ECONOMICS TEACHERS’ GUIDE

KEY ASPECTS OF THE SPECIFICATION FROM 2015
MACROECONOMICS (3 OF 4)
AREA OF STUDY
Public Sector Debt:
Fiscal Policy:
Monetary Policy:
Interest rates
DESCRIPTION
Learners should understand that in the light of recent developments
across the world, there is a greater emphasis on the problems with
government sector deficits and debt and the extent to which these need to
be kept under control.
An ability to evaluate the extent to which a large and/or growing national
debt (and the budget deficits which contribute to this) is likely to be a
problem (and the circumstances in which problems are more or less likely
to be serious) is important, together with an understanding that national
debt is not always inherently undesirable.
Learners should be able to evaluate the different approaches to reducing
budget deficits, their relative effectiveness and the extent to which
economists from different schools of thought might be likely to recommend
different approaches.
Learners should understand the difference between structural and cyclical
fiscal (budget) deficits and also the reasons that budget deficits may arise.
Learners should be able to explain how Keynesian economists believe
that fiscal policy can be used to control aggregate demand in the
economy, but that fiscal policy can be used to affect both AD and AS.
An understanding of the difference between current/capital spending and
direct/indirect taxes and the impacts of changes in these on issues such
as incentives, AD/AS and the key policy objectives is important.
Learners should understand the role of the Bank of England in creating
monetary and financial stability.
Learners need to have a good understanding of how interest rates are
used by central banks to control inflation and other key macro policy
objectives. In particular, an understanding both of the reasons central
banks might change interest rates and the impact of such changes (and
the timescale over which they are likely to occur) is important.
Learners are required to explain how quantitative easing is meant to work
and to evaluate the impact and risks associated with it. In addition learners
should understand that central banks may intervene directly in the banking
system via schemes such as Funding For Lending.
Detailed knowledge of different measures of the money supply is not
required.
Learners should understand the changes in the structure of the UK
economy in recent years, in particular the growing size and influence of
the financial sector.