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Question 1

Explain the role of the government in macroeconomics and why it is a key decision-maker in managing the economy

Answer 1

Fiscal policy/ monetary policy/ supply side policy

Question 2

Define “economic growth” and describe how it is typically measured in an economy.

Answer 2

Refers to the increase in the production of goods and services, its typically measured by real GDP

Question 3

Identify the three main types of policies that governments use to manage the economy, and briefly explain one of them

Answer 3

Fiscal policy/ monetary policy/ supply side policy

Question 4

How does the government aim to balance imports and exports, and why is maintaining a stable exchange rate important for the economy?

Answer 4

Governments aim to balance imports and exports through a variety of policies and strategies:
1. Trade Policies: Implementing tariffs, quotas, and subsidies to protect domestic industries and encourage exports.
2. Currency Management: Influencing exchange rates through monetary policy to make exports cheaper and imports more expensive.
3. Negotiating Trade Agreements: Establishing agreements with other countries to reduce trade barriers and enhance market access.
4. Promoting Domestic Industries: Investing in infrastructure, technology, and education to improve the competitiveness of domestic industries.
Maintaining a stable exchange rate is crucial for several reasons:
1. Predictability: It helps businesses plan for the future by providing a predictable cost for imports and revenues from exports.
2. Inflation Control: A stable exchange rate helps manage inflation by avoiding sharp fluctuations in import prices.
3. Investment: Stability encourages foreign investment by reducing the risk associated with currency fluctuations.
4. Economic Growth: It fosters a stable environment conducive to long-term economic planning and growth.

Question 5

What is the standard of living, and which factors influence the well-being of a country’s population?

Answer 5

The standard of living is influenced by combination of economic factors ( like income and employment,) social factors ( like education and employment,) environmental quality and political stability

Question 6

Describe the relationship between economic growth and inflation. Why is it difficult for governments to achieve both at the same time?

Answer 6

Economic growth is a trade of with inflation so if economic growth goes up inflation we’ll go up