Key real world examples for macroeconomics 2024

Here are some key real world examples for macroeconomics. Correct as of 1st May 2024.

Here is a link to a list of key micro real world examples.

For more A-level Economics resources, including practice papers and model answers, click the link below:

Key macro indicators – growth, employment and inflation

• The UK economy entered recession at the end of 2023, with the economic growth rate being -0.3% in the fourth quarter of 2023.
• Annual GDP growth was 2.7% per year on average, in the decade before the 2008 financial crisis. Following the 2008 financial crisis, the UK economy, the growth rate has averaged nearer 1.7%. This suggests a fall in the long-run trend rate of economic growth for the UK economy.
• The rate of unemployment in the UK has fallen from 5.3% in the three months to January 2021 to 4.2% in the three months to February 2024. Unemployment has remained near 4% since the end of 2021.
• The UK has witnessed disinflation, a fall in the rate of inflation.
• Specifically, the UK rate of CPI inflation has fallen from 11.1% in October 2022 to 3.2% in March 2024.

Fiscal policy

• At the start of the Covid-19 pandemic in 2020, the Government debt to GDP ratio increased. It has remained at an elevated level since.
• Specifically the UK’s Government debt to GDP ratio reached 97.6% of GDP in 2023.
• The rate of corporation tax has increased from 19% to 25% for companies earning profits above £250,000.
• The UK Government has frozen the personal allowance income tax threshold at £12,570 until 2027-28. Provided wages rise in nominal terms, this is likely to drag more people into paying income tax.
• At the same time, national insurance rates have been cut from 10% to 8%. This tax cut increases the disposable income of 27 million employees in the UK, with an employee on a salary of £35,000 receiving an extra £450 a year.

Monetary policy

• Broadly, the Bank of England has raised interest rates since the end of 2021. It has also engaged in quantitative tightening, the reverse of quantitative easing.
• The Bank of England’s interest rate, Bank rate, has risen from 0.1% in 2021 to 5.25% in August 2023. Bank rate has remained at 5.25% until now.
• Quantitative tightening: The Bank of England’s asset purchases (mostly government bonds) under quantitative easing stand at £744 billion, down from a peak of £895 billion.
• Banks in the UK faced accusations of not passing on interest rate rises to savers quickly enough.

Supply-side policies

• Education – the UK Government is spending £2.5 billion on the National Skills Fund. This helps pay for free adult training for level 3 qualifications.
• Infrastructure – £150 million of funding is being redirected from High Speed Rail 2 (HS2) to improve bus services in the North and Midlands.
• Deregulation – the UK Government is attempting to deregulate financial markets. This includes plans to reduce the amount of funds that insurance companies have to hold in reserve. Also there are plans to loosen the separation between commercial and investment banking divisions of banks.
• Tax cuts – cuts to the rate of national insurance (see fiscal policy).
• Privatisation – water industry. See the micro real world examples here for more information.

Tradeoffs between macroeconomic objectives

• Higher interest rates in the UK contributed to disinflation. However, higher interest rates have also slowed the rate of economic growth. [See above for specific facts on interest rates, inflation and economic growth in the UK].
• Despite inflation falling from 11.1% in October 2022 to 3.2% in March 2024 for the UK, the unemployment rate has remained roughly around 4%. This suggests the tradeoff between inflation and unemployment has been weakened.
• Automation and globalisation have contributed to economic growth but also to rising inequality. Automation explains 50 to 70% of the rise in income inequality from the 1980s up to 2016 in the US. (Acemoglu and Restrepo 2021)

Trade and the balance of payments

• The UK has left the European Union and entered the Trade and Cooperation Agreement with the EU. This includes tariff-free trade for goods. However there are new nontariff barriers, such as safety checks and customs declarations.
• In the meantime, the UK has signed trade deals with individual countries such as Australia, as well as with the CPTPP group of countries. The CPTPP includes fast growing economies such as Vietnam. However the CPTPP deal is only projected to increase UK real GDP by 0.08% over ten years.
• The UK has run a current account deficit every year since the 1980s.
• In 2023 the UK’s current account deficit was 3.3% of GDP.
• However the UK does run a financial account surplus. The City of London remains a major global hub for financial services including banking and insurance.

Exchange rates

• In the last fifteen years, the pound sterling has depreciated against the dollar. From 1 pound to 1.64 US dollars in 2009 to 1.26 US dollars per pound today.
• This reflects weaker economic growth and weaker growth prospects in the UK relative to the US.
• The decision to vote for Brexit led to a 10% fall in the value of the pound against the dollar on the night of the referendum result.
• The Truss-Kwarteng budget event of September 2022 contributed to the pound reaching a low of 1 pound to 1.08 US dollars. Since this event, the pound has returned to a value of 1.26 US dollars.
• Saudi Arabia has a fixed exchange rate which is pegged to the value of the US dollar. The exchange rate is 3.75 riyal to 1 US dollar.
• In October 2022, Japan has intervened in the currency market, by selling dollars and buying yen, to maintain the value of the yen.

Development and globalisation

• Multinational companies – Nigeria hosts several multinational companies, including Coca-Cola, Nestle as well as various oil operations. Starting in 2023, some multinational companies have been leaving Nigeria or downsizing, such as Unilever. Communities in Nigeria have also suffered from oil spills, harming agriculture.
• UK has faced deindustrialisation, in part because of greater international competition. In 1966 manufacturing represented 30% of all UK employment but this is down to 7.7% as of 2019.
• Globalisation has led to some companies moving their production overseas, including many clothing companies like Nike. This has resulted in lower costs for the business and hence lower consumer prices. However there have been accusations of poor working conditions in some of these clothing factories.
• Poverty and education – The Human Development index for Ethiopia is 0.38. Learning Poverty, a measure of the fraction of children who can read and understand a simple text by age 10, is very high, with 90% of children at this age not meeting this standard. Primary school education expenditure per child is 78.6% below the average for the Sub-Saharan Africa region.
• Primary product dependency – diamonds are the top export of Botswana, accounting for 90% of export revenues.
• Aid – aid with IMF conditions attached, including supply-side reforms and that governments cut their budget deficits, has led to protests in Argentina and Egypt. However the incidence of malaria has dropped by 57% from 2000 to 2015, in part owing to aid, including the provision of bed nets.
• Trade – Ethiopia has significantly liberalised trade. In the early 1990s and 2000s, there was a large fall in import tariff rates for Ethiopia. The average tariff rate fell from 23.2% in 1998 to 12.31% in 2006 (World Bank, Fiorini et al. 2021).

There are several other examples you should be looking into ahead of macro exams, including financial markets and other development barriers and policies. These facts and trends can be a great starting point!

Remember you can use facts from multiple areas in each essay. Discussing macro objectives? Perhaps it’s relevant to bring in economic growth and inflation figures for the UK for example. Talking about trade? Bring in information on the current account and exchange rates if relevant to the question. The good thing about macroeconomics real world examples is that facts can be used for several different essay questions, where appropriate.

Also, make use of what you know. If you know a lot about the clothing industry, perhaps you can tie that into globalisation. If you know a lot about technology, you can use that knowledge to discuss tradeoffs between economic growth and inequality.

Here is a link to a list of key micro real world examples.

For more A-level Economics resources, including practice papers and model answers, click the link below:

I have mentioned some of the sources for the facts above. More generally, you can find most of these facts, including the latest numbers, on websites like the ONS, UK Government, Trading Economics and miscellaneous others.