This document outlines the key topics and concepts to be covered in a 2 week study of the role of the state in macroeconomics. It will examine public expenditure, taxation, public sector finances, and macroeconomic policies in a global context. Specifically, it will explore the distinctions between different types of expenditures and taxes, how they impact economic indicators, and how countries approach fiscal and monetary policy given economic conditions like fiscal deficits and national debts. Homework resources are provided to find real world examples and data to illustrate these concepts. Assessment will include interim topic tests and a final unit exam.

1. Topic: Theme 4: A global perspective
4.5 The Role of the state in macro-economy
Length of time required:
Approximately 2 weeks
Link to Curriculum: Exam syllabus section 4
4.5.1 Public expenditure
a) Distinction between capital expenditure, current expenditure and
transfer payments
b) Reasons for the changing size and composition of public expenditure in
a global context
c) The significance of differing levels of public expenditure as a proportion
of GDP on:
 productivity and growth
 living standards
 crowding out
 level of taxation
equality
4.5.2 Taxation
a) Distinction between progressive, proportional and regressive taxes
b) The economic effects of changes in direct and indirect
 tax rates on other variables:
 incentives to work
 tax revenues: the Laffer curve
 income distribution
 real output and employment
 the price level
 the trade balance
Home Learning Resources/Extension Resources
Economics Blog: www.dbseconomics.blogspot.com
Set up the main issues and then get real world examples.
Plenty of articles on the issues are available from newspapers or
the BBC website.
Link into Osborne’s idea that reducing the size of the public sector
leaves room for the private sector to create jobs. There should be
plenty of resources, for example, Peston’s Picks ‘35 business
leaders back Osborne's cuts’ on the BBC News website.
Going back to why the UK wanted to reduce its fiscal deficit and
national debt would be useful. There should be plenty of articles
on BBC News, etc.
It would also be useful to discuss the Eurozone crisis in terms of
why the austerity programme was thought necessary in many
countries in the Eurozone.
Students could look at BBC News: ‘EU Austerity drive country by
country’.
Subject: Economics
Year: 13
Term: 2

2.  FDI flows
4.5.3 Public sector finances
a) Distinction between automatic stabilisers and discretionary fiscal policy
b) Distinction between a fiscal deficit and the national debt
c) Distinction between structural and cyclical deficits
d) Factors influencing the size of fiscal deficits
e) Factors influencing the size of national debts
f) The significance of the size of fiscal deficits and national debts
4.5.4 Macroeconomic policies in a global context
a) Use of fiscal policy, monetary policy, exchange rate policy, supply-side
policies and direct controls in different countries, with specific reference
to the impact of:
 measures to reduce fiscal deficits and national debts
‘Challenge’ Task – Optional
You can get lots of charts in this area to display to the class and to
aid discussion. Search for ‘images for composition of public
spending between countries’.
Other than the Laffer curve, the economic effects of changes in tax
rates on the macro objectives could be done by a teacher-
structured worksheet, since all relevant concepts should be
familiar.
The Financial Crisis of 2008 resulted in many countries using fiscal
policy as a Keynesian tool to stimulate the economy. Examples of
how this was done could be highlighted.
It would be useful to discuss cyclical and structural deficit data for
UK.
Assessments – Standardised
Interim Assessment task: Students tested during and after each
sub topic using past examination packs.
Summative Assessment Task (Exam week): End of unit test