaliation from other countries, which can lead to trade wars.

6.3 Foreign Exchange Rates

In this section, you will learn about foreign exchange rates, which determine how much one country’s currency is worth compared to another’s. 

You will explore how the value of a currency is determined in the foreign exchange market and study the factors that cause exchange rates to fluctuate, including changes in demand for exports and imports, shifts in interest rates, speculation in financial markets, and the entry or departure of multinational companies from a country.

Additionally, you will examine the consequences of exchange rate fluctuations and how they impact consumers and businesses. You will explore how changes in exchange rates affect a country's trade balance, inflation, and employment levels.

Finally, you will learn about the difference between floating and fixed exchange rate systems. You will examine the advantages and disadvantages of both systems and understand why some countries choose to fix their exchange rates while others allow them to fluctuate.

6.4 Current Account of the Balance of Payments

You will study the current account of the balance of payments and will learn about the different components of the current account. 

This will allow you to calculate whether a country has a current account deficit or a current account surplus.

You will examine the reasons why countries experience deficits and surpluses on their current account and study the consequences of current account imbalances.

Finally, you will explore the policies that governments use to achieve balance of payments stability. You will evaluate the effectiveness of these policies and understand the challenges that governments face in managing international trade and financial stability.

What is Covered in CIE IGCSE Economics Exam Papers?

Revision Resources for CIE IGCSE Economics

Everything you need to revise for CIE IGCSE Economics exams can be found below:

• CIE IGCSE Economics Revision Notes

• CIE IGCSE Economics Exam Questions

• CIE IGCSE Economics Past Papers

• CIE IGCSE Economics Flashcards

Edexcel IGCSE Economics Topics

Microeconomics and business economics

1.1 The Market System

1.1.1 The Economic Problem

You will learn that resources are scarce, but human wants are unlimited, meaning choices must be made about how to use resources efficiently. You will study opportunity cost, which is what is given up when making a choice. You will also explore the Production Possibility Curve (PPC), which shows the maximum output an economy can achieve, the effects of economic growth, and how resources can be used efficiently or inefficiently.

1.1.2 Economic Assumptions

You will explore the assumptions that consumers aim to maximise their benefit, while businesses aim to maximise their profit. However, in reality, decisions are not always rational. You will study reasons why consumers may not always maximise their benefit, such as habitual behaviour or lack of information, and why producers may not always aim for maximum profit, such as prioritising customer satisfaction or ethical considerations over financial gain.

1.1.3 Demand, Supply, and Market Equilibrium

Demand

You will learn how demand represents the willingness and ability of consumers to buy goods and services. You will study demand curves, which show how demand changes when prices rise or fall. You will explore factors that cause demand to shift, such as changes in income, advertising, or the price of related goods.

Supply

You will understand how supply represents the amount of a product that producers are willing to sell. You will study supply curves, which show how supply changes with price. You will explore reasons why supply can increase or decrease, such as changes in production costs, technology, or government policies.

Market Equilibrium

You will learn that markets work by balancing demand and supply to set a price where buyers and sellers agree. This is called the equilibrium price. You will study how changes in demand and supply shift market equilibrium, leading to excess demand (shortages) or excess supply (surpluses), and how markets adjust over time.

1.1.4 Elasticity

Price Elasticity of Demand (PED)

You will explore how sensitive demand is to price changes. You will learn how to calculate PED and interpret its values, understanding whether demand is elastic or inelastic. You will study factors that influence PED, such as availability of substitutes, necessity, and time period. You will also see how PED affects total revenue for businesses.

Price Elasticity of Supply (PES)

You will learn how supply reacts to price changes by calculating and interpreting PES values. You will study factors affecting PES, such as how easily firms can increase production, availability of resources, and production time.

Income Elasticity of Demand (YED)

You will study how demand changes when consumers’ income rises or falls. You will learn about normal goods, inferior goods, and luxury goods and how they react to income changes.

1.1.5 The Mixed Economy

You will explore how economies combine private and public sectors to produce goods and services. You will learn how the government intervenes to correct market failure, which happens when markets do not use resources efficiently. You will study public goods, which are non-excludable and non-rival, and understand why governments provide them. You will also explore privatisation, where state-owned businesses are transferred to the private sector, and evaluate its impact on consumers, businesses, and the economy.

1.1.6 Externalities

External Costs of Production

You will study the negative effects that business activities can have on others, such as pollution, congestion, and resource depletion. These are called external costs and are a form of market failure.

External Benefits of Consumption

You will explore how certain goods and services, such as education and healthcare, provide wider benefits beyond just the individual. These are known as external benefits, and governments often encourage their consumption.

Social Costs and Social Benefits

You will learn how to calculate social costs (private costs + external costs) and social benefits (private benefits + external benefits) to assess whether markets allocate resources fairly and efficiently.

1.2 Business Economics

1.2.1 Production

You will learn about the four factors of production - land, labour, capital, and enterprise—and how they are used to produce goods and services. You will explore the three sectors of the economy: primary (extracting resources), secondary (manufacturing), and tertiary (services). You will study how the importance of each sector changes over time, particularly in developing and developed economies, and how this affects employment and economic output.

1.2.2 Productivity and Division of Labour

Productivity

You will explore productivity, which measures how efficiently resources are used. You will study how land, labour, and capital contribute to productivity and how improvements in technology, education, and training can increase output.

Division of Labour

You will learn about the division of labour, where workers specialise in specific tasks to increase efficiency. You will explore its advantages, such as higher productivity and lower costs, as well as its disadvantages, like worker boredom and dependency on others in the production process.

1.2.3 Business Costs, Revenues, and Profit

Business Costs and Revenues

You will study different types of business costs, including fixed costs (which stay the same) and variable costs (which change with output). You will learn how to calculate total revenue, total costs, and profit, and understand why keeping costs low is important for businesses.

Economies of Scale

You will explore how businesses reduce average costs as they grow, benefiting from internal and external economies of scale, such as bulk buying, advanced technology, and skilled labour. However, you will also study diseconomies of scale, where growth leads to higher costs due to inefficiencies like poor communication and management difficulties.

1.2.4 Business Competition

Competition in Markets

You will study how competition benefits consumers, leading to lower prices, better quality, and greater choice. However, you will also explore its downsides, such as businesses struggling to remain profitable.

Size of Firms

You will learn why some businesses grow while others remain small. You will study factors affecting business growth, such as access to finance, economies of scale, and government regulation.

Monopoly

You will explore monopolies, where a single firm dominates a market, and understand the advantages (such as economies of scale) and disadvantages (such as higher prices and less choice for consumers).

Oligopoly

You will study oligopolies, where a few large firms dominate an industry. You will learn about collusion, price competition, and how firms differentiate their products through branding and advertising.

1.2.5 The Labour Market

You will study how demand and supply determine wages and explore factors affecting labour markets, such as population changes, skills, and education levels. You will learn about different types of employment, how wages vary between industries, and how labour mobility affects job opportunities.

2. Macroeconomics and the global economy

2.1 Government and the Economy

2.1.1 Macroeconomic Objectives

Economic Growth

You will learn how economic growth is measured using Gross Domestic Product (GDP) and why it is important for improving living standards. You will study the economic cycle, including booms, downturns, recessions, and recoveries, and how these stages impact inflation, employment, and business activity. You will explore how growth can reduce poverty, create jobs, and increase incomes, but also its possible downsides, such as inflation and environmental damage.

Low and Stable Inflation

You will learn that inflation is the rise in prices over time, and you will study how it is measured using the Consumer Price Index (CPI). You will explore demand-pull and cost-push inflation, the impact of inflation on wages, savings, exports, and business confidence, and the relationship between inflation and interest rates. You will also examine deflation, where prices fall, and its impact on the economy.

Low Unemployment

You will study unemployment, how it is measured, and why some people struggle to find jobs. You will explore different types of unemployment, including cyclical, structural, seasonal, voluntary, and frictional unemployment. You will learn how unemployment affects economic output, government spending, tax revenue, and poverty levels. You will also explore how low employment levels boost business confidence and consumer spending, supporting economic growth.

Surplus or Balance on the Current Account of the Balance of Payments

You will learn about the current account, which records a country’s exports and imports of goods and services. You will study current account deficits and surpluses, their causes, and their impact on the economy. You will explore how factors like exchange rates, international competitiveness, and domestic demand influence trade balances and how deficits can lead to increased borrowing and economic instability.

Protection of the Environment

You will study how business activity can damage the environment through pollution, deforestation, and resource depletion. You will explore how governments intervene to reduce environmental harm by introducing taxes, subsidies, regulations, and pollution permits. You will also examine the importance of sustainable economic policies, ensuring that resources are preserved for future generations.

Redistribution of Income

You will learn about income inequality, the differences between absolute and relative poverty, and why reducing inequality is important. You will explore how governments redistribute income through progressive taxation, benefit payments, education, and healthcare investments to create a fairer society and support economic growth.

2.1.2 Government Policies

Fiscal Policy

You will learn that fiscal policy involves government spending and taxation to influence the economy. You will explore how the government raises money through direct and indirect taxes and how spending on public services and infrastructure supports economic growth. You will study the effects of budget deficits and surpluses and how fiscal policy can increase employment, control inflation, and improve trade balances.

Monetary Policy

You will study how monetary policy controls the money supply and interest rates to manage inflation, unemployment, and growth. You will learn about central banks and how changing interest rates affects borrowing, saving, and business investment. You will also explore how monetary policy influences consumer spending and inflation levels.

Supply-Side Policy

You will learn how supply-side policies aim to increase productivity and total output. You will study policies like privatisation, deregulation, investment in education and training, tax incentives for businesses, and infrastructure spending. You will understand how these policies encourage businesses to be more efficient and competitive, leading to long-term economic growth.

Government Controls

You will explore how governments regulate markets to prevent market failure and protect consumers. You will learn about regulations, legislation, fines, and pollution permits, and how these measures help ensure fair competition, environmental sustainability, and ethical business practices.

2.1.3 Relationships Between Objectives and Policies

You will learn how different government policies interact and sometimes create trade-offs between economic objectives. You will study how reducing unemployment can lead to inflation, how economic growth may conflict with environmental protection, and how controlling inflation can impact trade balances. You will also explore how governments try to balance these objectives to maintain long-term economic stability.

2.2 The Global Economy

2.2.1 Globalisation

You will learn about globalisation, which means economies around the world are becoming more connected and interdependent. You will explore why globalisation has happened, including fewer trade barriers, cheaper transport and communication, and the rise of multinational corporations (MNCs). You will study how globalisation benefits countries by raising living standards, lowering prices, and providing greater choice but also how it can lead to job losses, harm to local industries, and environmental damage.

2.2.2 International Trade

You will explore free trade, where countries buy and sell goods and services without restrictions. You will study the benefits of free trade, such as lower costs, wider markets, and better prices for consumers, but also its downsides, like unemployment in domestic industries that cannot compete. You will learn about protectionism, where governments use tariffs, quotas, and subsidies to shield their own industries from foreign competition and support jobs and businesses at home.

2.2.3 Exchange Rates

You will learn that exchange rates show how much one currency is worth compared to another. You will study what affects exchange rates, such as interest rates, trade flows, and speculation. You will explore how a stronger currency makes imports cheaper but exports more expensive, while a weaker currency makes exports cheaper but imports more expensive. You will also study the impact of exchange rate changes on businesses and the economy.

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