IB Economics
Unit 3: Macroeconomics

MIcroeconomics is the study of the behaviour of key decision-makers in an economy: consumers, businesses and resource owners. Students of IB Economics will study the key model of supply and demand and how it operates in the market. Key factors influencing the operation of firms are examined, paying close attention to to costs, revenues and profits, as well as the different market structure that operate. Markets fail, and we examine this and the steps governments can take to intervene in the market.

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Macroeconomics in IB Diploma Economics

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The IB Economics Microeconomics section covers the following topics:

• Level of economic activity
• AD and AS
• Macroeconomic objectives
• Inequality and poverty
• Government policies

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What is macroeconomics?

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The difference between micro and macro economics

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MACROECONOMICS IN IB ECONOMICS

In contrast to microeconomics, where specific resource and product markets and the behaviour of consumers, producers and the owners of resources are studied by the IB Economics student. The study of the whole, overall economy is termed macroeconomics. Now this section of the IB Economics course shifts its attention to a much bigger picture of economies. Of course, an entire economy comprises much larger collections of consumers, business and resource owners. In some economies, such as China and India, consumers number in their billions, so you can see that macroeconomics is quite different from that of microeconomics.

In the IB Economics macroeconomics section of the course, attention focusses on the general price level of an economy and not the individual prices of goods and services it constitutes. The total demand for goods and services are examined, and not individual consumer demand or the market demand for individual products. The total output of an economy is examined, and not how much is produced at the level of the individual firm or industry. Important IB Economics concepts such as the overall total levels of employment, investment, exports and imports are studied. Such totals are termed ‘aggregates’ in macroeconomics.

Macroeconomics is important within IB Economics because some important and far-reaching economic objectives cannot be understood, modelled or analysed at the microeconomics level. Achieving full employment, stable inflation, economic growth, fair income distribution, and the balance of trade with other countries are all important macroeconomic objectives studied in IB Economics.

Employment, inflation, growth and inequality are all topics of study within this second section of the IB Economics course. Trade is examined more fully in the Global Economics section of IB Economics – Section 4.

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