2.6 Macroeconomic objectives and policies Flashcards
What are the 7 main macroeconomic objectives?
Economic growth
Low unemployment
Low and stable inflation
Balance of payments
Balanced government budget
Protection of the environment
Greater income equality
What is the opportunity cost for economic growth as an objective?
Other areas could be invested in for growth, such as emerging markets and economies
What is the aim for the unemployment rate?
No higher than 3%
What is a condition for low unemployment?
The labour force should be employed in productive work
What is the inflation target in the UK?
2%
What is the main measure for inflation?
CPI
At what percentage out of the target inflation rate does the Bank of England take action?
1% outside of the target
Why is it a good thing to have a balanced government budget?
It allows the government to borrow cheaply in the future
What is monetary policy used to do?
Control the money flow of the economy
What are two examples of monetary policy? (2)
Interest rates or Quantitative easing
Who is in charge of monetary policy?
The Bank of England
What is fiscal policy used to do?
Influence AD
What does fiscal policy include changes in? (2)
Government spending and taxation
Who is in charge of fiscal policy?
The Government
What should happen to AD when the base rate is increased?
AD should fall
