2.6 Macroeconomic objectives and policies

Question 1

a) Economic growth

Question 2

b) Low unemployment

Question 3

c) Low and stable rate of inflation

Question 4

d) Balance of payments equilibrium on current account

Question 5

e) Balanced government budget

Question 6

f) Protection of the environment

Question 7

g) Greater income equality

Question 8

a) Distinction between monetary and fiscal policy

Question 9

b) Monetary policy instruments:

Answer 9

o interest rates
o asset purchases to increase the money supply
(quantitative easing)

Question 10

c) Fiscal policy instruments:

Answer 10

o government spending and taxation

Question 11

d) Distinction between government budget (fiscal) deficit
and surplus

Question 12

e) Distinction between, and examples of, direct and indirect
taxation

Question 13

f) Use of AD/AS diagrams to illustrate demand-side policies

Question 14

g) The role of the Bank of England:

Answer 14

o the role and operation of the Bank of England’s
Monetary Policy Committee

Question 15

h) Awareness of demand-side policies in the Great
Depression and the Global Financial Crisis of 2008

Answer 15

o different interpretations
o policy responses in the US and UK

Question 16

i) Strengths and weaknesses of demand-side policies

Question 17

a) Distinction between market-based and interventionist
methods

Question 18

b) Market-based and interventionist policies:
o to increase incentives
o to promote competition
o to reform the labour market
o to improve skills and quality of the labour force
o to improve infrastructure

Question 19

c) Use of AD/AS diagrams to illustrate supply-side policies

Question 20

d) Strengths and weaknesses of supply-side policies

Question 21

a) Potential conflicts and trade-offs between the
macroeconomic objectives

Question 22

b) Short-run Phillips curve

Question 23

c) Potential policy conflicts and trade-offs