Suitable for : Cambridge AS Economics , IBDP SL Economics , IBDP HL Economics , Edexcel IAL Economics Unit 2

Macroeconomics : it is the study of economics from the whole market (aggregate) point of view , macroeconomics involves the study of aggregate demand and aggregate supply , the inflation , unemployment , economic growth and all aspects that represent the study of economics from a total/summative level

Aggregate demand : the demand for all goods and services within the economy , it is represented by aggregate demand curve that shows the relationship between the price level and the real output

• the increase in the price level is named as inflation , thus , the increase in the equilibrium price level as an intersection between the aggregate demand curve and aggregate supply curve at a higher point will counted as inflation
• The aggregate demand represent all aspects included by the consumption approach of the GDP , aggregate demand represents the total sum of demand in the economy resulting from Consumption , investment and government spending

Aggregate supply : the supply of all goods and services within the economy , same as demand , it is represented by a curve that shows the relation between the overall productivity of the economy within a specific period of time , but we should note that :

• the aggregate supply might be represented by 2 curves , one for the long run aggregate supply and the other for the short run aggregate supply
• some economic models merge the two curves in one curve
• the short run aggregate supply follows the normal rules of supply as being upward sloping , while the long run aggregate supply is represented by a perfectly inelastic curve, it is perfectly inelastic at the level of the potential output : the potential output is the maximum amount of goods and services that be produced given the available capacity of the economy

Inflation : it is the increase in the price level within the economy from a period to another

Economic growth : it is the increase in real output within the economy from a period to another

Unemployment : it represents people who are willing and able to work within the economy but cannot find a job

The macroeconomic framework represent the point by which all economic aspects are interrelated , they are affecting each other , for example the economic growth represented by the increase in the quantity of goods and services produced with the economy would result in an increase in the income of producers , and this income is recirculated within the economy as a reflection of the increase in the income of the household , thus , there might be an inflation within the economy in this case

the relationship between unemployment and aggregate demand, if unemployment within the economy increased , this would represent a signal of reduction in the aggregate demand, other opinion says that as a result from the increase in the aggregate demand , there would be a higher demand for workers from producers indicating that the increase in aggregate demand would represent a signal for producers to increase production , and since labour demand is a derived demand (demand resulting from the demand for another commodity within the economy) , thus increase in the aggregate demand would result in a decrease in the unemployment level within the economy

There are several types of unemployment such as :

• cyclical unemployment : the increase in the number of people who are willing and able to work but cannot find a job due to the downturn in the business cycle in the economy (the phase of economic recession in the business cycle)
• seasonal unemployment : the increase in the number of people who are willing and able to work but cannot find a job due to the nature of the job itself , the only solution for seasonal unemployment is adopting occupational mobility
• structural unemployment : the increase in the number of people who are willing and able to work but cannot find a job due to the closure or redundancies in a specific sector within the economy
• frictional unemployment : the increase in the number of people who are willing and able to work but cannot find a job due to people voluntarily leave the job for the sake of searching for another job