2.6 Macroeconomic objectives and policies Flashcards
what are the 7 macroeconomic objectives?
1) 2% +- 1% inflation
2) economic growth
3) reduce
unemployment
4) current account equilibrium (inflows= outflows)
5) balanced budget (government spending= tax revenue)
6) reduce inequality
7) environmental sustainability
what are the stages in the trade cycles/ business cycle?
.slowdown
.boom
.Recession
. recovery
define a recession
two consecutive quarters of negative economic growth
define the term boom in the business cycle?
The part of the business cycle where real GDP is at its highest.
define the term slump (slow down) in the business cycle?
The part of the business cycle where real GDP is decreasing.
define the term recovery in the business cycle?
The part of the business cycle where real GDP is increasing.
what is the difference between actual gdp and potential trend gdp?
actual GDP= Refers to the real, measured increase in a country’s GDP over time. (T)
potential trend GDP= Represents the long-term average growth rate of an economy’s productive potential.
define a negative output gap?
when the economy isn’t using its resources efficiently
define a positive output gap?
when the economy is producing above its potential. (overuse of resources)
define Potential Trend GDP
The sustainable rate of GDP growth caused by improvements in productive capacity overtime.
define business cycle
fluctuations in real GDP overtime
define demand-side policy
a policy which mainly affect aggregate demand e.g. income tax
define supply-side policy
a policy which mainly affects aggregate demand e.g. vocational training.
.all ssp’s are managed by the government
what are the types of demand-side policies?
fiscal policy= a policy that used government spending and taxation, to affect the economy as a whole.
monetary policy=
