What this lesson teaches
I can explain the causes of weak growth, unemployment, inflation or deflation and a large trade imbalance.
Syllabus 9570, 3.2.2(a). Macroeconomic Issues: Macroeconomic issues and their causes; Undesirable economic growth - persistently low or negative, unsustainable, non-inclusive due to factors such as changes in AD or AS, environmental degradation, inequitable income distribution; Unemployment - demand-deficient, structural, frictional due to factors such as lack of AD, technological changes, mismatch of skills, transition between jobs; Price instability - demand-pull inflation, cost-push inflation, deflation due to factors such as changes in AD, costs of production, productive capacity; Persistently large balance of trade deficit or surplus due to factors such as changes in global conditions, international competitiveness, exchange rates
I can explain how these macroeconomic problems hurt households, firms and governments.
Syllabus 9570, 3.2.2(b). Macroeconomic Issues: Consequences of undesirable economic growth, unemployment, price instability, persistently large balance of trade deficit or surplus for economic agents on the standard of living
Make a guess
Youth unemployment is 15% and overall unemployment is 5%. How should you describe the gap?
- 200%, because 15 is three times 5.
- 10%.
- 10 percentage points.
Show the answer
10 percentage points.
Use percentage points for the gap between two rates. As a ratio, young people are three times as likely to be jobless.
A whole H2 case study: 30 marks, about 75 minutes in the exam. Answer every part, then compare with the suggested answers.
This is a complete case study in exam format. It is about an economy with slowing growth, prices that barely rise and high unemployment among young people. It has six parts worth 30 marks, like each H2 case study. In the exam you have 2 hours 30 minutes for two case studies, so allow about 75 minutes for this one, including reading time.
The events in the extracts are real. Country K is an invented economy facing problems like China's. Country K and every number in Figure 1 and Table 1 are illustrative: invented for practice, not official data.
Allow about an hour. Read the data and all three extracts first. Write each answer before you open its suggested answer, and use the level descriptors below to mark the 8- and 10-mark parts.
The extracts
Extract 1: When home prices fall
Since 2021, China's property sector has slumped. Several large developers, including Evergrande, could not repay their debts, and home prices fell in many cities. Most Chinese households keep much of their wealth in property, so falling prices made them feel poorer and more cautious, and they saved more. Consumer prices barely rose in 2023 and 2024, and fell in some months. Written for these notes from public information.
Extract 2: Graduates without jobs
In June 2023, China's unemployment rate for people aged 16 to 24 in cities reached a record 21.3%. Officials paused publishing the figure, and later resumed it with students excluded. Many graduates said they could not find jobs that matched their degrees, while some factories reported shortages of skilled technicians. Some young people took short-term jobs, such as food delivery, while they waited for better work. Written for these notes from public information.
Extract 3: Spillovers to trading partners
With spending at home weak, Chinese firms sold more abroad, often at lower prices. Exporters elsewhere faced stiffer competition, and in 2024 the United States and the European Union raised tariffs on electric cars made in China. Economies that sell parts and raw materials to China, including Singapore, also feel the effects when Chinese demand slows. Written for these notes from public information.
How the 8- and 10-mark parts are marked
Data parts (1 to 3 marks)
Point-marked. A 'describe' part gives 1 mark for the overall trend and 1 for a refinement. A 'compare' part gives 1 mark for each similarity or difference supported by figures.
8 marks: L2 (4 to 6)
Both sides are explained with clear macroeconomic reasoning and tied to evidence from the case. A top L2 answer develops both sides fully.
8 marks: L1 (1 to 3)
One-sided, or points listed without explanation, or little use of the case.
8 marks: E (1 to 2)
E2: a reasoned judgement in the context of the case that says what the answer depends on. E1: a judgement that is stated but not explained.
10 marks: L2 (4 to 7)
The costs of both problems are developed with clear analysis and case evidence. If only one problem is developed, the answer is usually capped at about 5.
10 marks: L1 (1 to 3)
Mostly descriptive, one-sided, or not tied to the case.
10 marks: E (1 to 3)
E3: a well-reasoned judgement on which problem is the greater concern, considering how severe, lasting and widespread each is, with a conclusion. E2: a reasoned judgement with less support. E1: an unsupported judgement.
| Year | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|
| Aged 16 to 24 | 12 | 14 | 16 | 19 | 20 | 21 |
| Year | Real GDP growth | Inflation rate | Unemployment rate (all workers) |
|---|---|---|---|
| 2021 | 8.0 | 1.0 | 5.0 |
| 2023 | 5.0 | 0.2 | 5.2 |
| 2025 | 4.0 | -0.3 | 5.1 |
Worked example: Rates, gaps and ratios
Suppose youth unemployment is 18% and overall unemployment is 6%.
- Gap: 18 - 6 = 12 percentage points.
- Ratio: 18 / 6 = 3, so young people are three times as likely to be unemployed.
- Use 'percentage points' for a gap between two rates, not 'per cent'.
- Then say what it shows: the problem is concentrated among young people.
Watch out for this
Inflation fell from 2% to 0.2%, so prices in Country K fell.
Inflation of 0.2% means prices still rose, just very slowly. Prices fell only when inflation was negative, as in 2025.
Check your understanding
Why might a graduate in Country K be unemployed even while factories report shortages of technicians?
- Their skills do not match the jobs available: structural unemployment.
- They are between jobs for a short time while they search.
- Total demand in the economy has collapsed, so firms have stopped hiring.
Show the answer
Their skills do not match the jobs available: structural unemployment.
Right. There are vacancies and job seekers at once, but the graduates' skills do not fit the jobs, so they stay unemployed.