The Economy 2.0: Macroeconomics

Take a closer look at the units of the The Economy 2.0: Macroeconomics – what they’re about, what models they present, how they’re changing compared with The Economy 1.0.


Unit 2 — Unemployment, wages and inequality


Unit 2 places a strong emphasis on inequality in the study of macroeconomics, teaching students how to use Lorenz curves, relate them to the Gini coefficient (covered in Microeconomics Unit 5) and derive them from the WS-PS model. Furthermore, Unit 2 follows up the puzzle introduced at the start of Unit 1: why do countries that use similar technology and compete in the same global markets experience vastly different labour market outcomes? Unit 2 extends the WS-PS framework to include topics such as labour unions, taxes, and policy choices. It unpacks the implications of these topics for the distribution of incomes within an economy and concludes with a comparison of Germany and Spain which demonstrates how students can use the WS-PS model and real-world data to help explain cross-country differences. 



Unit 2 provides various applications and extensions of the WS-PS model introduced in Unit 2. It also introduces Lorenz curves as a way to calculate inequality. The WS-PS and Lorenz curve models are linked together throughout the unit to show how economic shocks and macroeconomic policies impact the distribution of incomes.



This unit comes with several applications of the WS-PS model, including these topics:

  • Did a decline in competition increase inequality in the US?
  • Employment security and labor market flexibility in Denmark.
  • Comparing the macroeconomic performance of Germany and Spain.


Major changes

Although parts of this unit are similar to sections of The Economy 1.0 Units 9 and 17, Unit 2 as a whole is brand-new.

← See how Unit 1 is changing See how Unit 3 is changing →