Economic Policy Objectives Flashcards
What are the main 3 EPO’s?
1) Sustainable economic growth - TR = 4%
2) Low inflation/Price stability - TR = 2-3%
3) Low unemployment/Full employment - TR = 5% UE
How may the economic objectives and the Aus Government complimenting with each other?
Full Employment & Economic Growth: Low UE pushes aggregate expenditure outward.
- policies; tax reduction, interest rate cuts help promote full employment.
- inversely economic growth provides more jobs to meet increased supply levels.
Price Stability & Economic Growth: PS lowers uncertainty - increasing future investment/consumption - driving economic growth.
How may the economic objectives and the Aus Government conflicting each other?
Economic Growth & Price Stability: EG can cause inflation - pressure on resources/prices.
Price Stability & Full Employment: To achieve PS we need to avoid excessive demand - which causes decreased employment.
What are time lags and how do they affect economic policies?
Recognition Lag: The time taken to recognise the state of the economy.
Decision (implementation): The time taken for the Government / RBA to make a decision on economic policy.
Effect (impact) Lag: The time taken for policy to have an effect within the economy.
What are the economic policy objectives of the Reserve Bank of Australia?
The RBA take action to achieve these objectives, noted as the monetary policy - predominately focusing on the manipulation of cash rate and interest rates.
