Macro economics (calculations) (AS)

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Last updated 1:58 PM on 6/10/26
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14 Terms

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Inflation Formula
((New CPI − Old CPI) ÷ Old CPI) × 100.
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Calculate Inflation: CPI 120 to 126
5%.
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Economic Growth Formula
((New Real GDP − Old Real GDP) ÷ Old Real GDP) × 100.
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Calculate Growth: GDP £2tn to £2.1tn
5%.
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Unemployment Rate Formula
(Number Unemployed ÷ Labour Force) × 100.
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Calculate Unemployment: 1.5m unemployed, 30m labour force
5%.
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Who sets UK interest rates?
The Monetary Policy Committee (MPC) of the Bank of England.
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Effect of Higher Interest Rates
Borrowing becomes more expensive, spending falls and AD tends to decrease.
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Effect of Lower Interest Rates
Borrowing becomes cheaper, spending rises and AD tends to increase.
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Expansionary Fiscal Policy
Increasing government spending or reducing taxes.
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Contractionary Fiscal Policy
Cutting government spending or increasing taxes.
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Three Supply-Side Policies
Education and training, infrastructure investment and reducing business taxes.
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How does education improve AS?
By increasing labour productivity and skills.
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Why is low inflation important?
It maintains purchasing power, business confidence and international competitiveness.