4 Macroeconomic Objectives

Question 1

Economic Growth

Answer 1

Economic growth measures increases in rea GDP or increases in potential capacity in an economy. it can lead to an increase in living standards, but this is not guaranteed, and many other factors are also required for an improvement in welfare.

In the UK, the long run trend of economic growth is about 2.5%.
Governments aim to have sustainable economic growth for the long run. In emerging and developing economies, governments might aim to increase economic development before economic growth, which will improve living standards, increase life expectancy and improve literacy rates.

Question 2

low and stable Inflation

Answer 2

the UK target for inflation is 2%. the task for controlling inflation s the monetary policy committee in the UK. it raises interest rates to try cut inflation and cuts interest rates if inflation is low to allow other areas of the economy to improve.

In the UK, the government target is 2%, measured by
CPI. This aims to provide price stability for firms and consumers and will help them make decisions for the long run. If the inflation rate falls 1% outside the target, the Governor of the Bank of England has to write a letter to the Chancellor of the Exchequer to explain why this has happened and what the Bank intends to do about it.

Question 3

Low unemployment (Employment and Unemployment)

Answer 3

These look at the efficiency of the countries workforce. inactivity helps to explain this. underemployment is a good way to measure unemployment.

Governments aim to have as near to full employment as possible. They account for frictional unemployment by aiming for an unemployment rate of around 3%. The labour force should also be employed in productive work.

Question 4

Balance of Payment

Answer 4

by looking at the flow of the money in and out of the country. exports brings money into a country and imports flow the money out of the country.