General Rules for Macroeconomics:

• Be Skeptical of Raw Numbers:

  • Always use national income at constant prices to account for inflation.
  • For international comparisons, always use national income per capita.
  • Remember that economic statistics like GDP/capita don't fully capture the distribution of wealth or overall welfare.
  • National income figures generally do not include unpaid work (like household work) or non-market economic activities.
  • Be aware that the "hidden economy" (black/grey market) is not included in official national income figures, despite its contribution to living standards.
  • Be critical of unusual spikes in economic data, such as those caused by multinational asset transfers ("leprechaun economics").

• Understand Key Economic Definitions:

  • Be precise about the differences between GDP, GNP, GNI, NNI, and NNP.
  • For Ireland, GDP is a better indicator of economic activity, while GNP is better for standard of living, due to profit repatriation by MNCs.
  • For a comprehensive view of a population's available income, Gross National Disposable Income (GNDI) is a much better indicator than GNI as it includes transfers like foreign aid and remittances.
  • To convert from a 'gross' figure to a 'net' figure, subtract depreciation.
  • To convert from a 'domestic' figure to a 'national' figure, account for Net Factor Income from Abroad (NFIA).
  • To convert from 'factor cost' to 'market prices', add indirect taxes and subtract subsidies.

• Think Critically About Policy and Outcomes:

  • Recognize that government economic policies, such as increasing taxes or reducing spending, can have unintended knock-on effects. The economy should be seen as a "living organism," not just accounting figures.
  • Be aware that government economic aims often conflict; for example, policies to achieve full employment might lead to inflation.
  • Understand the limitations of fiscal policy, including time lags and potential to discourage private investment.
  • Differentiate between direct and indirect taxes and their respective advantages and disadvantages (e.g., direct taxes are equitable but might discourage work; indirect taxes are efficient to collect but can be inequitable and inflationary).
  • When evaluating tax systems, apply Adam Smith's Canons of Taxation: equity, economy, certainty, and convenience.

• Analyze Causes and Effects Broadly:

  • Understand that inflation can have multiple causes, including demand-pull, cost-push, government-induced indirect taxation, imported inflation, and increased borrowing.
  • Recognize the broad economic and social effects of unemployment (e.g., decreased demand, budget deficits, social problems).
  • Be aware of the wide-ranging effects of inflation (e.g., fall in purchasing power, reduced savings, less competitive exports, wealth transfer).
  • Remember that both inflation and deflation can be damaging to an economy.

• Consider the Global Context:

  • Be aware that for countries in economic unions like the EU/Eurozone, domestic fiscal and monetary policies are influenced or constrained by supranational bodies like the European Commission and the ECB.
  • Understand the key factors driving globalization, such as containerization, technological change, economies of scale, tax differences, and reduced protectionism.
  • Evaluate globalization by considering both its positive impacts (e.g., employment, technological advancements) and negative impacts (e.g., widening wealth gap, environmental degradation).
  • Apply theories of international trade like the Law of Absolute Advantage and the Law of Comparative Advantage, but always remember their simplifying assumptions (e.g., ignoring transport costs, perfect factor mobility, free trade).
  • Know the roles of major global institutions like the WTO, World Bank, and IMF in managing international trade and economic stability.