2.6.1 Macroeconomic Objectives and Intro to Policies Flashcards
1
Q
what are the 7 macroeconomic objectives
A
- stable, sustained economic growth
- low unemployment
- low and stable inflation
- trade balance on current account on BoP
- balanced government budget
- protection of the environment
- greater income equality
2
Q
why is economic growth an objective
A
- job creation
- rising average incomes
- improved living standards
- multiplier and accelerator effects
- improved confidence
- improved budget
3
Q
why is unemployment a major problem
A
it represents a waste of resources and indicates poor economic performance
4
Q
why is low unemployment an objective
A
- higher consumption and AD
- higher incomes and living standards
- higher tax revenue
- improved productivity
- reduced poverty
5
Q
why is full employment not achievable
A
there will always be people moving between jobs (frictional unemployment)
6
Q
why is inflation important
A
it affects purchasing power, worker’s wage demands and consumer confidence
7
Q
what is the UK’s inflation target
A
2% (+/- 1)
8
Q
has the UK typically been running a deficit or surplus on the current account
A
deficit
9
Q
why may a deficit on the trade balance not necessarily be detrimental
A
- a high level of imported goods can improve choice, quality and lower prices (enhancing living standards)
- firms may also benefit from cheaper or higher quality imported components or raw materials (potentially reducing costs)
10
Q
give the three types of macro policy
A
- fiscal policy
- monetary policy
- supply-side policy
11
Q
describe fiscal policy
A
- any policy relating to government spending, taxation and borrowing
- government-led
- demand-side
12
Q
describe monetary policy
A
- any policy relating to interest rates or the money supply
- central bank-led
- demand side
13
Q
describe supply-side policy
A
- any policy intended to increase the productive potential of the economy
- increasing the quality or quantity of the factors of production
- free market vs interventionist
