C37 Macro economics objectives Flashcards
What are the 4 main macroeconomic objectives?
Strong economic growth
Low inflation
REducing unemployment
Equilibrium of balance of payments
What are some other economic objectives?
Equal income distribution
Environmental protection
Economic stability
Productivity improvements
Why does the government want to distribute income more evenly?
Increases overall welfare
High earners tend to save more so may lead to more spending
How can the government equally distribute income?
More taxation of higher earners
Welfare payments
What is the problem with redistribution?
Higher wages act as an incentive to work hard
Wealth creation may lead to more jobs
Higher waged people may spend more on luxury goods
How does the government protect the environment?
Identify what caused environmental damge
Measure the cost of this damage
Give financial penalty to limit this damage
They may also try to use more renewable resources
How does the government ensure economic stability?
The government will try to limit booms and slumps using monetary policies
Why does the government do this?
Slumps may discourage firms from investing
Volatility in inflation rates may cause unemployment and discourage firms from investing
What factors effect economic stability?
It’s political state
Why does the government try to improve productivity?
It will help future economic growth
How can the government increase productivity?
They may offer financial support to firms to increase efficiency
They may put policies to encourage firms to compete
