Economic Objectives Flashcards
Why does the government want to achieve economic growth?
A consistent rate of economic growth increases GNI per capita and thus living standards
Higher incomes also create higher taxations revenue which can be used to fund public goods and support the general welfare of an economy
Why does the government want to achieve full employment?
When the economy is at fully employment, production is maximised and prices are minimised, supporting economic growth
Why does the government want to achieve price stability?
It avoids the negative effects of high inflation, and ensures consumers maintain purchasing power
This supports AD and economic growth
Why does the government want to achieve external stability?
External instability is a constraint on internal economic objectives
Why does the government want to achieve environmental sustainability?
Because the private sector does not consider these factors and social costs
To achieve intergenerational equality
Why does the government want to achieve a more equal distribution of income?
To avoid the social and economic disadvantages arising from high levels of inequality
Why is there conflict between price stability and full employment?
When unemployment is decreased, labour becomes scarcer, causing firms to offer higher wages to attract labour
This increases the cost of production, causing cost-push inflation
This can lead to a wage-price spiral
Why is there conflict between economic growth and external stability?
Economic growth increases consumption
This increases import volumes, worsening the BOGS and CAD
Why can there be a conflict between economic growth and the equal distribution of income?
The benefits of economic growth are often skewed towards entrepreneurs and the owners of capital
Hence, those with high incomes may find increased opportunity to further increase their incomes
