2.6.2 - possible macroeconomic objectives

Question 1

What is the goal of governments regarding economic growth?

Answer 1

Governments aim to have strong, sustained, and sustainable economic growth for the long run.

Question 2

Why is fast economic growth not ideal?

Answer 2

Fast economic growth is not sustainable as it can cause environmental damage and increase inflation.

Question 3

What factors are considered in economic growth?

Answer 3

Income and living standards, which should both be high.

Question 4

What might governments in emerging economies prioritize before economic growth?

Answer 4

Governments might aim to increase economic development, improving living standards, life expectancy, and literacy rates.

Question 5

What is the goal of governments regarding unemployment?

Answer 5

Governments aim to have as near to full employment as possible for higher productivity (output per worker), less poverty and international competitiveness

Question 6

What is unemployment?

Answer 6

The proportion of the economically active population who are unemployed.

Question 7

Why are unemployed individuals more likely to be in poverty?

Answer 7

They do not contribute to tax revenue and receive welfare from the government.

Question 8

What is the UK government’s target inflation rate?

Answer 8

The target is 2%, measured by CPI.

Question 9

What is inflation?

Answer 9

A sustained increase in the general price level of goods and services in an economy in a given period of time - decreasing purchasing power of money

Question 10

What is deflation?

Answer 10

A sustained decrease in the general price level of goods and services in an economy in a given period of time - increasing purchasing power of money but discourages spending and investment as people expect prices to go down more

Question 11

What is disinflation?

Answer 11

A fall in the rate of inflation, where prices are still rising but at a slower rate.

Question 12

What does low and stable inflation help?

Answer 12

This aims to provide price stability for firms and consumers and will help them make decisions for the long run.

Question 13

What is the balance of payments equilibrium on the current account?

Answer 13

Record of all the economic transactions between the country and the rest of the world

Question 14

What is the current account?

Answer 14

Net trade in goods and services, foreign aid, transfers made to foreign investors

Question 15

Why is a balance of payments equilibrium important?

Answer 15

It allows the country to sustainably finance the current account, crucial for long-term growth.

Question 16

What are the two main components of the balance of payments?

Answer 16

The current account and the capital and financial account.

Question 17

What happens in a current account deficit?

Answer 17

Imports are more valuable than exports.

Question 18

What happens in a current account surplus?

Answer 18

Exports are more valuable than imports.

Question 19

What are imports?

Answer 19

Goods or services bought from abroad, with money flowing outward. Important as customers want goods and services from other countries

Question 20

What are exports?

Answer 20

Goods or services sold abroad, with money flowing inward. Important as brings capital to country

Question 21

In terms of trade, to be internationally competitive how should an economy be?

Answer 21

Exports and imports must be balanced

Question 22

Why is balancing the government budget important?

Answer 22

It ensures control of state borrowing and prevents national debt from escalating. This allows GOV to borrow cheaply in future and make repayments easier - achieved through GOV spending and taxation, eg. reducing national debt by raising taxes

Question 23

What is austerity?

Answer 23

Government creating difficult economic situations to reduce public expenditure

Question 24

What is fiscal balance?

Answer 24

GOV tax revenue - GOV spending

Question 25

Why is protecting the environment important?

Answer 25

It ensures resources are not exploited and are available for future generations, as well as reducing excessive pollution

Question 26

What is intergenerational equity?

Answer 26

Leaving a planet with the same or more opportunities for future generations.

Question 27

What is intragenerational equity?

Answer 27

The distribution of resources within the current generation.

Question 28

What are key macroeconomic indicators?

Answer 28

Growth of real GDP, real GDP per capita, inflation rate, unemployment rate, and balance of trade.

Question 29

Why is greater income equality important?

Answer 29

Minimises the gap between the rich and poor, an unequally distributed income is a sign of a falling economy

Question 30

What is current trend for economic growth?

Answer 30

2.50%

Question 31

What is the aim for unemployment rate?

Answer 31

3%