IB Diploma Programme Economics SL, Unit 3 Macroeconomics (first assessment 2022). This topic covers the SL content of syllabus sections 3.1–3.7 in full: measuring economic activity and illustrating its variations, aggregate demand and aggregate supply, macroeconomic objectives, the economics of inequality and poverty, monetary policy, fiscal policy and supply-side policies. One shared macro model runs through the worked examples — AD $P = 90 - Y/2$ against SRAS $P = 20 + Y/2$, equilibrium $(70, 55)$ — with the CPI arithmetic from the earlier drives. At SL the model is read as a DIAGRAM; the Keynesian multiplier, the natural rate of unemployment and the deflator algebra are HL extensions and are left out.

Must-know for this topic:

Gross domestic product 国内生产总值 (3.1) is the value of all final goods and services produced within a country in a period — measurable by the output, income or expenditure approach (they agree in principle). NOMINAL GDP uses current prices; REAL GDP removes price changes with the GDP deflator (illustration: nominal index 112 at deflator 108 is real 103.7 — the algebra is HL, the idea is SL); per head divides by population. GDP PER CAPITA is a headline welfare proxy with limits (non-market activity, distribution, environmental damage, price differences), which is why the IB pairs it with alternative indicators — the OECD Better Life Index, the Happiness Index and the Happy Planet Index — that add health, education and the environment to income. The business cycle 经济周期 (also 3.1) illustrates short-run fluctuations around the trend: recovery → boom → recession → trough; each stage moves growth, inflation and unemployment together.

Aggregate demand 总需求 (3.2) $= C + I + G + (X - M)$; the components follow disposable income and confidence (consumption), the interest rate and expectations (investment), the budget (government spending) and incomes, exchange rates and world demand (net exports). The AD curve slopes down with the price level (wealth, interest-rate and trade effects); a price change MOVES along, a component change SHIFTS. Illustration: with $C = 60$, $I = 20$, $G = 20$ and $X - M = 0$, AD $= 100$.

Aggregate supply 总供给: short-run AS rises with the price level; the LONG run divides the schools — the KEYNESIAN range is flat with spare capacity then curves up to full employment; the MONETARIST (classical) AS is vertical at the natural level of output, so demand-side policy moves only prices. On the shared model AD meets SRAS at $(70, 55)$; a demand injection shifting AD up 15 gives the new equilibrium $(85, 62.5)$ — more output AND a higher price level; against a vertical LRAS the same shift only raises prices. Shifters of LRAS: technology, productivity, education, labour-force growth, institutional quality.

The two long-run views give the two policy camps: with spare capacity the Keynesian reads a demand injection as output gained at little inflation cost; the monetarist reads the same injection as inflation with no lasting output gain, and sends the government to supply-side policy instead. Every Paper 1 macro essay chooses its diagram with this in mind.

The objectives (3.3): LOW unemployment 失业 (measured by the ILO definition; types cyclical, structural, seasonal, frictional; costs to the individual, society and the economy); LOW AND STABLE inflation 通货膨胀 (the CPI basket: weights 50/30/20 over relatives 110/100/120 gives CPI $= 109$, inflation 9%; demand-pull vs cost-push); EQUITY IN THE DISTRIBUTION OF INCOME (3.4 pairs here — the Lorenz curve and Gini with the quintile 5/10/15/20/50 calculation of 0.40, absolute vs relative poverty, and the equity-efficiency trade-off); and ECONOMIC GROWTH (rising real GDP, shown as an outward PPC or a rightward LRAS, with its consequences for living standards, the environment and equity). The objectives CONFLICT: low unemployment against low inflation, growth against environmental sustainability, growth against equity — every objective answer names the conflict and evaluates it. A sustainable level of government debt is the HL-only objective.

Monetary policy 货币政策 (3.5) is the central bank's management of interest rates and the money supply: higher rates raise borrowing costs, cut consumption and investment, cool demand and inflation (and appreciate the currency). QE adds money when rates are near the zero bound; the equity of distributional effects is the standard critique. A rate cut works through the same mechanism in reverse — the SAM India anchor (6.5% → 6.25%) shows a 25-point cut supporting demand.

Fiscal policy 财政政策 (3.6) uses government spending and taxation: expansionary (more spending, lower taxes) shifts AD right; contractionary does the reverse. The BUDGET balance divides into the structural deficit (persists at full employment) and the cyclical deficit (varies with the cycle); automatic stabilisers (taxes falling, benefits rising in recessions) dampen fluctuations without discretion. Debt and deficits raise sustainability and intergenerational-equity concerns; time lags and political pressures are the standing constraints.

Supply-side policies 供给侧政策 (3.7) shift LRAS right: education and training, infrastructure, deregulation and privatisation, lower taxes on work and investment, labour-market reform. On the shared model, LRAS from 85 to 105 along AD cuts the price level from 47.5 to 37.5 while output RISES — growth with disinflation, the contrast the IB wants drawn against demand management.

• GDP by the three approaches; nominal vs real (the deflator idea); per capita; welfare limits and the three alternative indicators; the business cycle's four stages (3.1).
• AD = C + I + G + (X − M) with each component's shifter; movements vs shifts (3.2).
• SRAS; the Keynesian vs monetarist long run; LRAS shifters (3.2).
• The objectives: ILO unemployment with its four types and costs; CPI 109 → 9% with both causes; growth and its consequences; the conflicts between objectives (3.3).
• Inequality and poverty: Lorenz/Gini 0.40; absolute vs relative; equity-efficiency (3.4).
• Monetary policy: the interest-rate mechanism, QE, distributional critique; the India 6.5 → 6.25 anchor (3.5).
• Fiscal policy: the AD shift; structural vs cyclical deficits; automatic stabilisers; debt and lag constraints (3.6).
• Supply-side: the six instruments; LRAS 85 → 105 cutting prices from 47.5 to 37.5 with rising output (3.7).

Boundary notes: SL sits Papers 1 and 2 only; the multiplier, deflator and AD/AS algebra are HL Paper 3. Paper 1 macro essays want a labelled AD/AS diagram, the transmission mechanism named link by link, and evaluation of trade-offs and lags — the key concepts change, interdependence and intervention frame it. All worked numbers are original or SAM-adapted as labelled.