4.2.1.1 - Objectives Flashcards
What are the 7 macro objectives
- economic growth
- low unemployment
- low inflation
- balanced balance if payments
- balanced gov budget
- protection of the environment
- greater income equality
What is economic growth
The rate of change of a countries output
How is economic growth measured
By GDP, the sum on a country’s output over 1 year
Gov target for economic growth:
the persuit of sustainable economic growth (2% per year). In terms of actual and potential productivity. It is a crucial goal of Macroeconomic performance
How does economic growth link to other objectives
If economic growth occurs, unemployment decreases as more jobs are created
Benefits of economic growth
· Job creation
· rising incomes
· improved standards of living
· lower government spending on benefits
- tax revenue increases so government spending increases
Define unemployment
People that are actively seeking work but are unable to find a job
How us unemployment rate measured
By the unemployment rate (%)
What is the gov target for unemployment
a low unemployment rate, this is because high unemployment is a waste of resources and is an indicator of poor economic performance. When unemployment rate is high, income tax decreases, therefore the governments income is less.
How does low unemployment to another macro objective
Low unemployment allows for economic growth to occur as productivity is high to output increases.
Benefits of ow unemployment
- higher consumption
- standards of living
- higher tax revenue ( due to increased income tax)
- Improved Productivity
- reduced poverty
- social benefits ( reduced crime and improved wellbeing)
Define inflation
The rate of change of average prices in a economy
How is inflation measured
By the CPI
What is the gov target for inflation
the government do not manage inflation as people wanted more transparency after long periods of high Inflation In 1970s and 1980s. The bank of England are now responsible of managing Inflation. They aim for low inflation at 2 %. With a +/- 1 maintenance to create stability.
How does low inflation link to another macro objective
low inflation can lead to economic growth as the government will receive more income in VAT.
Define balance of payments
Measures the uk’s economic activities with other countries
How is balance of payments measured
Either in surplus or deficit:
- surplus= exports > imports
- deficit = imports > exports
Define balanced gov budget
Gov revenue = gov expenditure
A budget surplus = revenue > expenditure
Budget deficit = expenditure > revenue
Why greater income equality important
More equality leads to better living standards for all and a happier society due to economic growth and the trickle down effect
Why is protection of the environment important
Global warming and climate change are high on the political agenda
The gov look to develop a sustainable future particularly for out growing energy needs
Gov goal for protection of the environment
- manage / decrease climate change and global warming
- aim for a sustainable future, particularly for our energy demands
How is the protection of the environment going to be achieved
- supporting businesses through investment grants
- subsidising sustainable/ green products
Gov goal for income equality
- extreme income equality is viewed as socially unacceptable
- all citizens should have access to fair wages and a fair days work
How will income equality improve the economy
- increasing income equality will lead to higher levels of economic growth
- allowing better living standards for society
- and a happier society overall
Hoe does unemployment conflict with inflation
- increasing employment levels will lead to prices riding at a higher level
- this is because incomes increase, so consumption will increase
- this incentivises firms to raise prices as they will be able to increase their profit
How does balance of payments conflict with growth
- when growth occurs, it is assumes that consumer spending increases - causing a rise in import spending
- making exports less competitive
- leading to a higher number of withdrawals than injections
How does economic growth conflict with protection of the environment
- a higher gdp will lead to higher levels of pollution and consumption of non renewable resources,
- for example increased imports produces fossil fuels by the transportation and productions of the goods
